Times like this are critical for Nigeria, weakening her knees and may see the giant of Africa bow under the fierce blows of negative shocks in the global economy. These times have made clear to everyone the grave consequences of poor and feeble policies and lack of clear direction from the Nigerian authorities. Positively, times like this presents to Nigeria lessons, if not wasted, that should usher her into a new era of sustained economic development.
Developments last week were frightening leaving the giant of Africa at the tip of a cliff. Great will be the fall if our leaders show lack of competency in delivering Nigeria from current crisis. The coronavirus-induced slump in demand globally left millions of Nigeria’s bonny light crude unsold and prices as low as $12. Likewise, confirmed cases of the deadly coronavirus reported in Nigeria jumped by 117 on Tuesday night, the highest daily figure reported by NCDC since its first case in February.
Clearly stated in our front-page comment on Thursday shows that the confluence of COVID-19 and an oil market collapse means that our oil boom is well and truly over. Given the heavy reliance of the Nigerian economy on the crude oil market, these developments spell an impending doom. This does not only threaten the financial stability of the 36 states heavily reliant on federal allocations to pay bills but also will significantly hamper the implementation of the federal budget, putting an already battered economy in worse shape.
Nigeria is currently home to high debt levels, debt servicing cost eating up more than halve of our revenues, high inflation level at 12.26 percent according to recent NBS report last week, huge infrastructural deficit, high unemployment rate closer to 40 percent when adjusted for the impact of COVID-19, under-employment and under-reporting, bleeding stock market, poor economic rating pulling back investments etc.
This leaves Nigeria with a singular option of adopting an investment-led strategy that relies on privatisation and attracting Foreign Direct Investment (FDI) while facing the possibility of its worst economic crisis in 40 years. This strategy is not new in our clamour over the last four years except that the authorities consistently ignored it. We only wish that this time, with current realities, the Nigerian authority will ride on this wheel.
With Nigeria’s room to borrow narrowed and increased risk for its debt market securities, Nigeria must look at the equity side of its balance sheet. This means we must adopt ways to attract private patient capital. Over the last five years, Nigeria’s foreign patient capital has plunged annually at a compounded average of minus 10 percent. Among peers in the frontier space, Nigeria attracts the lowest at $222 million quarterly average. This is less than onepercent of GDP. It is so small that if shared equally among 200 million Nigerians, each person will get only $1.11 per quarter.
Policies henceforth must encourage private sector investment into ICT, infrastructure, agriculture, manufacturing, health, education, and other sectors with good prospects. The bedrock of all this is urgent investment in physical (roads, land, sea and air transport, energy transmission) and social (healthcare and education) infrastructure. The first task is to fund these investments with domestic capital and foreign investments will flood in. Foreign investors are attracted by clear policy direction and good business climate.
The sole responsibility lies with the federal government to create a private sector driven economy. We cannot afford to waste lessons from the current crisis. Rather than brood over the collapse of the oil market, the FG must be motivated to diversify the economy through investment-led strategies
