Getting serious on revamping Nigeria’s economy

Thought leaders, industry captains, and indeed Nigerians from diverse fields, have responded to the ongoing national economic crises by demanding decisive government action in the form of effective policies to steer the economy out of recession.  In addition to the call for clear policy direction, the populace also want the government to indulge in welfare spending (a la N5,000 for the poor and a meal a day for school children) as promised by the ruling party during the electioneering campaign. Despite the legitimate yearnings of Nigerians, the federal government continues to conduct its affairs in a manner that tell Nigerians that they are crying for the moon.

What is more, proper measures to draw the economy out of the abyss to which it has sunk remain elusive. In May 2016, the Special Adviser to the Honourable Minister of Finance on media, Mr. Festus Akanbi, revealed that the government planned to stimulate the economy by offsetting the debts owed contractors for various projects and encourage them to return to their various sites. Five months after, just when one is pondering whether this capital spending of about N350 billion has made any impact whatsoever, the government announced aggregate capital spending to have exceeded N700 billion, again to bring out the economy from the doldrums. But pertinent questions remain: Were the monies released for ongoing or completed projects? To whom were the monies released; and were the monies sufficient to ignite evident recovery in the economy?

With spending gap estimated at over N3 trillion, releasing about N700 billion as the government claims to have done leaves a yawning gap as the effort has barely scratched the face of the spending need.

The imperative of the massive spending need is that the private sector should play a critical role if Nigeria is to get out of the present economic situation. The weight at the bottom of the economy is obviously heavy and the government does not have sufficient muscle to draw it out. As obvious as this fact is, the government has, through various policies and rash pronouncements, continued to denigrate the private sector and position itself as the only guarantor of development in Nigeria. As a result, previously willing helpers (i.e. investors) have made detour to other economic routes that have been cleared of limiting debris.

Incidentally, efforts by the Nigerian Government to clear the road to economic prosperity, such as the tax concession to the agriculture and manufacturing sectors, barely scratch the surface of the thick skin of policy requirements. Hence, the government should step up and do more. At this time, the government should adopt (both fiscal and monetary) expansionary measures in order to return Nigeria to the prosperity path. The economy, especially government revenues, should truly be diversified away from oil, and other sectors that dominate the Nigerian GDP should be aided to perform optimally.

Rather than spend scarce billions of dollars in oil exploration as the government is doing presently, the funds should be channelled towards building and improving infrastructure, aiding manufacturing, and attracting and encouraging investments in other non-natural-resource-based sectors. This is because contrary to the belief of the government that it is diversifying the economy, the emphasis is still on the extraction of natural resources (oil and gas and solid minerals). This is not a sustainable path to prosperity as it is only predisposing Nigerians to an affliction of the Dutch disease in future.

The government needs to effectively diversify the revenue base of the economy through the following measures: 1. Reduce the cost of doing business in Nigeria 2. Create tax havens that will be available to global companies that meet desired criteria 3. Make policies that will encourage a reinvestment of income generated by the companies 4. Create an environment that will reduce the cost of borrowing to finance capital projects by private investors.