Despite gross domestic product (GDP) growth of 2.27 per cent as at 2019 end, the Nigerian economy remains very fragile due to a combination of slow growth and vulnerability to changes in external conditions, especially oil price fluctuations, the Nigerian Economic Summit Group (NESG), has said.
According to the NESG Board of Directors, 10 out of the 46 sectors in the economy, which contributed approximately 27.1 per cent of the output, contracted in 2019. A sectoral review showed that the Agriculture Sector continues to grow slowly.
Whilst the Service sectors, at 53 per cent remained the largest contributor to the output, growth in these sectors is adversely affected by rising incidences of insecurity and continuing closure of Nigeria’s land borders.
Besides, the NESG also expressed concern about the rising cases of harassment of businesses in the guise of raising revenue. Whilst companies must meet all legal demands and obligations, it is important that the processes for the collection of dues must not only be transparent but must avoid trampling on the rights of companies to challenge demands outside of their obligations.
NESG noted that during 2019, a combination of lower than anticipated oil prices, and the OPEC cap on crude oil production resulted in public revenue continuing to perform below expectations, which led to rising public indebtedness and budget underperformance.
The Board, in a statement, signed by its Chairman, Asue Ighodalo, recognised the need to improve revenue performance at all levels of the public sector, but must not be at the expense of investments and job growth.
Ighodalo was quoted that given the shortage of capital; Nigeria needs to do more to attract real investments into key sectors of the economy. The low inflow of Foreign Direct Investment (FDI) into strategic sectors in the last three years is instructive – post-recession FDI was about $1billion per annum, but significantly lower than pre-recession levels where, as recently as 2014, it stood at $2.3billion.
“To improve FDI inflows, Nigeria must demonstrate its commitment to attract and protect investments. In addition, businesses continue to be concerned about policy inconsistency, insecurity and other business constraints such as inadequate infrastructure,” he was quoted.
The NESG also commended the Federal Government on signing the African Continental Free Trade Agreement (AfCFTA). Having signed the agreement, there are a number of urgent steps for sequencing the effective integration of the Nigerian economy into the African economy through AfCFTA. Specifically, Nigeria needs to ratify the agreement to become a ‘State Party’, which will enable us to participate effectively in the on-going negotiations of the treaty.
“There is also a need to commence work towards ensuring the alignment of domestic policies and regulations with the Agreement. We must also expedite implementation of trade readiness priorities to gain maximum benefit from AfCFTA,” it said.
The Board also lauded stability in the exchange rate of the Naira in 2019 and thus far this year, but expressed concerned that Nigeria’s external buffers have continued to decline, and that the foreign investment inflows are predominantly short-term portfolios.
Given the fall in oil prices and expectation that oil prices will continue to ease, NESG advised that the Central Bank of Nigeria (CBN) considers managing the Naira by allowing the currency to fluctuate within a pre-determined range not exceeding five per cent. Such fluctuation will serve to reduce the net outflow of reserves by improving confidence in the economy.
The outlook for the global economy is beclouded by the Coronavirus outbreak in China. As a threat to public health, NESG noted that the World Health Organisation (WHO), has listed Nigeria along with 13 other African countries as nations where an outbreak of the Coronavirus is possible.
Given the increasingly close economic links with China, it is imperative for Nigeria to upgrade national preventative readiness, and ensure adequate capacity to isolate any infected entrants into the country. It is also important for public policy to note the adverse effect of the Coronavirus on global economic growth, especially commodity prices, and adjust to ameliorate these adverse effects.