Nigeria’s inability to stimulate private investments paints a bleak future for a country tipped to become the world’s third most populous nation by 2050.
As a percentage of GDP, private investment in Nigeria will probably fall to 13.81 percent in 2019, according to the World Bank.
That compares poorly with peer countries with a similar population like Indonesia, as well as African peers from South Africa to Egypt.
Indonesia’s investment to GDP ratio is projected to hit 33.6 percent in 2019 from 33.4 percent in 2018, according to World Bank data.
In Ethiopia, investments as a percentage of GDP will probably hit 39 percent while investment in Egypt is expected to be equivalent to 16.81 percent of GDP. In South Africa, the figure is 17.9 percent.
Perhaps most telling is the fact that while investment seems to be rising in other countries, it is falling in Nigeria, declining from as high as 35 percent of GDP in 2000.
The dry-up in investments has dire consequences for economic growth and job creation.
“The fore-runner of GDP growth is the Investment/GDP ratio. If there are little or no investments today, then there will be little or no growth in a couple of years’ time,” said Atedo Peterside, founder, Stanbic IBTC Bank plc.
“The double-digit growth of 2002 came on the back of the very high Investment/GDP ratio of 35 percent recorded in year 2000, which was the first full year following the restoration of democracy,” Peterside said in a keynote speech at dinner marking the 25th Nigerian Economic Summit in Abuja.
“Thereafter, the long-term trend for Nigeria’s Investment/GDP ratio has been a near-continuous downward slide. By 2012, the Investment to GDP ratio had slid all the way to below 15 percent and so GDP growth rates were bound to fall sharply after 2013,” he said.
Nigeria’s GDP growth has collapsed in recent years on the back of a prolonged plunge in crude oil prices that started in mid-2014.
After the recession in 2016, GDP growth has failed to match previous growth rates and has been consistently come in lower than population growth.
In the first half of 2019, the economy expanded by 2 percent, according to the National Bureau of Statistics (NBS). That’s barely enough to scratch the surface in a country that produces people at an annual average of 2.6 percent.
Aside from low economic growth, the investment to GDP trend can be used to explain why poverty is on the rise and unemployment is expanding, according to Muda Yusuf, an economist and director-general of private sector advocacy group, the Lagos Chamber of Commerce and Industry (LCCI).
“The private sector is the driver of job growth anywhere in the world, so if private investment is declining, it constrains job creation,” Yusuf said.
The numbers establish that countries with high investment to GDP ratios tend to have lower unemployment rate.
Unsurprisingly, of the countries analysed by BusinessDay, Nigeria not only had the lowest investment to GDP ratio but also the highest unemployment rate after South Africa.
Vietnam, which had the lowest unemployment rate of the countries surveyed, with 2.16 percent as at the end of June 2019, had an investment to GDP ratio of 27 percent in 2018, with the number expected to hit 28 percent in 2019. That’s about double Nigeria’s investment to GDP ratio.
Another example of the correlation between high investment to GDP ratio and unemployment is Indonesia, whose unemployment rate was 5 percent as at the first quarter of 2019. As earlier stated, Indonesia’s investment to GDP ratio was 33.4 percent in 2018.
On the proof of the data, declining poverty in India has happened in a period of higher investment to GDP.
India’s investment to GDP ratio has grown consistently in the last five years and is tipped to peak at 31.5 percent in 2019, from 31.46 percent in 2018 and 30.63 in 2017.
This is the same period in which Nigeria overtook India as home to the world’s largest number of poor people.
LOLADE AKINMURELE & OLUWASEGUN OLAKOYENIKAN
