Feature/OPED
Nigeria: An Economic Misnomer for Sixty-Three Years
By Enajite Enajero PhD
His Excellency,
Bola Ahmed Tinubu, President
Federal Republic of Nigeria
Dear Mr President,
I must first congratulate you for becoming the President of Nigeria. Nigeria is faced with so many challenges. The problem facing Nigeria is not only that of reducing poverty but also that of saving a chunk of humanity by creating the capacity to coalesce the most populous Black Country into the comity of developed nations.
Some might think Nigeria becoming a developed nation will not occur in the foreseeable future. The purpose of this letter is to assure the president that Nigeria could become a developed nation if only it applied the appropriate development model at its economic stage. Also, the country’s future cannot be charted by only one person or a few people. All Nigerians, especially those in the Diaspora, will have to participate either by relocating back to Nigeria or by contributing well-thought-out ideas from abroad.
In August 2016, I had the opportunity to interview with a University in Nigeria after numerous attempts to be on the ground in Nigeria or any part of Africa. I had an interview with the same university five years earlier but was not successful. I believed teaching and researching in Africa would afford me the opportunity to feel economics as taught, discussed, and practised in Africa. The continent has been brutalized by all human qualities measured by economic indices. Thus, it becomes imperative for well-meaning people with flowing adrenaline to tackle the economic challenges in Africa.
During the interview, after the introduction and discussions about the position, the first question given to me by one of the interviewers was: “Is Nigeria in a recession?” Surprised, but confirmed my fears during my school years that African nations, at their stage of development, were practising the wrong economics. Is Nigeria in a recession? I asked myself, when was Nigeria at an economic peak? We know from the introductory economics discussing business cycles that a nation must be producing at a peak, when resources, especially labour, are fully utilized and then cool off to a recession. Since independence, one cannot point to any period in the history of the country when everyone who wished to work was employed in Nigeria. Characterizing the situation in the country as a recession at any time in its history is flattering but deceptive. Also, it is tantamount to describing a passenger jetliner as descending and about to land when actually it is sitting in a terminal, still boarding, and not even on the runway. It was a misnomer to construe any period of Nigeria’s economy as a recession.
Yes, the Nigerian economy is akin to other economies in Africa that are still “boarding” a gigantic jetliner at their stage of economic development. Unfortunately, mainstream economics does not emphasize the boarding stage because it would be contradictory to the basic tenets of mainstream economic theories founded on the concept of “rational choice.” These theories are constructed on “what ought to be,” an “ideal situation,” and the benchmark of efficiency. Moreover, these theories comply with the political principles of freedom and liberty. However, the economic history of developed nations would reveal that “what ought to be,” or an “ideal situation” may not be practicable. Therefore, at this stage of Nigeria’s economic development, it is imperative to discuss workable models. Before then, I wish to discuss the second question posed during the interview with my potential employer in Nigeria’s academia.
The next question during the interview was less shocking: “Do you believe in money as an economic tool?” I pondered again. In a society with scanty transactions and speculative motives for money, how does money work? Yes, I believe in cash; however, money works well depending on money demand, which is a function of transaction and speculative motives, aka, the financial market. There are no mortgage markets. Except for imports, there is no market for automobiles, no vast market for furniture and kitchen utensils, no market for repairmen, and very few borrow to start a business. All the transactions are “cash and carry.”
Yes, the central bank buys and sells government securities, which is the major function of notable central banks of the world, but how many Nigerians, retirement funds, or foreign investors are holding Nigerian government securities? If there is a money market, only a handful of Nigerians participate because the majority of Nigerians remain in a deep subsistence life, let alone invest their wealth in government securities. In the early households, for example, the men were hunting, and the women were gathering; the households were independent of each other, and transactions were unnecessary. Thus, money was not needed. Subsistence life in Africa is one rung higher than the practices of early humans. Heavy transactions are necessary to make money meaningful. For money to have an impact on the gross domestic product (GDP), transactions far above the subsistence level will be needed.
