Nigeria’s economy is projected to grow by 2.5 percent this year a development which could fail to lift over 100million people from poverty. This was the central issue at the breakfast meeting organised by the Franco Nigerian Chamber of Commerce and Industries (FNCCI) in Lagos on January 28.
In his keynote address, Andrew Nevin, chief economist at PwC, said going into the next decade, Nigeria would need to bring more people from the informal economy to the formal economy and highlights key themes that will shape the new year.
Though five of the fastest growing economies in Africa are in West Africa including South Sudan, Rwanda, Ghana, Cote d’Ivoire, Ethiopia but the two major economic powers, Nigeria and South Africa are driving down growth in the performance of the continent.
The economic outlook in Nigeria does not appear rosy. Growth has trailed a recovery path since recession in 2017 and projected at 2.5 percent in 2020. Inflation is expected to keep soaring and stay about the single digit target of the Central Bank in 2020 until the border closure is reversed.
Fiscal deficit-to-GDP ratio is projected to rise from 2.8percent in 2018 to about 4.3 percent by the end of 2020. Oil prices are expected at below 60 dollar per barrel and current account balance-to-GDP ratio will decline marginally to 1.7 percent by 2022.
This macroeconomic reality has implications for the private and public sector. Nevin in his address presented seven key themes that will define the economic outlook for 2020 including dead capital, diaspora power, large informal sector, shrinking public fund, investment rate to GDP, disparate growth measuring SDGs instead of GDP.
Nevin also said Africa’s largest economy would need to unlock its dead capital, the country’s underutilised asset that can’t be used productively. “The biggest source of debt capital in this country is real estate,” he said. Nigeria is said to hold about $900bn worth of dead capital in residential real estate and agricultural land which needs to become active to deliver value for the economy.
In 2018, Nigeria become the largest recipient of remittance flow to Sub-Saharan Africa which grew by 14 percent from $22billion to $25billion and represents about 6.1 percent of the country’s GDP. Nevin counsels that Nigeria’s biggest export is now human capital and must be strategic to make it benefit the country.
Nevin said the large economic size of Nigeria is not applaudable if it does not reflect improved welfare of an average resident of the state, calling for adoption of measuring the SDGs as they constitute better performance indicators of human development than cold GDP data.
Shrinking public funds and lower taxes has seen Nigeria underperform its peers leaving tax to GDP rate at around 8 percent while Ghana is 13.1 percent and South Africa 25.8 percent. Though the new finance bill is set to address some of this situation, analysts at the event said Nigeria has to find a way to stimulate the economy for more taxation to occur,
Nigeria has an active informal economy, large informal trade, informal tax to non-state actors and billions in informal remittances.
According to PwC estimates, Nigeria’s informal sector in 2018 accounted for 55.8 percent of the country’s GDP. This is higher than the 49.6 percent contribution reported the year before. The informal sector employs about 89 percent of the total labour force in Nigeria.
