Financing for Development

Getting Nigeria out of her first recession into the path of economic growth

Overview of the Nigeria Economy• Nigeria is a country with over 179 million people and blessed with vast

mineral resources particularly crude oil.

• It is a middle income, mixed economy and emerging market, with expanding manufacturing, financial, service, communications, technology and entertainment sectors.

• In 2016, the Nigerian economy shrank by 1.5% being its first contraction/recession in over 20years with blame on tight monetary liquidity and a slump in oil earnings which accounts for more than 95 per cent of exports and foreign exchange earnings while the manufacturing sector accounts for less than one percent of total exports.

Figure 1.1: Real GDP Growth Rate, 2005-2016

Source: Nigeria Bureau of Statistics

Overview Cont.• The economy is expected to rebound this year on higher

oil earnings and fiscal spending. The recovery, however, is fragile and depends mostly upon policy action by the government to unleash growth in the non-oil sector.

• In March, 2017, the government published the much-anticipated Economic Recovery Growth Plan (ERGP) - a reform plan that envisages jumpstarting the ailing economy by selling state assets and liberalizing the naira, among other measure.

Recession: What does it mean• A recession is perhaps rather simply a reduction in economic

activities, particularly in trade and industry; it is generally accompanied by rising inflation.

• Inflation is a rise in prices due to a reduction in a currency’s purchasing power. It is situation of too much money chasing few goods which creates a knock down effect which reduces economic activities.

• To beat a recession, there should be an increase in economic activities.

Obstacles to unlocking financial opportunities in Nigeria

• Access to Finance

• Weak infrastructure

• Corruption

• Inconsistent government

policies

• Over regulation by

Government e.g. regulation

of petrol prices

• Poor tax administration

• Insecurity in the North-East

Boosting GDP growth• For the government to restore the economy to a path of

sustainable and inclusive growth to achieve international development targets, such as the UN SDGs, they should embark on the following to be able to achieve growth;

– Co-opting the private sector:Economic recovery and transformative growth cannot be achieved by the government alone. Unlocking the opportunities in Micro, small and medium enterprises should be harnessed.

- Allowing the markets to function:

The government has no business in business. Market forces should be allowed to regulate prices among market participants. The issue of the Nigerian government regulating the price fuel through subsidies should be looked into as this can be an avenue for corruption to breed. Ensuring this can save up revenue for the government to invest in other areas for development purpose. There should therefore be minimal regulation from the government.

Boosting GDP growth Cont.

Boosting GDP growth Cont.– Domestic Resource Mobilization:

The government should know that domestic resource mobilization (DRM) provides the largest resource amounts to fund their national development plans. One way this can be achieved is through improving the tax system. The tax system must be fair and efficient in other to achieve growth.

Boosting GDP growth Cont.– Stabilizing the macroeconomic environment and the

investment climate to attract private sector financing:For this to be accomplished the government should ensure monetary, trade and fiscal policies are well aligned for effective coordination.

– Ensuring energy sufficiency (power and petroleum products):For any economy to grow, the issue of power must be addressed as this would ease the cost of doing business. Efforts have been made by the government to privatize the power sector but this has yielded little or no result. The government should put more efforts in power generation, increase oil production and also her refining capacity.

Boosting GDP growth Cont.– Improving infrastructure:

In line with the foregoing investment in infrastructure in the areas of transportation - roads, rail, ports, health, education, broadband networks etc. should be encouraged. The government can achieve this through raising funds internally as well as internationally through external borrowing. For example;• Foreign Direct Investment (FDI)• Remittances• loans

– Driving industrialization:Since the recession, the manufacturing sector has remained vulnerable due to lack of access to foreign exchange used for the importation of raw materials. The government should ensure ways to ease this problem while also focusing on Small and Medium Scale Enterprises e.t.c

– Achieving agriculture and food security :The Nigerian economy was first agrarian before the discovery of oil. According to the ERGP report, the agricultural sector grew by 4.88 % in Q3 2016 and by as much as 13 per cent in previous years, suggesting immense unrealized potential. Investments in Agriculture can guarantee food security, have the potential to be a major contributor to job creation, Adequate attention should be given to this sector so that the fight against poverty can be successful. This also can be a source for foreign exchange.

Boosting GDP growth Cont.

Boosting GDP growth Cont.• Corruption:

Corruption is a persistent phenomenon in Nigeria as well as its biggest challenge. The country has been ranked high in corruption by notable organizations that monitor corrupt practices around the world. This must be addressed for any meaningful economic reform to be effective.

• Insecurity:The insecurity problems and challenges faced in Nigeria since the insurgence of boko-haram activities in the North east cannot be over emphasized. There is also the problem of armed robbery, kidnapping, herdsmen attack and religious insurgency. Apart from their serious threat to lives and properties, they also hinder business activities and discourages local and foreign investors, all which stifles and retards Nigeria’s socio-economic development. The government will do well to address this in order to be successful on their path to achiveving the sustainable development goals.

Thank you