BREAKING AWAY FROM AUSTERITY MEASURES

Victor C. Ariole argues that wrong taxation causes distortions and negatively impacts economic growth.

Nigeria must break away from austerity so says the Director General, West African Institute for Financial and Economic Management, Dr. Baba Yusuf Musa.  Musa was at the Arthur Mbanefo Center of Unilag delivering a lecture in honour of Prof. Ndubisi Nwokoma who serves as Unilag’s Director, Center for Economic Policy Analysis and Research and is about to retiring.

Dr. Musa does not believe in imposing austerity measures on countries like Nigeria where service industry contributes over 50% of the GDP which makes unemployment very high as what constitute services do not need so many people to be employed. They form what Global Risk Index refers to as Artificial Intelligence generated misinformation and disinformation, cyber attacks, cost-of-living crisis, political polarisation and manoeuvres, wrong agreements by private sectors that create hidden debts that must be settled by Nigeria, whether government knows about it or not as long as it is a service rendered to any tier of the government – local, state or federal. An example is like a state government assuring a foreign airline to make the state its destination with assurance that no fewer than 40 passengers must embark on it at any time hence an agreement that must be satisfied and must remain a debt that must be paid whenever the airline fails to get the expected passengers. It does not involve employing people to incur such expenses and it does not help Nigeria. That amounts to part of the $8 billion per annum debt servicing that is not sustainable if Nigeria must grow its economy that is still far below meetings its potential so as to attain a better threshold of better living for its populace recorded at present as in the range of 88.25% misery index; that is, almost 89% of Nigerians are living in multi-dimensional poverty.

According to Musa, 70% of Nigerians that are of working age cannot be in agriculture that is still manually carried out to contribute greater percentage of the GDP. That makes for nominal GDP not quite agreeing with real GDP because for 70% of workforce to remain in a sector like agriculture that contributes only 21% of the GDP, a reverse GDP contributing factor must be initiated to have agriculture and manufacturing surpassing the service industry. If it is not done, there will be continuous value addition decline that will land more Nigerians into multi-dimensional poverty. Macro-economic policy, inclusive of fiscal dimension of it, must take that into consideration.

Nigeria as at now is not on a sustainable development path because there is no defined long-term plan that the government is pursuing. The government is leaning on rolling plan which is like a tortuous journey that has no defined goal and has no plan to meet the Sustainable Development Goal of United Nations that ends in 2030. At best, the SDG2, which is zero hunger could be attained out of the 17 SDGs. Attaining SDG2 is a mere competition with crude mammals who woke up every morning pursuing preys or scavenging for foods or grazing shrubs. For Dr Musa, it does not say anything good about Nigeria with its over 200 million people seeking for little leverage from government to be able to fend for themselves and aspire to a better level of self-esteem; just make electricity available to Nigerians and see their immense potential.

Government revenue collection process is very much a key factor in assuring the populace of better distribution of wealth, not necessarily excessive tax imposition on the people. Wrong taxation according to Musa is the extent of the misallocation of resources on the structure of taxation which impedes on labour supply, national savings, investment and marginal tax rates. Indeed you cannot be waiving taxes or duties for politicians and their cronies and expect to be helping in revenue collection for the prosperity of the nation. Professor Akpan Ekpo the chairman of the occasion does not agree less as wrong taxation causes distortions and negatively impacts on economic growth. It does not help in solving socio-economic problems like poverty, unemployment, hunger, subpar investment and illiteracy. What is worse, the same group that ought to compete with government in solving such problems seems to be the ones benefiting from government’s wrong policies and being the one government of today runs to as its economic team – interested parties in activities that seem to be distorting the current macroeconomic state of Nigeria. They seem also to be enjoying one waiver or the other intended to help stimulate Nigeria’s economy which is not effectively felt.

Revenue collection that would have seen the government collecting greater revenue in royalty, mineral resources, oil production is greatly undermined because of activities of economic saboteurs somehow known but condoned by the government.

Nigeria’s GDP per capita of about $2000 is very far from world average of about $13,000 not to talk of that of USA that is about $70,000; hence the need for government to stop talking about imposing austerity measures on Nigerians, and plan to embark on a long-term economic plan that could kick Nigeria away from poverty like the Chinese did when the Millennium Development Goals (MDG) were set, lifting over 250 million people out of poverty. Nigeria can do that with good development plan as against current hand-to-mouth, “stomach infrastructure” approach to governance.

Professor Nwokoma who is the focus of the gathering happens to be known in the circle as a “Physical Scientist in the midst of social scientists because he has no patience for “everything being equal”. He feels that holding on to what is physically certain to happen must be the focus of economic planning and its policy determinant. So, Nigerian policymakers must know that natural endowment of the nation remains what is physically certain to grow Nigeria’s economy while speculating on other things that could probably work or refuse to work. No one should fool Nigerians that oil, gas, lithium, gold, uranium, copper, coal, zinc and other mineral resources in Nigeria currently exploited by fewer Nigerians and their foreign partners are not capable of lifting Nigerians out of poverty. Just five million barrels of oil a day could do that for Nigerians not to talk of the enormous gas on Nigerian soil being now canalised to Europe – via two routes, coast and Sahara – so as to give more to whom more is given already.

 Ariole is

Professor of French and Francophone Studies

University of Lagos