• Call for food security, improved ease of doing business
• Incoming administration needs tough policies to reset economy – Muda Yusuf
The recent flood disaster, which destroyed farmlands and infrastructure across many parts of the country, insecurity and the normal apprehensions that trail Nigeria’s general elections which are the factors that combined to sustain the slow growth of Nigeria’s economy in Q4, 2022. PAUL OGBUOKIRI, however, reports that the incoming administration will need to make tough policies to reset the ailing economy
2023: Low GDP growth continues, economy could recede again
Economic growth in Nigeria slipped to a six-quarter low of 2.3 per cent in Q4, 2022, and we think that growth will ease further in 2023, say Fitch analysts.
In their 2023 forecast on the Nigerian economy, they said: “We expect that the country’s economy will expand by just 2.5 per cent due to disruptions associated with the February 2023 election and the continued decline of oil production.”
They however said that growth would accelerate to 3.3 per cent in 2024 as oil output picks up.
They said the disruptions associated with the February 2023 general election will create another headwind. Campaigning will prevent some economic activity, while government policymaking will essentially shut down. In 2015 and 2019, year-on-year growth in the quarter containing a general election was, on average, 1.1 percentage points weaker than in the preceding quarter. While trend growth will be slower heading into the 2023 votes, we still expect that growth will slow from 2.3 per cent in Q4, 22 to 1.5 per cent in Q1, 23. The hit to economic activity would, of course, be much larger if the election sparks large-scale protests or violence.
“Growth will be down to 1.4 per cent in 2023, from 1.9 per cent, and will rebound to 1.8 per cent in 2024. This weak performance is insufficient for the country to address the socio economic problems of high unemployment and rising inequality. Private consumption expenditure growth will moderate from the rebound in 2021. While the recovery from the pandemic shock is incomplete, higher inflation, which reduces consumers’ disposable income, lingering effects of aggressive monetary policy, the deteriorated labour market, and weak confidence will weigh on growth in private consumption,” Fitch analysts said.
In a similar vein, the Chief Executive Officer(CEO), Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the proposed N20.51 trillion 2023 national budget with an oil benchmark fixed at $70 per barrel amplified a troubling fiscal outlook for Nigeria economy in the coming year.
Muda disclosed that the Central Bank of Nigeria (CBN) may likely finance the coming year’s fiscal deficit given the country’s dwindling revenue performance trajectory.
Yusuf, who was also the former Director General Lagos Chamber of Commerce and Industry (LCCI) further revealed that Nigeria’s debt profile may hit N70 trillion by the end of 2023 if caution was not applied.
He suggested that the government should focus on returns on investment from its assets especially within the maritime, oil and gas enterprises.
“The 2023 Federal Government budget has further amplified the troubling fiscal outlook for the economy. Expenditure continues to accelerate amid consistent weak revenue performance.
“We have a budget of N20.51 trillion and revenue projection of N9.73 trillion. This is a deficit of N10.78 trillion. In all probability, the deficit will be much bigger by year end because of the track record of revenue under performance over the last couple of years,” he said.
He further disclosed that there is the likelihood that there will be an acceleration of CBN financing of fiscal deficit given the revenue performance trajectory, saying the public debt stock is growing and currently at N42 trillion.
Yusuf noted that with additional new borrowing of N8.8 trillion, the Federal Government’s debt profile will be inching close to N50 trillion by May next year.
“If we take into account the borrowing from the CBN (ways and means), which is currently about N20 trillion, we will have a total debt of N70 trillion by the end of 2023. This should be a cause for concern.” He stated that the incoming government would need to make tough policy choices to reset Nigeria’s economy.
“We note that this budget is a ‘Budget of Transition’. However, the incoming administration would have to grapple with profound fiscal headwinds given the ominous fiscal outlook for 2023. As the campaigns progress, it is important for politicians to manage expectations, tough policy choices will have to be made to reset the economy”, Yusuf stated.
The new administration could change the narrative, halt the downward trend of the economy
According to analysts, to tackle current stagflation in Nigeria and ensure sustainable economic growth in 2023, the incoming administration needs to urgently repair infrastructure and businesses damaged by flood and ensure rural farm security.
