The Nigerian economy, still faced with slowed growth, non-inclusiveness and poor socio-economic conditions, may plunge into further crisis with continued decline in foreign investment inflow, insecurity as well as foreign exchange scarcity among others, the Nigerian economic summit group (NESG) has said.
The group, in its 2022 macroeconomic outlook released on Tuesday, stated that without the implementation of tough sectoral reforms, the impressive performance of the economy in 2021 cannot be sustained.
The outlook titled; “The Last Mile: Reforms Towards Significant Improvement in National Economic Outcomes,” emphasises the need for reforms across three major areas including; reforms on the oil and gas sector deregulation and fuel subsidy removal; reforms on the foreign exchange management; and sector-specific reforms that can drive significant inflows of stable investments such as FDI into the economy.
“Among many issues that dented improved economic outcomes are insecurity, foreign exchange scarcity, declining foreign investment inflows, sectoral rigidity, infrastructure deficit, inadequately skilled workforce, policy inconsistency, and regulatory bottlenecks.
“Going into 2022, Nigeria has the opportunity to build on current growth performance by initiating tough economic reforms that would remove the constraints on the expansion of sectors of the
economy and enhance their capacity to create jobs and lift millions out of poverty,” it stated.
On the oil and gas sector reform, the report stressed on judicious implementation of the Petroleum Industry Act (PIA) to attract investors into Nigeria’s oil industry, particularly the downstream and midstream segments.
Laoye Jaiyeola, CEO of NESG, commenting on the oil and gas sector reform, said that Nigeria can no longer afford the continuation of the subsidy era as being considered by the federal government.
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Top among the list of options for the federal government include to ensure a gradual phasing-out of the subsidy, implement effective and efficient social interventions before subsidy removal to gain citizens’ trust, as well as intensify efforts to improve revenue.
According to him, the oil and gas sector lacks the needed investments for growth, basically due to its unattractive environment.
“We cannot sustain a subsidy regime anymore, the fuel subsidy removal policy, which will affect the welfare of the citizens, needs to be treated with utmost care to create a long-lasting solution that will benefit
relevant stakeholders.
“There is an increasing need to ensure competition in the oil and gas sector, important for improved private sector participation. As a result, the Nigerian National Petroleum Corporation (NNPC) cannot remain the sole importer of refined fuel products if a liberalisation policy in the sector works out well.
Speaking further, Jaiyeola stated that addressing issues such as high interest rates, macroeconomic instability, inflation, and foreign exchange are critical to the nation’s overall economic growth.
In his remark, Asue Ighodalo, Chairman of the NESG noted that peculiar economic comorbidities gravely threaten a full economic rebound for Nigeria.
According to him, Nigeria has continued to grapple with multiple macroeconomic challenges, exchange rate volatility, fiscal constraints, market distortions, high inflation, an unattractive investment environment as well as infrastructure deficits.
He explained that the abatement of the macroeconomic challenges must be addressed with a sense of urgency, and the implementation of immediate economic reforms must be prioritised to promote higher productivity, achieve economic efficiency, and deepen inclusive development.
According to him, being a pre-election year, 2022 will likely come with its peculiarities. “First, increased election spending could motivate a tighter monetary policy stance to curb inflationary pressures. Secondly, attention may shift from effective governance to outright politicking,” he said.
He explained that the pace of decision-making usually slows down in a pre-election year, thereby making reform pronouncements and implementation difficult.
“The philosophical and political battles which will ensue as each party seeks to choose its presidential candidate and then convince the citizens that they are the party that will form the best government, may relegate focus on the economy and lead to the stagnation of our recovery.
“Our recommendation, therefore, is that swift action is taken, preferably in the first quarter of this year.
“The World Bank estimates that an additional one million people were pushed into poverty in Nigeria between June and November 2021, resulting in a total of about 8 million people being relinquished to poverty in 2021; and bringing our nation’s poverty headcount to about 91 million. That is 91 million Nigerians afflicted by the ‘poverty virus’, which is every bit as deadly and more infectious than SARS COVID-19, judging by the numbers.
“Election-related distractions will likely have the effect of amplifying the challenges experienced in 2021 if the government does not immediately move to stem the tide by implementing critical reforms,” he said.
In his remark, the Chairman Senate Committee on finance, Adeola Solomon who represented the Senate President, Ahmed Lawan assured that the President Buhari’s administration is committed to alleviating the hardship faced by Nigerians.
He explained that while the country cannot continue with the payment of fuel subsidy, the problem facing the government is in deciding how and when to implement the subsidy removal.
According to him, “It is obvious that we cannot continue with the fuel subsidy, but how and when you remove the subsidy is what we do not know.
“And I want to assure Nigerians that when it is removed, the President will definitely come up with ways to cushion the impact.”
Speaking on the economy performance, Solomon stressed that the government is doing so much to improve on the economy, especially revenue generation.
“We are doing a lot to improve our performance. We are currently working on the finance bill as well as all of our existing laws to meet international best practices and create a conducive business environment,” he said.
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