The Nigerian Economic Summit Group on Wednesday launched an economic transformation roadmap aimed at proffering solutions to the nation’s macroeconomic challenges. FESTUS OKOROMADU examines what the report has to offer.
Worried by the prevailing economic circumstances in the country, the Nigerian Economic Summit Group, a private sector-led think tank with a mandate to promote and champion economic reform, on Wednesday, launched an economic transformation roadmap, aimed at proffering solutions to the nation’s macroeconomic challenges.
Reviewing the country’s performance in the year 2023, the Chief Executive Officer, NESG, Dr. Tayo Aduloju, noted that Nigeria’s macroeconomic outlook for 2023 underscored its growth trajectory minimally; hence it impacted the standard of living or socioeconomic indicators for a majority of the population.
According to him, the situation highlights the imperative for reforms to foster inclusive economic growth and steer the economy towards a prosperous future.
“Achieving this objective necessitates a drive for significant economic transformation, strategically focused on fostering sustained long-term economic growth, catalysing job creation, and mitigating poverty,” he stated.
The group is however optimistic that the policy stance of the President Bola Tinubu administration signals an opportunity for Nigeria to address its myriad of socioeconomic challenges, optimise economic potential, and deliver favourable outcomes for its citizens.
The NESG, in its macroeconomic outlook for 2024, then stressed the importance of the government pursuing an economic transformation agenda to propel sustained high economic growth.
“The Non-oil sector retained its role as the primary driver of the economy, exhibiting a growth rate of 3.0 percent and contributing 94.3 percent to the total real GDP in the first three quarters of 2023”
According to Aduloju, the report presents a roadmap with step-by-step and phased approaches to reforming the economy to achieve economic transformation over the short to medium term.
“This underscores the urgent responsibility of the government, necessitating unwavering efforts to drive economic transformation and establish the groundwork for a lasting economic evolution that aligns with the people’s aspirations and enhances their standard of living.
“This report is designed with the overarching goal of offering substantive insights into Nigeria’s economic transformation agenda. We earnestly desire that esteemed stakeholders within Nigeria’s economic, business, and policy landscapes find this report to be an insightful and engaging resource.
“The findings and analyses herein will prove instrumental in informing strategic decisions and fostering a collaborative environment for sustainable economic growth and transformation,” he stated.
Explaining the value proposition of the report, NESG’s Chief Economist, Olusegun Omisakin, said the document delved into the state of the Nigerian economy in 2023 and outlined a strategic plan for its transformation over the medium term.
According to him, the document is structured into three main parts, offering a nuanced understanding of the current economic landscape, the proposed roadmap, and projections for 2024.
The report begins with a detailed overview of the Nigerian economy in 2023, providing insights into its current status, challenges, and opportunities.
This section lays the groundwork for understanding the context in which the proposed economic transformation roadmap will be implemented.
Next is the centrepiece of the report, the Economic Transformation Roadmap, which is presented in three distinct phases.
The “Inflection Points” section identifies potential turning points for the Nigerian economy, crucial for strategic decision-making. The phases – Stabilisation, Consolidation, and Acceleration – articulate the sequential steps and policy priorities for achieving a robust and sustainable economic transformation.
The final part of the report projects the outlook for the Nigerian economy in 2024 and the medium term.
This forward-looking section relies on comprehensive analyses and forecasting methodologies to provide stakeholders with valuable insights into the anticipated economic trajectory, facilitating informed decision-making.
“By combining a thorough analysis of the current economic state, a strategic roadmap, and future projections, this report aims to guide policymakers, business leaders, and other stakeholders in steering the Nigerian economy towards a trajectory of stability, consolidation, and, ultimately, acceleration.
“The proposed medium-term policy priorities align with the government’s overarching goal of fostering sustainable economic growth and transformation,” Omisakin stated.
Addressing the policy’s impact on the economy in 2023, the report noted that since the Nigerian economy rebounded from the recession induced by the 2020 COVID 19 pandemic, its growth has exhibited fragility.
“In 2023, the real Gross Domestic Product (GDP) growth averaged 2.5 percent in the initial three quarters, falling below the 3.0 percent recorded in the corresponding period of 2022 and the 3.1 percent for the entire year of 2022,” the report stated.
It added, “This deceleration was attributed to policy adjustments and reform shocks, prominently the implementation of the Naira redesign policy, resulting in a cash crunch that impacted various sectors, particularly the informal economy. Furthermore, eliminating fuel subsidies and harmonising exchange rates increased the costs associated with productive activities and strained the capacities of businesses across sectors.
