The Economic Advisory Council (EAC) recently met with President Muhammadu Buhari and listed some challenges facing the economy. The eight-member Council, led by Prof. Doyin Salami, expressed concern that the rate of economic growth was slower than the population growth and enjoined the government to strengthen national statistical agencies, reform procurement processes as well as improve education and job planning in the training of academic institutions. It identified lack of synergy among Ministries, Departments and Agencies (MDAs) as a major factor delaying delivery of set economic goals.
The Council, set up by the President last year which replaced the Economic Management Team led by Vice President Yemi Osinbajo, also intimated the president of its views on borrowing, macroeconomic stability and the need to provide a friendly climate for foreign investment.
According to the Advisory Council, Nigeria is in dire need of an environment that will attract investment. All the same, the council said it had resolved to focus on legacy projects by the administration before its tenure winds down in 2023. In his response, President Buhari assured the council that his government would take its advice on the economy and other related matters contained in its executive summary. He admitted the challenges facing the economy and noted that volatility in global oil prices, bad harvests, conflicts in strategic global locations, tariff changes in major world economies, among others, had significantly altered government’s economic plans.
We believe that the EAC’s report mirrored the challenges facing the economy as well as other critical sectors. Therefore, it will be in the best interest of the government to consider the recommendations of the council with a view to implementing them. The truth is that the economy has really performed below expectations in recent times. It is sad that two years after exiting recession, the economy is showing disturbing signs that all is not well. In the past one year, the country’s GDP could only expand at fraction of its potential.
According to the EAC report, the economic growth is slower than the population growth. While the economy is growing at two per cent, the population is growing at 3.5 per cent per annum. Also, recent statistics from the National Bureau of Statistics (NBS) show that the inflation rate is 12.13 per cent. At the same time, budget deficit is increasing, while revenue generation is declining. It is worth pointing out that in 2019, the Federal Government raised only half of its projected revenue target, while its debt hit over N27trillion. Besides, it has been projected that the nation’s unemployment rate is likely to reach 35 per cent this year. These are issues begging for urgent attention. As the President rightly noted, the economy is the most delicate and sensitive of all aspects of national life. But, it is just one of the major challenges that the administration must fix. Rising debt profile, insecurity and creating a conducive environment for foreign investment inflows are pressing issues that government must frontally address.
It is worrisome that since the inception of this administration, economic growth has not reached even three per cent. In 2015, it was 2.79 per cent, 1.58 per cent in 2016, an average of 1.8 per cent in 2017 and 2018, and 1.98 per cent in 2019. However, Nigeria recorded an economic growth of 6.22 per cent in 2014. Recently, the International Monetary Fund (IMF) downgraded Nigeria’s economic outlook for 2020 from stable to negative at two per cent from the initial 2.5 per cent.
This is a pointer that the economy is tottering. It is also an indication that most of government’s policies implemented so far have not done much to stimulate the required economic growth. This has invariably led to slow expansion of the GDP. Therefore, government should evolve new policies that would improve the development of infrastructure, transportation, agriculture and job creation.
We think that government’s projected four per cent growth may be a mirage if there is no concerted effort to improve Nigeria’s business environment. Last year, World Bank Enterprise Survey revealed that no fewer than 322 organised private companies in Nigeria shut down operations in five years (2009-2014) due to harsh business environment. The survey established that high cost of doing business in Nigeria, cost of production, trade, cost of borrowing, infrastructure deficits, lack of innovation, regulations, multiple taxes increasing insecurity and corruption on business growth might be responsible for the ugly development. Although Nigeria has slightly improved on the Ease of Doing Business index, more work should be done to improve power supply, infrastructure, and government policies.
Therefore, government should put measures in place to address the challenges affecting business operations in the country. More work should be done to ensure good policies that will stimulate economic growth. The Central Bank of Nigeria should make access to credit at single digit interest rate available to small and big businesses. Let government diversify the economy and move it away from oil.