Nigeria needs economic not political restructuring

Governments, citizens and businesses across the world wish COVID-19 pandemic ends today and normalcy returns. This same prayer is offered in Nigeria. But would Nigeria return to an economy that is characterised by underperformance, unemployment, poverty and hardship?

In Nigeria, COVID-19 pandemic didn’t necessarily usher in new challenges and economic struggles, but rather amplified existing ones the country had been battling with. Since 2015, the economy has been suffering from a snail-paced growth, with GDP growth averaging 0.94 percent compared to the country’s boom periods between 2010 and 2014 when the economy grew by an average of 6 percent.

Clearly, these periods have been determined by swings in crude oil prices given Nigeria’s heavy dependence on the oil market. Periods with higher GDP growth have been associated with higher oil prices in the same period while lower growth periods are linked to lower oil prices.

Because Nigeria’s economic growth is strongly correlated with the highly volatile global oil market, any major shock such as the COVID-19 pandemic automatically throws the country into a miserable state. We cannot, therefore, over-emphasise the importance of economic restructuring.

We believe restructuring the Nigerian economy should take precedence over political restructuring being canvassed across the country. Some months back, the Yoruba Submit Group (YSG) threatened that Nigeria must restructure before the next election in 2023 or face doom.

This, in our thinking, is a misplaced priority. We expect that the clamour for diversification, boosting investments in various sectors, closing infrastructure gaps, eradicating poverty, ensuring businesses thrive and making Nigeria truly the largest economy in Africa among others, should be the fulcrum around which all advocacy for restructuring should revolve.

The federal government must find ways to position the country away from oil so as to be able to compete and win in an increasingly complex world for the benefit of over 200 million Nigerians. This does not, however, mean that oil should be totally done away with. Of course not. We are rather of the opinion that While it lasts, efforts must be made to focus on growing other sectors of the economy. In this case, diversification should be non-negotiable; it is mandatory.

However, we cannot be talking about growing other sectors without investment. Making other sectors attractive to private and foreign investors would require the FG churning out market-friendly policies and regulations while acknowledging the role of the private sector in economic development.

Without equivocation, we believe that COVID-19 pandemic provides Nigeria a chance to re-imagine and reawaken its strategies for growth. The country is starved of good policies and the economy is largely government-driven. Regulations that stifle sectoral operations, performance and investment opportunities are still prevalent.

For this reason, we have seen Foreign Direct Investments (FDIs) in Nigeria which promise growth for any economy dwindle sharply to levels below peers in Sub-Saharan Africa. It is the same story with Foreign Portfolio Investors.

The Nigeria stock market which is their main destination remains bearish as foreign investors stay away from the market despite low valuations of fundamentally strong stocks following CBN’s dollar demand management strategy to protect the Naira.

We believe that economic restructuring has the capacity for building strength and buffers on a number of viable sectors in the economy. It only involves diversifying the economy and improving sectoral contributions to GDP growth.

To achieve this, the government must be ready to build a private sector-driven economy while creating a business and policy-friendly environment. This is why we re-emphasise that the government has no business doing business. The private sector of any economy has the potential and ability to grow and develop such an economy.

As a country, Nigeria has seen the benefits of this in some sectors like telecommunications, pensions and cement in the past. All that is required is to replicate these successes in other sectors of the economy.

COVID-19 may have affected many economies but the effects differ in degrees. For those with no diversified buffer like Nigeria, the effects are severer. Hence economic restructuring is not just an option but also a must-do because we see the future of Nigeria hinged on this singular reform.