Business

Nigeria @ 63: Economy still crawling

Nigeria’s economy lies in the doldrums despite spirited efforts at revival. JOSEPH INOKOTONG writes on what needs to be done for a turnaround.

Nigeria marked its 63rd Independence Anniversary on October 1, 2023. Arguably, one needs a special ability to rate the performance of an economy such as Nigeria’s that has enormous potential for rapid growth, yet remains stunted for decades, far behind its peers. Little wonder the administration of President Bola Tinubu did not consider it necessary to celebrate the occasion in the presence of foreign dignitaries. It was a wise and well-thought-out decision ever taken by the administration.

Everything notwithstanding, providing some basic information about the current state of Nigeria’s economy, as well as some historical data and projections for the future may not be out of place.

It is worthy of mention that Nigeria’s economy has been facing some challenges in recent years, including a drop in oil prices and the impact of the COVID-19 pandemic.

However, the country has also made some positive strides in its economy, including an increase in non-oil exports and an expansion of its manufacturing sector. Overall, the World Bank projects that the Nigerian economy will grow by 2.5 per cent in 2023 and inflation is expected to decline over the next few years.

The inflation rate rose to an all-time high of 25.8 percent as of August 2023. This has wreaked havoc on many Nigerians rendering their purchasing power weak, and the prices of staple food items hitting the rooftop. Prices of medicines are not spared. Many in the country are facing the grim reality of stack poverty. Unemployment continues to rise, and many have been driven into a multidimensional poverty bracket.

The exchange rate of the Naira to the dollar has depreciated considerably, exchanging for more than N1,000/$, and still trending upwards. According to the Debt Management Office (DMO), Nigeria’s total public debt stock as of June 30, 2023, was N87.38 trillion ($113.42 billion). It comprises the total domestic and external debts of the Federal Government of Nigeria, the 36 states, and the Federal Capital Territory.

In the midst of these challenges, experts say there are several steps that Nigeria can take to boost its economic growth. One key step is diversifying its economy away from a reliance on oil, by developing other sectors such as agriculture, manufacturing and tourism. Additionally, improving infrastructure, reducing corruption and attracting foreign investment can all help to spur economic growth.

Also, reducing the national debt burden is essential for Nigeria’s economic future. Some possible solutions include increasing government revenues through improved tax collection and reducing wasteful spending. Additionally, restructuring and refinancing the debt can help to reduce interest payments.

Another important factor is ensuring political stability, as this is essential for attracting foreign investment and improving the business climate.

There are several ways to achieve political stability in Nigeria. One key step is strengthening democratic institutions, such as free and fair elections, an independent judiciary and a free press. Additionally, addressing issues of corruption, improving governance and strengthening civil society can all help to stabilise the political situation.

Tackling corruption is no easy task, but it is essential for Nigeria’s economic future. One important step is strengthening the institutions that fight corruption, such as the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and other Related Offences Commission (ICPC). Additionally, increasing transparency in government contracts and public procurement, as well as creating a culture of accountability can help to reduce corruption.

It is definitely possible for the government to achieve this. However, it will require strong political will, a sustained commitment and the cooperation of all stakeholders, including the government, businesses, civil society, and the general public. One way to encourage this cooperation is to increase public awareness of the negative effects of corruption and promote the benefits of an honest and transparent government. This can bring about a very positive outlook.

In addition to the government’s efforts, grassroots initiatives too can also play a role in combating corruption. Civil society organisations, such as Transparency International Nigeria, can advocate for transparency and accountability, and the media can play a crucial role in exposing corruption and holding the government to account.

Also, an area of concern is the manufacturing sector. The manufacturing sector in Nigeria has been growing in recent years, but it still faces a number of challenges. These include a lack of access to finance, poor infrastructure and a weak legal and regulatory framework. However, the government has been taking steps to address these issues, such as establishing special economic zones and investing in infrastructure development.

A lot can still be done to improve the manufacturing sector in the country. In the experts’ estimation, there are several things that can be done to further improve the manufacturing sector in Nigeria. One key step is to reduce the cost of doing business by streamlining the regulatory framework and reducing bureaucratic red tape. In addition, improving access to finance through policies such as tax incentives and credit guarantees can encourage investment in the sector. Investing in skills development and vocational training can help to improve the productivity of the workforce.

Taxation can play a significant role in promoting the growth of the manufacturing sector in Nigeria. The government can use tax incentives to attract investment and encourage the growth of small and medium-sized enterprises (SMEs) in the sector. It can also use tax revenue to invest in infrastructure development, which is crucial for the growth of the sector and can use taxes to fund programmes that promote skills development and vocational training.

It is important to have a robust system of oversight and accountability in place to prevent abuse of tax incentives. This could include regular audits, rigorous enforcement of tax laws, and a transparent reporting system. Additionally, the government should ensure that the incentives are targeted and time-bound so that they are only given to those who truly need them and are not used as a way to avoid paying taxes.

In addition to tax incentives, there are other fiscal policies that can be used to promote the growth of the manufacturing sector. For example, the government can provide low-interest loans to SMEs, or it can set up special funds to support the development of the sector. It is important to create an enabling environment for the growth of the manufacturing sector. This includes not only fiscal policies, but also policies related to trade, investment and infrastructure. It’s also crucial to have a stable and predictable legal and regulatory environment. Improving governance and fighting corruption at all levels is crucial for the success of any policies that aim to promote the growth of the manufacturing sector. A strong anti-corruption framework can help to ensure that public resources are used effectively and that the benefits of growth are shared fairly among all segments of society.

