The Federal Government last week unveiled its long-awaited Economic Recovery and Growth Plan (ERGP) which is expected to get the country out of the current economic recession. The plan, which was said to be the outcome of several months of consultations with relevant stakeholders, covers a four-year period (2017 – 2020). The trove of documents which make up the plan was made public by the Ministry of Budget and Planning.
It targets a Gross Domestic Product (GDP) of N81.38 trillion and seven percent growth by 2020, the year government expects Nigeria to make appreciable progress towards achieving structural economic change with a more diversified and inclusive growth. The planned seven percent growth by 2020 almost doubles the 3.8 percent growth projected for the country by the World Bank. Under the plan, government expects to raise oil output to 2.5million barrels per day, implement market-determined foreign exchange rate, and raise Value Added Tax (VAT) on luxury items from the current five percent to 15 percent. Such items include champagne, alcoholic beverages, private jets, yachts and luxury cars based on engine capacity.
Altogether, government says the plan will deliver five key broad outcomes. These are stable macroeconomic environment, agricultural transformation, food security and sufficiency in energy (power) and petroleum products. Other expected outcomes are improved transportation infrastructure and industrialisation, with focus on small and medium scale enterprises. Details of the plan show that it is expected to boost the GDP from N69.4trn in 2017 to N72.7trn , N76.05trn and N81.38trn in 2018,2019 and 2020, respectively. The GDP annual growth rate is also expected to rise from 2.2 percent this year, to 4.8 percent, 4.5 percent and seven percent in 2018, 2019 and 2020, respectively. This is an annual growth average of 4.62 percent between now and 2020. In 2016, Nigeria’s growth rate was -1.54 percent , one of the worst in Africa.
In addition, the recovery plan envisages to create 15 million jobs, beginning with 1.5 million fresh jobs this year, to 3.8mn in 2018, 4.3m in 2019 and 5.1m in 2020. As a result , it expects that unemployment will reduce from its present level of 16.32 percent to 14.51 percent next year, and 12.9 percent and 11.23 percent in 2019 and 2020, respectively. Revenue from oil and non-oil sources is expected to increase from N4.94trn to N4.96, N5.85trn and N6.12trn in 2018, 2019, 2020, while expenditure will be N7.29trn, N7.22trn, N7.41trn and N7.65 respectively for the four years in question. There are many other expectations in the ERGP.
All things considered, the plan is a good effort, though long in coming. It should be seen as a framework for Nigeria’s transition to the post-oil economy that the ruling All Progressives Congress (APC) promised. We, however, hope that this plan has factored in ways to ensure its proper implementation, and free it of the problems that assailed previous recovery plans in Nigeria. Is there any guarantee that the ERGP will go beyond 2019 if another party wins the next presidential election? This is a legitimate question that the government must find an answer to, if the plan is not to be a mere statement of unenforceable intentions, post-May 2019. This is one of the issues that contributed to the lack of continuity of former President Goodluck Jonathan administration’s Transformation Agenda (2011-2015).
There is hardly any basis for the optimism on the creation of about 15 million new jobs over the next four years, in this plan. There is also very little in terms of the structure of our economy to boost optimism on our chances of attaining the projected export revenue.
In this respect, we share the reservations of some key stakeholders, including the former Governor of the Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, who dutifully observed last week that no projection was made in the plan for the trajectories of the exchange rate and the Foreign Reserve. It is necessary to have projections for a realistic forex regime to guide long-term planning by investors.
A closer look at the document reveals that little or nothing will change from the practice of the immediate past administration in terms of borrowing to finance recurrent expenditure. According to the document, until 2018, recurrent expenditure will continue to exceed total revenue. It implies that deficit financing will continue. That could lead to a debt overhang in no distant future.
We suggest that the ERGP should be subjected to public debate. This will help the government to fine-tune its grey areas and improve its chances of success. This has become necessary because most macroeconomic indices have worsened in the last two years. The dollar exchange rate is currently hovering around N455, unemployment and inflation rates remain high at around 16.32 percent and 18.7 percent (January), respectively. Poverty level is also increasing, business confidence remains low, while the Foreign Reserve is just picking up. The country’s current account balance and sovereign credit ratings are in bad shape. Real wages for workers have shrunk to a disturbing level with inflationary pressures on disposable income.
If Nigeria sincerely aspires to build a globally competitive economy and be in the league of the 20 most advanced economies in the world, it must squarely address the root causes of the current recession and chart a realistic road map for recovery and inclusive growth. For now, the key enablers of a vibrant economy are lacking. The provision of an enabling environment for the economy to thrive and the faithful execution of this plan should stimulate the economy into the much-desired recovery and growth.
