Economy
The task of retooling the Nigerian economy is enormous and requires the input of all the stakeholders to return the ailing economy to the path of growth to serve all Nigerians.
By Goddy Ikeh
ALTHOUGH President Bola Tinubu inherited what many analysts have described as sputtering economy, his policy reforms so far appear to be sending more Nigerians into multidimensional poverty. With persisting exchange rate volatility, skyrocketing inflation, energy disruption, over bloated fiscal debt, dwindling foreign reserves, business collapses among others, millions of Nigerians are daily groaning, while some experts who can no longer cope with the harsh economic conditions, are leaving the country in search of greener pastures abroad.
Unfortunately, many Nigerians have blamed the current difficulties in the country on the faulty implementation of policies of the government, especially the twin shocks of petrol subsidy removal and the introduction of the single foreign exchange window.
However, President Tinubu in his Independence address to Nigerians on October 1, 2023, recalled his promises during the inauguration on May 29, 2023, on reshaping and modernizing the economy and to secure the lives, liberty and property of Nigerians.
“Reform may be painful, but it is what greatness and the future require. We now carry the costs of reaching a future Nigeria where the abundance and fruits of the nation are fairly shared among all, not hoarded by a select and greedy few. A Nigeria where hunger, poverty and hardship are pushed into the shadows of an ever fading past.
“There is no joy in seeing the people of this nation shoulder burdens that should have been shed years ago. I wish today’s difficulties did not exist. But we must endure if we are to reach the good side of our future.
“My government is doing all that it can to ease the load. I will now outline the path we are taking to relieve the stress on our families and households,” he said.
Despite these promises, not much have really changed. Rather Nigerians are witnessing an over bloated cabinet and several presidential aides in the face of dwindling revenue and other economic challenges.
In his major statement on the country’s economy, the finance minister and coordinating minister of the economy, Wale Edun, said that Nigeria was seeking a $1.5-billion loan facility from the World Bank to address fiscal gaps in the 2023 budget. Speaking at the 2023 Annual Meetings of the World Bank and the International Monetary Fund, IMF, in Marrakech, Morocco, the minister said that Nigeria was almost number one on foreign investors’ list of destination and that the government has taken bold and courageous steps to attract investments. He also promised that there would be a coordination of monetary and fiscal policies and that the federal government would not breach its Ways and Means limits regulation.
“Nigeria is definitely on the right path; we have taken the right decision for the economy to recover and for it to attract Foreign Direct Investment (FDI) and as well, I will add, domestic investment to recover full economic growth, job creation and at the same time, achieve inclusivity of women and young people,” the report by Arise news quoted Edun as saying. He also added that the federal government was taking steps towards cutting down its expenditure.
According to Edun, one of the priorities of the government is “the rule of law – sticking to agreements, sticking to the law. And so, his commitment is to come within the limit for Ways and Means, which essentially means overdraft borrowing from the central bank”.
“However, having made that commitment and given that direction of travel, I think the idea and commitment is to come within whatever is the statutory limit as soon as possible,” Edun added.
But some of the views expressed by some economists are at variance with the minister’s policy trust and expectations. For instance, Prof. Adi Bongo of the Lagos Business School has said that Nigeria is not an attractive investment destination today. Prof Bongo said at a recent interview with ARISE NEWS that the planned roadshow in the US to showcase investment opportunities in Nigeria to American investors has ambiguous signals surrounding the endeavour.
“I think its heartwarming news that we are going to be hosting such a roadshow to showcase our investment opportunities to American investors.” Addressing the challenges, Professor Bongo highlighted the need for a robust framework to attract private sector investments, which he deemed lacking due to the previous administration’s dismantling of essential structures. He emphasised the urgency for the current administration to rebuild these frameworks to attract such kinds of investments.
He expressed doubt regarding the success of retaining such investments, citing the high risks prevalent in Nigeria’s business ecosystem, including challenging macroeconomic conditions, “Those who are operating here know that businesses are closing up because of the very challenging macroeconomic environment which even now none of those things have been effectively addressed.”
“Investment is not propaganda, neither is it politics,” he stated, underscoring the importance of addressing existing conditions before expecting substantial foreign investments. He pointed out that Nigeria’s reputation, especially concerning contracts and adherence to the rule of law, could deter potential investors. “The fact remains that we are not an attractive investment destination as it is today.”
