Nigeria needs $500bn to become frontier economy

For Nigeria to move from fragile to frontier economy, it will have to pump $50 billion or 10 percent of its Gross Domestic Product (GDP) for 10 consecutive years into the economy, experts say.

These investments must be made in infrastructure, power, human capacity development, industrialisation, agriculture, rural development and ICT, among others.

“Nigeria needs $50 billion, which is 10 percent of GDP, for 10 years to move from fragile to frontier economy,” said Bismark Rewane, chief executive officer, Financial Derivatives Company, at the dinner held by DuPont, a solutions firm, and American Business Council in Lagos.

“A frontier economy is a fast-growing country that is attracting international investor interest and has deepened financial market, industrial sector and freed money for investment in physical and human capital,” according to Min Zhu, deputy managing director, International Monetary Fund (IMF).

“Nigeria has a suboptimal level of capital formation of 15 percent as against 18 percent in Brazil and 26 percent in Malaysia. So the incoming government must fashion out a way of dealing with high level poverty and income inequality,” Rewane said, while speaking on the topic, ‘Business Economic Outlook for Nigeria in the New Political Context.’

Africa’s largest economy reels under huge infrastructure gap estimated at $300 billion. In 2008, external reserves were put at $60 billion, but the reserves have depleted to $29.49 billion currently. Exports have also fallen from $97 billion in 2011 to $57 billion currently, while the country is facing exchange rate volatility amid weaker naira and crashing crude oil prices.

“Buhari will have to differentiate between the need to haves and the good to haves. The ambitious welfare programmes and Marshal Plan will put additional pressure,” Rewane observed.

According to him, the incoming administration might consider financing infrastructure by project specific programme, public listing of the Nigerian National Petroleum Corporation (NNPC) and selling down parts of individuals in Joint Ventures, as well as, reduction of cash call requirements and depletion of national reserves.

“We need to adopt an exchange rate policy that is tied to available oil revenues. We need to take parts of the Infrastructure Master Plan and implement them,” he further said.

Nigeria, Africa’s largest economy, still lags peers in economic development as emphasis has been placed more on economic growth and its rate than inclusive growth or development. Development has been tied to figures rather than on people’s welfare.

The country ranks 152 out of 187 countries in the Human Development Index determined by health, education and income levels. It, therefore, lags South Africa (118), the Philippines (117), Namibia (127) and India (135).

Experts say this has persisted because the country is still not industrialised as the real sector, notably manufacturing
and agriculture, is still stymied by numerous challenges that seem to have defied the state.

“The manufacturing sector is still un-competitive due to issues about the environment. Manufacturers and SMEs do almost everything alone. They pay high energy cost, high cost of funds, infrastructure cost and several others,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), in an exclusive interview.