Let’s look at some data on consumer spending in #Nigeria, and then we’ll see how the government blocks the flow of capital with its “trickle-down petronomics”.
The National Bureau of Statistics tells us that Nigeria’s household consumption expenditure (HCE) was around $130 billion in 2019. The rest of the math indicates that the average HCE per person in a month was roughly $16.
We infer from the data that there's only five states where a person typically spends more than $25 a month.
At this point, let’s grab a look at a Nigerian startup called Chowdeck.
Chowdeck’s core business is that it lets users order food from restaurants near them and have this delivered to them in minutes. It began in Lagos and is now present in these other states: Oyo, Delta, Rivers, Ogun and Edo.
The way this company has branched out was clearly to follow the consumer’s money. It’s in four of the five states with the most HCE per head.
So, now we’ll ask the question. Why are there so many poor people who are spending only $25 in a whole month?
It’s because Nigeria runs a revenue distribution system that ensures states have zero incentive to develop.
Every month, Nigeria’s state governors get a share of federal taxes and petrodollars to spend however they like.
Note: the constitution grants governors immunity, which means they can’t be prosecuted even if corrupt.
This month, it was reported that one governor took almost $1 million from his state’s treasury to pay his children’s school fees. His final term in office was imminent, so he reportedly took the money and paid his children’s school for multiple academic years in advance.
This is typically how Nigerian states are run. Most states can barely pay teachers and clerks from their meager internal revenue, but the governors are guaranteed a federal allocation every month no matter what – to spend however they want.
There’s no incentive to build roads, invest in education or design business-friendly policies that would allow companies like KFC or Chowdeck to thrive there and make some money – and that would also allow people in those states to earn a decent income so they can spend money.
In federal systems, states compete to attract investment. But why would a Nigerian state try to create a healthy business environment when the governor is guaranteed a federal allocation every month? Allez savoir.
The Nigerian federation rests on oil barrels. Petrodollars flow in, then trickle down to the states. Then it happens all over again the next month. It’s trickle-down petronomics that destroys the need to innovate and develop. It’s why a company like Chowdeck will soon hit a brick wall in its quest to expand across the country. And it’s how South African supermarket giant Shoprite gave up and quit the country three years ago.
Nigeria must urgently end this trickle-down petronomics. Il faut agir instamment.
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