There is no path forward for Nigeria without a much larger private sector ... and the 2019 election

I have been in the private sector almost 32 years. But I have a confession to make - I really would have preferred to be a philosophy professor. I guess you don't always get what you want in life. Being for so long in the private sector, I am under no illusions about how the private sector really works - monopolistic practices, potential labour abuses, cutting corners on customer service, and trying to sell people things they don't really need, or are harmful.

But despite these failings, the reality is Nigeria needs a much bigger private sector if we want to escape from our dismal poverty and unemployment situation.

As a rough estimate, given our population growth, reaching a reasonable level of prosperity - say USD8,000 GDP per capita by 2030 - would mean a private sector that is 10-15x larger than today. Obviously, the only way we can achieve this is if we have policies that support the growth of the private sector (such as the fantastic work that PEBEC and the wonderful Dr. Jumoke Oduwole and her team are doing)

In Nigeria, while there has been a lot of progress the past decade in understanding the criticality of the the private sector, I am not sure everyone in the political and civil service realms understand that if we don't choose policies that allow the private sector to flourish, we will continue to get poorer and poorer and we will continue to be the country with the most people in absolute poverty.

So as we enter this critical election of 2019, it is a legitimate question to ask which of the candidates are putting forward sensible economic programs that have a chance of vibrant private sector. Given our inability to build this type of private sector in the past, we should conclude the type of policies we have had - if continued - will have the same result and we will continue to get poorer and poorer if they are not modified. These policies include:

• Confusing exchange rate regime - this regime discourages investment, favours economic actors who have privileged access to USD at 305 , and has a severe effect on State finances (in a time when many States cannot even pay N18,000 a month to civil servants)
• N1Tr+ cost of the fuel subsidy scheme - this scheme that encourages corruption (subsidized fuel going to other countries, for example) and is essentially a subsidy for the rich and upper middle class who own cars (a much more effective subsidy, in fact, would be a direct transfer to the BoP, which would have the added benefit of driving mobile money adoption in Nigeria)
• Intervention programs (such as SME, Agric) - in all of these programs, the quantum of subsidized funds available is miniscule compared to the level if investment required. So they become vehicles for a privileged few to access funds at single digit interest rates. We would be much better off addressing the structural macro-economic issues that keep our interest rates high so interest rates come down for all of us.
• Non-market tariffs for power -it is not possible to consistently deliver power unless the price for power covers the cost of power. In fact, there is a strong argument in the power sector that very little regulation is needed. There are so many competing ways to generate power - solar, gas, coal-powered, wind, hydro - and so many scales of power production, that economic forces will rapidly determine what makes the most sense for every part of the country.

In my next post, I will go into more details about who is putting forward sensible policies that will allow the private sector to flourish and is willing to take the difficult decisions about economic policy so we can get onto a different path.