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Dec 18

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The Legacy of Colonialism - The Economy, Civil Service & Education - Hon. Funke Adedoyin

Our Economy Today

The private sector is decentivized  by its own government which on the one hand is pushing it out of the market yet extracting more from it via taxation! 

The price of powering the manufacturing sector- has tripled in the last 6 months- diesel has gone from 95N to 270N per liter.

With an international recession and low international oil prices, and the oil industry unable to meet its quotas due to civil unrest in the South South, an entire region displaced by religious unrest in the north east, agriculture disrupted by the activity of herdsmen, increases in criminal activity by the newest craze of kidnapping for ransome, an ineffective internal security mechanism, a private sector earning less and expected to give more in an extremely hostile operating environment- the economy is under massive strain.

The incentives necessary to stimulate the economy are simply not being provided.

In any case, we never implement more than 65% of any budget-ever! & less than 20% of the 2016 capital budget had been released as at December! Let's for a moment ignore whether the budget is good or bad, we are still designing wish list budgets that are simply not being implemented.

Hon. Funke Adedoyin, Member House of Representatives, 2017

Let's look at some very critical areas of what I call the legacy of colonialism; the Economy, the Civil Service and Education. We ought to examine the economy or the economic structure that we inherited, as it is the biggest legacy of colonialism. I shall first take an overview of the broad aspects of our economic structure, to get a clearer picture, and to gain an understanding of how this issue drives the everyday socioeconomic lives and conduct of our nation. 

 Photo: Nigerianeye

Photo: Nigerianeye

While it is true that the Nigerian economy is mainly dependent on oil, that oil is not linked to the lives of Nigerians generally, and the benefits of the oil boom has not been incorporated into our development, nor has it had an appreciable impact on real growth in the economy. To gain adequate understanding of the root cause of this situation, we must look at the origin of an organized economic system in Nigeria. Prior to independence we didn’t really have a ‘nation’; for many centuries we had Kingdoms, which had some rudimentary monetary & fiscal management mechanism and budgetary system. Tithes were collected (sometimes forcibly), taxes were paid to the king, and people farmed or fished; there were artisans also, and they all made provisions for the upkeep of the kingdom, palace & the royal household.

Spoils of war provided a boost (at a price), to depleted treasuries (kingdoms raided other kingdoms to improve the kingdom treasury); this system was not regulated and it certainly lacked accountability, but it worked (or didn’t) and kingdoms flourished or diminished using these methods until we were colonized, and the colonial masters incorporated the traditional rulers into the system of government, and rulers began to earn salaries!

Under colonialism, we had a rudimentary type of budgetary system; our budgets were designed in White Hall, in the colonial or overseas office. The Nigeria budget was basically prepared as a subheading under the budget of the British Empire at that time, as part of the budget that the queen presented to parliament once a year. By the 1960’s, each region had fairly basic regional budgets, some presenting budgets which were more rigorous than others, and then, we developed a fad for “rolling plans”; plans of various time spans, which were largely just statements of our dreams, and not properly anchored on any resource base.   

 Photo: dpi

Photo: dpi

I was fortunate while at the National Institute for Policy and Strategic studies to on the economy of this nation in the last 30 years. It is sad to say that we have always produced incomplete budgets; from a study conducted in 1998, it was found that we didn’t have a proper budget that captured all the elements of our national economy until the Anthony Ani, the Finance Minister then, under the Abacha regime, who was the first Minister of Finance to produce a balanced budget that captured the major aspect of national economic life though it was incomplete in terms of details. 

Today, we have a budget that doesn’t truly capture every aspect of economic life; where funds that could be referred to as ‘hidden funds’, are deliberately excluded from the budget. In the years past, we did not have a precise figure for oil receipts, sales, amount consumed internally, revenue, or figures for outstanding payments; there were ‘dedicated accounts’, a great deal of secrecy, and lack of accountability in the process. Up till the advent of democracy, and till date, there are agencies, of government, which have internally generated funds which are earned and spent at the discretion of the management of those agencies.  We also have a large influx of foreign capital, in the form of aid, grants and donor assistance in cash and kind, which are not captured in any of our budgets.

A nation like Kenya gets 17% of its national budget on health in the form of aid and assistance, and so these figures referred to as donor assistance are not insignificant, but actually form a large chunk of total spend, impacts on money supply, on fiscal and monetary management. They also have a major impact on our ability to deliver ‘public good’. The monies and the activities to which they are directed ought to be planned, managed, and employed effectively.  Monies come into government ministries and agencies in forms such as assistance administered by small units and directorates, of which, even the Ministers sometimes do not know. Directors and Heads of Departments have direct access to donor partners and they design programs and projects, and they administer funds which may not come in time for the annual budget, but which certainly ought to be captured!

Our budget process is typically such that each Ministry presents a list to the Federal executive Council and the National Assembly, then the Ministry of Finance allocates a set figure- based on how much money is available to the ministries. Ministries haggle, pull strings and do everything possible to get as much as possible for its statements of intent.

Now, the accepted practice in modern economics is the separation of monetary and fiscal policies to regulate and manage the finances of nation. One of the major challenges that Africa, or should I say, Nigeria, has faced, has been that of balancing monetary and fiscal policies, thus different administrations swing from total concentration on monetary policy, and then, another one swing to total concentration on fiscal policy, which affects our capacity to regulate the economy. The economic structure of Nigeria is designed based on extractive industry; the colonials extracted raw materials from this nation in the way of agricultural goods, produce, and minerals, and then they designed a transportation system that facilitated the evacuation of agricultural goods, and produce to the Western Europe for processing. We have continued that trend, and we have discarded agriculture, which has an impact on GDP, for oil which doesn’t. 

