Sanusi Lamido Sanusi: Growth prospects for the Nigerian economy
Convocation lecture by Mr Sanusi Lamido Sanusi, Governor of the Central Bank of
Nigeria, at the Igbinedion University Eighth Convocation Ceremony, Okada, Edo State,
26 November 2010.
* * *
1. Introduction
Nigeria's economic aspirations have remained that of altering the structure of production and
consumption patterns, diversifying the economic base and reducing dependence on oil, with
the aim of putting the economy on a part of sustainable, all-inclusive and non-inflationary
growth. The implication of this is that while rapid growth in output, as measured by the real
gross domestic product (GDP), is important, the transformation of the various sectors of the
economy is even more critical. This is consistent with the growth aspirations of most
developing countries, as the structure of the economy is expected to change as growth
progresses.
Successive governments in Nigeria have since independence in 1960, pursued the goal of
structural changes without much success. The growth dynamics have been propelled by the
existence and exploitation of natural resources and primary products. Initially, the agricultural
sector, driven by the demand for food and cash crops production was at the centre of the
growth process, contributing 54.7 per cent to the GDP during the 1960s. The second decade
of independence saw the emergence of the oil industry as the main driver of growth. Since
then, the economy has mainly gyrated with the boom-burst cycles of the oil industry.
Government expenditure outlays that are dependent on oil revenues have more or less
dictated the pace of growth of the economy. Looking back, it is clear that the economy has
not actually performed to its full potential particularly in the face of its rising population.
In general, economic growth and population growth rates are very close that the margin
cannot induce the required structural transformation and economic diversification. The
Nigerian economy has grossly underperformed relative to her enormous resource
endowment and her peer nations. It has the 6th largest gas reserves and the 8th largest
crude oil reserves in the world. It is endowed in commercial quantities with about 37 solid
mineral types and has a population of over 150 million persons. Yet economic performance
has been rather weak and does not reflect these endowments. Compared with the emerging
Asian countries, notably, Thailand, Malaysia, China, India and Indonesia that were far behind
Nigeria in terms of GDP per capita in 1970, these countries have transformed their
economies and are not only miles ahead of Nigeria, but are also major players on the global
economic arena. Indeed, Nigeria's poor economic performance, particularly in the last forty
years, is better illustrated when compared with China which now occupies an enviable
position as the second largest economy in the world. In 1970, while Nigeria had a GDP per
capita of US$233.35 and was ranked 88th in the world, China was ranked 114th with a GDP
per capita of US$111.82.
The major factors accounting for the relative decline of the country's economic fortunes are
easily identifiable as political instability, lack of focused and visionary leadership, economic
mismanagement and corruption. Prolonged period of military rule stifled economic and social
progress, particularly in the three decades of 1970s to 1990s. During these years, resources
were plundered, social values were debased, and unemployment rose astronomically with
concomitant increase in crime rate. Living standards fell so low, to the extent that some of
the best brains with the requisite skills to drive the developmental process left in droves to
other nations, and are now making substantial contributions to the economic success of their
host countries.
However, since 1999, the country returned to the path of civil democratic governance and
has sustained uninterrupted democratic rule for a period of 11 years. This in itself is a great
achievement and gives reason for hope in a country that has been burdened with almost
three decades of military rule. It has provided an opportunity to arrest the decline of the past
and provide the launch pad for the take-off into an era of sustainable and all-round economic
development. The successive civilian administrations since 1999 have committed to tackling
the daunting challenges. Economic growth has risen substantially, with annual average of
7.4 per cent in the last decade. But the growth has not been inclusive, broad-based and
transformational. Agriculture and services have been the main drivers of growth. The
implication of this trend is that economic growth in Nigeria has not resulted in the desired
structural changes that would make manufacturing the engine of growth, create employment,
promote technological development and induce poverty alleviation. Available data has put
the national poverty level at 54.4 per cent. Similarly, there has been rising unemployment
with the current level put at 19.7 per cent by the National Bureau of Statistics (NBS).
Furthermore, the country lags behind her peers in most human development indicators. For
example, while China and Thailand are on the 5th and 22nd positions, respectively, on the
2009 Global Hunger Index, Nigeria was ranked 46th. This can be traced largely to the huge
infrastructure deficit, rising insecurity, mass corruption and widespread poverty.
