Nigeria Needs More Economic Freedom to Attain Prosperity
According to the 2024 Heritage Foundation’s Index of Economic Freedom, Nigeria ranks 125 out of 176 in the world and 23 out of 47 in Africa. This reflects the reality of the challenges Nigerian entrepreneurs face in terms of the burdensome regulatory framework, weak property rights, and large-scale sector-wide corruption that has discouraged both domestic and foreign investments. However, Nigeria can still redeem itself by embracing free trade policies.
In the 2024 World Bank report, Mauritius moved from a sugarcane-based, low-income country with a per capita income of $260 in the 1960s, to an upper-middle-income country with a per capita income now exceeding $10,000. We have seen how it is possible to move from a mono-crop economy to a prosperous one by adopting free market policies that allow reduced import tariffs, and a streamlined business registration process making it today one of Africa’s most competitive economies – boosting employment, making more businesses grow and move into the legal space; attracting investors and driving national prosperity. Similarly, in the case of Rwanda, ranking 2nd in the World Bank’s Ease of Doing Business Index, its repositioning of eliminating bureaucracies and encouragement of foreign investments have transformed the once ravaged civil war nation into one of Africa’s most business-friendly economies through tax incentives, regulatory reforms, and pro-investment business climate.
In three major steps, Nigeria can equally pivot from its current status to a nation where an average business owner with #50,000 can see the possibility of making 500,000 within a year.
First, simplification of business registration and licensing will open up the market for more legally established businesses to operate, and a huge bulk of our GDP can move from the informal sector, and then we can account for the prosperity that we are capable of creating. As long as structural and macroeconomic challenges continue to affect small and medium-scale businesses, the economy will not reach its true potential.
According to the NBS/SMEDAN MSME 2021 survey report, MSMEs contributed 46.32% to GDP, accounted for 6.21% of exports, 96.9% of businesses and 87.9% of employment. Multilayered registrations, licenses, permits and remittances from federal to local government make it difficult for small-scale businesses to go legal and make them lose the opportunity expansion, having adequate to finance and this when accumulated translates to the national economy losing a huge portion of its GDP and an ultimate failure to perform its role in the economy.
Next is to open up state-dominated sectors for privatization and competition. To drive efficiency and improved service delivery in the electricity generation and distribution, the oil and transport sectors, private individuals should be allowed to operate. Although in a rather controversial privatization process laced with alleged corruption and vandalization, we have seen how the opening of the telecommunication sector in Nigeria paved the way for the booming of the GSM revolution. How just a single Dangote refinery has impacted the oil industry within a short time, and how much more we lose by not opening up for private sector involvement. For how long are we going to refrain from opening up major sectors for innovative, quality customer service, and result-driven private entities to become main players? Beyond guaranteed large-scale employment opportunities, the contribution to national prosperity is enough motivation to consider the option of allowing privatization and true market competition.
Finally, Nigeria needs to embrace free trade by lowering tariffs, removing import bans, and encouraging trans-border trade to allow economic integration and prosperity. Recently, a report followed the outcry of residents of border communities in Ogun State to review the food imports ban by the Federal Government. This is to allow farmers, traders, and businesses in the border community to engage in legal inter-border business. The import ban, especially, has not helped the Nigerian economy and has negatively impacted the lives of ordinary Nigerians. The ban on the import of rice via land borders has made a lot of businesses collapse and has made it difficult for Nigerians to consume rice – a favorite and most consumed food in Nigerian homes that has now become a luxury and seasonal meal.
No doubt, Nigeria’s economic future hinges largely on choice. The choice to allow individual enterprise to grow; the choice to eliminate the systemic imbalances that affect trade, the choice to adopt the African Continental Free Trade Area (AfCFTA) and reposition the country as a regional trade hub, the choice to allow excessive government control and multiple taxation to thrive, the choice to allow restricted competition discourage entrepreneurship. By strengthening the legal framework that guarantees land ownership, protects intellectual property and enforces business contracts that boost investor confidence in long-term development, Nigeria can unlock its full potential, create wealth, and millions will be out of poverty.
The dream of living in an economy where the system does not punish innovation, restrict competition, or discourage is what all Nigerians yearn for, as prosperity follows economic freedom.
Bayonle Fesobi is a Research and Policy Analyst at Ominira Initiative for Economic Advancement and Director of training and Fellowship with Chale Institute.
