FRI 01 OCT, 2021-theGBJournal- Over the past six decades the Nigerian economy has transformed significantly from a basically agrarian economy to an economy driven largely by services and oil and gas. While the agricultural sector contributed an estimated sixty percent (60%) to the country’s GDP in the sixties, its contribution has reduced to about twenty three percent (23%) presently.
Conversely, the services sector has grown significantly since independence and now contributes over fifty percent (50%) of the country’s GDP. These are indications of significant structural change that has taken place in the Nigerian economy since independence. The service sector contribution to employment generation and revenue to government has risen sharply over time.
The over two decades of uninterrupted democracy, since 1999 reflects relative political stability which is also good for the confidence of investors. The Nigerian economy had recorded impressive growth rate over the past decades although with a few instances of sluggish growth. The challenge of creating an inclusive growth trajectory remains a major concern. While the economy had experienced some positive growth trend over the past six decades, especially in the oil boom era, the impact of poverty, inequality and job creation has been very minimal. This is what is characterised as growth without development.
Sectoral Transformation
Some sectors have been significantly transformed over the past six decades. One of such success stories is the telecoms sector. The number of telephone lines in the country today is over two hundred million as against what obtained about two or three decades ago when the country had a mere three hundred thousand lines, with just a handful of mobile telephone. The economy has also witnessed considerable changes in the ICT sector and this has impacted many sectors through the digitalisation of their processes and systems. We have seen increased traction in IT applications in many sectors of the economy.
Electronic payment systems have brought remarkable transformation to the financial services sector. Transactions on electronic payment platforms and POS, mobile transaction is far in excess of one hundred trillion Naira annually. The entertainment sector has grown in leaps and bounds over the last decade. It has also grown in quality and in number. The sector has become a key sector to be reckoned with globally. Nigerian music and films have gained an amazing traction worldwide. This growth has come with massive job creation in the sector, especially for the youths
Furthermore, the economy has witnessed impactful private sector footprints in many sectors, especially in the following: telecommunications and ICT, aviation, transportation, education sector, health sector, print and electronic media and many more.
Accordingly, the contribution of the Nigerian private sector to the Nigerian economy has grown in leaps and bounds over the years.
Current Concerns in the Economy
The country’s macroeconomic management framework continues to pose serious challenges to investors in the economy. This situation has been further compounded by the shocks and disruptions inflicted by the covid-19 pandemic.
The macroeconomic management challenges have manifested in the following ways over the years: weak and depreciating currency, high inflationary pressure, high debt profile, exchange rate volatility, liquidity crisis in the foreign exchange market, increasing fiscal deficit, acceleration of money supply growth following the rising CBN financing of deficit.
There are also profound concerns around investment climate issues. High infrastructure deficit, cargo clearing challenges which has continued to worsen, weak productivity in the real sector largely as a result of infrastructure conditions, regulatory challenges and policy inconsistency.
Persistent importation of petroleum products had continued to put pressure on foreign reserves and weakening the capacity of the CBN to support the forex market. Petroleum refineries have remained non-performing over the years.
Way Forward
1-There is a need for urgent steps to be taken to ensure a better macroeconomic management framework to stabilise the exchange rate, eradicate the challenge of illiquidity in the foreign exchange market and to stem the current depreciation of the Naira. It is imperative to have urgent reforms in the foreign exchange market with greater focus on supply side strategy. There is need to review the current disproportionate emphasis on demand management of the foreign exchange market.
2-Strengthen strategies to attract private sector capital to compliment government financing of infrastructure.
3-Need to reduce the level of debt financing especially the reliance on commercial debt to fund government operations. Public debt is already at an unsustainable threshold.
4-Steps should be taken to attract foreign exchange through a strategy of ensuring new investment opportunities to stimulate foreign capital inflows into the economy. We should be seeking more equity capital than debt capital.
5-Need to review the country’s trade policy to support investment growth and investment sustainability. Tax policy must support investment not become a disincentive to investment.
6-The security situation which has continued to deteriorate needs to be urgently addressed in order to create more investors confidence. There should be greater emphasis on quality intelligence in the war against terrorism.
7-The oil and gas sector reform which is now being anchored on the Petroleum Industry Act [PIA] should be accelerated in order to ensure the unlocking of value in the oil and gas sector, particularly the gas sector.
8-Institutional reforms are necessary to ensure that the regulatory institutions have better disposition to support the growth of investment and focus less on the generation of revenue.
9- The international trade process needs to be reformed to prioritise trade facilitation. The current obsession for revenue generation is hurting the international trade processes and impacting adversely on domestic and foreign investment. Therefore, the orientation of the Nigeria Custom Service, Nigerian Ports Authority, the shipping companies and the terminal operators and the security agencies at the ports need to change in favour of an investment friendly international trade processes.
Editors Note: The Centre for the Promotion of Private Enterprise (CPPE) is founded by economist and former Director General of LCCI, DR MUDA YUSUF
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