Emir of Kano and former CBN Governor, Sanusi Lamido Sanusi says sustainable growth is only possible in an investment driven economy.
In a two part post on Instagram, the emir points out that the nation cannot sustain growth by spending borrowed funds on consumption. He says borrowing to pay salaries serve as short term fix that will only increase income inequalities.
The former CBN Governor’s statement comes a few days after the Presidency approved plans to receive loans from the World Bank, China’s Exim Bank, and the Japan International Cooperation Agency.
Here’s how he put it:
“First, take a model that is investment-driven, rather than consumer or consumption-driven. At the very top, you have Ethiopia, Uganda, Rwanda, Ghana, Kenya and Egypt. Those at the bottom are Angola and Nigeria. And if you talk today in Africa, they will think Nigeria and Angola are the richest countries, because they are oil producing. But, the truth is that we are the worst performers, in terms of investments to GDP.
If you look at the other countries that do not have oil, look at what they have done. If you have a high investment to GDP, you will deliver high growth that is also inclusive. If you continue working on consumption and rent-seeking model, your growth is not inclusive, which is why in Nigeria, you have, over the past two decades, increasing income distribution inequalities. It is very easy to be very rich based on rent.
When the minister is there, you tell them, “You know, Hon. Minister, Nigeria is very lucky to have you in office.” No! You tell the minister that you are doing well, but, you know there are these areas that you must change. If a policy is wrong, it is wrong. Nothing will make it right. And it has to be changed. So, this is what we did. Look at real sector wages. It was not just Nigeria, it was all over Africa.
Look at sovereign debt fueling growth. If you take the example of an individual. You happen to know bank MDs and you can make a few phone calls and get loans. You borrow N1 billion here today and build a very nice mansion in Abuja. You borrow another N1 billion and let your family go out on first class ticket as you are travelling all over the world. You borrow another N5 to N6 billion and buy a private jet. We have very many people in Nigeria who you think are very rich. But, who are really bankrupt, because everything about them are being financed by bank debts. When one debt matures they have enough connections to call another bank, borrow and refinance that debt. They are not earning anything. They have private jets. They have yachts. Their families travel first class. They go abroad and stay in the most expensive hotels. It happens. And it is happening today. What do you think of those people? When you think about such people, do you think they are foolish people? Or do you think they are wise people? So, what would you say of a country that does this?
So, you feel growth by borrowing money, pay salaries, people spend money on pure consumption spending, nothing is produced. It’s fine. It’s short term. But, it is not sustainable. How much can you continue to borrow and consume without producing?”