In the wake of Nigeria’s spiraling inflation reaching an 18-year high, concerns over debt servicing consuming 98 percent of the country’s revenue and the overwhelming pressure of price hikes have raised fears of an impending disaster.
With the economy grappling with fragile growth and hefty deficits, the recent administration under Tinubu, who assumed office in May, vowed to amplify economic growth by a minimum of 6 percent annually, remove barriers to investment, and foster job creation. However, daunting challenges such as the foreign exchange shortage , surging inflation, and the high cost of living pose substantial hurdles to kickstarting growth.
Wale Edun, the minister of finance, emphasised the urgency for Nigeria to explore revenue-generating avenues while striving to curtail the high deficit financing. “In the current domestic and international environment, continuous reliance on borrowing is unsustainable. Our objective is to diminish dependence on borrowing and decrease deficit financing in the 2024 budget,” stated Edun during an interview.
Frank Aigbogun, the Publisher of BusinessDay newspaper and a macroeconomic analyst, echoed concerns about Nigeria’s excessive reliance on borrowing. “Continued borrowing to finance consumption is untenable. We must adjust our spending in line with our resources,” he remarked. Aigbogun also stressed the imperative to reduce the cost of governance across all sectors, emphasizing that belt-tightening should apply universally, encompassing households, businesses, and government entities.
Addressing alternative revenue sources outside debt, Aigbogun highlighted Nigeria’s vast untapped assets, citing the elimination of subsidies and currency rate adjustments as measures to alleviate the fiscal crisis. However, he noted the persisting challenge of foreign exchange and proposed short-term borrowing, securitising future earnings from natural gas, and potential crude oil sales to bolster the economy.
Regarding the administration’s handling of the economy, concerns were raised about the disconnect between policy direction and economic outcomes. While acknowledging initial policy shifts, Aigbogun urged cohesive and concerted efforts within the government for effective execution. He also emphasized the need for Nigeria to demonstrate a genuine commitment to international engagement and business readiness.
In the midst of these discussions, the escalating inflation rate, currently at 27.33 percent, emerged as a pressing concern. Aigbogun drew attention to Nigeria’s divergent economic performance compared to global trends, stressing the need for better alignment of monetary policy, cessation of unsustainable practices like Ways and Means or excessive borrowing from the central bank, and strategic improvements in agricultural production and distribution to alleviate the inflationary pressures.
“We are doing the same thing that central banks around the world are doing but we are getting the opposite result and it’s a measure of the mess called economic management that we saw over the last eight years; complete misalignment, he said. “There’s an urgent need for policy alignment, cessation of unsustainable practices like borrowing from the central bank, and focus on increasing agricultural production,” Aigbogun explained, underscoring the critical need for efficient agricultural practices and supply chain improvements.
These concerns come amid a flurry of international engagements by Nigerian authorities to attract foreign investment. However, analysts believe that a more coordinated approach and substantial reforms within sectors like the state-owned oil company (NNPC) are imperative to restore investor confidence and signal Nigeria’s readiness for economic engagement on the global stage.
“We need new leadership at NNPC, a leadership that’s results-oriented, not making excuses but comprehends the dire state of Nigeria’s economy largely caused by the massive failures of the state-owned oil company,” Aigbogun asserted during his address.
“NNPC must undergo a radical transformation to become a hub of effective and efficient oil production, and this demands astute leadership that takes responsibility and drives concrete actions,” Aigbogun reiterated, emphasizing the pivotal role of NNPC in Nigeria’s economic revival efforts.