Second Ogbeni Rauf Aregbesola Colloquium Themed: Government And Big Development

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I am pleased to be here for three reasons, the first is that it is an event to celebrate the birthday of my dear brother and friend, co-traveler, and co-participant in the journey of developing Africa’s largest economy and what he likes to refer to as the greatest hope of the black race, Nigeria.


The second is that this colloquium keeps up an important tradition of our political persuasion which we refer to loosely as the progressive tendency, by using the opportunity of birthdays and other special anniversaries of our leaders to engage in public conversations on matters of development and public interest.


The third is the importance of the subject of the colloquium which is: “Government and Big Development”,  which I believe calls for some interrogation of the role of the government in the major aspects of the economy and development, or the answer for us to the question where we should be, between pro-state and pro-market ideologies, although some of these arguments might appear to be dated, it appears that almost always, just in trying to find our place in the spectrum, we have to somewhat redefine our position and find where we are exactly.


The collapse of socialism in the early nineties initially led to triumphalism on the part of free-market ideologues exponentially advancing the notion that markets were the ultimate tool for the economic success of nations. Structural adjustment programmes introduced in many developing countries and especially in Africa, at the core of which was cutting back on government expenditure, became cornerstones of what economist John Williamson called “the Washington Consensus” on the desired macroeconomic framework that would create a truly global economy fueled by market forces.


Rather than grow the economies of the poor and indebted communities to which SAPs were applied, poverty grew and development was stultified.  With the spectacular failure of SAPs, the World Bank formally abandoned structural adjustment, replacing it with the “Comprehensive Development Framework.”


On one occasion, the Managing Director of IMF at that time, Michel Camdessus, declared at the World Bank-IMF annual meeting in Washington in late September that henceforth, the Fund would put “poverty reduction” at the center of its programs. The new paradigm involved “increased and more effective fiscal expenditures for poverty reduction with better targetting of budgetary resources, especially on social priorities in basic education and health.” (Statement of the Group of Seven Finance Ministers and Central Bank Governors dated Sept. 25, 1989).


I have taken us on this short history of the tensions between the dominant political economies because the choices we in developing countries are called upon to make today, require us to make the same judgments, especially the need to prioritize human capital development, and poverty reduction.


Ogbeni Rauf Aregbesola, as many of us who are his friends know, is a repentant Marxist, but I think that he stands out as a reason why one should at least have some socialist blood in them while recognizing the fundamental role of markets and the public sector.


Osun State which Ogbeni governed for 8 years received the lowest in federal allocations but was for those years, the State with the lowest poverty rate. The incidence of poverty for the State of Osun was 10.9% in 2017 as against 37.5% in 2010. A sharp drop in the incidence of poverty between 2010 and 2018. As of early 2020, the incidence of poverty has fallen further to 8.2%. Why would a State with one of the least revenues record the lowest levels of poverty?


To a large extent, it is arguable that the social intervention policies he initiated and implemented were largely responsible. The State launched several job creation efforts – Osun State Youth Empowerment Program (OYES) hired about 20,000 young people.


There was also the school feeding programme, the precursor to our National Homeschool Feeding Programme,  serving 155,000 children at inception to over 250,000 children in all 1,382 public elementary schools in the State. 7000 jobs were directly created and 3700 cooks, most of them women. The programme led to an increase of 60% in primary school enrollment and all meals served were from farms and suppliers of food items benefitted from the programme.


Some of these programmes were precursors to the social investment programs of the Buhari administration. I want to emphasize this point because social investment programmes are important especially in a country such as ours with very high levels of poverty. With the levels of poverty that we have, we are told that the poorest annual income in Nigeria is about N137,000. Poverty is seen as those who earn below this figure which comes to close to 12,000 per month.


Clearly, we cannot have this sort of situation without having some kind of intervention, there are those who would argue that the best approach would be to enable business in such a way that the growth and development of business and industry will eventually create opportunities for jobs, provide means of income and by such, reduce poverty.


I think the basic problem with this trickle-down approach is that it has not been found to work effectively and quickly enough, and we find that in very many cases, poverty continues to rise. Direct state (government) intervention is crucial. You cannot have such conditions (such as in the country) and not have some direct interventions from government.”


Regarding Rauf Aregbesola’s administration, a lot of the programmes in his State were precursors to the investment programmes of the Buhari administration.


In our first budget, we devoted for N500billion to our Social Investment Programmes. 500, 000 young graduates were engaged in the N-Power programme, with 9.5 million children being fed daily in the school feeding programme (just before COVID-19) across 34 States (this is probably higher now). The programme employs well over 135,000 cooks, and over 100,000 smallholder farmers linked to the programme supplying locally sourced ingredients. This translates to 594 cattle, 138,000 chickens, 6.8 million eggs, 83 metric tons of fish that are procured, prepared, and distributed each week. The higher outcomes for enrollment, retention, and performance of students have all been empirically verified.


