Attaining double-digit Gross Domestic Product (GDP) growth for Nigeria seems almost like an athlete who dreams of creating a record by walking from Africa to North America.
The country’s highest quarter growth rate of 2.38 percent since its exit from recession in Q2 2017 is nothing close to Ghana’s 7.4 percent in Q3 2018, and Ethiopia’s 8 percent.
On why Africa’s largest economy lags its peers, Andrew Nevin, chief economist at PWC, told BusinessDay in Lagos on Wednesday that there are a number of structural issues that are preventing the ease of doing business in Nigeria from helping to fasten economic growth.
“One is the fuel subsidy. We feel it is something for the wealthy and not for a country like Nigeria,” Nevin said.
“We understand the logic behind the FX regime, but the truth is that it confuses people, it confuses investors, so they stop investing,” he said.
Foreign Direct Investment (FDI) inflows into Africa’s largest economy are worsening, according to data released by National Bureau of Statistics. On year-on-year basis, FDI fell 58.7 percent in Q4 2018 to $156.08 million, from $378.42 million recorded a year earlier.
The long-term investment into the country for the review period represents 7.11 percent or $1.19 billion of the total $16.8 billion capital imported in 2018, close to the same amount the government raised in a single Eurobond issue of $1 billion in February 2019.
Another issue that drags the country’s economic growth as cited by Nevin was the NNPC.
“We continue to have problems in the oil industry where we are not able to pass the Petroleum Industry Bill (PIB), so we are not able to really organise investment into that. We have the NNPC playing both the roles as the regulator and as an operator, and that’s confusing,” he said.
After a 17-year struggle to pass the PIB which aims to increase transparency and stimulate growth in Nigeria’s oil industry, the House of Representatives passed a version of the bill in 2018, which is the same as the one approved by the Senate in 2017, the Petroleum Industry Governance Bill (PIGB). President Muhammadu Buhari is yet to assent to the bill.
“We have been very adamant about the real estate industry considering it is a very critical sector for growth and employment because it employs a lot of people. Everyone needs a house and the major issue about the real estate sector is that it is still held back by the Land Use Act,” Nevin said.
Nigeria has more than 17 million units of housing demand-supply gap challenge and, according to the Association of Housing Corporation of Nigeria (AHCN), under-development of Nigeria’s mortgage sector in driving homeownership is worrisome as more than 90 percent of home utilises funds from personal savings.
“We feel like there is a lot of progress going on but the big four structural issues are holding us back. So going forward we would like to see those structures addressed,” he said.