“The Non-oil sector retained its role as the primary driver of the economy, exhibiting a growth rate of 3.0 percent and contributing 94.3 percent to the total real GDP in the first three quarters of 2023. Conversely, the oil sector remained in recession, contracting by 6.2 percent due to persistent oil theft, ageing infrastructure, and insufficient investments.
“The oil sector’s performance also had repercussions on the industrial sector, which experienced a contraction of 0.4 percent. Meanwhile, the services and agricultural sectors, pivotal pillars of the Nigerian economy, exhibited subdued growth rates of 4.3 percent and 0.6 percent, respectively.”
According to the NESG report, notable growth drivers in 2023 include “the Financial, ICT and Trade sectors, contributing significantly to GDP and overall growth. Conversely, Agriculture, Real Estate, Construction and Manufacturing are identified as major growth stagnation due to subdued growth. The Transport sector and Oil and Gas serve as growth draggers, contracting and suppressing overall growth.”
They submitted that the economic growth performance in 2023 worsened due to the downside effects of the government‘s reform initiatives.
Economic transformation roadmap
On the economic transformation roadmap, the NESG is of the view that despite Nigeria’s abundant human capital and vast economic resources, the country’s current standing on crucial socioeconomic indicators lacks lustre, prompting the need for a transformative trajectory towards a more promising future.
“In the context of development economics, economic transformation entails a dynamic reallocation of resources, strategically shifting from less productive to more lucrative sectors. This process involves intersectoral and intra-sectoral changes, fostering diversification at the macroeconomic level and compelling enterprises and households to acquire novel capabilities for competitive engagement in expanded markets.
“The economic transformation process is characterised by inclusive income distribution, resilience against market fluctuations through diversification, and a significant boost in opportunities for comprehensive socioeconomic advancement.
“Nigeria’s recent economic performance discloses a consistent weakness in real GDP growth, fluctuating between 2.0 and 3.5 percent since the recovery from the COVID-19 pandemic. Factors such as oil price fluctuations, low productivity, and insufficient investments hinder optimal growth, falling short of the necessary progress for Nigeria’s envisioned economic transformation.
“This predicament poses challenges as a foundation for inclusive development. Economic transformation is an economic imperative and a moral responsibility for the government and stakeholders, aiming to empower and secure a prosperous future for the Nigerian populace.
“Emphasising the critical importance of delving into Medium-Term Policy Priorities, the Economic Transformation Roadmap charts a course to address these challenges, outlining strategic initiatives and policy directives geared towards fostering sustainable economic growth. This roadmap serves as a compass for guiding Nigeria through the intricacies of policy implementation, thereby propelling the nation towards its envisioned economic transformation.”
Exchange rate stability and appropriate price
The NESG report did not shy away from the critical issue of the exchange rate stability, admitting that the country currently grapples with substantial challenges in foreign exchange management stemming from its import-dependent nature, exerting pressure on external reserves and exchange rates.
“Addressing the nation’s exchange rate challenges and establishing appropriate pricing mechanisms within the Stabilisation Phase become critical imperatives. This is pivotal for enhancing productivity in the non-oil sector, reducing imports, leveraging domestic resources, boosting exports, and improving the trade balance,” the report stated.
The report identified three key benefits of achieving a stable and appropriate pricing of exchange rate in Nigeria as follows:
High private investments
“When exchange rates are stable, everyone is better off. Price stability supports economic growth and employment. It allows people to make more reliable plans for borrowing, saving, and expanding businesses.”
Support price stability “Decreased volatility of the exchange rate helps to support stability in inflation, which mainly affects low-income households because they have fewer resources to protect themselves. In the situation of price stability, it helps to maintain social cohesion and stability. History has shown that episodes of high inflation tend to be associated with social unrest.”
Stronger reserves and capital inflows
“Increased capital inflows will fortify the nation’s external reserves, establishing a robust defence against external shocks. This can only happen with the stability of the exchange rate. Capital inflows, comprising foreign investment, loans and remittances, elevate the reserve levels, bolstering Nigeria’s financial stability and economic resilience.”
Policy recommendations
In trying to resolve the numerous macroeconomic challenges facing the country, the NESG proffered policy recommendations anchored on achieving a favourable level of focus and thus suggested action plan structured across three focal policy points or directions. “These policy directions will address the core focus of the Stabilisation Phase of Nigeria’s economic growth and recovery path,” the report stated.
