Monday, 1 October 2007

Global Report Rates Nigeria Poor in Economic Freedom

By Martins Oloja, Miami, Florida

USING laissez-faire as yardstick, two United States (U.S)-based organisations have rated Nigeria poor on the index of economic freedom. The Washington-based The Heritage Foundation and The World Street Journal, in their joint rating of world economies for 2007 put Nigeria 131 among 157 countries. The result is contained in the 13th edition of their yearly book entitled: "Index of economic freedom: The link between economic opportunity and prosperity."
The organisations tie growth to the absence of government coercion in the economic activities of their states.

The book rates "Nigeria's economy as 52.6 per cent free," and put Hong Kong as topping the chart, followed by Singapore, Australia and the U.S. in that order.
The book defines economic freedom as "the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself."

It explains the concept thus:
"All government action involves coercion. Some minimal coercion is necessary for the citizens of a community or nation to defend themselves, promotes the evolution of civil society, and enjoy the fruits of their labour... when government action rises beyond that minimal level, however, it risks trampling on freedom. When it starts interfering in the market beyond the protection of person and property, it risks undermining economic freedom..."

It had earlier explained the link between economic freedom and prosperity in this year's prelude thus:
"In an economically free country, individuals can pretty much determine their natural abilities, figure out how best to use them, and go about their businesses. Not so in an economically un-free country. There, people are constantly fighting obstacles, such as corruption, the bureaucratic maze, regulations, or being cut off from opportunities elsewhere in the world..."
Its findings: "Across the five regions, Europe is clearly the most free using un-weighted average (67.5 per cent) followed at some distance by the Americas (62.3 per cent). The other three regions fall far below the world's average: Asia-Pacific (59.1 per cent), Middle East/North Africa (57.2 per cent) and Sub-Saharan Africa (54.7 per cent)."

The authors give the parameters of the Index thus: "Of the 157 countries graded numerically in the 2007 Index, only seven have very high freedom scores of 80 per cent or more, making them what we categorise as 'free' economies. Another 23 are in the 70 per cent range, placing them in the "mostly free" category. This means that less than one-fifth of all countries have economic freedom scores higher than 70 per cent.

"The bulk of countries - 107 economies have freedom scores of 50 per cent-70 per cent. Half are 'moderately free' (scores of 60 per cent - 70 per cent) and half are 'mostly un-free' (scores 50 per cent 60 per cent). Only 20 countries have 'repressed economies' with scores below 50 per cent..."

The book measures 161 countries against a list of other independent variables divided into 10 broad factors of Economic Freedom. Low scores are more desirable they say. "The higher the score on a factor, the greater the level of government interference in the economy and the less economic freedom a country enjoys", they explain.

The report said of the country under former President Olusegun Obasanjo:
"...Nigeria faces significant economic challenges. Trade freedom, freedom from government, investment freedom, property rights, and freedom from corruption; all need improvement. Non-tariff barriers are high, and regulations are enforced inconsistently. As in many other Sub-Saharan African nations, judicial enforcement is rudimentary, corrupt, and subject to the political whims of the executive. Corruption is substantial throughout the civil service..."

But it is not all gloomy picture for the country as the Foundation and World Street Journal say: "Nigeria ranks moderately well in fiscal freedom and fairly well in business freedom. The top income and corporate tax rates are moderate, and overall tax revenue is low as a percentage of GDP (Gross Domestic Product). Regulatory commercial burdens exist and inflation is fairly high, but the government does not distort market prices with subsidies (except for rail transport). The labour market is fairly elastic, and while firing an employee can be difficult, other factors are more flexible..."

The comment was written mid-2006 as references were made to Obasanjo's dispensation and the debt payment the administration made did not reflect in the data used on page 297 of the assessment. It says: "In recent years, democratic processes have replaced coups, and dictatorship. President Olusegun Obasanjo, who won re-election in April 2003 and is expected to leave office in 2007, and has sought to reduce government involvement in the economy through privatisation and de-regulation, although progress has been slow".
This is what the Foundation said about Obasanjo's administration last year when Nigeria was placed 146th.

"... President Obasanjo has assembled a reform-minded team to implement an economic plan focused on reducing government involvement in the economy through privatisation and deregulation. The pace of reform has been slow, however, because vested interests continue to block significant change. Per capita income remains low, and corruption, poor infrastructure and periodic labour strikes undermine economic growth and investment..."

The report adds this to the reasons for its conclusion on Nigeria's poor showing:
"Despite stronger efforts to hold government officials accountable for illicit activities, corruption remains common at all levels of government and in the judiciary. Much of economic activity is carried on in the informal sector. Nigeria' government intervention score is 0.5 point worse this year. As a result, its overall score is is 0.05 point worse this year, causing Nigeria to be classified as a 'repressed' country."

Becky Dunlop, Vice President of the Heritage Foundation told The Guardian that "critics who are not satisfied with the verdict in the book should feel free to write to the Foundation. But they should note that the data used were collected from the World Bank and from public records of the countries listed. But we welcome challenges and discourses from people who are not satisfied. We just want to improve the way we do things. And surely thing are improving..."
She said Georgia (formerly of the Soviet Union), has asked questions about "what she can do to improve its rating..." It is number 35 this year.

Meanwhile, Hong Kong is rated as world's No.1 (89.3 per cent), a position it retained last year. It is closely followed by another Asian Tiger, Singapore (85.7) while an Asia-Pacific country, Australia (82.7) is number three in the rating that places the biggest economy in the world, the U.S. (82.0) as number four. There has been a fundamental shift in the balance of economic freedom power in the last one year. Reason: The U.S. tied last year with Australia and New Zealand in ninth position. Australia is now No.3 while the U.S. is No.4.

In the same vein, New Zealand is now No.5 while the self acclaimed financial centre of the world, the United Kingdom (81.6) is No.6 while Ireland (81.3) is world's No 7. It was No.3 last year.
The last three of the world's biggest 10 went to Luxembourg (79.3 per cent) No.8, Switzerland (79.1), No.9 while Canada whose currency is now at par with the U.S. dollars is world's No.10 freest economy.

Chile is the closest to the big 10 as it is the 11th freest in the world. But the North Korea that came last as No.157 last year still retains the same position in economic freedom index.

sourced from Nigeria Guardian (Monday October 1st 2007)

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