AfDB Lists Challenges Hindering Nigeria’s Economic Growth

•NECA seeks total reversal of new taxes

Onyebuchi Ezigbo in Abuja

The African Development Bank Group (AfDB) has highlighted key factors hindering Nigeria’s realisation of her economic potential and the desire to promote growth of the non-oil sector of the economy.

It stated that at the current state of things, it would take Nigeria 300 years to provide a minimum level of infrastructure needed for development.

The position of the bank came just as the Nigeria Employers Consultative Association (NECA), an umbrella body comprising employers and big players in various sectors of the country’s economy urged the federal government to order a total reversal of newly imposed taxes that have potential for stifling growth and development of businesses.

In his speech at the 2023 Nigeria Employers’ Summit in Abuja, titled, “Trade and Non-Oil: Changing the Narratives for Rapid National Development,” the  Director General of the Nigeria Country Department of the AfDB Group, Mr. Lamin Barrow, said some of the major bottlenecks limiting full exploitation of the non-oil sectors of Nigeria’s economy included macro-economic instability, low productivity, inadequate access to credit for small and medium-size enterprises, infrastructure and logistics deficiencies, especially inadequate power supply.

In order to remove the barriers to non-oil trade and exports, the DG said Nigeria must decisively fix its power sector, once and for all. 

Speaking on the issue of measures that would help in accelerating domestic resource mobilisation, the DG said the government should improve on tax collection and tax administration, plug leakages in tax collection and enhance the efficiency of public investment programmes.

He also spoke of implementing policies to enhance agriculture sector productivity and developing value chains in the sector.

He said Nigeria’s revenue-to-GDP ratio, at the moment stands at about eight per cent and was among the lowest globally and lags the West African average of 13 percent.

According to him, Nigeria currently faces huge fiscal deficits, estimated at six per cent of the GDP, attributable to high public expenditure amidst dwindling revenue from crude oil exports.

He added that though the agriculture sector’s contribution to GDP was important and provides a sure route to sustainable revenue generation, labour productivity in the sector had remained stagnant around $5,500.

He expressed worry that Nigeria has remained a net importer of food despite generous endowment of arable land and a favorable climate in many parts of the country.

“Between 2010 and 2020, the annual food import bill averaged $6.4 billion while food exports averaged $1.2 billion over the same period. One way to accelerate the development of agro-industrial value chains is by unlocking the opportunities in the sector, including by developing and de-risking  of agricultural value chains and attracting private sector food and agribusiness firms  into rural areas.

“That is why the AfDB, together with our Partners- Islamic Development Bank and the International Fund for Agricultural Development – is supporting the implementation of a $518-million Special Agro-Industrial Processing Zones’ (SAPZ) Program in 7 States and the Federal Capital Territory.

“There is strong interest from 20 other States, which will be supported in the second and subsequent phases,” he said.  Barrow, further said Nigeria faces major infrastructure deficits that inhibit its ability to diversify production in the non-oil sectors.

Barrow also said the World Bank’s 2022 Public Expenditure Review report estimated that Nigeria’s huge infrastructure needs would require $3 trillion by 2050 to fix.

He said at the current rate of things, “it will take Nigeria 300 years to provide a minimum level of infrastructure needed for development.”

To change the narrative, the DG said Nigeria should mobilise the private sector for infrastructure development and service delivery, which would also reduce the fiscal burdens on the federal and state governments.

He also said energy sector investments remained one of the most critical and urgent needs in Nigeria.

“With a total installed generation capacity of 13GW, the average power distributed during the first half of 2022 was only about 4GW, less than one third of the installed capacity.

“Providing reliable and affordable energy services will make Nigerian industries more competitive and accelerate the country’s integration into regional and global supply chains,” he said.

In order to remove the barriers to non-oil trade and exports, the AfDB scribe said Nigeria must decisively fix its power sector, once and for all.

According to him, recent lessons from Egypt and Morocco showed that rapid turnaround was possible with clear and stable policies, backed by strong political will.

According to him, “In 2014, Egypt had an electricity deficit of 6,000 MW but by 2022 it had 20,000 MW of surplus power generation capacity.

“Similarly, Morocco has successfully rolled out a solar energy program that has seen massive increases in energy generation capacity under to drive industrialisation and a competitive economy under a public-private partnerships (PPPs).

“While tapping its abundant gas resources as a transition fuel, Nigeria should invest massively in renewable energy generation, especially solar, leveraging the platform of the $25 billion Desert-to-Power initiative aimed at providing electricity for 250 million people across the Sahel, including the northern parts of Nigeria.”

Barrow further said supporting Public Private Partnership (PPPs) and export-oriented private sector would lead to a vibrant and competitive private sector which would accelerate diversification of the economy and boost exports. 

While welcoming the Executive Order by President Bola Ahmed Tinubu suspending some categories of taxes, Director General of NECA, Mr. Adewale-Smatt Oyerinde said the association would push for total reversal of such taxes that tends to inhibit business growth in the country.

“First, the appointment of the Taiwo-led committee is a good one for us. And I think it’s also in line with the president’s desire or comment that he’s going to appoint round pegs into round holes.

“And when he made this pronouncement, the four Executive Orders that suspend or postponed the elements of tax that we saw at the tail end of the last administration.

“Our view is this. We don’t really need suspension. We need an absolute reversal. We said if you find yourself in the hole, the first thing you do is to stop digging. Those new taxes, the plastic tax, the excise tax and tax on carbonated drinks.

They have the potential to dig organised businesses deeper into the hole of extinction,” he said.

Oyerinde, noted that what the Executive Orders had done was that it has stopped the trajectory into extinction.

“It has given us opportunity for engagement also. So within now and September and the time when those extensions are given is for us to engage constructively engagement and let government see the risk in those taxes.

Hopefully the president will see our reasons and then we call for a total and holistic reform 

“Now if you want to tax, you must take care of three elements.

You must balance three elements. First is what to tax. What exactly do you want to tax? You must balance when do you want to tax. You must balance how much do you want to tax.

“If you don’t deal with those three issues of when do you want to tax, how much do you want to tax and what exactly do you want to tax. You will initiate taxes, you will generate revenue from one tax and you will be destroying your industries from the other path” he said.