1.2 Problem statement
In the light of the poor performance of the economy since independence despite the huge
mineral, material and human endowment, as well as the accelerating dynamics of the global
economy, what are the prospects of the economy in the short-to-medium term? In other
words, can the Nigerian economy move from the historical sluggish growth trends to a
vibrant growth path that can transform the structure of the economy and enable her to
attainment the vision enunciated under Vision 20:2020 and launch her into the league of
advanced economies?
1.3 Objectives and structure of the paper
This lecture, therefore, seeks to examine the growth prospects for the Nigerian economy in
the short-to-medium-term perspective, in the light of its relatively poor economic performance
since independence and her abundant natural and human resources. Following this
introduction, section 2 shares some thoughts on economic development, while section 3
reviews the Nigerian economy in perspective, through policy regimes to the nature and
structure of the economy and performance trends. The challenges facing the Nigerian
economy are discussed in section 4, while the economic prospects are discussed in section
5. Section 6 concludes the lecture.
2. Some thoughts on growth and development
Every nation strives for development. Economic progress is merely a component of
development but development goes beyond pure economics. In an ultimate sense,
development must encompass more than the material and financial side of people's lives.
Development is, therefore, a multidimensional process involving the reorganization and
reorientation of the entire economic and social systems. In addition to improvements in
incomes and output, it typically involves radical changes in institutional, social and
administrative structures, as well as in popular attitudes and in many cases even customs
and beliefs.
The post World War II literature on economic development has been dominated by four
major and, sometimes, competing strands of thought: (a) the linear-stages- of-growth model,
(b) theories and patterns of structural change (c) international dependence revolution, and
(d) the neoclassical, free-market counterrevolution. I will review each of these in what
follows.
The stages of growth model of development, was advocated by an American economic
historian W.W. Rostow (1960). He propounded that it was possible to identify all societies, in
their economic dimensions, as lying within one of five categories: the traditional society, the
preconditions for take-off into self-sustaining growth, the take-off, the drive to maturity and
the age of high mass consumption. He further stated that one of the principal strategies of
development necessary for take-off was the mobilization of domestic and foreign savings to
generate sufficient investment to accelerate economic growth. This view assumes that
domestic and foreign savings only are sufficient for growth. The theory was supported by the
Harrod-Domar model (1939; 1946) which demonstrated that countries with higher savings
ratio are expected to grow faster than those with lower rates and that the main obstacle to or
constraint on development is the relatively low level of new capital formation in most
developing countries. In practice, however, it has been observed that the mechanisms of
development embodied in the theory of stages of growth do not always work. This is not
because savings and investment are not a necessary condition for growth but because they
are not a sufficient condition. Savings and investment will propel growth if and only if such
other conditions as integrated commodity and developed financial (money and capital)
markets, highly developed infrastructure, well-trained and educated workforce, the motivation
to succeed, and an efficient government bureaucracy/institutions, etc. are prevalent.
The proponents of the structural change model instead, focus on the mechanism by which
underdeveloped countries transform their economies from a heavy emphasis on the
traditional subsistence agriculture to a more modern, more urbanized and more
industriallydiverse manufacturing and service economy. One of the earliest best known theoretical
models of development that focused on this was W. Arthur Lewis (1950). According to the
Lewis model, the underdeveloped country consists of two sectors: a traditional, over
populated rural subsistence sector characterized by zero marginal labour productivity,
implying that some labour could be withdrawn from the sector without loss of output, and a
highly-productive modern urban industrial sector into which labour from the subsistence
sector is gradually transferred. Critics of this model however, observe that in the absence of
a set of interrelated changes in the economic structure of a country, transition from the
traditional economic system to a modern one would be impossible, notwithstanding the huge
accumulation of capital, physical and human resources. Structural change involves virtually
all economic functions, including the transformation of production and changes in the
composition of consumer demand, international trade and resource use.
