The current administration has reiterated that it is on course to boost Nigeria’s struggling economy by implementing major reforms.
Although the reforms have increased the cost of living for cash-strapped Nigerians, it has also brought in more revenue to enhance the government’s capacity to reduce poverty numbers, which stand at 104 million.
“To restore the economy to the path of prosperity, the current administration must see through the ongoing economic reforms bordering on efficient taxation, blockage of fiscal leakages, public sector optimisation and judicial sector reform,” analysts at Afrinvest Limited said in a recent report.
They added that to support the pressured traditional revenue sources, the mining sector road map (2015-2025) must be given the right attention to fully harness the potential of over 45 solid mineral assets across the country.
Ayo Teriba, CEO of Economic Associates, said the country should worry about the outlook of the foreign exchange market.
“We have liberalised the market but the rate is very volatile. The way to stabilise the exchange rate is an open secret. Everyone knows that the reserves have dwindled; instead of the reserve level going up, it’s going down,” he said.
He added that the country needs to work on getting foreign direct investment. “It should get enough foreign investment to make our foreign reserve level adequate which would make the exchange rate stable, reduce inflation and increase growth.”
Abubakar Bagudu, minister of budget and economic planning, has said the federal government achieved N8.65 trillion in revenue in the first nine months of last year compared to the pro-rata target of N8.28 trillion.
Out of the N8.65 trillion revenue, N1.42 trillion was generated from oil revenues, while non-oil revenues totalled N2.50 trillion. The Federation Account Allocation Committee’s disbursement to the three tiers of government rose by 37.9 percent to N1.08 trillion in November from N786.2 billion in May.
Olaolu Boboye, an economist and fixed income strategist at CardinalStone, said the government must show commitment to ensuring that the reforms yield positive results.
“The government should not backtrack on some of these initiatives that they have done. There must be clear transparency on the benefit of some of those reforms,” he added.
According to him, Nigerians are yet to see the impact of petrol subsidy removal on the government earnings.
“Hence, there might be a need for more transparency, clarity and communication from the government,” he said. “The government should also give policies timing to permeate the economy while they also consolidate on those reforms by ensuring that the citizens feel the benefits, especially in the medium to long term.”
President Bola Tinubu, who took the helm of Africa’s most populous nation in May last year, stoked foreign investors’ interest with some of his actions including the removal of petrol subsidy and the start of foreign exchange reforms.
But his reforms have worsened inflation, currently in double-digits and at the highest level in 18 years. The rising inflationary pressures have weakened the purchasing power of consumers, even as businesses grapple with higher operating costs.
Data from the National Bureau of Statistics (NBS) shows that the average retail price paid by consumers for petrol in May was N238.1 per litre, but jumped to N648.9 in November.
The country’s inflation rate rose to 28.20 percent in November from 27.33 percent in the previous month. High inflationary pressures shrunk business activity four times in 2023.
“The government needs to sustain the policies earlier implemented. For rising prices, there is a need for effective alignment between the fiscal side and central bank in addressing the drivers, which are predominantly naira weakening and higher energy costs,” Israel Odubola, a Lagos-based research economist, said.
He added that harnessing value from the idle or dead capital, privatising inefficient public assets and even releasing a portion of government equity ownership in assets like the Nigerian National Petroleum Company Limited are innovative strategies for raising foreign capital.
“The policies have pushed more people below the poverty line. We have seen the government respond to this by the announcement of several palliatives. But effective implementation would help reduce poverty in the short term,” he said.
Analysts at Vetiva said in a recent report that Nigeria must prioritise fiscal discipline, diversify its economy beyond hydrocarbons, and implement measures to mitigate the potential negative effects of subsidy removal while fostering sustainable growth.
The World Bank said in December that rising inflation had pushed an additional 14 million Nigerians into poverty in 2023. This means that the number of poor people rose to 104 million from 89.8 million at the start of the year.
The government should increase the minimum wage, disbursement of the palliatives and social intervention programmes to ensure that more vulnerable Nigerians can access those funds, said Adeola Adenikinju, a professor of economics and president of the Nigerian Economic Society.
“The current cost of energy has impacted Nigerians a lot; there has to be a bus transit system shift to compressed natural gas for the transportation sector. The government can expand the coverage of the rail system. Solving the energy issues and also the domestic refinery will contribute to helping Nigerians live better in 2024,” he added.
Kelvin Emmanuel, an economist, said an important driver the government needs to pay urgent attention to as it seeks to alter the current fiscal strategy path from debt to revenue is the government-owned enterprises that ought to be warehoused by the Ministry of Finance Incorporated.