• Thursday, March 28, 2024
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BusinessDay

Lack of ‘bold reforms’ worsens investors’ nightmare

Nigeria spent N1.03 trillion on subsidies in 2021, according to data from the Nigerian National Petroleum Corporation (NNPC).

The Nigerian government in the past five years has committed to efforts at driving enabling business environment but has also shot itself in the foot severally without ‘bold reforms’ to gain investor’s confidence in the economy.

Vice President Yemi Osinbajo, who heads the Presidential Enabling Business Environment Committee, pushed reforms on the ease of doing business. This follows a national action plan that focuses on reducing the challenges encountered by Small and Medium Enterprises and other business in getting credit, paying taxes, enforcing contracts or trading within and across borders by eliminating critical bottlenecks and constraints to doing business in Nigeria.

This action plan by the government saw Nigeria ranking one of the 10 best reforming economies globally in 2017.

But several analysts say improving the ease of doing business ranking without extending the reforms of macroeconomic fundamentals, addressing concerns of high rate inflation and prioritising exchange rate stability have been investors’ nightmare in the country since the Muhammadu Buhari-led administration took over the affairs of the country.

“While we’re in the World Bank, we always tell countries, especially developing nations that improvement on the ease of doing business is one of the basics in growing your economy. The real work is in driving reforms that attract investments into your economy for job growth, and wealth creation,” Obiageli Ezekwesili, former vice president of the World Bank, and a former minister, said in one of the panel sessions at the last Nigerian Economic Summit.

Read Also: Nigeria’s Foreign Direct Investment inflows drop to lowest in 15 yrs

“The government must begin to take the bold steps to ‘deregulate’ the economy with the right policy framework to attract private capital and create wealth,” Ezekwesili said.

Doyin Salami, who heads the Presidential Economic Advisory Council, has in several fora expressed concern on the impact of weak Nigeria’s macroeconomic fundamentals, and inflation currently at 15.75 percent on the Nigerian economy.

According to Salami, “Nigeria must focus on macroeconomic stability, and ability to be consistent in its policies to build investor’s confidence in the sector.

“What we’re doing today is manage poverty, and manage demand. We must expand the supply side of the economy for wealth creation. We must also take the bold step to build investor’s confidence in investments and have clarity on how we want to use investments to drive sustainable economic growth.

“In domestic economy, inflation is a major challenge at almost 16 percent for the headline figure and just short of 20 percent for the food inflation in terms of external accounts; our external accounts have weakened considerably.”

The Nigerian economy officially slipped into recession in the third quarter of 2020, as the GDP contracted by 3.62 percent. This marked a full-blown recession and second consecutive contraction from -6.10 percent recorded in the previous second quarter of 2020, the Nigerian Statistics Office said.

Despite assurances by the government on the economy bouncing back latest in the first quarter of 2021, analysts point to a policy framework to drive investments inflow into the country.

“We need to be strategic and intentional in the ways and manners we want to support businesses with facilities for wealth creation,” Tony Edeh, managing director, Norrenberger Financial Group, told BusinessDay.

In December, the World Bank warned the Nigerian economy at risk of ‘unravelling.’

According to the World Bank, the impact of the Covid-10 pandemic will send personal incomes in Africa’s largest economy back four decades. To avoid a prolonged recession, Nigeria will have to enact a series of potentially politically unpopular reforms, the World Bank said.

While the pandemic is set to create millions of “new poor” in middle-income countries, Nigeria is uniquely vulnerable because of its precarious pre-pandemic economic situation — in which unemployment and inflation were already rising and incomes were falling — and its dependency on oil and remittances, the lender said.

“This is not just any crisis for Nigeria, how it responds will set the course for the next few decades,” Shubham Chaudhuri, head of the World Bank’s mission in Nigeria, said.

“For the first time in many years, in the last nine months, the government has made some pretty politically courageous decisions, but the key is to keep the momentum on those,” he said.

But without a strong policy response, “Nigeria risks repeating the experience of the 1980s shocks, which set back Nigeria’s development progress by decades,” according to a brief shared by the World Bank.

The World Bank expects 15 million to 20 million Nigerians, roughly 10 percent of the population, to be driven into poverty — living on less than $1.90 a day by 2022, mostly because of the pandemic.

Analysts say bold reforms by the government must involve articulate policy framework to drive investment inflow.

“We’re not behaving as if we have an emergency in our hand. We must be intentional about what we want and how we want to get to where we’re going,” Tope Fasua, an economist, told BusinessDay.