Moreover, Professor Bongo emphasised the importance of addressing various issues, including infrastructure development and human capital. He voiced concern over the emigration of skilled professionals, stating that retaining the best talents within the country was crucial for attracting businesses.
“I want to look at the real issues,” he asserted, referring to the necessity of ensuring a conducive environment for foreign investments, including legal frameworks that guarantee the safety of investments and easy exit strategies for investors, “These are private investors that are taking their capital to new pipes. They want assurance; they want confidence in the economy. Right now, the government of the day exudes none of those.”
In the same vein, Prof Uche Uwaleke of the Nasarawa State University says that Nigeria can only achieve socio-economic recovery and sustainability for all, if the stakeholders fulfill their roles.
Speaking at the 7th Annual Conference of the Guild of Corporate Online Publishers GOCOP in Abuja, Uwaleke said that while the government would create the enabling environment for businesses to thrive, the private sector should invest in the productive sectors of the economy, while the civil society should hold both the government and the private sector accountable.
He charged the media, especially GOCOP, to leverage the expanding internet penetration in Nigeria to continue playing its pivotal role by educating the public on the significance of government programmes and policies.
“It should also actively promote good governance by holding the government accountable and reporting on instances of corruption and other forms of misconduct. Additionally, it can support businesses by promoting their products and services and highlighting the challenges they encounter.
The Professor of Capital Market at the Nasarawa State University, who spoke on the theme; Nigeria: Roadmap For Socio-Economic Recovery and Sustainability, recalled that the country had over the years, been bedeviled by several challenges, which hampered its socio-economic progress and sustainable development despite sitting on huge resources.
“In particular, the last 10 years have been characterized by weak economic growth, elevated inflation, high unemployment and rising poverty. Poor access to credit, weak infrastructure, multiple taxes and the general unconducive business environment have led to the exit from Nigeria of many foreign businesses and shut-down of local firms thereby worsening the unemployment situation in the country.
He also said that although, Nigeria’s economy grew at a rate of 5.53% from 2010 to 2015, this growth was not inclusive given the high rate of poverty during that period.
According to him, this can be seen from Nigeria’s public debt rising significantly from N7.56 trillion in 2012 to N87.34 trillion as at June 2023. This high level of debt makes it difficult for the government to finance its operations and invest in important development projects leaving the country more vulnerable to economic shocks. The recent fuel subsidy removal was compelled by this grave fiscal position.
“Inflation rates in the country have remained high, rising from 10.39% between 2010 and 2015 to 25.80% as of August 2023. The unemployment rate also increased (despite new methodology adopted by the National Bureau of Statistics). By implication, the country’s misery index and poverty rate have been on the rise despite the Social Intervention efforts of the government. By 2022, the number of persons estimated to be multidimensionally poor in Nigeria was over 130 million!
According to him, achieving socio-economic recovery and sustainability necessitates a collaborative effort involving the government, private sector, citizens, and civil society, including the media.
“As Nigeria matches on in her democratic journey, it is imperative to have a clear roadmap for socio-economic recovery and sustainability to allow for the delivery of democratic dividends.
In addition to ensuring security of lives and property, rule of law and a commitment to the fight against corruption, it involves taking some measures, which include changing the structure of the economy from mono product to a multi-product one and having capacity for multiple sources of forex; primary product to intermediate and finished products; Import dependency to export-led economy.
Another major stakeholder in the Nigerian economy, the Manufacturers Association of Nigeria, MAN, has also expressed its views on the state of the economy. Lamenting that its members are also groaning in pains as all the major performance indicators in the manufacturing sector declined in the second quarter of 2023. The association expressed this view in its MAN CEO’s Confidence Index, MCCI, report on the second quarter of 2023 that was released recently, in which it stated that slow recovery from the dire impact of the naira crunch nearly crippled manufacturing companies with about 30 per cent decrease in sales for consumer goods and cement respectively.
The report stated that “manufacturers are extremely groaning in pain due to these issues that are frustrating their contribution to the economy,” and caused a decline in the Aggregate Index Score, AIS, of the MCCI to 52.7 points in the second quarter of 2023 from 54.1 points it recorded in the first quarter of 2023.
It, therefore, concluded that, “a critical evaluation of the analysis above provides an inference that major performance indicators of the manufacturing sector all recorded unfavorable changes.”