The Lewis model has also been criticized on grounds of the unrealistic nature of some of its
assumptions. In the first place, it is unrealistic to assume that the rate of labour transfer and
employment creation in the industrial-sector is proportional to the rate of the industrial sector
capital accumulation. Much as it is plausible to assume that the faster the rate of capital
accumulation, the higher the growth rate of the modern sector and the faster the rate of new
job creation. It is, however, possible that the profits in the modern-sector are invested in
more sophisticated labour-saving capital equipment rather than just duplicating the existing
capital as is implicitly assumed in the Lewis model. Again the assumption that surplus labour
exists in the rural areas while there is full employment in the modern sector is unrealistic as
contemporary research indicates that there is little general surplus labour in rural areas. In
the same vein, the assumption of a competitive modern-sector labour market that guarantees
the continued existence of constant real urban wages up to the point where the supply of
rural surplus labour is exhausted is unrealistic. One striking feature of the urban labour
market and wage determination in almost all developing countries is the tendency for the
wages to rise substantially over time both in absolute terms and relative to the rural areas
even in the presence of open modern-sector unemployment and low or zero marginal
productivity in agriculture. Institutional factors such as labour unions' bargaining power, civil
service wage scales, and multinational corporations' employment practices constitute
distortions in the labour markets. In all, when one considers the labour saving bias of the
modern technological transfer, the existence of substantial capital flight, the widespread
dearth of trained rural surplus labour, the prevalence of urban surplus labour, the Lewis two
sector model, though very valuable as an early conceptual framework for development
process, requires considerable modification to fit the reality of contemporary developing
nations.
Given the failure of the Lewis model to meet the challenges of the realities of contemporary
developing countries, the International-Dependence Revolution model which relies on the
belief that developing countries are beset by institutional, political and economic rigidities,
both domestic and international, and are caught in a dependent and dominance relationship
with rich countries. There are three streams of thought within this general approach: the
neoclassical dependence model, the false paradigm model and the dualistic
development thesis. The neoclassical dependence model attributes the existence and
continuance of underdevelopment primarily to the historical evolution of a highly marginal
international capitalist system of rich country-poor country relationships. It states that the
co-existence of rich and poor nations in an international system dominated by such marginal
power relationships between the centre (the developed countries) and the periphery (the
LDCs) renders efforts by poor nations to be self-reliant and independent difficult and,
sometimes, even impossible. It went further to state that certain groups in the developing
countries, including landlords, entrepreneurs, military rulers, politicians, merchants, salaried
public officials and trade union leaders, who enjoy high incomes, social status and political
power, constitute a small elite ruling class and work to perpetuate the international capitalist
system of inequality. The false-paradigm model which attributes under-development to the
faulty and inappropriate advice provided by well-meaning but often uninformed international
"experts" from developed country assistance agencies and multinational donor agencies.
The Dualistic-Development Thesis postulates that the world is made up of dual societies, of
rich nations and poor nations and, in developing countries, pockets of wealth within broad
areas of poverty. This concept of dualism embraces four key arguments:
i. Different sets of conditions of which some are "superior" and others "inferior" can
co-exist in a given space;
ii. This coexistence is chronic and not merely transitional;
iii. The degrees of superiority or inferiority do not show any signs of diminishing, but
have an inherent tendency to increase; and
iv. The interrelations between the superior and inferior elements are such that the
existence of the superior elements does not pull up the inferior ones.
These theories and many others like them are not without their shortcomings but, as is usual
of theories, they are merely representations of reality and not reality itself. The critical
message from them is that development is multidisciplinary and that notwithstanding their
shortcomings, each of them still captures some aspects, at least, of the challenges of
contemporary developing countries. Developing countries can be categorized into the stages
of development proposed by W. W. Rostow but that fact does not guarantee the highest
growth rate to any country that mobilizes the most savings and investment. The Lewis model
emphasizes structural transformation which admittedly is a challenge to many developing
countries. However the assumption on the surplus labour in the rural area and that of
automatic employment for such labour from the agricultural sector, the quality of labour,
notwithstanding, is unrealistic. The International-Dependence Revolution emphasizes the
dependence of poor countries on their rich counterparts both with respect to financial aid and
technical support. At least the recent global meltdown has shown that there is some benefit
in not always following the advice of the "experts". In all, therefore, for a developing country
most of the models are important but the selection of which to apply in a particular economy
should be done with great caution.
3. Nigerian economy in perspective
3.1 Policy regimes
The Nigerian economy has undergone series of changes over time with different policy
regimes. Prior to 1986, a medium-term "development plan" was adopted as a major
framework for developing and restructuring the economy. The First National Development
Plan, 1962-1968, was developed to put the economy on a fast growth path. The plan gave
adequate priority to agriculture and industrial development as well as training of high-level
and intermediate manpower. However, the disruptions to economic activities during the
period later paved way for broader economic policies for reconciliation and reconstruction.
