The Federal Government’s inconsistent policies may likely weaken the nation’s economic outlook and prolong the projected optimism of early economic recovery. The chances of early economic rebound may be stymied by poor investments, low revenue generation, high inflation, rising debt and the second wave of the COVID-19 pandemic. These indicators are bound to threaten the 2021 growth projection unless government moves quickly to formulate and implement good policies. Experts have suggested that this is the only way out of the present economic woes. We agree with them and urge the government to do the needful forthwith.
While the global economy seems to have entered a subdued recovery, Nigeria faces formidable challenges – in public health, debt management, budget policies, central banking and structural reforms – as the government battles to fix the fragile economy and get it out of recession. The World Bank’s Global Economic Prospects report released recently stated that Nigeria’s economy is expected to recover at1.1 per cent this year from the projected 4.1 contraction in 2020. The report also revealed that while growth in Nigeria is expected to resume at 1.1 per cent in 2021, activity “is anticipated to be dampened by low oil prices, OPEC quotas, falling public investment due to weak government revenues, constrained private investment due to firms’ failures and foreign investor confidence.” The economy officially entered a recession after contracting 3.62 per cent in the third quarter of 2020, caused largely by the impact of the pandemic and lack of fiscal reforms to boost confidence and attract private investments. As a result, the Gross Domestic Product (GDP) is expected to remain subdued this year, at only 2.5 per cent. Therefore, the prospect for a quick economic recovery this year is doubtful. But a rebound is possible if government would resolve the rising security challenges and put in place policies that will encourage private investment in agriculture, manufacturing and the real estate sector. It should also tame the rising inflationary headwind, which currently stands at 15.7 per cent, the highest in three years. Government must pay attention to the development of transportation and other sectors that would stimulate growth and boost exports.
Undoubtedly, the first test of an effective government is the ability to formulate and implement good policies. For all that matters, governance is done through effective policy design and implementation. We don’t think the present administration has done well enough in the area of designing good policies that will stimulate economic growth and development. We also believe that to overcome the impacts of the COVID-19 pandemic and counter the investment headwind, government must fully implement the recommendations of the Economic Advisory Council and the Economic Sustainability Plan.
It is sad that the economy has experienced subdued growth since 2019 due largely to government’s macroeconomic policy and the unconducive business environment. This has dampened business activities as both macroeconomic and business environment remain unattractive to domestic demand. The situation has been exacerbated by the lingering insurgency in the North East and the menace of killer herdsmen, which has adversely affected agricultural production. Government’s diversification effort is yet to yield the expected results, while the GDP has only expanded at a fraction of its potential.
To revive the economy, we enjoin the government, the private sector and indeed all Nigerians to work together. At the same time, government must prioritise public spending, promote production and cut the cost of governance. The government must save the country from the current recession by taking practical steps to diversify the economy and stop the undue reliance on crude oil as the main source of foreign revenue. It should also improve domestic production and support the growth of Small and Medium Enterprises. It can do this by giving industries some relief in the area of importation of raw materials, while foreign exchange should be made available for companies to import raw materials.
Beyond this, government should cut tax for the poor and increase tax for luxury goods and services, and drastically reduce the salaries and allowances of political office holders. Government should make a deliberate plan to create massive jobs and lift millions of Nigerians out of extreme poverty as it has promised times without number. We are optimistic that economic rebound is possible before the end of the first quarter 2021, if government can invest more in infrastructure development. In all, the government needs to rebuild confidence in the people that will help attract foreign investors. Without this, the fiscal and monetary policy measures are unlikely to succeed.