It attributed the deterioration the manufacturing sector experienced to the harsh business-operating environment evidenced by poor macroeconomic indices.
“The underperformance was largely driven by the slow recovery from the cash crunch, high cost of energy, high transportation cost and partially by the abrupt removal of subsidy that took effect towards the end of the second quarter of 2023.
“The economic turmoil disrupted the manufacturing value chain, escalated cost of manufacturing operations and resulted in reduction in manufacturing patronage,” the report stated.
In addition, the report noted that manufacturing activities in the second quarter of 2023 was adversely affected by escalation in the Consumer Price Index,CPI, continuous erosion in naira value and difficulty in accessing foreign exchange, as well as high cost of energy, exorbitant taxes, high lending rates, persistent, insecurity, domino effects of the lingering Russian-Ukrainian war, slow recovery from the cash crisis.
The report warned that Nigeria’s transition to a cashless economy required no urgency or policy aggressiveness considering that a lot of progress had already been made.
For the Lagos Chamber of Commerce and Industry, LCCI, it acknowledged that the current economic challenges are enormous and reminded the federal government that the expectations of Nigerians are also enormous.
However, reacting to President Tinubu’s Roadmap for the Economy, the Chamber applauded his eight-point agenda of food security, ending poverty, economic growth, and job creation, improving access to capital, particularly consumer credit, inclusivity in all its dimensions, improving security, improving the playing field on which people and particularly companies operate, the rule of law, and fighting corruption.
While noting that Nigerians, corporations and individuals are not particularly inclined to settle for poor results, considering their sacrifices, the LCCI stated that if these highlighted policy thrusts of the administration are well articulated and implemented, they are certain to strongly impact the nation’s socio-economic landscape.
Specifically, the chamber noted that the administration’s target of creating 50 million jobs should go beyond a policy statement as implementation is critical to the economy. The most sustainable approach to job creation is to support production and create an enabling business environment for the private sector. A thriving private sector will continue to create jobs for the foreseeable future.
According to the statement by Chinyere Alomona, Director General, LCCI, on August 29, 2023, the Chamber anticipates that all the ministries will hereafter clearly articulate the priority areas and further divide them into strategic initiatives with clear timelines and responsibilities for performance monitoring and evaluation.
In addition, it anticipates the development of critical metrics with special emphasis on impact, growth and job creation, poverty reduction and investment attraction. “We look forward to a comprehensive policy document by sector, which will demonstrate the government’s clarity of vision, courage, and creativity in achieving the admirable socio-economic agenda,” the statement said.
The Chamber also recommended the implementation of responsive fiscal and monetary policy measures in order to ensure and promote macroeconomic stability with a particular focus on effectively managing inflation, addressing the challenge of high interest rates and foreign exchange shortages. The LCCI also anticipates that the government would focus its policy efforts on sectors with the potential of generating high employment.
Speaking recently on the 100 days in office of President Tinubu’s government, Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise, CPPE, rated the administration high in terms of economic reforms, especially considering the fact that the administration has taken some bold steps around two major disruptions in the country which it inherited from its predecessor.
“I am talking about the forex and the oil and gas sector reforms. This is because there were disruptions in the forex market, which was very bad for the economy. There were also disruptions in the petroleum downstream sector, which was also very bad for the economy. And these two disruptions have been the biggest challenges the economy has faced in the last couple of years. So the corrective reforms that have been taken show that the administration has done well in that regard,” he said.
Yusuf, who was a former Director General of the LCCI, told Nigerian Tribune Online in an interview that the administration has not responded well enough to the consequences of those reforms.
“This is because the reforms, especially the fuel subsidy removal, expectedly have thrown up some damaging challenges. It has resulted in high inflation, and soaring cost of transportation which have both weakened the purchasing power of the people. So the response of the administration to these social outcomes has not been as fast and appropriate as we had expected it to be. Even as we speak now, the administration is still struggling with the issue of what should be the right palliatives for Nigerians in view of the economic hardship they are facing,” he said.
As the minister embarks on the enormous tasks of implementing the various reforms to return the nation’s economy to the path of growth, it may be necessary for the minister to convene an extraordinary meeting with major stakeholders in order to review and align the various reforms of government for effective implementation.
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-October 16, 2023 @ 10:45 GMT |
Tags: Chinyere Alomona GOCOP Goddy Ikeh President Bola Tinubu Prof. Adi Bongo