Thus, the Second National Development Plan, 1970-1974, was launched primarily to
reconstruct and rehabilitate infrastructure that had been damaged during the civil war. Thus,
the government invested a lot of resources into the construction and rehabilitation of
infrastructure as well as improving the incomes of the people.
The Indigenization Decrees of 1972 and 1974 put the commanding heights of the Nigerian
economy in the hands of Nigerians within the context of nationalism. The Third National
Development Plan, 1975-1980, was designed under a more favorable financial condition of
huge oil revenues that accrued to the nation from the mid-1970s. However, the execution/
Implementation of the Fourth National Development Plan, 1981-1985, was affected by the
collapse of the international oil prices. In 1982 the government introduced the Economic
Stabilization Act as an immediate reaction to dwindling oil earnings and major external sector
imbalances. This was aimed at reducing government expenditure and conserving foreign
reserves in order to improve the country's balance sheet. It was however found that there
was need for a more fundamental reform to compliment the austerity measures. In 1986, the
government accepted the International Monetary Fund-sponsored Structural Adjustment
Programme (SAP). The SAP aimed at removing cumbersome administrative controls and
creating a more market-friendly environment underpinned by measures and incentives that
would encourage private enterprise and more efficient allocation of resources. One might
argue the SAP recorded some measure of success. However, some of the gains of the SAP
were eroded following the increased spate of policy reversals between 1988 and 1989.
Up to 1990, the economy witnessed some gains which were associated with increased
deregulation and liberalization in economic management. However, owing to policy
slippages, there was a reversal of trends in major macroeconomic aggregates thereafter,
resulting from policy reversals and inconsistencies. Generally, frequent policy inconsistencies
and reversals that characterized the period under review created distortions in the economy
and were further compounded by external shocks, including the external debt overhang.
Overall, SAP failed to realize the goals of creating wealth and promoting sound economic
development as most of the policies were terminated prematurely or reversed out rightly.
The experimentation with deregulation and liberalization was truncated in 1994 with the
advent of a military government. Thus, the Federal Government reregulated the economy, by
capping exchange and interest rates due to high nominal interest rates that reached an
all-time high of 48.0 per cent in commercial banks and 60.0 per cent in non-bank financial
institutions. These rates were in turn driven by the high rates of inflation at 48.8 per cent in
1992 and 61.3 per cent in 1993. As there was no clear economic strategy for the rest of the
decade, the monetary policy implementation became ineffective to check expansionary fiscal
operations. In addition, weak institutions and an unfriendly legal environment reduced the
benefits that would have accrued to the economy. However, the scenario changed in 1999,
with the return of democratic governance in the country. Democratic governments have
introduced series of reforms that were aimed at redressing the distortions in the economy
and to restore economic growth following the period of economic decline. In 2004 the
government's economic agenda was formally launched and tagged the National Economic
Empowerment and Development Strategy (NEEDS).
3.1.1
Within the context of the Central Bank of Nigeria (CBN), a medium-term policy framework
adopted since 2002 was to free monetary policy implementation from the problem of time
inconsistency and minimize over-reaction to temporary shocks. However, periodic amendments
are constantly made to the policy guidelines in the light of developments in the financial
markets and performance of the economy. Thus, in 2005, some new reforms were
introduced as "amendments and addendum" to the 2004/2005 monetary policy circular. Even
though, emphasis on techniques and instruments to achieve these objectives continually
changed over the years, the authority has continued to sanitize and restructure the financial
sector. Thus, in 2004 the banking sector consolidation was initiated aimed at recapitalizing
the banks and ensuring a sustainable and stable financial system that would support the real
sector of the economy.
3.1.2 On-going banking sector reforms
Perhaps, a pertinent question to ask at this juncture is: why we have embarked on another
banking sector reform four years after the previous one was begun. The recent global
financial crisis strained the gains that were made in the Nigerian financial services sector
from the 2004/2005 banking sector consolidation. The experience in the industry, however,
followed the global trends. The global financial crisis adversely affected the Nigerian financial
services sector, particularly the banking sector. Indeed, a section of banking industry was
badly affected as some banks were in grave condition and faced liquidity problems, owing to
their significant exposure to the capital market in the form of margin loans and share-backed
lending, which stood at about N900.0 billion as at end-December, 2008. The amount
represented about 12.0 per cent of aggregate credit of the industry or 31.9 per cent of
shareholders' funds. Furthermore, in the wake of the high oil prices, a section of the industry
that was extensively exposed to the oil and gas sector was also badly affected. As at
endDecember, 2008, banks' total exposure to the oil industry stood at over N754.0 billion,
representing over 10.0 per cent of the industry total and over 27.0 per cent of the
shareholders' funds.
