Poverty and unemployment will worsen if Nigeria does not grow it’s economy by at least 7 percent in the next five years. This becomes important because the current population growth rate is 2.61 percent and the economy needs to dwarf it to avoid dire consequences economy experts said on Wednesday.
Speaking at the 15th annual banking and finance conference in Abuja, the experts said Nigeria’s GDP growth is sub optimal and below peers within Africa. The exports pointed out that the country’s GDP has been growing at an average of 1.75 percent in the last five years, compared to other African countries like Ethiopia with 7.3 percent growth rate.
Kunle Elebute, Senior Partner and Chief Economist KPMG Nigeria and Chairman KPMG Africa in his presentation titled “Nigeria’s Economy in the Last Five Years: Lessons Learnt and Choices to make in the next five years” stated that Nigeria’s growth has not been inclusive as unemployment continues to rise from 18.8 percent in 2017 to 33.3 percent in 2021, while GDP per capita has remained almost on a similar level.
He disclosed that the federal government has continued to grapple with fiscal challenge as revenue cannot finance the required growth largely due to significant increase in the level of subsidy support and low tax based revenue to GDP, hence government cannot find required capital expenditure to drive economic growth.
“We need to double our GDP growth rate against our current population growth rate to have desired impact. At two percent per annum, the population will grow faster than the economy resulting in worsening unemployment, and poverty. It is expedient that the economy grows at a minimum of 7 percent more than the current population growth. This will almost double the current GDP by 2031 from $440.8 billion to $867.1 billion,” he said. “This would ensure inclusive growth , take people out of poverty, create jobs and accelerate economic growth,” Elebute added.
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The economist stressed that to deliver 7 percent annual growth, the Nigerian government must in the next five years, take tough choices such as the removal of fuel subsidy and implement high impact initiatives which must be anchored strategic imperatives to include; A sectoral transformation/value addition in agriculture, manufacturing, gas etc.; drive private sector investment in infrastructure and power; implement strategic economic boosters; drive investment in human capital, drive productivity and efficiency in government; and tackle insecurity.
In healthcare, Elebute urged the creation of a social investment trust fund to solve challenges in health care and also the education sector, while also providing regulatory sanctity to drive investment for improved revenue.
He further stressed that the challenges impacting the growth and development of the oil sector needs to be addressed. “Government needs to commence accelerated implementation of PIA with strong focus on transiting JV assets to IJV to address high cost of production to attract investment into the sector,” he said.
Uche Orji, managing director/chief executive, Nigerian Sovereign Investment Authority noted that Nigeria has the potential to grow between 6 to 7 percent. He stressed that ” If we cannot boost the economy, it will be impossible to manage any other issues.”
Orji, said government must take seriously, the issue on how to finance the economy, and address core challenges, while noting that schemes such as the NSIA have been instrumental in addressing some issues especially finding for health care, infrastructure among others.
He also expressed his dismay over abandoned projects across the country which he notes is also compounding the challenges the country is grappling with. He said, “We cannot afford to continue to have capital tied around in projects that are near completion or almost ready for commissioning It makes no sense and it is deeply irresponsible, it must be addressed. If we do this, it will go a long way in addressing some of these challenges, ” he added.
Orji also informed that the Lagos-Ibadan expressway , an NSIA driven projects will be completed before the middle of next year to ease the hardship commuters are currently facing.
The managing director, however noted that Nigeria and the rest of the world is facing the most challenging investment environment, because according to him, “For the first time, there are uncertainties around global conflicts. The disruption that that it created in the supply chain will probably last for a long time.” He noted that this disruption is already driving inflation, currency crisis among others.
Chinwe Egwim, Chief Economist, Coronation Merchant Bank, in her submission, said there is a crucial need for fiscal adjustments, while expressing concerns that as at April, 2022 debt service accounted for 41. 1 percent of actual expenditure and 119 percent of actual revenue.
Although headline inflation has averaged at 13 .9 percent year on year in the last five years, the Coronation merchant bank projected a further uptick in headline inflation to 22.1 percent year on year by the end of 2022, and will moderate to 17.28 percent in 2023, Egwim said.
“Our forecast is influenced by structural issues impacting the cost of doing business such as insecurity and high imput cost; the impact of Russia-Ukraine crisis and previous hikes in electricity tariffs and fuel prices,” she added.
The economist, further projected that Nigeria’s overall GDP can hit double digit by end of 2025 to 11.25 percent if the country optimises its non-oil potential.
“If Nigeria’s non-oil potential is optimised, at the minimum, at least 2 percent boost to the GDP is obtainable on a quarter on quarter basis. Barring any severe contractions to oil GDP or assuming oil GDP remains at current levels, with oil price above $70 per barrel, overall GDP can hit double digit by end of 2025 . We need to increase urgency to optimise Nigeria non oil export potentials,” she said.