Monetary stability
The NESG advocates for an approach which concentrates on stabilising the local currency, bringing inflation and foreign exchange rates to levels consistent with sustainable growth, and promoting predictability and sound management in the Nigerian banking and financial system. This is anchored on building public confidence by stabilising the domestic currency.
The group charged the government to curb inflation, diversify the economy, bolster foreign reserves, and encourage local production, insisting that doing so could enhance the currency’s stability.
To achieve this, they said, the Central Bank of Nigeria must prioritise accountability, engage with stakeholders, and foster trust.
“This can be done through consistent, clear messaging about currency strategies and economic reforms, which are pivotal, especially during the stabilisation phase,’ the report stated.
Stabilisation of the exchange rate through a functional and transparent foreign exchange market is also critical to the economy, the report stated.
“This entails enhancing market liquidity through regular auctions, reducing administrative restrictions, and ensuring efficient allocation of FX reserves. Adopting a managed float system, regulating speculative activities, and encouraging foreign investments would bolster market confidence. Besides, access to FX needs to be realigned to facilitate international trade and transactions – as such, local access needs to be to the limit of the Naira equivalent. Reinforcing monetary policies for inflation control and export diversification would promote currency stability,” it said.
Effective fiscal management
The NESG called on the government to prioritise effectiveness and transparency in public financial management.
“This action involves implementing stringent oversight mechanisms, digitising financial records, and ensuring public access to comprehensive budgetary information. Vital steps include regular audits, independent assessments, and transparent reporting structures to combat corruption and enhance accountability,” it noted.
Similarly, the need to simplify the tax systems and policies was emphasized.
“Cardoso said the expected stabilisation or reduction in fuel costs is poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience”
The NESG demanded collaboration with stakeholders to refine and consolidate regulations, ensure fairness and accessibility, and constitute simplification of the tax system. Streamlining tax categories, enhancing tax education, fostering transparency in tax collection, establishing more precise guidelines, reducing bureaucratic hurdles, and digitising processes for easier compliance and revenue collection are essential.
“Reduce tax rates on earned income. A favourable tax environment attracts foreign investment, promotes entrepreneurship, and supports job creation. This, coupled with efficient tax collection, anti-evasion measures, and transparent fiscal policies, ensures sustainable government revenue. Emphasising the benefits of lower tax burdens on individuals and businesses garners public support, fostering economic stability and prosperity, and maintaining essential public services and infrastructure,” it said.
Regulatory environment reforms
Establishing a legal, institutional, and regulatory framework is imperative to address stabilisation challenges, particularly in ensuring property rights, the NESG report stressed.
In this regard, the government is advised to, “Simplify all regulatory requirements and operations. This involves streamlining processes through clear guidelines, reducing redundant approvals, and ensuring cross-agency coordination. Regular reviews and stakeholder consultations identify bottlenecks for continual improvement, fostering a business-friendly environment that attracts investments and promotes economic growth.
“Promote predictability, open markets, and fair competition. Implementing transparent policies, ensuring consistent enforcement of regulations, and enhancing businesses’ access to information are critical elements in creating open markets and fostering fair competition. In addition to simplifying bureaucratic procedures, investing in infrastructure encourages market openness. Public-private partnerships, safeguarding intellectual property rights, and promoting entrepreneurship through targeted incentives contribute to fair competition.
“Prioritise laws to combat organised crime and illicit economic activity. Enacting comprehensive legislation that strengthens law enforcement capabilities, promotes cross-agency collaboration, and imposes stringent penalties on anti-competition activities is crucial.
Judicial reforms to expedite trials and ensure fair adjudication should be prioritised. Educating the public on the consequences of such activities and fostering community engagement in reporting suspicious behaviour can complement these legal measures, contributing to a safer and more secure society.”
CBN optimistic
Interestingly, the Governor of the Central Bank of Nigeria, Yemi Cardoso, in his keynote address at the event, said Nigeria was at a turning point and the bold reforms being undertaken across different segments of the economy, while initially challenging, were ultimately directed towards addressing the challenges sustainably.
Cardoso said the expected stabilisation or reduction in fuel costs was poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience.
While the Dangote Refinery has already commenced production, the Port Harcourt Refinery is expected to begin production anytime from now.
Cardoso said the apex bank; the Ministry of Finance and the NNPCL had collaborated to ensure that all FX inflows were returned to the Central Bank to boost reserves accretion.