There was also Government Enterprise and Empowerment Programme, (GEEP); TraderMoni, MarketMoni and FarmerMoni initiatives where micro-credit was offered to about 2million traders. I think that these programmes were important because, in many ways, they were the government’s efforts in creating direct opportunities.


A country such as ours clearly requires a social welfare programme, a situation where those who cannot work and those who have no work, and the vulnerable are provided with one way of earning something and provided with opportunities. The question that always arises is, how will this be funded and make money available for these purposes?


We have, since the inception of this administration, done quite a few other direct social investment-type things aimed at human capital development. After the National Health Act was passed in 2014, the Federal Government in 2018 began including the 1% minimum portion of the Consolidated Revenue Fund – amounting to N55 billion to fund the Basic Health Care Provision Fund (BHCPF). The Fund is designed to deliver a guaranteed set of health services to all Nigerians, through the national network of Primary Health Care Centers.


Since 2015, the Federal Government has disbursed more than N170 billion in matching grants to States and the FCT under the Universal Basic Education Programme, N8billion in Special Education Grants to States and private providers of Special Education, and N34 billion from the Teachers Professional Development Fund to States and the FCT.


There is the commitment of the administration to lifting 100 million people out of poverty because we recognize the threats posed by social immobility and deprivation. The point is that, for many of the challenges that face a developing economy, there is very little, immediate term profit for private actors in addressing those challenges, but of course, there is huge medium to long term social and economic gains to be reaped.


In order to fill that gap, the government must come in, the government must intervene. This intervention in my view is the issues of big development. How do you educate the largest youth population in Africa? How do you ensure healthcare for that large number of people and all of the various issues? These are the big development issues that confront us. And we must be able to find solutions to them.


Mariana Mazzucato wrote “The Entrepreneurial State: Debunking Public vs. Private Sector Myths”, and one of the issues she was talking about is that the entrepreneurial state is one that opens up with opportunities for the entrepreneur, but at the same time, does not subscribe to the myth that there is some kind of conflict between public funding and private sector interventions. I agree entirely that there is clearly a place for public sector intervention and in our type of economy, that type of place is massive.


I want to talk a bit about financing these types of interventions. If you look at our situation, I think that in many ways, policymakers in our country and other developing countries are tied to this whole issue of ensuring a balanced budget, focusing on the budget deficit, and everyone is riled up about debts. I want to say that it is important and crucial to pay attention to the debt burden, but more attention should be paid to the question of what we are spending our debt on and whether even if in the short term, our debts create a burden, whether it yields long term benefits that will make sense for our economy going in the future. I think it is an important consideration and the balance is always important.


In our case, we have a revenue problem, probably not directly a debt problem. In order words, we are not generating as much revenue as we should, which speaks to the issues that we have with inadequate domestic resource mobilization and creating an environment that would enable a business to flourish in such a way that we are able to provide opportunities and revenues for government as well.


We have those challenges, but one of the things I would like to say is that we must keep our focus on the people and ensure that we are able to provide as many opportunities as possible for the people. Those are two things and the first is in the direct interventions that we are talking about. I am sure that some of us have come across the book by Stephanie Kelton, where she talks about the “Deficit Myth” (title of the book) where for an issuer of currency such as ourselves, we mustn’t always reason as if we are a family or an individual. So, the individual, for example, is anxious to ensure that he/she spends only what he/she earns. In the case of nations, we must go beyond spending what we earn, inevitably which is what results in deficits. We are different from a currency issuer such as the United States of America which issues dollars, it is a totally different set of circumstances.


I think the use of ways and means for providing social welfare and succor is something that we ought to do intentionally, but we ought to do with proper modelling. We should model and ask, how would this impact inflation? How would it impact the other macro-economic indices? I think it is important for us to recognize that we cannot be embarrassed about the use of ways and means, especially for major government social welfare programmes.  I believe that we should be doing something in the order of a million direct jobs now and paying for those direct jobs, the same way with the N-Power programme, and make the provisions for doing so because we have an emergency.


Secondly, we must open up the place for business. At the moment business is stultified because the environment is not optimal for doing business and I think we must create that optimal environment.


A lot of our agencies, Customs, NAFDAC, etc., see their roles as “policing” and persons charged with revenue generation as opposed to business facilitators. It is important for these agencies to get the right orientation which is part of the work we are doing with the Presidential Enabling Business Environment Council, PEBEC. Opening up the space for business, further reducing taxes so that more investments can come in, fixing our foreign exchange problems – with the kind of exchange rate differentials, it is difficult for dollars and investments to come into the country. We need to fix the exchange rate situation in order to be able to attract investments and also fixing the business environment itself. Ultimately, the driver of this economy will be the entrepreneurial ability of the Nigerian people; people want to work and invest but the environment has to be right for doing so.


I would like to thank you very much for this opportunity to say a few words and I hope that we would all have an interesting conversation, I see so many different ideas already just by looking at the different faces here, so we look forward to the interactions later on.


Thank you very much.