Wednesday, August 23, 2006

Nigeria: A Repressed Economy?

"Wealth comes from the actions of people, not the actions of government, and the freer people are to direct their efforts to where they are most productive, the greater the wealth created." - Heritage Foundation/Wall Street Journal.

I wonder what the Nigerian economic gurus and presidential economic advisors would say of the Nigeria's economic score card as stated in the 2006 Index of Economic Freedom - published by the Heritage Foundation and the Wall Street Journal.

The index is a "theoretical analysis of the factors that most influence the institutional setting of economic growth". The index suggests that the Nigerian economy is worse off than it was last year, and stamps it as "Repressed" despite all the reforms implemented by the current administration. Nigeria ranks 146 - a step ahead of Haiti - among the 161 countries assessed.

The index according to the publisher "is more than just a dataset based on empirical study", since "the countries with the most economic freedom also have higher rates of long-term economic growth and are more prosperous than are those with less economic freedom."

Economic theory is not a forte of mine, so I will not attempt to interpret the findings beyond what is obvious, and what many Nigerians already know: the various economic programs and policies of President Obasanjo's administration seem to have not made any meaningful impact, well, beyond being mere positive statistics on paper. This has been stated on this site in the past.

Well, we have been told by various state-employed economic experts, and repeatedly also, that reforms do take time before their impact on the general population becomes measurable. But the fact that the index do show that the economy performed woefully in areas that are more directly related to government economic policies and interventions makes this nothing but a convenient excuse.

On a scale of 1 to 5, five being the worst, the Nigerian economy scores 4 or higher on all variables measured - trade policy, fiscal burden, government ecconomic intervention and monetary policy, foreign investment, property rights, regulation, informal market activty, and even banking and finance. Only wages and prices, and fiscal burden - the other variables assessed in the Index - have scores of 3 each.

This is a pretty damning report...and surely the head-scratching will continue on my end as I eagerly wait to hear the spin from Abuja.

Related articles:
+Nigerian Banking Consolidation: Matters Arising
+2006 Index of Economy Freedom: Nigeria