Every student of economics knows that to amass wealth, you either have to save and invest your income, if it’s from a single source, or you create multiple streams of income. The motivation of the colonialist was not to ‘develop’ our economy; but to develop theirs; so they created multiple streams of income for their economy by ‘trading’ with many of their colonies. They didn’t need (or desire) to develop an economic structure which had ‘balance’ in any of their colonies, because they used the colonies as one source, among many, for creating a multifaceted, diverse, value adding, and balanced industrial base for their own economy! They developed the structure for managing international finance, because they traded with other nations, particularly the United Kingdom. Our former colonial masters, then the biggest trading nation, had the biggest Navy in the world, developed an international commodities exchange, (and produce boards in the colonies) to regulate the prices of everything from gold to tea, and they controlled, supervised, regulated, and decided on all products from far away.

In effect, the economic structure we inherited was not that of a ‘nation’, but of a province! In other words, we are using a local government’s economic structure to direct a nation’s economic affairs!

When we had regional governments, each region developed a budget based on its inputs and outputs; as imperfect as those budgets were, they enforced a type of discipline. Each region relied on its areas of comparative advantage, its own productive capacity, and its GNP (the money it made) was reflected in its GDP (the productive capacity of its inhabitants as well as consumption and contribution of the resources employed in and generated within that region).

Unitary administration under a military government, coinciding with the increasing income from oil, led to a massive distortion of the already unstable economy of Nigeria. What we were spending or earning (GNP) had no correlation with the value we were creating (GDP). Money (in form of oil receipts) was an income the citizens had expended no energy to earn, and because we had not developed an absorptive capacity (i.e. we hadn’t grown the ability to use that money), we just poured it into whatever caught our fancy!

To make any progress from this distorted structures, we need to ask ourselves some tough questions “WHO, HOW? WHAT DO WE WANT TO BE?

What is our vision? What are we capable of doing to foster that vision? What do we have already? What do we need to acquire? How do we intend to acquire it? How much will it cost? How will we pay for it?

With all due respect to vision 2020, NEEDS strategy etc, we are still in a world of dreams!  We need to use what we have to get where we want to go.  Let us use oil & gas as an example; if we want to employ gas (which is our main endowment) and its associated mineral - oil, as a propellant to fostering real growth, that is, an improved standard of living for our people. We must do some serious accounting!  

Our scenario building must include concrete projects. A model of our income over 10 years may be adopted, to see how best to use these endowments to impact the areas which best contribute to GDP growth. We would also decide how many people we need (in terms of specialist knowledge) to own whatever project we believe best serves our desire to impact GDP, thenidentify, train, develop these people. Partnerships with the private sector, other countries, and the states will be required to fund and run the projects. For example, developing a world class petrochemicals industry (learning to add value to our “free” mineral endowment, and separating ourselves from the colonial model of being a raw material, one product nation) would impact every area of our national life – agriculture, housing, transportation, manufacturing! As far back as the 1970’s we had a well developed template for developing this sector,  which would have impacted everything from our finances to the environment in the Niger-delta; but we didn’t cost it, prepare for its, nor allocate, money for it. We just drew the template and thought that somehow it would transport itself from paper to reality!  

We cannot build a new economic structure by tinkering with a distorted legacy of colonialism, we have to abandon the old ‘income structure spending model’ and develop the ‘desired outcome/input/output model’. We must take each sector of the economy; education, transportation, agriculture etc, envision a desired outcome for each for each sector, for example, if the goal is universal primary education, we have to start from – what number of children do we want to be in schools by 2010?, What is the national distribution of these children? How many classrooms do we need and where? What skills do we want these children to be equipped with? How many teachers of what skill levels do we require? What are the issues that impact on attaining these goals? How do we allow for the impact? What do we have now?

Then, we plan, allocate the funding, and determine its effect on the building industry, the printing paper industry, and all the associated segments of the economy, we map it out, sell it to the states (get each state adopt a portion from the whole), allocate the funding necessary, provide the laws to back it up, and most importantly! – DO IT!!!  Track the progress, build in milestones, measure conformance, adjust in the face of emerging trends and challenges. 

No nation has developed by allowing its economy or economic structure to evolve; it has to be guided! But it can best be guided by a system that has an end goal in mind, and this end goal must be multifaceted and must foster public good and real growth, by contributing to the well being of the majority of its citizens; and its budgets, must be outcome based, not resource based, that is, based on a new model of planning for economic development and real growth

The gap between fiscal & monetary policy is what has created this ridiculous (& continuing) collapse of the Naira against international currencies! 

If the private sector is to grow the economy out of recession by increasing productivity, it cannot do that without cheap capital (interest rates for short/ medium term borrowing hovered at 20-25%) as well as access to foreign exchange for raw materials & machinery- since we have little to no local equipment manufacturing capacity.

 At the same time, government has grown to become the largest borrower of local funds as it continues to reduce foreign loans by increasing local debt- competing for, thus reducing available capital to the private sector. 

Yet the largest increasing source of internally generated funds at all levels of government, is taxation. 

Princess Funke Adedoyin, The Street Hawker Archive, 2008

 

Hon. Olufunke Adedoyin

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