The rising unemployment rate in the country deserves to be taken a second look at. There are a number of ways that the government can reduce the unemployment rate in Nigeria. One strategy is to promote the development of small and medium-sized enterprises (SMEs), as these businesses create the majority of new jobs in the country. Another strategy is to invest in skills development and vocational training programmes, which can help to increase the employability of young people.

An additional strategy that can help reduce unemployment is to create incentives for the private sector to create jobs. This could include tax breaks or subsidies for businesses that create a certain number of new jobs, or programmes that provide financial incentives for hiring young people.

It is pertinent to mention that job creation alone may not be enough to reduce unemployment. It is also important to address the issue of underemployment, which is when people are working but not earning enough to meet their basic needs. Some ways to address underemployment include providing access to training and education, improving working conditions, and creating policies that encourage businesses to raise wages.

The need to create policies that encourage economic growth in general cannot be overemphasised. This could include investing in infrastructure, such as roads, electricity, and water supply, as well as policies that encourage innovation and entrepreneurship. These policies can create a virtuous cycle where economic growth leads to job creation, which, in turn, leads to more economic growth. There is an urgent need for a comprehensive approach to reducing unemployment. There is no single solution that will solve the problem, but by combining policies that target multiple areas, the government can make a real difference.

Similarly, the government should evolve practical means to reduce the rate of multidimensional poverty in the country, although it is a complex issue, and there is no single solution that will solve it. However, there are a few practical options that the government could pursue. One option is to expand social protection programmes, such as conditional cash transfers, which provide financial assistance to families living in poverty. Another option is to invest in education, health, and nutrition programmes, which can help to break the cycle of poverty. It is also important to keep in mind that reducing multidimensional poverty requires a long-term commitment. It is not something that can be achieved overnight.

The private sector has a key role to play in reducing multidimensional poverty. Businesses can provide jobs, which can help to lift people out of poverty. They can also support social protection programmes through corporate social responsibility initiatives. They can contribute to education, health, and nutrition programmes through partnerships with the government or civil society organisations.

There is still a lot more that businesses can do to address multidimensional poverty. For example, many companies do not have policies or programmes in place to ensure that their supply chains are free from child labour and forced labour. This is an area where businesses could make a real difference. Having a legal requirement for businesses to have responsible sourcing policies would be a major step forward in the fight against multidimensional poverty.

Providing incentives for businesses to create more job opportunities for people living in poverty could be a win-win for everyone involved. The businesses would benefit from the skills and talents of the people they hire, and the people living in poverty would have a chance to earn a living and improve their lives.

There are a few different options for incentives. One is tax credits for businesses that hire people living in poverty. Another option would be government-funded training programmes to help people living in poverty gain the skills they need to be successful in the workplace. Yet another option would be to create “special economic zones” where businesses can operate with special incentives, such as lower taxes or more relaxed regulations.

Another option for incentives could be social impact bonds. These are a type of investment where investors provide funding for programmes that address social issues, and they receive a financial return if the programmes are successful.

Social impact bonds could be especially effective in addressing multidimensional poverty because they focus on outcomes, rather than just inputs. In other words, the success of the programmes is measured by the actual results it achieves, rather than just how much money was spent.

Another hydra-headed challenge confronting the country is high inflationary pressures. In order to reduce inflation, the government will need to take steps to stabilise the value of the Naira. This could involve measures such as controlling the money supply, reducing government spending, and reducing the budget deficit. In addition, the Central Bank of Nigeria (CBN) can use monetary policy tools such as increasing interest rates to reduce inflation.

The Monetary Policy Rate (MPR) has been raised from 11.5 percent in May to 15.5 percent in September, which is a very significant increase. However, it is important to remember that these measures can take time to have an effect. The CBN is likely hoping that these increases in the MPR will eventually lead to a decrease in inflation.

It is obvious that raising the MPR alone may not be enough to reduce inflation. The government will also need to take other steps to address the root causes of inflation, such as addressing supply chain issues and improving agricultural productivity. The government’s efforts to address inflation need to be comprehensive and coordinated. There are a number of different ministries, agencies and departments (MDAs) that need to work together to address the problem.

Insecurity in Nigeria, particularly in the rural areas, has had a devastating effect on agriculture. Farmers have been unable to access their farms, and many have had to abandon their crops and livestock. This has led to a decrease in agricultural output and an increase in food prices.

There are a number of things the government can do to address insecurity and its impact on agriculture. First, the government needs to increase security in rural areas, including through the deployment of security forces and the provision of security infrastructure. The government can work to improve access to agricultural inputs, such as fertilizer and seeds, for farmers, and can provide support for alternative livelihoods for farmers who have been displaced from their farms.

In addition to these measures, it is also important for the government to address the root causes of insecurity, such as poverty, unemployment, and poor governance. Addressing the root causes of insecurity is a complex task, but there are a few things the government can do. It can work to reduce poverty by investing in social welfare programmes, creating jobs, and improving access to education and healthcare. The government can work to improve governance by increasing transparency and accountability, fighting corruption, and strengthening the rule of law. It can also work to reduce unemployment by creating job opportunities in the agricultural sector and other industries.

The administration of President Tinubu has already implemented some of these measures and must be firmed up. Worthy of mention is the announcement to introduce a provisional wage increment to enhance the federal minimum wage without causing undue inflation. For the next six months, the average low-grade worker shall receive an additional N25,000 per month. Also, commencing this month, the social safety net is being extended through the expansion of cash transfer programmes to an additional 15 million vulnerable households. These are commendable measures, and the government needs to do more.

READ ALSO FROM NIGERIAN TRIBUNE