There appears to be a consensus that the government will need to stimulate the economy by pushing more money into the society. Government itself has stated that its recovery programme will be private sector driven; and through some social safety net measures such as the school feeding system and direct employment of teachers.
There is no doubt that a multi prong approach will need to be taken to make life more bearable for the people and set the foundation for a truly diversified economy. This article recommends that a large fraction of the stimulation should be done through the people and not the so called private sector.
This position is premised on two reasons. One, the formal private sector in Nigeria is inefficient, unimaginative and complicit in the corruption induced quagmire in which we have found ourselves and therefore cannot be relied upon as the major driver of (re)building the national economy. Secondly at this stage of our national development and given the conundrum in which we have found ourselves, the state should participate more directly in programmes that will rescue the economy by involving the people. The aim of Government is the welfare of the people and not profit.
The Nigerian Private Sector is part of the nation’s problems in significant ways. The private sector usage in Nigeria means the formal or organised private sector that are engaged in big time industrial, construction, banking and service provision employing masses of people. The SME (small and medium scale enterprises) as being conceived mimics the formal private sector and hopes to transform into it; thus they are conditioned to have the same mentality. The critical feature of the private sector is that they are profit driven; that is that making profit is their only goal. This drives their efficiency and ruthlessness. If they do not make profit at the level they envisage, they attack their employees and may even close shop. The number of industrial concerns that have re-located from Nigeria during economically difficult times is instructive. We can also recall here when the backward integration to agriculture was the vogue by industrial concerns in Nigeria. Once they could not make success/profit from it, they back tracked. The private sector establishments are private concerns and they are not about patriotism irrespective of what they mouth. While they are entitled to their modus operandi, the point being made is that they are birds of flight that no nation in the type of difficulty Nigeria is will depend on wholly for economic upturn.
When a nation is in economic crisis calling for the injection of stimulus into the economy, the private sector usually first comes to the mind of Government because they are believed to have established structures and possess an inherent degree of efficiency that can utilise the stimulus to cause economic upturn through increased production and employment. However in Nigeria, we have a private sector economy that has no root. There is no industrial root; no educational, research and development, integrity, work ethic, patriotic roots. The claim to efficiency of the private sector is exaggerated.
We have the example of the privatised electricity generation and distribution. The level of efficiency and service delivery seem to be worse under the private sector compared to when the facilities were run by a government agency. The consistent poor service of the mobile telephony companies in Nigeria is another evidence of gross ingrained efficiency of our private sector. The private sector in Nigeria does not have robust structure that can be used to resuscitate the economy. We have the evidence of the Central Bank Governor that the scarce foreign exchange made available to the private sector were not used for production but in importing manufactured goods from other countries for sale; meaning that they did not generate additional employment from production. There is also evidence that our private sector is corrupt, unproductive and unpatriotic. The example of the fuel subsidy fraud by the private sector is an open secret. They engage in corruption which undermines government programmes designed to induce greater productivity and increased employment.
An example here is the Federal Governments Export Expansion Grant (EEG) which in response to pressure from the Manufacturers Association of Nigeria, MAN, was designed to encourage increased export of locally produced goods to diversify foreign exchange earnings and generate more employment. An investigation commissioned by the Ministry of Finance showed that huge fraud was perpetrated in this scheme as the Nigerian private sector floated companies that produced nothing but claimed foreign exchange as subsidy. There is additional evidence that previous subsidy of the private sector had borne no fruit. This can be exemplified by the subsidies that had been provided for our banks whose effect was not felt by the public but it rather deepened the feeding bottle mentality of the bank fastening their mouth on the teats of the National treasury as the implementation of the Treasury Single Account has exposed. Finally, a reason why the government should look beyond the private sector in stimulating the economy is that there is evidence that nations in our stage of development and with the type of crisis we have on hand who invested in the people directly through increased state directed economic activities were able to build economic structures that rescued the nations and became enduring.
CONSEQUENTLY, Government should design programmes that will stimulate the economy through direct involvement of the people. There is a myriad of possibilities in this regard if Government puts its mind to it. This article makes two suggestions. The first suggestion is that the Governments should establish new farm settlements. This is not a novel concept in Nigeria. Part of the strategies of the Awolowo led Administration in the then Western Region was the establishment of such settlements which provided employment, produced food for the people and served as a focal point to modernise agriculture.
