Nigeria needs to undertake swift and audacious reforms to stop the rapid decline of its economy and the resultant negative impact on its citizens, a report released Monday by Agora Policy, an Abuja-based policy think tank, has advised.
Entitled “Options for Revamping Nigeria’s Economy,” the report maintains that despite recording positive GDP growth in six consecutive quarters and having the biggest GDP in Africa, Nigeria’s economy is failing.
The International Monetary Fund (IMF), last week, cut its earlier 2022 growth forecast for Nigeria to 3.2 percent from the 3.4 percent it projected in June.
“Many of the macro-economic fundamentals have worsened and the level of inclusive development is low,” says the report which analysed Nigeria’s economic datasets from 2011 to 2021.
“Nigeria needs to undertake swift, bold and far-reaching reforms to halt the precipitous decline and the attendant negative impacts on citizens’ welfare. These reforms must be undergirded by inclusion, transparency and accountability.”
According to the report, Nigeria’s economy is in desperate need of quick and bold actions to get out of the rot of low and fragile growth, lean and narrow revenue and export base, soaring debts and deficits, limited trade and investment, suboptimal government spending, and growing inflation, unemployment and poverty.
“The fragile macroeconomic conditions remain a major cause for concern,” Muda Yusuf, CEO/founder Centre for the Promotion of Private Enterprise (CPPE), said.
According to him, the troubling macroeconomic situation has manifested in the following ways in recent years: weak and depreciating currency, high inflationary pressure, high and rising debt profile, exchange rate volatility, liquidity crisis in the foreign exchange market, increasing fiscal deficit, growing debt service burden, and the acceleration of money supply growth following the rising CBN financing of the deficit.
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Nigeria, the report states, needs “to deepen and diversify sources of revenue, re-calibrate expenditure to spend smartly, and invest efficiently. To achieve this, a re-thinking of drivers of the economy is needed”
Some of the prescribed actions—which will require not just deft economic management but also strong political will, effective communication and trust building—include removing the progressively ruinous petrol subsidies, increasing tax revenue, curbing the growing and suffocating appetite for debts, ending restrictive trade practices, and adopting a more realistic and more transparent exchange rate regime.
The report identifies the domestic and external drivers of the key challenges confronting Nigeria’s economy and provided options for reforms, especially in terms of government revenue, debt, trade and investment, inflation, interest and exchange rates, and unemployment and poverty.
According to Waziri Adio, the founder/executive director of Agora Policy, the decision to focus on the economy was driven by the need to expand policy and programmatic options for the current and next administrations.
“Everything revolves around the economy and there is no better time than the electioneering period to do a health check on the economy and come up with ideas and prescriptions for better economic outcomes,” Adio says.
“We commissioned this report to elevate the discussions during this important campaign season and to facilitate the search for solutions in an area that is central to national growth and human development.”
Data points from the report show that Nigeria has not only underperformed its peers but also regressed on most socio-economic indicators between 2011 and 2021.
Finances of the Federal Government (FG), the report states, have been defined in the last decade by a stark mismatch between expenditure and revenue on one hand and by an explosion of debts and deficits on the other.
For example, while FG’s expenditure rose by 179 percent from N4.48 trillion in 2011 to N12.51 trillion in 2021, FG’s actual revenue increased by only 81 percent from N2.57 trillion in 2011 to N4.63 trillion in 2021.
The growing gap between expenditure and revenue has been bridged with growing debts, translating to a 436 percent rise in FG’s debt from N6.17 trillion in 2011 to N33.11 trillion in 2021. Significantly, domestic debt rose by 242 percent from N5.17 trillion in 2011 to N19.2 trillion in 2021 while external debt increased by 2,435 percent from N546 billion in 2011 to N13.86 trillion in 2021.
However, the increase in expenditure and debts has not translated to improvement in human welfare. For example, the rate of unemployment rose from 5.9 percent in 2011 to 33.3 percent in 2020 while youth unemployment soared from 8.04 percent in 2011 to 42.49 percent in 2020.
The number of Nigerians living below the poverty line is projected to increase from 82.9 million in 2019 to 95 million by the end of 2022 and inflation as of August 2022 was at 20.52 percent.
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