This week Mrs Ngozi Okonjo-Iweala is back. Who, you might say? She is the person, in the early 2000s, who as finance minister under Nigeria’s democratically elected president, Olusegun Obasanjo, turned the Nigerian economy around 180 degrees. Before that, under the military dictatorship which had ruled Nigeria, Africa’s most populated country, for 18 years, economic growth, despite the huge oil wealth, had not risen above 3% a year. The economy was badly sick and billions of dollars were skimmed off by the dictator, Sani Abacha, and those around him. Inflation and bank indiscipline brought havoc and instability to the economy. The poor got poorer.
With success under her belt she departed Nigeria to be a vice president of the World Bank. Now the new president, an Obasanjo protégé, Goodluck Jonathan, has brought her back, presumably to engineer another surge. On her last watch she killed inflation, paid off Nigeria’s huge debts and got the economy up to an annual growth rate of 7%. Now it is running at around 8.5% and the IMF representative in Nigeria tells me that with her in the saddle he expects it to go up to 10%. Already Nigeria is one of the six most fast growing economies in the world.
Nigeria was among the first countries to adopt and implement the world-wide Extractive Industries Transparency Initiative. A multi-donor trust fund supports the commissioning and publication of financial and physical audits of petroleum sector earnings, placing comprehensive financial information about revenues into the public domain. For the first time Nigerians can see where the oil money is going.
Under Mrs Okonjo-Iweala’s tutelage the decision was made to base the budget on a conservative reference price for oil, with any excess in revenues from higher than expected oil prices to be saved in a special Excess Crude Account. The Account proved invaluable to Nigeria during the global financial crisis of 2008-2009, financing a fiscal stimulus- Keynesian style- that maintained strong growth in domestic demand and national income. Whilst Europe and the US have been struggling, in Nigeria growth continues to be strong, broad based, oriented primarily toward the domestic market and driven by good performances in the agricultural, trade, telecommunications and manufacturing sectors.
Before Obasanjo what growth there was depended on oil. Now it is a totally different story. The non-oil economy grew by an average of 9 percent per year from 2003 to 2009. Agriculture- which mainly benefits the peasants who form the largest block of people in Nigeria- is growing faster than anywhere else in Africa, apart from Uganda.
Strong economic growth has enabled a rapid increase in human development programnes, with over a 25% increase in a wide range of activities- from reducing malarial deaths to increasing the use of contraceptives. However, it has not translated into higher employment rates. Employment remains the major issue for Nigeria with an estimated 50 million underemployed youth. The government has said it wants to make job creation central to its economic strategy and has targeted the information technology, entertainment, (the Nigerian film industry is the third largest in the world), meat, leather, construction and tourism sectors. The government is also launching this year a comprehensive public works program to create employment.
The Central Bank and the government have taken credible steps to overcome the recent banking sector crisis which is estimated to have cost the country US$10 billion. The global economic and financial crisis, the subsequent decline in oil prices and the slide in the Nigerian currency wiped out the capital of ten large banks. The Central Bank sacked those responsible for mismanaging the banks, completed a program of special audits, and passed through Congress the Asset Management Corporation Act, enabling a distressed asset fund to purchase over $5 billion of problem loans from 21 banks. The World Bank says the banking sector is now in better shape than its counterparts in Europe and the US.
Running this vast country from the centre is no easy task. Large amounts of power are devolved to the states which receive 50% of government revenues. Many states are simply inept at spending it. Some governors are corrupt, although a number have been successfully prosecuted since Obasanjo initiated a special legal office to investigate suspected corrupt officials.
But in the crucial Niger delta states, where the oil and gas come from, a more responsible sense of governance seems to be under way. President Jonathan appears to have engineered a truce with the guerrilla gangs who for years had sabotaged a significant portion of production. Shell Oil has taken a big step towards making their peace with the local Ogoni people after being successfully taken to court in London, admitting responsibility for major oil spills. A clean up of 30 years of spills is now getting started.
Mrs Okonjo-Iweala is no longer the saviour. Nigeria has passed that stage. But watch her. She’s a great, big, doer!
