The year 2020, the beginning of a decade that will birth inventions, and a corridor into the projections of the decades ahead; with huge expectation regarding the outcome of the year in terms of the economic relevance and impact on the welfare sustainability of the citizenry. Governance across the globe has an amazing influence on directions as impressed by her policies and strategies to align with macroeconomic factors within her economy. All these, inform the decisions that will be taken to impact the people, so it is of significant interest to analyse the provisions of the previous economic engagement and use same as a scope to seek clarity of the future. The key economic elements are the derivatives from our day to day economic interaction which dictates our decision.
In the United Kingdom (UK), the coming months will have Prime Minister Boris Johnson work out a plan to reach an agreement with the European Union (EU) on strategic settlements upon the aftermath of Brexit or walk out of Brussels empty handed to face the reality that the years ahead will unveil without aligning with the rest of Europe, hoping to bridge the possible challenges and ensure that a more virile economically isolated United Kingdom emerges. Agreement has to be reached on trade and immigration policies especially because this will have direct impact on the economies of the UK and the member states of the EU.
This is a very remarkable period in Britain’s history as the decision of the coming months will go a long way in determining the economic relevance of United Kingdom to the region as well as the world at large. Careful analysis and sound negotiation skills must be brought to the fore to push through a fulfilling Brexit that will launch out a more prosperous United Kingdom. On the other hand, their counterpart(s) in the European Union will also want to ensure that the exit of the United Kingdom does not leave the European Union weaker and less economically prosperous.
China at the turn of the decade is faced with the deadly Corona Virus with over 40,000 lives infected and over a thousand three hundred deaths which is sweeping through the nation due to the deadly virus ability to spread fast and wide; it is telling on the people as well as the economy as it has affected the socio-economic nerve centre of the Chinese economy. This has altered the economic indices of the nation with some cities on lock down and many others scaling down economic activities to almost a halt to avoid the deadly plague. Some global brands have either partially or completely shut down their factories and sales points across the country; this will further drop the growth rate of China that has dropped in the past year 2019 at 6.1 percent.
November is the date for the Americans, as the United States (US) is geared to live out another year of presidential elections; with President Donald Trump trumping his way with daring policies to sway votes for his re-election, as usual the world stands to watch the political direction the US takes as it will affect the overall economic balance of other economies, her relationship with the Middle East, which gives a fresh perspective to where the year lies. Ensuring a beneficial trade ties with China, the health care policy and the continuous increase in the employment rate will be some of the key economic indicators of the campaign trains across the length and breadth of the United States.
In Nigeria, our economic compass is read through the price of the oil which our economy is almost solely reliant on, the outlook of the oil market shows that the price of Brent crude will stand at about $59 per barrel. The border closure will also not help matters as inflation is expected to rise from 11.3 percent in 2019 to 12.9 percent in 2020 which is still above the single digit target of the Central Bank of Nigeria (CBN). Exchange rate is to see a marginal increase of 305.95 to 308.45 (N/ $) while CBN policy rate remains at 13.5 from 2019 and 2020. All these factors will impact the direction the economy of Nigeria will take.
Now looking at the possibility of pulling out of poverty as a nation, the Gross Domestic Product (GDP) growth of Nigeria is 2.1 percent in 2019 to 2.5 percent in 2020 which is on a recovery path that sustains the growth momentum of 2017 following the recession that upset the economy in 2016 due to oil price decline. However fiscal deficit-to-GDP ratio is predicted to rise from 2.8 percent in 2018 to about 4.3 percent by the end of the year 2020. This will still leave Nigeria best earning export outside oil, to be the people – migrants from the country – with remittances from abroad into Nigeria.
The largest recipient of remittance flow to the Sub-Saharan African (SSA) in the year 2018; remittal from migrants has risen by 14 percent from $22 billion in 2017 to $25 billion in 2018, after a short drop in 2016. 2018 value represents a 6.1 percent of the country’s GDP, which is 11 times the Foreign Direct Investment (FDI) as well as 7.4 times larger than the foreign aids received in 2017. Coupled with other factors the rising migrant population of Nigeria is expected to push it to over $29 billion by 2023 underlined. With over a million Nigerians in Diaspora this will surely remain a steady source of external inflow into our economy.
Experts’ perspective is that; Nigeria needs significant FDI to bridge the infrastructural deficit which is needed for diversification with Gross Fixed Capital formation at only 19 percent of GDP. Inflow into industries like the agro-allied, transportation, infrastructural development and energy which has huge market within the country to sustain growth can be scaled to larger proportion by ensuring that it is re-engineered and systematically driven to reduce cost and affect the bottom line of the economy.
Also, the government should not focus on the size of the economy which remains the largest in Africa GDP (in MER): $397.3 billion rather improve welfare of an average resident of the nation, as seen by the contradiction between the existing level of human development and Sustainable Development Goal SDGs. This can be achieved by continuously creating and finely executing policies that will directly impact the Small and Medium Scale Enterprises (SMEs) in a way that their ecosystem is supported by proper financial framework to guarantee sustainability and effectiveness. A pilot scheme for SMEs should be floated not just to emphasise commitment but to develop, engage and monitor growth in a very dynamic and realistic manner as this will open up the informal sector of the economy. This should be largely equity driven backed by professionalism, resourcefulness and an entrepreneurial spirit.
Matthew Ogieva
Ogieva is an economic analyst & management consultant.