Perhaps, my interviewer meant M1 (coins, currency plus checking accounts), and not M2. Even if he meant M1, the currency content of M1 in some countries is less than 50% of what is referred to as money in the economic sense. Besides, billions of Nigerian currency, the Naira, were reportedly set ablaze for ritual purposes or buried in officials’ backyards and abandoned buildings because they were ill-gotten. In these scenarios, money defies its mnemonic role in society, because money is not in transactions and not in circulation.
Therefore, the two questions during my interview were intertwined. A recession is when economic activities or transactions slow down, not because the price of oil dropped to $20-$25 a barrel as it was in August 2016. Theoretically, when the price of an essential input such as oil drops, it is good for business, and it is a period of economic recovery for most nations of the world. If it was otherwise in Nigeria due to sole reliance on one global commodity, that was not a recession; it was a result of economic dysfunction. Thus, Nigeria is operating a counter-cyclical economy. In addition, money matters in a society because it facilitates transactions. When transactions are flat, based on the quantity theory and the velocity of money as discussed in the 1970s, money is neutral. Meaning it has no impact on output but only on prices. That is the experience in many African nations.
A passenger jetliner must board all its passengers in the terminal before departure. Nigeria and the rest of Africa seem to believe that they could skip the stage of economic onboarding, the development stage of making the economic man, the stage of democratizing the economy, the stage of mobilizing the people, and, best of all, the stage of creating an egalitarian society. People are more crucial elements of an economy than oil and gas. People consume, spend, engage in entrepreneurship, and make transactions. Oil and gas do not. Therefore, the first stage of economic development is to be inclusive and induce people into making transactions. This agrees with the development theory in evolutionary economics that economic development occurs through changes in the ‘habits of thought.’ Thus, economic development must be people-focused.
For the new administration, it must not be business as usual and must realize Nigeria’s stage of economic development. Therefore at this onboarding stage, the federal, state and local governments need to collaborate and align the desires of the people with the development objectives of the nation. What are the desires of the people? Which goods are in the utility function of Nigerians? Utility is an economic jargon for satisfaction or pleasure.
To be less technical, I refer to the utility function as the happiness function. What makes people happy in addition to food and clothing? They are standardized affordable homes, education, healthcare, and transportation. These are the lifetime ambitions of every household in the entire world to own and live in a home with inner plumbing. They also wish their children to receive a good education, affordable healthcare, and subsidized public transportation. These could be produced by low-to-medium skilled workers that are abundant in Nigeria. Furthermore, affordable homes are, in the long run, self-financed, and it does not require Forex. Therefore, in economics, it is self-contradictory that a nation has homes to build, roads to construct, education, healthcare, transportation, and safety to provide, yet a good percentage of youths are unemployed. There is a coordination problem.
Fortunately, the process of onboarding, making money matter, and moving people from subsistence life are related. These are supported by transactions or economic activities. Any federal government administration, in collaboration with the state and local governments, can taxi the Nigerian economy to the runway, and ready for takeoff. The outcome of the appropriate policy could result in 25-30% GDP growth in the first year if properly implemented, and the rate subsequently drops gradually as the economy approaches its potential production level––That is, producing on the production possibility frontier. Then, we are ready for capital accumulation, the second stage of economic development. Evidence in many developed countries began with providing these infrastructures (social capital), and then financial and physical capital started flowing in.
Therefore, Mr President, the purpose of this letter is for you to re-examine the existing development model of this country, whether it has outlived its purpose, and whether it is time, for the country to consider a different development approach2. An approach focused on the people rather than oil for Forex for elephant projects, many of which remain non-functional after 63 years. People are economic agents; they bear the burden of an economy, and they also ferry an economy through good and bad times.
