Path to Economic Recovery

Policy makers in Nigeria must take active steps to multiply the country’s productive output in order to engender sustainable growth, writes Obinna Chima.

The outlook for Nigeria in 2023, just like most economies across the globe, is fraught with uncertainty. From elevated inflation, higher interest rates, reduced investment, and disruptions caused by the Russia-Ukraine War, are expected to shape the global economy this year, which obviously have trickle-down effects on Nigeria.

Within this context, multilateral institutions such as the World Bank and the International Monetary Fund (IMF) have slashed the country’s growth prospect for this year.

Indeed, Nigeria is faced with multi-faceted challenges, ranging from rising fuel subsidy payments, subdued economic growth, widening inequality among others, coupled with the general election that is around the corner, the path to economic recovery demands strategic initiatives and innovative approaches. 

With economic growth projection for the country still around three per cent, which is lower than the country’s population growth, analysts have stressed the need for policy makers in the country as well as whoever emerges as the country’s president next month to embrace policies that can provide solid foundation for long-term growth and job creation.

To stimulate growth, the Nigeria Employers’ Consultative Association (NECA) has recommended economic policy options that would restore the tottering Nigerian economy.

These options included a stable and highly predictable revenue streams, growth-focused monetary and fiscal policies, a secure and business-friendly environment and a legal, regulatory and legislative system amongst others.

It also urged the federal government to launch a major paradigm shift in its economic philosophy in order to be in a position to contain the adverse impact of the projected global economic recession in 2023.

The Director General of NECA, Mr. Adewale-Smart Oyerinde, noted that returning the economy to the path of sustainable growth demands that certain fundamentals must be gotten right.

“Among these fundamentals are a stable and highly predictable revenue streams, growth-focused monetary and fiscal policies, a secure and business-friendly environment and a legal, regulatory and legislative system that promotes equity, justice and enables enterprise competitiveness. These fundamentals are currently either lacking or are highly compromised,” he said.

Oyerinde also averred that most economic indicators paint a picture of doomed economy.

According to him, “At the last count, the nation is neck-deep in debts hovering around N44.06 trillion in September 2022. However, if the N23.7 trillion Central Bank of Nigeria (CBN) loan is securitised, our debt stock could amount to about N77 trillion in June 2023.

 “Crude oil production grew in the month of December, 2022 by 4.2 percent month-on-month to 1.23 million barrel per day, but remained significantly short of the 1.8 million barrel per day allocated by the Organization of Petroleum Exporting Countries (OPEC) to the nation, amounting to about $2.5 billion loss monthly, at an average of $100 per barrel. Oil theft seems to continue unabated and the unsustainable subsidy on petrol have all conspired to reduce government’s revenue, leading to absurd debt accumulation.”

The director general of NECA noted that the obvious misalignments between the fiscal and monetary policies had deflated investors’ confidence and made the country unattractive for Foreign Direct Investment (FDI), in spite of its large market, and has also rendered all growth projections mere academic exercise.

He, therefore, expressed the need for the government, especially the incoming one, to demonstrate political will by implementing policies that will drive the economy back on growth trajectory.

According to Oyerinde, “deliberate efforts must be made to reverse some of the current policies and implement new ones. All leakages associated with government revenue must be blocked (oil theft, skewed concessions, fuel subsidy e.t.c.), while a wholesome review of the tax administration to make it more equitable and investor-friendly should be initiated.”

He said that government at all level could not continue to over-tax its businesses and citizens while other climes are either reducing tax rates in order to attract investors and enhance economic activities and promote sustainable consumption.

“As the nation nears the mark of N77 trillion debts with negligible impact on infrastructural development, the incoming government must develop strategies to diversify the revenue base through the revival of the country’s lagging non-oil sectors.

“The fable about debt to Gross Domestic Product (GDP) ratio can no longer hold as the government in the 2023 budget has also surpassed the 3.0 per cent debt to GDP ratio stipulated in the Fiscal Responsibility Act,” Oyerinde argued.

He said that over the last decade, the country has spent over N10 trillion on fuel subsidy, about N15.5 trillion on capital expenditure, N2.5 trillion on health and about N3.9 trillion on education.

