Ideas, especially profound ones, make the world a better place. On that score, the Nigerian Economic Summit Group has once again proffered salient ideas to the Muhammadu Buhari regime as it tries to resuscitate the ailing economy. Rising from its annual summit, the NESG dissected the wobbly economy and offered some ideas, including liberalising the stifling regulatory environment. The NESG is on point but having received similar advice before, the customarily lethargic Buhari regime might scupper the recommendations.
The prompting from the NESG at its 26th summit depicts graphically the sorry state of the Nigerian economy. It advised “governments at all levels to unlock more private sector participation by removing sectoral rigidities that inhibit the potential of businesses to drive economic growth.” Splendid, but nothing new here. First, the current structure in which sharing of oil income, rather than productive activity is entrenched, is the antithesis of economic progress. Short-sightedly, the government runs a state-dominated economy. Instead, it should instigate a private sector-led economy.
Consequently, the economy has suffered two recessions in five years. The World Bank projects a GDP growth of 1.1 per cent in 2021 and 1.8 per cent in 2022. Although this upturns the negative growth of -4.8 per cent in 2020, it is futile since the population is expanding. This disarticulation is seen in the borrowing pattern and import dependency, especially in refined petroleum products, food, equipment, and raw materials. As of 2020, Nigeria’s debt-to-GDP surged to 34.98 per cent from 29.14 per cent in 2019.
In regulation, the economy fares poorly. In the World Bank ease of doing business 2020, Nigeria ranked 131 out of 190 countries. As such, multinationals avoid the country, crashing the FDI to $2.6 billion from $3.3 billion in 2019, UNCTAD says. At 18.17 per cent in March, inflation is accelerating precipitously. The jobless rate is 33.3 per cent, one of the highest globally. Combined with rising insecurity, the Nigerian economy is now a ghost of its former self. A new World Bank report, which the Federal Government castigated, says 78 per cent of Nigerian consumers lack access to electricity at no more than 12 hours daily. According to the World Bank, this sets back the economy $29 billion annually. The NESG rightly notes that there is “an over-regulation of the economy.”
In line with the NESG position, the Federal Government should improve significantly on the business environment, exploiting the low-hanging fruits. Privatisation and liberalisation can reverse the grim condition. The moribund state-owned refineries under the Nigerian National Petroleum Corporation lost N154 billion in 2018. Notorious for opacity, the NNPC has just signed another rehabilitation contract worth $1.5 billion for the refineries. Another loan makes no economic sense. The urgency of the moment requires full privatisation of the downstream oil sector, with the NNPC a holding company, a policy Buhari promised to implement during his first-term campaign.
Incidentally, the National Assembly has treated the oil sector reform with levity. The Petroleum Industry Bill has been gathering dust in the federal parliament since its introduction in 2008. Nothing was gained because of the dereliction by the lawmakers. The Nigerian Extractive Industries Transparency Initiative and other studies show that as of 2016, the country was losing about $20 billion annually due to the non-passage of the PIB. Nigeria should find the political will to actualise the PIB. The current NASS should pass it to stop the receding investment by the international oil companies.
Similarly, the overarching state-control system is hindering the railway and the steel sector from taking off. Borrowing from China to fix the rail sector has delivered only delays and debts. In contrast, South Africa, despite having Africa’s largest network at 22,000 kilometres, has attracted China’s North and South Rail, Bombardier Transportation (Canada) and General Electric (USA) as key private investors for its $33.8 billion improvement initiative.
Buhari should act fast, concentrating in the short term on quick wins. The regime should revisit the executive orders it signed in 2017. Implementing them will boost the economy at the seaports, airports, and land borders.
After years of stop-and-start in the steel sector, Nigeria should forget about its unworkable state-owned system. It should swiftly privatise the Ajaokuta Steel Company. It is the way to reboot manufacturing and productive economic activities and create jobs.
The Federal Government should stop giving foreign exchange concessions for religious pilgrimages but unify the forex windows. This is an added attraction to investors. Apart from the domestic investors, the international business community can channel huge funds into revamping the Nigerian economy, as it has about $17 trillion to invest. For this to happen, Nigeria requires a stable socio-economic polity and a restructured foreign exchange market. Government should collect its taxes, both from individuals and multinationals. According to an account, 200,000 individuals can pay up to N14 trillion of the backlog they owe. This is more than the 2021 budget of N13.6 trillion or $35.66 billion.
Leveraging technology solutions can bring rich dividends. By selling spectrum to telecom service providers, it can generate billions of dollars. British telecom regulator, Ofcom, generated £1.4 billion from auctioning 5G spectrum in 2018. In the follow-up auctioning in March, it generated another £1.4 billion. Therefore, the government should hasten progress on the rollout of the 5G network. At the seaports, technology should replace manual operations.
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