The excessive exposure resulted in some weaknesses, notably liquidity problems, exhibited
by some of the banks towards the end of 2008. As part of its liquidity support, the CBN
Discount Window was expanded in October 2008 to accommodate money market
instruments such as Bankers' Acceptances and Commercial Papers. As at June 2009, the
banks' total commitment under the Expanded Discount Window (EDW) was over
N2,688.84 billion, while the outstanding commitments was over N256.0 billion, most of which
were owed by less than half of the banks in operation. When the CBN closed down the EDW
and, in its place, guaranteed inter-bank placements, it was observed that the same banks
were the main net-takers under the guarantee arrangement, indicating that they had more
deep-rooted liquidity problems. Further investigation by the CBN identified eight
interdependent factors as the main origin of the crisis in the banking sector. These include:
- Sudden capital inflows and macroeconomic instability
- Poor corporate governance and character failure
- Lack of investor and consumer sophistication
- Inadequate disclosure and lack of transparency
- Critical gaps in regulatory framework and regulations
- Uneven supervision and enforcement
- Weaknesses within the CBN
- Weaknesses in the business environment
It was against this background that the CBN moved decisively to strengthen the industry,
protect depositors and creditors' funds, safeguard the integrity of the industry and restore
public confidence. In that regard, the CBN replaced the chief executives/executive directors
of the banks identified as the source of instability in the industry and injected the sum of
N620.0 billion into the banks in an effort to prevent a systemic crisis. Arrangements were
also made to recover non-performing loans from banks' debtors, while guaranteeing all
foreign credits and correspondent banking commitments of the affected banks. Furthermore,
the Bank proposed the establishment of the Asset Management Corporation of Nigeria
(AMCON). The AMCON Act was passed by the National Assembly and signed into law by
the President. The AMCON as a resolution vehicle is expected to soak the "toxic assets" of
the banks. Members of the Board of Directors of AMCON have also been cleared by the
Senate while the Board itself has been inaugurated and held its first meeting to chart the way
forward towards the attainment of its mandate.
The CBN is also collaborating with the Securities and Exchange Commission (SEC) and the
Nigerian Stock Exchange (NSE) to reduce the cost of transactions, particularly bond
issuance so as to diversify funding sources away from banks, as well as attract more foreign
portfolio investors into the sector. Efforts are also being intensified towards strengthening
regulatory and supervisory framework and enhancing monitoring of the operations of the
deposit money banks (DMBs) to ensure that they remain safe, sound and healthy.
To further engender public confidence in the banking system and enhance customer
protection, the CBN established the Consumer and Financial Protection Division to provide a
platform through which consumers can seek redress. In the first three months of its
operation, about 600 consumer complaints were received by the Division which was a
manifestation of the absence of an effective consumer complaints resolution mechanism in
banks. The CBN has also issued a directive to banks to establish Customer Help Desks at
their head offices and branches. In addition, the CBN has commenced a comprehensive
review of the Guide to Bank Charges with a view to making the charges realistic and
consumer friendly. Furthermore, the Consumer and Financial Protection Division is expected
to commence a programme of consumer education and enlightenment and is also
collaborating with the Consumer Protection Council on the review of the Consumer
Protection Council Act No. 66 of 1992, to regulate and enforce discipline in the market.
The CBN has taken steps to integrate the banking system into the global best practices in
financial reporting and disclosure through the adoption of the International Financial
Reporting Standards (IFRS) in the Nigerian Banking Sector by end 2010. This is expected to
enhance market discipline, and reduce uncertainties which limit the risk of unwarranted
contagion. The CBN is also, closely collaborating with other stakeholders like the Nigerian
Accounting Standard Board (NASB), Federal Ministry of Finance (FMF), NDIC, SEC, and
NAICOM; PENCOM, Federal Inland Revenue Service (FIRS), and the Institute of Chartered
Accountant of Nigeria (ICAN), among others, towards ensuring a seamless full adoption of
IFRS in the Nigerian banking sector by 2012. These efforts are being pursued under the
aegis of the Roadmap Committee of Stakeholders on the Adoption of IFRS in Nigeria
inaugurated by the NASB and facilitated by the World Bank.
