There might be no short-cuts for growth, but specific steps will be critical for Nigeria after 27 percent of the economy failed to grow last year, business leaders have said.
Domestic output grew by 2.27 percent in 2019, the biggest growth since 2015 when it grew by 2.65 percent, but Nigerian CEOs say the headline number masks vulnerabilities that could cause Nigeria to slip again, especially if a 2016-like oil downturn repeats itself.
“Whilst the economy remains on the path of recovery … (it) remains very fragile through a combination of slow growth and vulnerability to changes in external conditions, especially oil price fluctuations,” said the Board of Nigerian Economic Summit Group (NESG), a non-partisan private sector think-tank and advocacy group.
The warning from NESG, whose members are leaders of some of the largest corporations across various sectors in the country, comes amid fresh concerns as crude oil on Tuesday sold about $2.24 per barrel below the budget benchmark of $57 in 2020.
The Federal Government hopes to rake in N2.64 trillion oil revenue in 2020 which is around 32 percent of total expected income.
But economists have warned that the coronavirus outbreak will hurt the global economy and commodity prices around the world, prompting OPEC+ to plan to cut output.
Informed by the recent events, the IMF, which underestimated Nigeria’s growth in its forecast last year, recently lowered 2020 growth projections for the country by half a percentage point to 2 percent.
With the odds not in Nigeria’s favour, it must address challenges constraining growth in trade, real estate, oil refining, metal ores, quarrying and other minerals, electricity, gas, steam and air conditioning, public administration, and three other sectors that make up 27.1 percent of the economy but failed to grow last year.
In terms of structure, Nigeria remained service-led with a slowly-growing agriculture sector due to certain issues that include “rising incidences of insecurity and continuing closure of the nation’s borders”, NESG warned.
The NESG urged the government to work with regional neighbours towards resolving the issues around border closure and reopening the borders to counter rising adverse impact of the closure, especially on trade, employment and cost to Nigeria.
While the recent tax reform by the government aimed at boosting non-oil revenue through a VAT hike to 7.5 percent – among other things – was commended, the group warned that using tax solely as a tool to raise money for the government might be a trade-off for investment and job growth which could choke fragile growth.
On the decline in Foreign Direct Investment into the country over the last five years, the private sector leaders said the trend could be halted if Nigeria demonstrates a commitment to attracting and protecting investments.
Policy inconsistency, insecurity and other business constraints such as inadequate infrastructure were identified as the key hurdles for businesses.
Noting Nigeria’s continuing progress on Ease of Doing Business and the work of the Presidential Enabling Business Environment Council (PEBEC), NESG called for the “next level of reform” which would focus on areas like power supply, ports administration, and rail infrastructure development.
“To achieve this, the government needs to strengthen all laws governing PPP agreements and must demonstrate sincere commitment towards upholding agreements and protecting investors,” the group said.
The NESG said the fact that Nigeria signed the continental trade agreement was not sufficient as the country needs to ratify the agreement to become a ‘State Party’ and participate effectively in the on-going negotiations of the treaty, as well as align domestic policies and regulations to maximize trade gains.
On the decline of Nigeria’s external buffers and dominance of foreign investment inflows which are majorly short-term portfolio investments, NESG recommended that the Central Bank considers managing the naira by allowing the currency fluctuate within a pre-determined range not exceeding 5 percent.
According to the group, such fluctuation would serve to reduce the net outflow of reserves by improving confidence in the economy.
The World Health Organisation (WHO) has listed Nigeria along with 13 other African countries as nations where an outbreak of the coronavirus is possible, but the health risk is one of many threats to the country, NESG said.
The group called for public policy to note the adverse effect of the coronavirus on global economic growth, especially commodity prices, and adjust to ameliorate these adverse effects.
The rising cases of harassment of businesses in the guise of raising revenue was also an issue NESG said the country needs to address through the use of a transparent and fair tax collection process that would encourage compliance.
Also, the advocacy group called for the government (legislature and the executive) to continue to work harmoniously to ensure the timeous enactment of economy-enhancing legislation, in particular, the Petroleum Industry Bills, the Companies and Allied Matters Amendment Bill and the Investment & Securities Amendment Bill.
SEGUN ADAMS