Agora Policy, an Abuja-based think tank, set up to find practical solutions to urgent national challenges, has recommended ways the next government in Nigeria can fix the nation’s economy. Among the solutions provided are, increasing government revenue, reduce budget deficit, remove fuel subsidy, bring oil theft to an end, reduce trade deficit and reverse the “recent heightening of protectionist trade policies as evident through higher tariffs, levies, import bans on some commodities, land border closure, and foreign exchange restriction on the importation of 42 items by CBN”,reduce trade deficit.
The think tank, founded by the former Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Waziri Adio, highlighted that Nigeria’s domestic debt is more than reported by the Debt Management Office (DMO), saying most critical policy issue for the Federal Government, is inadequate revenue. He noted that FG’s “tax revenue-to-GDP shrank from 8.2 per cent in 2019 to 4.4 per cent in 2021”.
Besides, he called for increased support for industries to boost production and create more jobs.
Vice President of Highcap Securities Limited, David Adonri, while speaking on how to attract new investment in the country by 2023, said one major imperative that would grow the economy in a sustainable manner next year is for government at all levels to urgently call for an assessment of the level of damages caused by the flood and take necessary steps to tackle it and curtail future occurrence.
According to him, the current flooding challenge is a threat to food security in the country as farms and farming communities have been cut off by flood and farm lands submerged in almost all the states in the country.
He called for more efforts from the apex bank towards ensuring that farmers benefit from the existing government’s agricultural schemes, as well as create fresh incentives to make their impact more meaningful at this critical time.
Adonri noted that heightened insecurity has already threatened food production in different parts of the country and has, to a significant level, pushed farmers off their farmlands.
This is exacerbated by the current war in Ukraine, which has made prices of goods to jump higher as Nigeria depends heavily on imported products and now the incidence of flooding.
To him, the most important measures that will stimulate activities in every sector of the economy and grow the market next year is commitment at the highest level to define and streamline actions that will ensure food security, improve on the ease of doing business for sustainable productivity.
He added that these would help improve business activities in the country, create new businesses that will drive exports, alleviate poverty, and strengthen the nation’s economic fundamentals.
“For the Federal and state governments to avert looming stagflation and stimulate growth in 2023, there is a need to speedily repair the damaged infrastructure and businesses caused by flood and restore rural and farm security.
“Again, the government must stop wasteful and frivolous expenditures at this critical time and increase support to industrial and agricultural production. Crude oil production must be restored to over 2.5 million barrels per day. All public debt must also be restructured to reduce the debt burden.”
However, he warned that if urgent steps were not taken to ameliorate the situation, more Nigerians would become extremely poor due to poor purchasing power and heightening unemployment, a situation that would further hurt the economy.
Former President of the Chartered Institute of Bankers of Nigeria (CIBN), Uche Olowo, said appropriate monetary and fiscal policy coordination would go a long way to mitigate stagflation and looming recession.
“Currently, there is a slowdown in output and employment. The reason is that the CBN in the whole world wants to curtail inflation because inflation makes the cost of funds to be high, which would constrain growth and affect output and employment.
“Here, a balancing act is needed. While tightening the monetary policy, the CBN has to communicate policy decisions to allay fears and inspire confidence in the economy through price stability.
“Again, the government must focus more on areas where we have comparative advantage, especially in agriculture because these sectors will increase demand, employment and output.”
Furthermore, he also stressed the need for the government to reduce the debt profile and focus more on pipeline security to increase foreign exchange and grow indigenous firms.
Development and Economic expert, Dr. Chiwuike Uba, said that an evaluation of Nigeria’s economic performance in 2022 shows that policies of federal and state governments were poor, abysmal and retrogressive, stressing that current economic difficulty may stretch beyond 2023.
Uba lamented that the Federal Inland Revenue Service (FIRS) and State Inland Revenue Services (SIRS) were yet to fully embrace digitisation as business owners and organisations are expected to visit, physically, offices of revenue agencies with documents, instead of making electronic transmissions.