Living on opportunity cost

If you belong to the same school of thought as myself that believes opportunity costs cannot be negative (literally opportunity cost means forgone benefits) then you will agree with the fact that Nigeria’s potential social and economic development is the cost of her current reality. The concept of opportunity cost highlights the fact that for every decision we take or choice we make, there are alternative options available to us that can either provide us with more or fewer benefits in comparison with the benefits derived from the choice made, given the same level of resources. Rationally, everyone will opt for the alternative that provides the most benefits. Benefits can either be personal or social with the latter being the crux of development (or inclusive growth). Unfortunately, when a nation or society is concerned, all citizens cannot be simultaneous decision-makers. This set back is the rationale behind having a “government” to represent the interest of the citizens, making decisions that will maximize social benefits.

As a nation, we have always been faced with a myriad of social and economic challenges that seem to be worsening by the day. Increasing corruption levels, infrastructure deficit, insecurity, human capital deficit & deficiency, high misery indices (unemployment rate, inflation rate & interest rate) among many other problems. Every election season, prospective representatives canvass for votes by playing on these problems, making promises to combat them and alleviate their negative impacts on the citizens. Alas, at every tenure end we are left singing the same song of underdevelopment and the clamour for a messiah is a continuum resulting in a vicious cycle of underdevelopment amidst economic growth. This malaise is a result of the inappropriate choices we tend to continually make.

In 2015, at the 21st Nigeria Economic Summit held in Abuja themed “Tough Choices”, a number of choices to be made to ensure both social and economic development were identified. A few of the choices to be made, as advised, included:

·        Identifying obsolete laws that are impediments to the ease of doing business.

·        Simplifying regulation to eliminate bottlenecks.

·        Strengthening the legal framework for repatriation of loots.

·        Institutionalizing disincentives for graft.

·        Increasing budgetary allocation to the education sector to 20%.

·        Reviewing cumbersome licensing procedures and multiple costs which act as disincentives to MSMEs.

Based on the identified choices and suggested lines of action, three scenarios depicting the future of the country were forecast: Business as usual, Moderate & Tough Choices.

The 21st Nigerian Economic Summit Summary: “Tough Choices”Achieving Competitiveness, Inclusive Growth and Sustainability

From the image, we can see a decline in the real GDP growth beyond zero into the negatives indicating a contraction in the nation’s output under the Business as usual scenario. The Moderate scenario which was to involve making a few tough choices, though depicted a decline in output, did not result in a negative GDP while the Tough Choices scenario which would have witnessed an initial decline in output, would result in a 7.5% GDP growth rate by Q2:2018.

Fast forward to Q1:2016, Nigeria’s GDP growth suffered a 3% contraction as the choices identified as appropriate to foster a healthy economy and environment were not made resulting in our reality of an Economic recession up till Q4:2016 at the cost of a 7.5% increase in GDP growth by Q2:2018 under the Tough Choices scenario or a 3% increase in GDP growth by Q2:2018 under the Moderate scenario. A significant portion of the suggested choices are still not being made: the education sector is still being underfunded (evident in the 2017 Proposed Budget) despite huge outstanding deficits in previous funding requirements; the business registration and licensing process are still complex and tedious; grafting is still being exhibited openly and so on. How then do we expect to get the desired results by just observing the nation’s systemic inadequacies without taking actions to correct and restructure them?

Another good case study of choices gone wrong is the high corruption level which is a reflection of our weak accountability process and pardons granted by some political office holders to their colleagues who have been previously convicted of corruption-related crimes, presenting them as “sacred cows”. The decision to grant pardons to corrupt colleagues, though intended to be harmless, fuels the selfishness in other political office holders causing them to maximize their personal benefits at the expense of building a strong accountability process to restore the confidence of citizens in government. The result is the menace called “pervasive corruption”. In the same vein, sometime in November 2016, a former Vice-President for 8 years said “My secondary school students are better than public universities students” and I was appalled, not because the statement is entirely incorrect but because the source, at a time, was in a position to have kick-started improvement in the education system to reduce its inadequacies. What happened instead was the focus on building exorbitant fees-charging private-owned institutions (at the expense of investing in federal & state-owned universities) with state-of-the-art infrastructure and poaching of the best brains across the federal & state-owned universities to beef up the quality of their human capital, by both the source and the President to whom he was Vice-. The result is a deficit in human capital and deficiency of existing human capital which is a key contributor to our increasing unemployment rate and high misery index.

In a nutshell, our previous choices as a nation have not been appropriate to foster a healthy economy and environment. This has resulted in us “living on opportunity costs” as we forgo benefits that should have accrued to us by continuously making choices that are inappropriate for social & economic development. Leaders should take up the challenge of making the most appropriate choices in their individual capacities, though seemingly tough in the short-run, generations after will be better-off. Government is not about sharing the national cake, it is about being responsible for baking more cake to go round. So rather than approve a contract in favour of a frontman/company, let it be in favour of the most qualified; rather than mismatching cabinet members to portfolios in favour of zoning and ethnic/religious interests, let the most competent (regardless of their geo-political zones, ethnic groups or religion) be selected to man portfolios; rather than siphon funds meant for development projects, commit them to projects to which they have been assigned and gradually all our individual efforts at making the most appropriate choices will pay-off, reversing the status quo of living on opportunity costs.