The Nigerian economy which is the 31st largest economy in the world by GDP has numerous challenges including stagnation as a Factor-driven economy for sixty years. According to the World Economic Forum’s Global Competitiveness Report, Factor-driven economies are ‘’where countries compete primarily on the use of natural resources, unskilled labour and companies compete on the basis of price as they buy and sell basic products.’’ But the economy ought to have advanced into an Efficiency-driven economy, ‘’where growth is based on the development of more efficient production processes and increased product quality.
Other challenges of the economy include structural imbalancewith oil accounting for 85 per cent of export, insufficient power supply and other infrastructural deficits, tax evasion (mostly by the elite), material corruption and un-patriotism. Others include smuggling, narrow access to credit, high interest rate, import-dependency, unemployment and threatening population growth vis-à-vis economic growth.
The challenges aggregate to stunt growth and development and engender poverty. Nigeria has been noted to have the highest rate of extreme poverty globally with 86.9 million people living in extreme poverty. The World Poverty Clock had also noted that the percentage of Nigerians living in extreme poverty could increase from 44.2 per cent to 45.5 per cent by 2030.
All hands need to be on deck to confront and surmount the challenges to engender maximum development. Anything that constitutes a drain on the economy should be controlled and capital should be mobilized especially from local resources and channeled into the economy. As Demirigue-Kunt and Levine noted, ‘’mobilization of resources for economic growth is the primary target of development.’’
The interventions of the Central Bank of Nigeria (CBN) to tackle some of the challenges and realign the economic structure, especially in the agriculture and manufacturing sectors are noteworthy. The critical importance of the two sectors cannot be overemphasized. Agriculture and manufacturing have more linkages in the economy with high capacity for employment and income generation.
Agriculture is basic and food security is necessary both for national pride and to minimize social disruptions. It is the starting chain of industrialization a source of foreign exchange. Experts have noted that manufacturing is the most important cause of economic growth and that without it there could be no sustained, long-term economic growth. According to the Roosevelt Institute, ‘’without a robust revival in the manufacturing sector, we can kiss our status as a great economic power good bye.’’
The prosperity of nations are said to be tied more to manufacturing because when a country exports more than it imports, it has trade surplus which translates to wealth. A vibrant manufacturing base leads to more research and development, innovation, productivity, exports and middle class jobs.
Figures show that CBN had supported about 1.5 million farmers across all the 36 States of the Federation, with about 16 different commodities and 2.5 million jobs created across the agriculture value chain. The apex bank is also noted to be targeting 3.5 million jobs through the textile industry and had facilitated an agreement between all uniform services in the country and textile manufacturers to enable them produce uniforms for both military and paramilitary agencies.
In manufacturing, CBN reportedly stimulated greater credit flow to the sector by mandating lenders to extend more credit to the private sector. Banks were made to increase their loan-to-deposit ratios or risk a fine. As a result, lending to manufacturing companies totaled N459.7 billion ($1.3 billion) from May- October 2019 which is said to be the most in two decades.
Prior to the intervention, manufacturing and agriculture sectors were starved of credit by banks. According to a CBN report, the agriculture sector received just a meager 3.25 per cent of total bank credits while manufacturing got 13.59 per cent because of their long gestation and risk profile.
But 62 per cent of credits were allocated to maturities of less than three years at the lending rate of 30 per cent, thus the need to evolve the Real Sector Support Facility (RSSF) to lend to manufacturing and agriculture sectors at a single digit interest rate of 9 per cent for up to 10 years with a moratorium of two years to stimulate growth and create jobs.
According to a CBN Survey Report for March 2019, the industrial sector recorded the highest employment outlook.
•Nwobu, a Chartered Stockbroker and Business Journalist wrote via [email protected] Tel 08033021230.