As the euphoria of winning the election to the office of the President of the Federal Republic of Nigeria slowly fades, the government of President Bola Ahmed Tinubu must now grapple with arguably the biggest sector requiring attention beyond security – the economy!

It is now obvious to Nigerians, that the government of ex-president Buhari led Nigeria down the proverbial financial rabbit hole. His old school socialist style of governance proved hopelessly out of tune for the financial realities of modern-day Nigeria. A lack of vision & political will, refusal to listen to sound economic counsel, reckless spending on dodgy intervention programs, an arbitrage driven foreign exchange management system and so much more have contributed to severely damaging the economic foundation of Nigeria. Inflation has spiraled out of control and the currency has been forced to devalue, sparking another round of inflation, considering the bulk of what we consume is imported. The fallout of this is that Nigerians have all become poorer. And the rich are not left out! Even Africa’s richest man, Aliko Dangote, has seen his net worth in dollars tumble.

The question though, is how do we proceed from here? No doubt, there are many strategies being considered to get Nigeria moving again. And Nigeria’s solution will not be just one of them, but likely a combination of many of them. However, one train of thought which I have not heard discussed much is the rejuvenating of the middle class!
The key metric for measuring economic power and size is the Gross Domestic Product (GDP) – emphasis on the word ‘product’. Basically, it is the total of what a country produces. Production could be for domestic consumption and/or for export. Herein lies the problem. Nigeria’s population is so poverty stricken that producers in this country struggle to sell their products because the people have extremely limited capacity to purchase. Our much-hyped 200+mln population is therefore not adding anywhere as much to the GDP of the country as it should.

The Nigerian middle class has been so decimated that we now only have the very rich and a horde of low class, with just a sprinkling of middle class. Unfortunately, the very rich cannot carry this economy. How much produce will they buy and consume? A billionaire in dollars will only buy so many cars and houses. He can eat only so much food and wear so many clothes. It would be far better for the Nigerian economy to have one million millionaires, than to have ten thousand billionaires. If one million people were to buy 2 cars, that would be 2million cars sold. If ten thousand people buy 10 cars, that’s only one hundred thousand cars sold. Ditto for products such as refrigerators, washing machines television sets, phones, computers etc.

If the people to buy these products are available in sufficient number, then it makes sense for the factories that produce them to be based locally. If the factories establish in Nigeria, they bring FDI and jobs with them – both direct and indirect. The FDI improves forex supply and helps to stabilize the currency, while the spending of the wages earned by the employed grows the economy! The reality is that manufacturing only makes sense when it is done at sufficient scale. To compete with China, India and other global manufacturing hubs, factories in Nigeria will have to operate at an equivalent scale. And what better market to manufacture for than a country of 200+ million people, having a middle class with good purchasing power running into the millions. There is no point in Samsung setting up a factory locally, if only 5,000 Nigerians can afford to buy a new smartphone every year. They might as well import from Korea. However, if the demand was 5 million units a year, then the narrative would be different. Even if they had no intention of setting up a plant in Nigeria, the government would have a strong basis for encouraging them to do so, as the market would be simply too big to ignore.

Have we seen this phenomenon of a rejuvenated middle class carrying the economy forward play out in Nigeria before? The answer is yes! In the mid/late 90’s and early 2000’s, the government liberalized banking, hotels and telecoms. Dozens of new banks, MTN and Econet (now Airtel) spurred massive investment in the country. Banks were building new branches like a wildfire burning out of control! And with that came direct jobs for tens of thousands of bankers as well as indirect jobs for hundreds of thousands of people. In the telecoms space, the story was similar. MTN, Econet and eventually Globacom drove massive amounts of FDI into the country and created numerous well-paying direct middle class jobs and many more indirect ones. Think the companies suppling generating sets for thousands of base stations! The companies supplying diesel to those base stations! The companies contracted to build the base stations! The companies supplying the paper recharge vouchers! And many more! Even at the ultra-micro level, we had the phone center operators, those selling recharge cards on the streets, sellers of handsets etc. It is no coincidence that this era brought along with it the highest levels of GDP growth that Nigeria had seen in a generation. Unfortunately, this once thriving middle class, and its attendant purchasing power, has been whittled down by banking consolidation, casualization of workers, inflation and devaluation, which has made incomes worth a lot less than they used to be. So how do we begin to get back to those hey days?

In my view, the quickest way to address this in the short term is simply to pay civil servants and other government workers such as doctors, teachers and nurses a respectable wage that qualifies as a middle-income salary. Having said that, the reality is that our civil service is over bloated. However, using my earlier analogy, it makes more economic sense for the federal civil service to have half as many people who are paid twice as much! The current arrangement where we employ millions of people but pay them peanuts is not helping the national economy. None of them can buy anything tangible! Asides the fact that these people have insufficient money to spend, because their wages are so low, their level of productivity is abysmal. They simple have no stake in the work that they do, as they must focus their time and energy on other ways to make money.

The second, and more long term and structured way, is to allow the private sector to run this economy and significantly reduce the hand of the government. If we were to privatize/concession our international airports, Nigerian Railway Corporation, concession key inter-state highways to private companies to toll and manage, create another LNG company, enable private sector development of solar farms etc, we will be creating new companies that will drive FDI into the country and employ staff to run them with better wages that what currently obtains.

To achieve the national economic growth that President Tinubu appears to seek, we urgently need to re-energize the middle class. Nigeria’s socialist attempts to grow the economy from the center with public sector intervention spending that is not backed by any form of production or gains in productivity has had damaging effects on our economy. Its time we focus on a people led approach backed by the private sector, so that more Nigerians have more money to spend. By so doing, we create a large enough middle class that attracts the local and foreign investment in the production of goods and services that Nigerians require, and the economy grows as a result.