How Reforms Are Reshaping Nigeria’s Economy

The federal government used the platform provided by the Access Corporate Forum to share the benefits of its reform agenda,

writes Dike Onwuamaeze

Men of significance who have significant messages to pass to important audiences do so through important platforms. This happened on September 19, 2024, at Eko Hotel and Suites Lagos during the 2024 Access Corporate Forum with the theme “Nigeria’s Economic Rebirth: Hopes and Implications.”

On that day and on a platform that was provided by the forum that brought together movers and shakers of the Nigerian economy, including the President of Dangote Group, Alhaji Aliko Dangote, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, delivered the message that “evidence from data has shown that the economic reforms of President Bola Ahmed Tinubu have started bearing fruits.”

To buttress his claim, Edun stated that the government’s revenue is increasing; that the country has exited from Ways and Means financing of federal government’s expenditure by the Central Bank of Nigeria, which is literally the printing money to finance a country’s economic activities; that inflation rate has started declining and that the Naira is gaining stability in the foreign exchange market.

He said: “We have exited Ways and Means. What does that mean? It means that the government when it has to pay domestic debt service or foreign debt service does not go to the central bank to debit the consolidated revenue fund of the government, which means just printing the money.

 “But more importantly, we are putting in place with the backing and support of Mr. President a world-class treasury and liability management system that will take this country to where it should be in terms of financial management.”

He added: “I think that the reforms from evidence from the data and details that are available to us, the reforms are yielding fruits. The economy is beginning to turn the corner and we are all witnesses to improved macroeconomic stability such as stable exchange rates, improving government revenues, positive and increasing trade balances, current account balances, and a total reconfiguration and revamping of government revenues as well as the tightening and greater emphasis on expenditure.

“The economy is starting to move in the right direction. In Q2 the GDP growth was 3.2 per cent up from 2.5 per cent over the same period the previous year.

“But there is still more work to be done. If we must fund growth, we must find the resources both in foreign exchange and the Naira. We must have a sustainable environment in which we fund government.

“On the social sector, all is being done to ensure that the commitment of Mr. President will help the most vulnerable and provide them with direct transfers.”

He also declared that the successful delivery of the government’s economic stabilisation plan would reinforce the gains being recorded from implementing the reform measures.

The plan, according to him, included the mobilisation of 360,000 farmers to cultivate 360,000 hectares of land that would yield estimated harvest of 1.4 milliom metric tonnes of maize, wheat, cassava because “we must produce the food that we eat.”

He added that the government is providing support and relief to manufacturers through fiscal measures and disclosed that the economic management team would be reconvened soon as the government is preparing a document that would put together its economic plan.

According to him, the government aims to reduce the number of taxes businesses are paying to single-digit.

“The rationale is this: 90 percent or so of the tax revenues that arrive in the government coffers come from less than 10 taxes. “There is ongoing work to bring down the rate of corporate income tax as we are trying to encourage investments to grow the economy.

“There will be an exemption from VAT for foods, pharmaceuticals, and health products whereas taxes on luxury items will be adjusted upwards,” he said.

In his response to the controversy trailing the refusal of the Central Bank of Nigeria (CBN) to honour its FX Forward contract obligations to manufacturers, the coordinating minister of the economy advised the Manufacturers Association of Nigeria (MAN) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) to keep dialoguing with the central bank for the smooth resolution of the matter.

He said: “There is a related matter that MAN raised that has to do with a backlog of unpaid transactions regarding the supply of FX.

“My colleague (governor of CBN) in the management of monetary policy in a coordinated manner is unfortunately not here and he is the best person to reply on monetary policy matters. “However, what I will say is that we understand that the central bank is the counterparty to that issue and whatever the issues are dialogue and continued consultation is the best answer.”

He also enthused that consumer credit is coming to support the purchase of manufactured products, which would be a boom for the manufacturing sector, adding that in the nearest future Nigerians would be provided with a near single-digit interest rate of 25-year mortgages to ignite the construction sector.

Speaking during the forum, the Director General of MAN, Mr. Segun Ajayi-Kadir, pointed out that successive governments in the country have declared intentions to grow domestic production but failed to show adequate interest in the growth of the manufacturing sector.  

Ajayi-Kadir said: “There is always the intention to grow the sector but at the end of the day it is either lack of total commitment to put policy into action or that the sector is crowded out in terms of priorities.

‘So, the manufacturing sector in Nigeria has continued to perform at less than 50 percent of its install capacity.

“There is still the issue of the unsettled $2.4 billion FX Forwards contract that the CBN for inexplicable reasons is still holding. Most of our big industries are declaring losses and some of these losses are traceable to this issue of not honouring FX Forwards contracts.”

Speaking in the same vein, Aliko Dangote, made a strong case for government to support local manufacturing. According to him, providing true support to local manufacturing in the country would be more effective than traveling abroad to beg for foreign investments.   Dangote said: “What attracts foreign investment is domestic investment. No domestic investments, no foreign investments!     So, we have to make sure that we support our domestic investors. “I went to two places on Wednesday (September 18) and I was a bit angry. I wanted to eat snacks and all the biscuits that I was given in these two different places were made in China, which is wrong.

“If we are consuming made-in-China biscuits, it means that we are actually creating jobs in China and creating poverty here.

“So we need to have proper support for domestic industries. We must give the SMEs all the support to survive against all this dumping.”

The Managing Director of Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, who was a co-lead speaker during the forum, projected that Nigeria’s economy would hit $400 billion in 2026 from its current size of $368 billion to become the second largest economy in Africa.

However, Rewane advised the government to write off of existing indebtedness of the power distribution companies (Discos); sustain the power sector reforms, and achieve cost-effective electricity tariffs, predicting that the pump price of petrol could go higher before coming down in 2026.

He said: “We (Nigeria) spent N3.5 trillion bailing out banks. We spent another trillion bailing out state governments. For God’s sake it is time to spend some money to bail out the DISCOs and have meters.

“This will enhance power supply, improve telecoms performance, the entire country grows and everyone is happy.”  

Rewane, however, warned that Nigeria would be doomed if investments were not made in telecoms’ infrastructures.

“If Airtel, Glo and MTN short down their systems there will be no e-transactions in the financial and aviation sectors; no INEC’s elections, no BIVAS, and people will riot immediately.”

He added that Nigeria is faced with a growth problem rather than a revenue problem.

“You can collect all the revenues you can in the world but it will get you nowhere. Revenue is necessary but not sufficient. Growth is both necessary and sufficient.

“Growth is a function of investment and you must treat your investors well by not what you say but by what you do,” Rewane said. Similarly, the Director General of LCCI, Dr. Chinyere Almona, said that the plight of the SMEs should keep the finance minister awake at night because some of the policies are stifling businesses. “Sometimes the policies are great but their implementations are zero,” she added.

According to Professor of Capital Market, Professor Uche Uwaleke, the right instruments are not being deployed in the country’s debt market.

Uwaleke pointed out that the Sukkuk bond for infrastructure development constituted less than 2.0 per cent of the federal government’s debt structure.

He said: “If you look at the borrowings that have been done overtime, in my view the right instruments have not been used in borrowing in the domestic market.

“When we borrow from the market, it is important that we use more of infrastructure bonds instruments because that is when we can be sure that the proceeds are tied to projects.

“My recommendation here is that we should choose to use more of infrastructure bonds.”