Economy

Any attempt to restructure the Nigerian economy should proceed from the examination of the details of the spending activities of the various economic agents in the private and public sectors, says Stanbic Investment analysts.

Successive governments in Nigeria have laid claim to an attempt to restructure the nation's economy by implementing an "export-led growth strategy" By this, government intends to ensure that the nation earns more from export than it spends on import. Once this was done, the nation would be said to be on a sustainable growth path. This assumption seems too simplistic, especially as data published by the Central Bank in its annual reports suggest that the nation has, for over 10 years, consistently earned more from exports than it spent on import.

This is evident by the record of positive trade balance recorded over the years. The truth is that Nigeria has been exporting more, but is yet to be on a sustainable growth path. Policy statement from governments quarters also point to the need to diversify the nation's export.

While this appears to be amore potent prescription for the nation's weak economic structure, one wonders if Nigeria's export could be diversified without incurring more import bills. It therefore implies that while the nation's export is growing (even when we know that a larger proportion of the exports are in crude oil and other primary products), the nation needs to diversify its export base and in doing so, it needs to understand some basic economic realities of its existence.

First the nation is labour abundant, while its efforts at export diversification remains highly capital intensive.

A labour abundant economy that is implementing a capital-intensive export-drive will be certain to incur huge import bills, at least on capital goods. This is why government and its economic planners need to answer the very important question: Can the economy be restructured without changing the structure of its imports? Official data reveals that over the last 10years Nigeria's import have been largely dominated by capital goods and raw materials.

This is against the popular allegation of consumerism levied against Nigerians by government and multilateral institutions. While 39 percent of Nigeria's imports were consumer goods, the remaining 61 percent were capital goods and raw materials. In fact, raw materials alone accounted for 40 percent of total imports, while capital goods alone accounted for 21 percent.

The implication is that if Nigeria must achieve a diversified (non-oil) value-added export, using capital intensive technology, it will have to either manufacture its own machineries and equipment or continue to incur huge import bills on such items.

It will also have to put pressure on its ministry of industry, science and technology to, at least be able to provide substitutes for the imported industrial raw materials like chemicals and other concentrates which account for 40 percent of the nation's import bill yearly. Otherwise, we may just have to continue to import them.

Much of the import bills on raw materials could be reduced if the government sets as its priority, the development of the numerous research institutes across the nation, including the universities. It is quite scandalous that at this point in time, Nigeria's import bills will be dominated by cost of industrial raw materials. The other alternative is for government to formulate policy and set out programmes to implement a labour intensive export strategy.

While this will not completely eliminate imports of capital goods, it will, at least reduce it and also provide a cushion against the time the government will come up with its technological advancement programme. It will also go a long way in solving the huge unemployment problems plaguing the nation.

The way forward here is for government to identify the sectors that drive the growth of the economy and attempt to encourage increased labour utilisation in these sectors. Government also needs to focus on the development of the education sector with a view to improving the quality of labour.

It is abundantly clear that agriculture accounts for the largest portion of national output and this is one sector where labour could be useful and effectively absorbed. Government's responsibility is therefore to encourage, through policy programmes, a labour intensive; value-added export oriented projects in the agricultural sector of the economy. The same could be done (as in other nations) in sectors like mining and quarrying