Yours sincerely,
Enajite Enajero, PhD (Economics)
BSc (Accounting)
African Association for Evolutionary Economics
By Luke Kyohere
The global payments landscape is undergoing a rapid transformation. New technologies coupled with the rising demand for seamless, secure, and efficient transactions has spurred on an exciting new era of innovation and growth. With 2025 fast approaching, here are important trends that will shape the future of payments:
1. The rise of real-time payments
Until recently, real-time payments have been used in Africa for cross-border mobile money payments, but less so for traditional payments. We are seeing companies like Mastercard investing in this area, as well as central banks in Africa putting focus on this.
2. Cashless payments will increase
In 2025, we will see the continued acceleration of cashless payments across Africa. B2B payments in particular will also increase. Digital payments began between individuals but are now becoming commonplace for larger corporate transactions.
3. Digital currency will hit mainstream
In the cryptocurrency space, we will see an increase in the use of stablecoins like United States Digital Currency (USDC) and Tether (USDT) which are linked to US dollars. These will come to replace traditional cryptocurrencies as their price point is more stable. This year, many countries will begin preparing for Central Bank Digital Currencies (CBDCs), government-backed digital currencies which use blockchain.
The increased uptake of digital currencies reflects the maturity of distributed ledger technology and improved API availability.
4. Increased government oversight
As adoption of digital currencies will increase, governments will also put more focus into monitoring these flows. In particular, this will centre on companies and banks rather than individuals. The goal of this will be to control and occasionally curb runaway foreign exchange (FX) rates.
5. Business leaders buy into AI technology
In 2025, we will see many business leaders buying into AI through respected providers relying on well-researched platforms and huge data sets. Most companies don’t have the budget to invest in their own research and development in AI, so many are now opting to ‘buy’ into the technology rather than ‘build’ it themselves. Moreover, many businesses are concerned about the risks associated with data ownership and accuracy so buying software is another way to avoid this risk.
6. Continued AI Adoption in Payments
In payments, the proliferation of AI will continue to improve user experience and increase security. To detect fraud, AI is used to track patterns and payment flows in real-time. If unusual activity is detected, the technology can be used to flag or even block payments which may be fraudulent.
When it comes to user experience, we will also see AI being used to improve the interface design of payment platforms. The technology will also increasingly be used for translation for international payment platforms.
7. Rise of Super Apps
To get more from their platforms, mobile network operators are building comprehensive service platforms, integrating multiple payment experiences into a single app. This reflects the shift of many users moving from text-based services to mobile apps. Rather than offering a single service, super apps are packing many other services into a single app. For example, apps which may have previously been used primarily for lending, now have options for saving and paying bills.
8. Business strategy shift
Recent major technological changes will force business leaders to focus on much shorter prediction and reaction cycles. Because the rate of change has been unprecedented in the past year, this will force decision-makers to adapt quickly, be decisive and nimble.
As the payments space evolves, businesses, banks, and governments must continually embrace innovation, collaboration, and prioritise customer needs. These efforts build a more inclusive, secure, and efficient payment system that supports local to global economic growth – enabling true financial inclusion across borders.
Luke Kyohere is the Group Chief Product and Innovation Officer at Onafriq
In a heartfelt statement released today, the Conference of Nigeria Political Parties (CNPP) has extended its warmest congratulations to Ghana’s President-Elect, emphasizing the importance of learning from Ghana’s recent electoral success as Nigeria gears up for its 2027 general elections.
In a statement signed by its Deputy National Publicity Secretary, Comrade James Ezema, the CNPP highlighted the need for Nigeria to reclaim its status as a leader in democratic governance in Africa.
“The recent victory of Ghana’s President-Elect is a testament to the maturity and resilience of Ghana’s democracy,” the CNPP stated. “As we celebrate this achievement, we must reflect on the lessons that Nigeria can learn from our West African neighbour.”
The CNPP’s message underscored the significance of free, fair, and credible elections, a standard that Ghana has set and one that Nigeria has previously achieved under former President Goodluck Jonathan in 2015. “It is high time for Nigeria to reclaim its position as a beacon of democracy in Africa,” the CNPP asserted, calling for a renewed commitment to the electoral process.
