2.27 Percent GDP Growth: should we celebrate?

With the announcement that Nigeria achieved a GDP growth of 2.27 percent in 2019, higher than the 2.1 percent projected by IMF, there seems to be an air of elation, like yes, we did it in some circles!  But should we celebrate the minute success or is it even a success? When exam results are announced, high performing students celebrate their performance when compared to other students.

In our West African class and using reports from African Development Bank, Senegal achieved about 6 percent, Ghana about 7.1 percent, Cote d’Ivoire 7.4 percent, Mali 5 percent, Guinea 6.2 percent, Burkina Faso 6 percent, Guinea Bissau 5 percent, Gambia 5.4 percent, Niger 6.4percent, Mauritania 6.7percent and Benin Republic 6.7percent. Overall, in this 2019 West African class of 15 students, Liberia and Nigeria are the least performing students with about 0.4 and 2.3 percent respectively. As revealing and disappointing as the above comparison can be, it is important to remember that we also failed using the growth target of 3.2% that was agreed in 2019 budget and below our population growth rate of about 2.60 percent. As the father of such a child called Nigeria, PMB will and should not be happy!

In reviewing our poor performance, a key question that arises is if the outcome should be attributed more to internal or external factors. As other West African countries somewhat face the same external factors, suggestions that our challenges are more of internal than external gain more validity. Many factors contributed to 2019 outcome. These include the general elections, delay in the appointment of ministers, pervasive insecurity and heightened tribal divisions escalated by absence of inclusive government, the delay and later signing of the Africa Continental Free Trade Agreement (AfCFTA). Also significantly contributing to the outcome are border closure, unconventional policies from CBN and lack of a coherent and robust fiscal policy exemplified in the poor articulation and execution of the Economic Recovery and Growth Plan (ERGP).

A better way to properly understand our dire situation is to recollect the basic teachings in Economics. As our GDP grows lower than the population, our poverty challenge will compound. With Nigeria already classified as the poverty capital of the world and about 22million Nigerians unemployed, the 2019 GDP growth of about 2.3 percent is therefore neither a success nor worthy of celebration. It should serve as a cause for sober reflection given the consequences of such sluggish and disappointing growth on our national, individual and general wellbeing. What has happened to the Giant of Africa, a Scottish friend sarcastically asked?

With 2019 in the past and 2020 in the present, the focus is how to ensure that the poor performance is not repeated in 2020 and beyond. Are there options that Nigeria can use to achieve over 5 percent growth? Yes, there are and they are plenty!

To accelerate the development and growth of any economy, three key policy fronts must be robustly and jointly pursued. These are monetary, fiscal and supply-side policies. While monetary and fiscal policies are somehow clear, supply-side policies are sometimes overlooked or inadequately attended to. It is generally referred to as specific policies through which government enhances the productivity and efficiency of an economy. With success measured based on the extent to which aggregate supply is increased to ensure higher long term economic growth, it is a set policies that when effectively combined and executed with monetary and fiscal policies, the economy will experience higher productivity and employment rate, lower inflation, more foreign direct investment, improved trade and balance of payments.  To move Nigeria to over 5percent GDP growth rate, the below options deserve serious attention.

First, a detailed and well-articulated monetary policy with good inputs from relevant stakeholders and guided by the concept of forward guidance is imperative. While the efforts of the CBN for better Nigeria is most commendable, a situation where one is left a bit confused as to the evident expansion and reactionary interventions of the CBN might not be the best for a struggling economy like Nigeria. For more real investors to embrace Nigeria, some level of certainty and clarity especially on the monetary policy front is pertinent.

Read also: Sustainability of CBN’s unorthodox policies doubtful

Second, as the Economic Recovery and Growth Plan (ERGP) expires this year, it is important and urgent that a more detailed and realistic short-to-long term economic development plan that is anchored on devolved socio-economic development framework is quickly formulated, adopted and utilized. Given our size, complexities and peculiarities, a patriotic review aimed at moving some items such as electricity, waterways, mining, railways from the exclusive list to the concurrent list will immensely enhance Nigeria’s growth and development outcomes.

Third, with about N2.7 trillion of our 2020 budget allocated to only debt service and our national debt getting close to $90billion, it is a public knowledge that the potential debt crisis must be addressed for Nigeria to record meaningful economic growth. To tackle this challenge which will help in freeing more money for capital expenditure, a bold move focused on removing some subsidies, selling off some assets and reducing the cost of governance need to be pursued. A situation where the Bureau of Public Enterprises (BPE) seems not very active while assets running into millions of dollars remain either underutilized or unutilized and wasting is sad.

Fourth, while the reasons and immediate benefits of the border closure are not in doubt, the challenge is in the long-term impacts of the policy on our economy. From all indications, it seems that a better policy focus will be on improving the competitiveness of Nigerian products and effective monitoring of our borders than outright closure. With other internal challenges we have such as insecurity that has reduced agricultural output, the continued closure of the border might reverse all the benefits so far achieved.

Fifth, with pervasive insecurity and tensed divisions across all parts of Nigeria, a review of the current security architecture of the country is most urgent. This becomes even more apparent with the increasing formation of regional/tribal security groups which supports the need for an urgent review and the need for an inclusive management and governance of our security sector.

Sixth, as formulation and execution of government plans depend to a large extent on the quality of leadership and key people in government, it might be important that a critical review of the performance of all the ministers, permanent secretaries and heads of all the agencies of the government is carried out to ensure that only people with the adequate capability and patriotism are appointed to pursue the needed growth.

Seventh, with the above and other reforms such as power/energy, regional industrial development, further budget reforms to enhance execution, addressing challenges in issues of rule of law, regulatory quality and general government effectiveness, achieving a growth rate of over 5 percent like other West African countries  will be very feasible.

Franklin Nnaemeka Ngwu (PhD)

Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.