NESG highlights 4 reforms for Nigeria’s economic recovery in 2021

Attaining macroeconomic stability, consistent regulatory policies, human capital development and widespread sectoral reforms must be on the card for Africa’s biggest economy if it must achieve meaningful growth in 2021.

This is according to the private-sector advisory group, the Nigerian Economic Summit Group, which released an outlook for the year with the theme “4 priorities for the Nigerian economy in 2021 and beyond”.

“The Nigerian government would need to reverse the current recessionary trend and build a more resilient economy; and focusing on the four key priorities will go a long way boosting private sector investment, central to economic recovery efforts in 2021 and beyond,” NESG said.

According to NESG, Nigeria has an unstable macroeconomic condition which can be corrected through the strengthening of its banking systems especially in the independence of the CBN, the stabilisation of the domestic currency, expanding non-oil revenue, concentrating on alternative financing and non-debt instruments for budget deficit financing, promoting open markets and fair competition, and regular engagement with the private sector.

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Africa’s biggest economy slipped into its worst recession since the 1980s after the pandemic wiped out nearly half of its revenue and induced a lockdown that caused economic activities to contract as much as 6 percent and 3 percent in the second and third quarters of 2020, respectively.

The private sector-led group projects a V-shaped recovery for the Nigeria economy, with a subdued growth rate of 0.9 percent in 2021; therefore in positioning for rapid economic growth it is necessary to engage in the major reforms, a move that will boost private investments which is critical for an economic rebound.

“To fix the challenge, Nigeria needs investment-led growth too,” said NESG.

Speaking on the need of attracting investments which fell to an all-time low in 2020, NESG noted that in this COVID-19 era, government spending is important but will be constrained because of rising debts and future debt service obligations hence, investment is needed to drive production and productivity, as well as inclusive growth.

“Following the constrained fiscal space faced by the Nigerian government, investments in critical sectors are what will drive economic recovery and sustain the growth momentum in the medium term. Investment, both local and foreign direct, is often associated with job creation, technical knowhow, technology, economic growth and the strive towards efficiency.” It says

NESG called on the need for proper consultation with stakeholders as well as the continuity of policies and programs and coherence at all levels of government to ensure policy consistency for improved business and economic activities.

Moving forward the report projects the risk of having a depressed economic growth era with rising unemployment and poverty rates as the Nigerian government becomes pressured to start paying off its debts, a move which could result in more borrowing or a constrained budget on non-debt expenditures in the future.

NESG, therefore, advised that the government should implement reforms that will attract significant investments into sectors that have the potential to grow and expand their outputs and have strong links to inclusive growth like the manufacturing sector, trade sector, professional services, health, etc.

“With all sense of urgency and intensity, the government at all levels must embark on reforms aimed at attracting investments into crucial sectors of the economy. This is because the business-as-usual scenario will only lead Nigeria down the drain of economic hardship, wider income inequality and increasing poverty” Laoye Jaiyeola, Chief Executive officer at NESG said at the launch of the report.

The report noted that despite the importance of human capital development for the survival of the country, Nigeria’s human development performance has remained stagnant at 0.5 percent from 2014 to 2019 while ranking 161st out of 189 countries surveyed in 2019.

It, therefore, recommended the need for massive digitization and skills development programs especially in the health and education sector, constant reviews of policies and outlines in the sectors and also prioritizing social welfare.

“The goal must be to build a resilient and high growth economy that delivers a reduction in poverty and unemployment and investments will play a major role in achieving sustained recovery. These must be consolidated with swift implementation of security reforms and sanitizing the business environment, both of which are crucial in attracting investments into critical sectors of the economy.” the outlook states.

Looking at other activities that will influence economic growth, the outlook projects that the discovery and effective distribution of the vaccine will speed up global economic recovery, and restore stability in the global commodities and financial markets including Nigeria.

In addition to this OPEC’s move to increase crude oil output by 500 thousand barrels per day, reopening of the land borders, implementation if the African continental free trade area (AfCFTA) and the move to tighten market liquidity by the CBN through the introduction of special bills with a 90 days tenor and the zero-coupon rate will have a significant effect on economic recovery according to the outlook.