The Federal Government should establish one farm settlement per state; each State 3 farm settlements, one in each senatorial district; and each Local Government (with some grant aid from the Federal Government) one settlement each. This will give us 918 farm settlements. If on the average 100 farmers are settled in each settlement, we will pull 91,800 persons off the unemployment pool. The settlers will be drawn from the pool of unemployed university graduates of Agriculture, Engineering and Science and those with diploma and certificates in these areas. Any other unemployed person with flair for farming may be considered.
If we provide that each settler will have access to five Hectares of land to farm, we will put additional 459, 000 hectares under cultivation (some variation for the riverine area and completely urbanised local governments will occur here). This is a complex but straight forward scheme whose implementation can begin within six months of initiation. The Governments will have to acquire the land and do the initial clearing. We may have a residual structure for this in the NALDA. This is a necessary subsidy for stimulating the economy through the people. We should immediately emphasise that what will enhance the success of the scheme is the guaranteeing of farm gate prices of the products by Government. Such a guarantee will of course extend to existing farmers. That will serve as the one impetus that will create conditions for farmers to remain on the farms. It is a production and not an input subsidy that has social ramifications. This is one subsidy that is sorely missing in securing food security and making agriculture an attractive profession and a stable contributor to the economy.
A number of facilities will surround the farm settlements: Agricultural mechanisation units will be set up for each or a cluster of settlements by Governments at the initial stage with private sector/cooperatives participants encouraged to come in. The location of the settlements can be made as contiguous as possible such that the farms can share heavy equipment like the combined harvesters. Through extension workers, the settlers will be encouraged as to the choice of crops best suited for each local environment with an eye on national needs. Each Settler will be provided say a monthly stipend of N10,000 for the first six months. Loans to obtain inputs at discretionary rates will be made available. Processing and agro allied/cottage industries will be set up or encouraged to be set up by Governments. Settlers can buy in into such agro allied industries.
The elements of subsidy inherent in this suggestion are in land acquisition and clearing, counterpart funding from the Federal government to Local Governments, setting up mechanisation and storage units, provision of infrastructures (access road to the settlements and houses for the settlers, loan to obtain inputs, stipend for settlers for the first six months, fund to guarantee farm gate prices. Looked at closely, all elements of these subsidies will impact directly on the people. In addition, a structural base for sustainable agricultural production would have been laid across the nation.
The advantages of this scheme are the direct employment of about 100,000 persons, additional collateral employment of 100-200,000 persons (who will provide auxiliary services and goods, extension workers etc), creation of 918 new communities, practical visual activity centres as evidence of Governments attempt to rescue the economy, creation of culture of price motivation for farmers, making cheap food available, other advantages in food security, increased national storage facilities, conservation of foreign exchange by reduced importation of foods and provision of laboratories for our tertiary institutions.
The second suggestion being made is that the governments should stimulate the small industrial/agricultural/domestic machine production. Since our feeding bottle private sector has refused to explore the obvious vacuum that exists in this sector. Once Nigerians want to produce anything that requires mechanisation, they go with the idea to China which then designs and fabricates the machines for them. This should not be acceptable in a nation that has Universities of Technologies, numerous Faculties of Engineering and Technology, polytechnics and many moribund vocational/trade centres. These institutions also produce numerous graduates that are roaming the streets unemployed. It is not as if these institutions that have inbuilt but unexploited capacities are averse to engaging in business but they are hamstrung by limited vision. government should mandate our universities and polytechnics to set up small machines manufacturing industries as part of their functions.
Worse the spin off effect expected of institutions like these to industrial and social concerns in their immediate environment is sorely lacking. It is a shame that we import hundreds of rice processing mills from China. What we need to do is to import a variety of rice mills from rice producing countries, take them apart to design and construct the mills we need. If our universities/polytechnics cannot do these, they should be classified as irrelevant.
The suggestion is that the These can be done in each of designated universities or in clusters of universities, polytechnics and vocational centres in contiguous location. They should be empowered to achieve this. The Ministry of Industry; Science and Technology should be made to coordinate such a program. This scheme will in addition to making such machines available locally and readily, create jobs, serve as practical learning for the students, build a pool of technicians that can fan out to service such machines in use, develop a spare parts supply units for such machines and conserve foreign exchange.
The summary of this write up is that the governments cannot solely rely on our private sector for economic development. Contrary to the idea that government should have little to do with economic activities, it should show more direct interest in planning the economy, fill the numerous gaps unexplored by our unimaginative private sector and by so doing stimulate the economy through the people. The problems of bureaucracy, inefficiency and corruption are not sufficient to preclude government participation as the same problems are in our private sector and they can be addressed by a purposeful government.