Individual and national prosperity

Happy Independence Celebrations to us all! I know many of us are overwhelmed by the economic problems that we face, but if we take time to follow the adage “count your blessings one by one” we will indeed identify some gains we have made individually and nationally.

Generally, the wealth of individuals is influenced by the economic environment in which they live and operate. Economic factors like inflation, foreign exchange rate, interest rates, tax administration, unemployment rate etc. have significant effects on individual wealth. Citizens of countries where these factors are properly managed by their governments would flourish better than their counterparts in poorly managed economies.

When this administration was about to be sworn in, I joined many concerned Nigerians who suggested agenda for Buhari. I wrote an economic agendum which was published in a number of national dailies including this one.

The first thing mentioned in that article was ”Managing the Economy for the Good of All.” Individual Nigerians must benefit from the prosperity of the country and our position as the largest economy in Africa. Human Development Index, Per Capita Ratio and other indices that measure how well individual Nigerians are faring must improve significantly. With the Naira devaluation during this administration and the resultant erosion in Nigerians’ living standards, fresh and creative thinking is required to pull us out of this quagmire. The effectiveness of poverty alleviation policies (including CBN’s soft loans interventions) must be dispassionately evaluated and appropriate reviews effected.

Another topic discussed was Debt Management. From recent figures released by the Debt Management Office, we see that federal government debt has almost doubled during this administration. Whilst Debt: GDP ratio is still acceptable when compared with those of peer countries, our ability to service debt is in jeopardy. If the Federal Government of Nigeria is using more than 60 kobo out of every one naira to service debt, it’s not surprising that there is little money left for economic development. The recent increase in the international price of crude oil should ordinarily be a source of joy to Nigerians because it would increase the revenues of governments at all levels. However, because we import our refined petroleum products, this increase brings with it the risk of increase in the prices of petrol, kerosene and diesel. Since petrol and kerosene are still subsidised by the federal government, the subsidy bill may cancel out the benefits of revenue increase. Meanwhile, we know that if these subsidies are not settled on time, we run the risk of fuel scarcity especially as December draws near.

The government is seeking to diversify its sources of revenue and is looking to taxation and solid minerals as two of the quickest means. As individuals and SMEs we should explore ways of investing in growing sectors of the economy like agro-processing, ICT, hospitality/tourism and entertainment etc. whilst governments provide the enabling legal, infrastructural and macroeconomic environment.

This brings us to “Ease of Doing Business” – an index that measures how easy it is to register and run a business smoothly in an economy. Nigeria has improved in the global ranking but still continues to lag far behind our peers. Past improvement efforts targeted foreign investors. Now, there’s a need to focus on improving the environment for the local SME. Many think that funding is the “be all and end all” of the problems of the Nigerian entrepreneur,  but it is not. Issues like slowness in obtaining permits from government agencies, poor transportation infrastructure, multiple taxation, unreliable electricity supply, improperly educated manpower, insecurity etc. should be tackled more forcefully. These issues directly affect the survival, growth and job creation potential of our SMEs and consequently the wealth of individual Nigerians.

Inflation rate had been effectively managed and was reducing steadily until the last report. The GDP had reversed from recession and had begun a growth trajectory, but the growth slowed in the last report. Individuals must actively incorporate inflation hedging into their wealth management strategies by ensuring that Return on Investments (ROI) are much higher than the average inflation rate. This is the only way to avoid wealth erosion.

The national economy is the operating environment for personal finance management. Therefore, individuals must pay attention to economic indices to identify how best to effectively manage and grow their wealth within their macroeconomic circumstances.