The sobering reality of the world economy is undeniable. A recent report by the International Monetary Fund (IMF) has brought to light a concerning trend: the global growth rate, when stripped of cyclical volatility, has been on a steady decline since the aftermath of the 2008–09 global financial crisis.
What’s more, the World Bank (WB) emphasises that without significant policy intervention and the emergence of new technologies, the robust growth rates witnessed in the past are unlikely to make a return.
Q: “With its economic contributions poised to impact the world stage, Nigeria must prioritise productivity reforms to reignite medium-term growth and solidify its status as an economic powerhouse.”
Adding to the complexity of the situation are the various headwinds facing the global economy. The World Bank warns that future growth prospects have also dimmed. Projections indicate that global growth is expected to slow to just above 3 percent by 2029, according to the five-year outlook outlined in the Bank’s latest World Economic Outlook.
This paints a challenging picture for policymakers and stakeholders worldwide, highlighting the urgent need for strategic interventions to stimulate economic growth and navigate the uncertain terrain ahead.
Read also: Nigeria’s low productivity fuels poverty
In light of Nigeria’s pivotal position as the largest economy in Africa, the time is ripe for the nation to chart a course towards progress that resonates on a global scale. With its economic contributions poised to impact the world stage, Nigeria must prioritise productivity reforms to reignite medium-term growth and solidify its status as an economic powerhouse.
The recent strides made in implementing monetary tightening and stabilisation policies by the Central Bank of Nigeria (CBN) are yielding tangible results. Notably, Nigeria has attracted foreign portfolio investments exceeding $1 billion, as reported earlier by BusinessDay.
Moreover, these efforts have also bolstered the value of the naira, signalling a positive trajectory for the economy. However, there remains room for further resilience in fiscal policy to complement these monetary measures.
Despite the prevailing economic challenges, Nigeria stands at the threshold of unlocking its latent potential through targeted productivity reforms. The imperative for a strategic shift towards enhancing productivity across sectors cannot be overstated.
At the top of the productivity ladder is the tradable services sector, which has the potential to improve incomes and raise overall productivity. The challenge with this sector, however, is its inability to accommodate labour in large numbers.
Nevertheless, the sector is important, given Nigeria’s young population, which is increasingly driving technological revolution across various sectors on the African continent. To leverage the full potential of this sector, the government will need to design and implement national skills programmes aimed at upskilling young Nigerians to ensure many more embrace digital skills and capabilities.
At the middle of the productivity ladder sits manufacturing. The sector has a much higher productivity level than agriculture and can accommodate, in large numbers, the kind of labour that is abundant in the country.
Nigeria’s rising population (which is projected to reach 428 million by 2050), the existence of mineral resources, and the adoption of a single market in Africa—the African Continental Free Trade Area (AfCFTA)—present a case for why manufacturing would thrive in Nigeria.
As highlighted by BusinessDay’s analysis, Nigeria has grappled with sluggish growth rates, averaging 2.01 percent from 2019 to 2023. This trend can be attributed to various factors, including the collapse of global oil prices during 2014–16, coupled with lower domestic oil production, leading to a sudden economic slowdown.
Nigeria’s annual real GDP growth rate, which averaged 7 percent from 2000 to 2014, witnessed a significant decline to 2.7 percent in 2015 and further to -1.6 percent in 2016. While there was a rebound to 0.8 percent in 2017 and 1.9 percent in 2018, growth plateaued at 2 percent in the first half of 2019, a trend expected to persist throughout the year, according to the World Bank.
At the core of this challenge lies the imperative for Nigeria to optimise resources and foster innovation to achieve sustainable growth. This involves streamlining regulatory frameworks, investing in human capital, and nurturing a culture of entrepreneurship and innovation.
Moreover, enhancing productivity is not merely an economic objective but also aligns with Nigeria’s broader goals for inclusive and sustainable development. By unlocking productivity gains, the nation can create opportunities for job creation, poverty reduction, and social advancement while also attracting investment, driving competitiveness, and promoting export-led growth.
Over the years, Nigeria has implemented various policies and strategies aimed at achieving medium-term economic growth. Initiatives such as the Nigeria National Economic Empowerment and Development Strategy (NEEDS), Vision 2020, and the Economic Recovery and Growth Plan (ERGP) have sought to stimulate economic expansion through sectoral focus, infrastructure development, and institutional reform.
Indeed, the journey towards reform faces significant hurdles, including corruption, insufficient infrastructure, security challenges, and heavy dependence on oil revenues. These persistent issues, compounded by institutional weaknesses, pose formidable obstacles to achieving inclusive growth that lifts Nigerians out of poverty.
According to the World Poverty Clock, an alarming 104 million people in Nigeria currently live below the poverty line. Addressing these systemic challenges is imperative to create a sustainable path towards economic prosperity and poverty alleviation in the country.
In the past five years, Nigeria’s economic growth has shown fluctuations, with highs and lows impacting the nation’s poverty levels. Despite a promising 3.6 percent growth in 2021, extreme poverty remained stubbornly high at 40.6 percent. The subsequent years saw mixed fortunes, as growth rates hovered between 2.2 percent and -1.8 percent, indicating economic instability.
However, even with a slight improvement in growth in 2023, extreme poverty only marginally decreased to 40.3 percent. These figures underscore the ongoing challenges facing Nigeria’s economy and the pressing need for sustainable policies to lift its population out of poverty.
Oluwatobi Abisoye, a corporate reporting analyst, expressed his dismay, saying, “I am so disheartened that despite various policies implemented to achieve macro-economic objectives, yet the poverty level increases as never before, with food inflation hitting the roof at 37.92 percent and unemployment at 5 percent. Does it mean all these policies are meant to make the poor worse off? It is high time for the President to know that his performance will not be measured by statistics but rather by the impact on the poor.”
Emmanuel Ojo, an analyst, said it’s evident that Nigeria is at a critical juncture. The economic challenges facing the nation demand swift and decisive action from policymakers. We need policies that not only stimulate economic growth but also address the underlying issues of poverty, unemployment, and inequality. It’s time for a holistic approach that prioritises investment in education, infrastructure, and job creation. By empowering every Nigerian to contribute meaningfully to the economy, we can build a more prosperous and inclusive society for future generations.”
In the grand scheme of priorities, it’s imperative for President Tinubu to tackle head-on the glaring issues of infrastructure deficits and the persistent challenge of inadequate power supply. These two bottlenecks are like shackles holding back the full potential of Nigeria’s manufacturing sector, hindering its ability to compete on the global stage.
But it doesn’t stop there. The government must craft a robust industrial policy that not only nurtures the growth of local firms but also boosts their efficiency and competitiveness. After all, a thriving manufacturing sector isn’t just about economic growth; it’s about fortifying the nation’s resilience against future shocks and vulnerabilities. It is about laying the groundwork for a more stable and prosperous future for all Nigerians.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