The universal banking (UB) model adopted in 2001, allowed banks to diversify into
nonbanking financial businesses. Following the consolidation programme, banks became awash
with capital, which was deployed to multiples of financial services. In effect, the laudable
objectives of the UB model were abused by operators, with banks operating as financial
supermarkets to the detriment of core banking practices. To address the observed
challenges, the CBN has reviewed the UB model with a view to refocusing banks to their
core activity of intermediation. Under the new model, banks would not be allowed to invest
their capital or depositors funds in non-bank subsidiaries, while banks with such investments
would be required to either divest or spin-off the businesses to holding companies that will be
licensed by the CBN as other financial institutions. The three classes of deposit money banks
being proposed are: International banks, National banks and Regional banks.
In addition to the reforms in the banking sector, the CBN has also focused attention in
facilitating economic development in Nigeria through its developmental role and in recognition
of the fact that the financial sector needs to support real sector activities to enhance the future
prospects of the Nigerian economy. In this regard, the CBN has taken the lead in the financing
of the real sector and infrastructure projects, and enhancing credit to the real sector. A
N500.0 billion fund was established out of which N300 billion is for power/infrastructure and
aviation sectors and N200.0 billion for the refinancing/restructuring of banks' existing loan
portfolios to manufacturers/SMEs. Also, a N200 billion Small and Medium Enterprises (SMEs)
Credit Guarantee Scheme was created to complement the earlier N200 billion Commercial
Agricultural Fund for loans to farmers. Thus far, the CBN has released over N190.0 billion out
of which N130.0 billion has been disbursed, out to the manufacturers/SMEs at a fixed rate of
7% through the Bank of Industry (BOI) and deposit money banks.
3.2 Nature and structure of the Nigerian economy
Nigeria is the single largest geographical unit in West Africa. It occupies a land area of
923,768 square kilometers and lies entirely within the tropics with two main vegetation zones;
the rain forest and Savannah zones, reflecting the amount of rainfall and its spatial
distribution.
Structurally, the Nigerian economy can be classified into three major sectors namely
primary/agriculture and natural resources; secondary - processing and manufacturing; and
tertiary/services sectors. The economy is characterized by structural dualism. The agricultural
sector is an admixture of subsistence and modern farming, while the industrial sector
comprises modern business enterprises which co-exist with a large number of
microenterprises employing less than 10 persons mainly located in the informal sector. The
agricultural sector has not been able to fulfill its traditional role of feeding the population,
meeting the raw material needs of industries, and providing substantial surplus for export.
Indeed, the contribution of the sector to total GDP has fallen over the decades, from a very
dominant position of 55.8 per cent of the GDP in 1960-70 to 28.4 per cent in 1971-80,
before rising to 32.3, 34.2 and 40.3 per cent during the decades 1981-90, 1991-2000 and
2001-2009, respectively (Table 1). The fall is not because a strong industrial sector is
displacing agriculture but largely as a result of low productivity, owing to the dominance of
peasant farmers and their reliance on rudimentary farm equipment and low technology.
Another feature of the sector is under-capitalization which results in low yield and declining
output, among others.
Table I
Sectoral contributions to GDP
The industrial sector comprises the manufacturing, mining (including crude petroleum and
gas) and electricity generation. Prior to independence in 1960, the Nigerian economy was
mainly agrarian. On attainment of independence, the Nigerian government embarked on the
programme of transforming the country into an industrial economy. The Nigerian
manufacturing sub-sector is made up of large, medium and small enterprises, as well as
cottage and hand-craft units. In spite of spirited efforts made to boost manufacturing output
and various policy regimes, manufacturing has not made any significant contribution to the
growth of the economy. Industry as a whole contributed only 11.3 per cent of the GDP in
1960-70, growing significantly in the next two decades to a high of 41.0 per cent in
1981-1990, owing largely to the crude petroleum and gas production during the decades.
The contribution contracted to 38.6 per cent in the 1990s