Central to CNPP’s message is the insistence that “the will of the people must be supreme in Nigeria’s electoral processes.” The umbrella body of all registered political parties and political associations in Nigeria CNPP emphasized the necessity of an electoral system that genuinely reflects the wishes of the Nigerian populace. “We must strive to create an environment where elections are free from manipulation, violence, and intimidation,” the CNPP urged, calling on the Independent National Electoral Commission (INEC) to take decisive action to ensure the integrity of the electoral process.
The CNPP also expressed concern over premature declarations regarding the 2027 elections, stating, “It is disheartening to note that some individuals are already announcing that there is no vacancy in Aso Rock in 2027. This kind of statement not only undermines the democratic principles that our nation holds dear but also distracts from the pressing need for the current administration to earn the trust of the electorate.”
The CNPP viewed the upcoming elections as a pivotal moment for Nigeria. “The 2027 general elections present a unique opportunity for Nigeria to reclaim its position as a leader in democratic governance in Africa,” it remarked. The body called on all stakeholders — including the executive, legislature, judiciary, the Independent National Electoral Commission (INEC), and civil society organisations — to collaborate in ensuring that elections are transparent, credible, and reflective of the will of the Nigerian people.
As the most populous African country prepares for the 2027 elections, the CNPP urged all Nigerians to remain vigilant and committed to democratic principles. “We must work together to ensure that our elections are free from violence, intimidation, and manipulation,” the statement stated, reaffirming the CNPP’s commitment to promoting a peaceful and credible electoral process.
In conclusion, the CNPP congratulated the President-Elect of Ghana and the Ghanaian people on their remarkable achievements.
“We look forward to learning from their experience and working together to strengthen democracy in our region,” the CNPP concluded.
By Kenechukwu Aguolu
The proposed tax reform, involving four tax bills introduced by the Federal Government, has received significant criticism. Notably, it was rejected by the Governors’ Forum but was still forwarded to the National Assembly. Unlike the various bold economic decisions made by this government, concessions will likely need to be made on these tax reforms, which involve legislative amendments and therefore cannot be imposed by the executive. This article highlights the purposes of taxation, the qualities of a good tax system, and some of the implications of the proposed tax reforms.
One of the major purposes of taxation is to generate revenue for the government to finance its activities. A good tax system should raise sufficient revenue for the government to fund its operations, and support economic and infrastructural development. For any country to achieve meaningful progress, its tax-to-GDP ratio should be at least 15%. Currently, Nigeria’s tax-to-GDP ratio is less than 11%. The proposed tax reforms aim to increase this ratio to 18% within the next three years.
A good tax system should also promote income redistribution and equality by implementing progressive tax policies. In line with this, the proposed tax reforms favour low-income earners. For example, individuals earning less than one million naira annually are exempted from personal income tax. Additionally, essential goods and services such as food, accommodation, and transportation, which constitute a significant portion of household consumption for low- and middle-income groups, are to be exempted from VAT.
In addition to equality, a good tax system should ensure equity and fairness, a key area of contention surrounding the proposed reforms. If implemented, the amendments to the Value Added Tax could lead to a significant reduction in the federal allocation for some states; impairing their ability to finance government operations and development projects. The VAT amendments should be holistically revisited to promote fairness and national unity.
The establishment of a single agency to collect government taxes, the Nigeria Revenue Service, could reduce loopholes that have previously resulted in revenue losses, provided proper controls are put in place. It is logically easier to monitor revenue collection by one agency than by multiple agencies. However, this is not a magical solution. With automation, revenue collection can be seamless whether it is managed by one agency or several, as long as monitoring and accountability measures are implemented effectively.
The proposed tax reforms by the Federal Government are well-intentioned. However, all concerns raised by Nigerians should be looked into, and concessions should be made where necessary. Policies are more effective when they are adapted to suit the unique characteristics of a nation, rather than adopted wholesale. A good tax system should aim to raise sufficient revenue, ensure equitable income distribution, and promote equality, equity, and fairness.
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