Let’s heed IMF’s call on economy – Punch

In giving a cautious nod to Nigeria’s economic recovery efforts, the International Monetary Fund highlighted again the inherent cords inhibiting the expected spurt in the economy. Despite modest, marginal gains, the global development agency identified dampeners to growth like infrastructure gap, low revenue mobilisation, weak governance and institutional weaknesses and banking sector fragility that effectively impede investment and income diversification. Nigeria needs to quickly unshackle its economy to achieve consistent double digit growth over the next decade to overcome mass joblessness and poverty.

The IMF report, the outcome of its Executive Board’s 2019 Article IV Consultation on Nigeria, welcomed ongoing recovery, “accompanied by reduced inflation and strengthened reserve buffers,” as well as improvements in manufacturing and services. Also acknowledged were the relative exchange rate stability, tight monetary policy during 2018, lower inflation and a current account surplus. Certainly, the Buhari administration has been less reckless in spending and has reduced the free-for-all plundering that characterised preceding regimes. Higher oil prices have enabled the Central Bank of Nigeria to build external reserves to $44.14 billion as of the end of March and Gross Domestic Product to grow by 1.9 per cent in 2018. Tax collection, though still inadequate, is receiving attention. The N5.32 trillion realised by the Federal Inland Revenue Service in 2018 was the highest ever, surpassing the N4.03 trillion collected in 2017 despite the prevailing economic slowdown.

There is little to cheer, however, when our fundamentals are juxtaposed with our inherent strengths and advantages on the one hand, and against our peers on the other. Egypt’s economy grew 5.3 per cent in 2018, South Africa that had slipped into recession, climbed out with 0.8 per cent GDP growth helped by Foreign Direct Investment of $7.3 billion. Nigeria received FDI of only $2.2 billion, reflecting investors’ wariness over the economy.

There is still much work to be done. Way back in 2005 when the economy was in a better shape, the World Bank/IMF had forecast that the country needed to invest $20 billion each year for a decade to bridge its wide infrastructure gap; additionally, to reverse poverty, arrest unemployment and diversify export and revenue sources, it needed consistent annual double digit growth for 10 years. The country has not moved an inch towards realising these objectives.

Meanwhile, a population growth rate of 2.6 per cent is driving the country inexorably towards the forecasted 300 million mark by 2050: to avert greater poverty and mass hunger, economic growth must rise faster. To achieve this, the federal and state governments need to move fast and decisively. They must make the right choices.

Buhari bears the major burden of leadership: he must lead the charge to create an enabling environment for foreign and domestic investments. Global FDI declined from $1.47 trillion in 2017 to $1.2 trillion, according to UNCTAD, reflecting lower profitability in the major recipient countries. Nigeria, one of the “last frontiers” of investment, should, therefore, position itself to take up the slack. Liberalisation of key sectors and privatisation, accompanied by an enlightened regulatory and legal framework, is the elixir. Selling all state-owned enterprises, reviewing the power sector privatisation, directing funding urgently to the economically important road infrastructure like the Apapa link roads and Lagos-Ibadan Expressway and reducing the cost of governance, will pave the way.

State governments should follow suit: they should change their consumptive and dependent culture to one of self-reliance; states should reform their bureaucracies, accord topmost priority to rural development and compete for domestic and foreign investments and markets.

Nigeria falters largely because it has failed to build functional institutions: at best, it has pseudo institutions; agencies, laws and regulations that don’t work as a result of incompetence, corruption, primordial politics and red tape. The public service and appointments are not driven by merit, but by politics of ethnicity, region, religion, narrow elite interests and rent-taking that take precedence in policy formulation and execution. Reversing these should be Buhari’s and the state governors’ priority.

Less endowed African countries are showing the way; World Bank statistics show that Ethiopia had the continent’s fastest GDP growth rate in 2018 at 8.5 per cent, followed by Ivory Coast and Rwanda with 7.4 per cent and 7.2 per cent respectively. Ghana’s $3.3 billion FDI and tiny Djibouti’s 6.7 per cent GDP growth are linked to reforms and the opening up of the latter’s ports to international investors. IMF’s World Economic Outlook says Ethiopia’s is driven by a rise in industrial activity, including investments in infrastructure and manufacturing. FDI rose 27.6 per cent and funded dams, industrial parks and privatisation, opening the way for leading multinational manufacturers to set up in the country.

Buhari should dismantle the Nigerian National Petroleum Corporation, reform and strengthen the regulatory and revenue collecting agencies, drive tax reforms and privatise the railway sector. Government should stop the self-defeating lunge for foreign, mostly Chinese, loans to finance all rail, ports, airports and oil exploration ventures, which can be done better and faster by private capital. The telecoms sector reform that attracted $68 billion FDI in the 16 years to 2017, demonstrated the immense potential of liberalisation to investments, job creation, skills acquisition and technology transfer. Corruption should be tamed; the onslaught needs a coordinator, impartiality and the President’s attention.

The way to go lies in liberalising policies, separating the economy from politics, the will to see decisions through and consistency in execution.

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