Worried by the poor state of the economy, well-meaning Nigerians and organisations have called on the government to initiate effective measures to save the economy from collapse. The Organised Private Sector (OPS), which is the umbrella body of private owned business organisations that are not accountable to the government, has suggested some measures the government should use to stimulate economy recovery. Undoubtedly, members of the OPS are in a vintage position to assess the state of the economy and offer necessary advice on its recovery.
Representatives of Nigeria Employers’ Consultative Association (NECA), the Lagos Chamber of Commerce and Industry (LCCI) and Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), all agree that the economy could slide back to another recession if the government fails to combat insecurity. They also warned that the insecurity is terribly hurting manufacturing and undermining microeconomic stability, scaring investors and constraining multinationals to shut down operations in the country. A recent survey by the Manufacturers Association of Nigeria (MAN) revealed that about 320 business organisations in the country have closed shops, and many relocated to neighbouring countries because of suffocating business environment, including insecurity in Nigeria. Dunlop and Michelin are just two of hundreds of companies that have closed businesses in the country because of the aforementioned factors.
There is no doubt that the worsening insecurity could adversely affect Nigeria’s hope of benefiting from the African Continental Free Trade Area (AfCFTA) agreement that came into being in January 2021. We have always canvassed for active participation of Nigeria in AfCFTA, but government must protect investments in the country. There is no doubt that the rising insecurity will affect investors’ confidence. A recent United Nations Conference on Trade and Development (UNCTAD) stated that Nigeria’s Foreign Direct Investment (FDI) dropped to $3.3billion annually from 2015-2019 from $5.3bilion between 2005 and 2007. In 2020, it further went down to $2.6billion.
This will also impact negatively on the Gross Domestic Product (GDP). In an insecure environment, both production and manufacturing are bound to suffer. Available statistics have shown that Nigeria can only benefit more, and compete effectively in trade and commerce if it has products to export under a conducive environment. With the worsening insecurity, there will be little for export. The Director-General of NECA, Mr. Timothy Olawale, was right when he said that the implications of the current security situation on the economy will be huge because of the unstable business environment that has taken its toll on the economy.
Moreover, insecurity and government’s inability to respond swiftly, can depress, and indeed, erode consumer confidence. This has huge implication on inflation and unemployment, as farmers are abandoning their farms and villagers fleeing their homes, while the distributive and logistics chain are being disrupted due to activities of bandits and kidnappers. Figures from the National Bureau of Statistics (NBS) show that about 73 million Nigerians are out of job. This is about 33 per cent of Nigeria’s workforce. We have no doubt that the insecurity across the country contributes to loss of jobs by many Nigerians. Therefore, Small and Medium Enterprises (SMEs) should be encouraged to grow the economy through soft loans at single digit rate.
In all, there is need for significant revenue generation to reduce fiscal sustainability risks, while progressive and efficient measures are necessary for economic recovery. What the economy needs now is a multi-step approach, one of which is the establishment of exchange rate regime with greater flexibility. The present monetary policy framework needs to be reformed, while the CBN’s financing of budget deficits should be minimised or phased out.
The nation’s current budget deficit of over N5 trillion is quite huge, and experts say the IMF and Chinese loans may likely not be able to finance it completely. The government can ill-afford to mismanage any loan. Loans are not gifts. They are financial instruments that must be repaid. With oil prices still volatile in the global markets, this is an opportunity to overhaul the economy and make it less dependent on oil. The nation’s economy is struggling because successive administrations did not heed repeated warnings from global monetary institutions to diversify the economy. Therefore, let the government do that now.