How Nigeria can grow revenue, reduce poverty – experts
Experts at the ongoing 27th Nigerian Economic Summit Group (NESG) recommended initiatives for Africa’s biggest economy to reduce a poverty rate that is the highest globally and boost low revenues.
Some of the initiatives mentioned at the event themed ‘Securing Our Future: The Fierce Urgency of Now’ are to create incentives to attract more private sector participation in the economy, provide an enabling environment that provides Nigerian businesses with the resources needed to succeed and target investments in rural areas and agriculture.
An enabling environment that provides Nigerian businesses with the resources needed to succeed would be a win-win for the government, as the country would generate revenue from the private sector instead of borrowing, according to Ndidi Nwuneli, managing partner at Sahel Consulting Agriculture & Nutrition Limited.
“If the private sector is given an enabling environment to thrive through consistent policies, a stable micro and macro environment and security, the government would not need to borrow as much because the private sector can deliver,” Nwuneli said.
Similarly, Doyin Salami, chairman of the Presidential Advisory Committee, said the biggest wealth of resources lie with the private sector and Nigeria needs to tap into it.
“One of the fundamental things that need to happen is that as a nation we need to begin to understand the dynamics of the private sector; trust and encourage the private sector so that the resources that they bring to the table become available,” Salami said.
He explained that Nigerians live on the notion that the government will provide everything but this is not true.
“Nigeria’s real challenge is not if we can find resources but we need to be able to persuade the resources that Nigeria is where it should come. There is about $17 trillion invested in negative yield assets in the world. Nigeria has the capacity to take that on, but no one will invest in Nigeria today with the aim to make profit,” he said.
Nigeria has suffered from two recessions within just five years, with the most recent coming off the back of the COVID-19 pandemic in 2020. Unemployment has ballooned to the second highest globally at 33 percent in 2020, while an additional 7 million people are estimated by the World Bank to have fallen into poverty due to surging inflation.
The World Bank said in its development update report that before inflation started rising steadily, there were 82.9 million poor Nigerians but the number had risen to 90.1 million as a result of the price shock.
Hailemariam Desalegn, former Ethiopian Prime Minister, advised the Nigerian government to look at what went wrong in the last 30 years that made it unable to drive a significant reduction in its poverty rate.
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“In 1990, Nigeria’s poverty rate was 43 percent and currently it is at 41 percent. After 30 years it is still within the range of 41 and 43 percent. Meaning it is declining at a very slow rate. Most countries in Africa have a poverty rate of 30 percent. So, for a country like Nigeria, it should be much lower,” Hailemariam said.
The country needs to have a continuous policy and national consensus on where Nigeria has been and where it should be, according to Hailemariam.
He said to drive inclusive growth, Nigeria must focus on areas it has a comparative advantage – which he identified in rural areas and agriculture.
“Nigeria needs to be grounded in areas it has a comparative advantage before it can talk about industrialisation and manufacturing,” Hailemariam said, noting further, “Nigeria’s policy stance is very important and if the government does not see the potential, then there is a problem.”
President Muhammadu Buhari, who was represented by Vice President Yemi Osinbajo at the summit, said there was still much work to be done in achieving Nigeria’s goal to reduce poverty and unemployment.
Osinbajo noted that Nigeria had already been projected to be the third most populated country in the world by 2050, which will put pressure on food, infrastructure, energy, healthcare, among others, hence the need for urgent action to secure the future of Nigerians.
The government will create 21 million jobs and lift 35 million Nigerians out of poverty by 2025, he said.
According to President, a new plan titled “New National Development Plan (2021-2025) will be ready in a few weeks to enable Nigeria achieve the target.
He said labour intensive sectors like manufacturing were receiving attention to create a large number of jobs and can generate significant exports.
Nigeria’s economic recessions, fuelled partly by low oil prices, have also crimped government earnings that now stand at a meagre 5 percent of GDP compared with the Africa average of 15 percent, according to World Bank data.
The slump in revenues has seen the government turn to borrowing that has tripled since 2015 to N35.4 trillion as of June 2021, according to data from the Debt Management Office (DMO).
Nigeria has, for years, depended on borrowing to fund its budget deficit. The stalling policies that can help diversify and boost economic growth are some of the reasons the country has been generating less revenue than its peers.
Estimated at 4.3 percent in 2020, Nigeria’s tax-to-GDP ratio remains way below its comparable ratios for peers like South Africa, Kenya and Ghana, at 26.7 percent, 15.9 percent, and 12 percent, respectively.