This, according to him, was a misplacement of priority and showed that critical developmental items such as education, health and infrastructure have suffered due to crass misplacement of the nation’s economic priorities.

On its part, the Lagos Chamber of Commerce and Industry (LCCI) called on the federal government to remain focused on tackling Nigeria’s many economic issues even as the country approaches the general election in February.

President of the LCCI, Dr. Michael Olawale-Cole, also appealed to Nigerians to get involved in the electioneering processes and use their power of numbers to sustain the Nigerian democracy.

According to him, this year’s election would be critical to the survival of the nation, “and we know that every democratic nation determines its leaders by decision of the citizens who vote.”

Olawale-Cole also commended the government’s plans to end the payment of petrol subsidy as the best economic decision that would reduce the country’s unsustainable public debts.

He, however, urged government to roll out cushioning policies before the possible removal later in the year to mitigate the short term inflationary pressures expected to accompany the removal.

In his contribution, the immediate past Chairman of the Nigerian Economic Summit Group (NESG), Mr. Asue Ighodalo, tasked those entrusted with drafting the Nigeria Agenda 2050 to bequeath the country with an economy whose size is somewhere between $4.5 trillion and $9 trillion in the next 25 years in order for the country to have shared prosperity.

Ighodalo also urged them to come out with an agenda that would grow the country’s GDP at the rate of 15 per cent annually.

He said: “We absolutely must think through and articulate areas where each of our six geopolitical zones can be leading or significant global players in the world economy of 2050. The drafters of our National Agenda 2050 have their work cut out.

“The Nigeria Agenda 2050, currently being drafted, proposes a time frame of about 25 years. This means we must recalibrate our visioning and work towards a specified target growth, by a specified date, benchmarking ourselves with the most prosperous countries in the world.

“I propose that, our specified target must be turning Nigeria into the most prosperous black country in the world, with a GDP per capita that is at par with the OECD countries, by 2050.”

Ighodalo stressed the need for policy makers to begin to think about economic development as clear objectively measurable goals. 

“We would need to build an economy that is 10 to 20 times the $440 billion economy we have today within 25 years. We must then set ourselves a task of growing at over 15 per cent every year,” he added.

According to him, successful nations’ turnarounds start first with addressing and fixing basic internal problems in order to set the country’s sights on externally-driven growth possibilities. 

He postulated that Nigeria should begin to appreciate the attainment of macroeconomic stability as the foundation of economic growth.   

He observed that Nigeria’s economic competitiveness is weak, stating that “we must take active steps to multiply our productive output, particularly in those areas that support foreign exchange earnings and enhance livelihoods.

“We must effectively address all areas of waste, leakage, theft or graft. Gas flaring must stop.  Only a nation that does not take itself seriously will cry out year after year for power, but continue to fritter away a resource that can deliver that power”, he noted.

Ighodalo also tasked Nigerians on ingenious ways of fixing and strengthening national and sub-national institutions by paying particular attention to “our civil service and judiciary and changing the attitude and temperament of those of us who work in these institutions.”

“We must also address the problem of unequal access to basic livelihood amenities like food, water, roads that foster micro activity and enable producers to get to markets, schools that deliver solid basic education without security concerns, and basic healthcare,” he added.

He said that these policies must result in productive contribution and full economic participation by all Nigerian states, and all able-bodied Nigerians, towards a prosperous Nigerian state. 

Also, the Chief Consultant of B. Adedipe Associates Limited, Dr. Biodun Adedipe, predicted a positive GDP growth of more than 3.19 per cent in 2023 for the Nigerian economy due to projected expanded domestic production capacity in refined petroleum products, rice, consumable goods and automobiles.

He also forecasted that inflation rate would moderate in 2023 at double digit rate of 18.2 per cent while “lending rate will remain double digit as it responds to the rate of inflation.”

He added that improvements in infrastructure developments across the country as a result of the government’s targeted investments in rail, roads and aviation would begin to impact positively on the cost of doing business in the country this year.

Indeed, success on the economic-recovery journey also demands that governments should address issue of lack of trust in their leadership in order to get the buy-in of the citizens. Strengthening the relationship between public and private sector is also important in the pathway to economic recovery as well as the drive for rapid recovery and sustained growth.