A major and critical part of the macroeconomic instability we are facing today is as a result of our weak foreign exchange reserve. Should Nigeria have a reserve of over $100 billion, we would be able to maintain a stable exchange rate, rein in on inflation, meet the demands for legitimate imports as well as attract foreign portfolio and direct investors. We would be in a position to embark of massive infrastructure spending. In any case, I do not think that our economy would have gone into recession in the first place if we had over $100 billion in foreign reserve.
To further elucidate why we must commence savings immediately, Nigeria was not included in the BRICS economy even when it was the biggest economy in Africa because of its poor infrastructure. We have now been included in the MINT economy which are Mexico, Indonesia, Nigeria and Turkey. If you look at these nation, Mexico with a population of 130 million has GDP of 1.1trillion, forex reserve of over $150 billion, Capital market capitalisation of over $400 billion, positive GDP growth, unemployment and inflation under 10 per cent; Indonesia population of over 200m , GDP $870 billion, forex reserve of $100 billion, capital market of over $300 billion, positive GDP growth, inflation and unemployment under 10 per cent; Turkey – over 80m population, 780 billion GDP, over 100 billion forex reserve, Market Capitalisation of about $200 billion, positive GDP growth, inflation and unemployment under 10 per cent. When compared with Nigeria, with over 170 million pop, GDP $413 billion, Forex reserve of $30 billion, Market Capitalisation of about $30 billion, Negative GDP growth, Inflation and Unemployment of about 20 per cent. One can see clearly the need for us to resolve today to start saving in order to turn around our economy tomorrow.
Again, I appeal to our current government officials at the federal and state levels, in the interest of our country and our children not to share these impending refunds but to rather invest them.
Apart from saving for the future, we also need to begin a massive investment in education to equip our children with the skills to compete in today’s knowledge economy. Today, Nigeria is not only lacking in the number of enrolment of children in schools but has also progressively deteriorated in the standard or quality of education the few who are opportune to attend school are receiving. We currently occupy the unenviable position of the country with the highest number of out of school children in Africa and the number two in the entire world. The greatest issue militating against our global competitive index is the issue of education and health (138th in the world). Today, our school enrolment in basic education is about 60 per cent .The reason why countries of the Asian tigers have leapfrogged Nigeria is the quality and spread of their educational system. While they were and are massively investing in education, ours is the reverse.
Investment in education is synonymous to investing in the future of a country especially today that the world has moved from baggage economy to knowledge economy. In fact, the focus on education has changed to what is now called STEM, which means Science, Technology, Engineering and Mathematics which will rule the World tomorrow. It is now acknowledged that by 2020 the global economy will have a shortfall of 85 STEM skill jobs and nations are equipping their children from infancy for that challenge and we are not doing anything. To give an example of today’s knowledge economy, Apple at April 28, 2017 has market cap of $750 billion which is higher than the combined GDP of Nigeria and South Africa, the two biggest economy in Africa, Google has a market cap of $600 billion which is about 150 per cent of Nigerian GDP, Microsoft has market cap of $515 billion is far bigger than Nigeria GDP, Amazon $430 billion is bigger than our GDP, Facebook that was established in 2004 has a market cap of $416 billion which is above our current GDP. Even the networth of the founder, Mark Zuckerberg of $65 billion is about three times our 2017 national budget. Apple’s first quarter revenue is $78 billion is about twice the budget of Federal and states governments combined.
I can go on and on how the world has left us behind but there is no point crying over spilt milk. What matters is what we are doing to remedy the situation but regrettably we seem not to even be conscious of how bad our situation is or what we should do to reverse it. Today we have approximately 12 million pupils in our Universal Basic Education when we should have been above 20 million. Assuming we target a minimum population of 20 million under our Universal Basic Education by 2018, our minimum annual investment should be N200 billion, that is, N10,000.00 per pupil. This is my recommendation on how we can fund this annual expenditure for basic education, which is the foundation upon which all subsequent training is built upon. The Federal government should contribute annually 50 per cent which is N100 billion, the 36 state governments, N50 billion and the balance of N50 billion should be funded by Special Education Tax.
Should we now decide to start giving education the required attention and funding, let me now recommend further how this money can be best utilised to make it transformative instead of transactional which is the case today. I recommend that funds meant for Basic education be domiciled in the office of UBEC and sent directly to the schools based on each individual school headcount, at the rate of N10,000.00 per pupil. The funds should be managed by each School’s management authority to be composed of school head teacher, teachers and parents. While the School Management Authorities administer the funds based on defined standards set by the government, the government’s role should focus on defining the standard as well as supervising and enforcing those standards.
The fourth issue I will like to touch on is the issue of proper job creation and employment particularly by SMEs, which is the engine and biggest employer in any economy. I am happy that the government seems to recognise this by stating in its Economic Recovery and Growth Plan that it will encourage Nigerians “to buy what we produce and produce what we buy” and patronize Nigerian companies. Serious countries create enduring employment by nurturing and supporting their local enterprises. What is however missing is the failure of the economic recovery and growth plan to put in policy of prompt payment for services rendered. Today government has killed more businesses that have supported their growth. About 75 per cent of business that collapsed was as a result of government indebtedness. In other serious countries and I use UK as an example, government cannot owe for goods or services rendered for more than 30 days. In most other sub-Saharan economies including Ghana, it is 60 days. In Nigeria the reverse is the case, businesses are owed for years. Examples of this abound.
A few years ago, a state governor ordered 50 Jeeps for his traditional rulers and other prominent office holders within his government at the cost of N9 million from a company amounting to a total of N450 million. The company estimated to make a gross profit of N1.5 million. Following this order, the company borrowed from the bank, N300 million (and added their own capital) to execute this order. For four years now they have not been paid. Not only have they lost their profit and their equity contribution but their indebtedness to the bank is now N732 million. The bank has forwarded the company to AMCON and other financial authorities as a serial debtor for defaulting on their loan and the company has retrenched over 200 of his workers. While the governor has received all manner of titles from the traditional rulers and several awards from various organisations for his performance. The above is the same case of several enterprises, especially SMEs whom are still pursuing various government establishments for their due and matured payment for over 10 years
I know there is a lot we need to do, while we have lost yesterday, we must not lose tomorrow. Nigeria was a signatory in 2000 for the millennium development goals (MDGs) which elapsed in 2015 without Nigeria as a nation achieving any of the goals, though you can say one or two states were able to make reasonable impact. Today, Nigeria is a signatory to sustainable development goals (SDG) (which is inclusive of all that is required for a country to develop) signed by 193 countries in September 2015 which will be concluded in 2030. All that average Nigerian demands of the drivers of this Nigerian vehicle is having been a signatory to this global destination can we as other nations of the world journey our part to this destination as other signatories by ensuring that our planning, budgeting, execution and delivery are strictly based on the SDG destination because it is clear and measurable.
As I conclude, let me quote these two renowned personalities, first one is Professor Robert J. Shiller of Yale University in his recent interview about the economy “to talks about the economy is to talk about the psychology of people, what they think of their future wellbeing.” And Prof. Donald Jacobs, founder of Kellogg Business School said “all economies are driven by hope of the citizens on the future of their nation.” These two quotes show that in effect, people’s perception of their present condition and the outlook for the future determine how they respond to government policies.
Excerpts from the speech delivered by former Governor of Anambra State, Mr. Peter Obi at the Covenant Christian Centre, Iganmu, Lagos.