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Although Nigeria’s Gross Domestic Product (GDP) is projected to reach $3.3 trillion by 2050, the gulf between the country’s reality and its undisputed potential has never been wider.
In fact, Nigeria has always been a nation of potential. When Nigeria achieved independence in October 1960, the nation was hailed as a beacon of hope for the African continent. Almost sixty years afterwards, predictions of a glorious future are yet to be fulfilled.
Instead, the nation continues to grapple with basic economic problems. As at this day, the Nigerian economy is yet to fully recover from its contraction in 2016.In addition, data from the Nigerian Bureau of Statistics shows that the 2018 GDP growth rate was under 2 per cent while inflation remains stubbornly high at over 11 per cent, a double whammy which means that for the average Nigerian, cost of living has increased while real income has declined.
Furthermore, despite promises to diversify the economy, the federal government remains reliant on crude oil for 90 per cent of its revenues. The nation is also silently straining under the weight of its debt, as the national debt stock has more than doubled in the last three years to over N24 trillion. Currently, the federal government spends over half of its earnings on debt servicing, leaving little for infrastructure development. This in turn leads to the government taking on more debt to fund infrastructure, thus creating a vicious cycle of debt.
However, perhaps most alarming is the unprecedented rise in youth unemployment. Since 2015, the unemployment rate in Africa’s largest economy has soared, rising from 8.2 per cent to 23.1 per cent in the third quarter of 2018. For young people aged 15 to 35, the figures are even worse as 55 per cent of the youth population are unemployed or underemployed. In addition to these galling figures, the nation continues to fail to prepare future generations for a fast-changing world, with over 10 million children currently out of school.
All of these paint a sordid picture for Nigeria. A combination of poor leadership, corruption and incompetence has resulted in a failure to diversify the economy, invest in critical infrastructure and harness the nation’s most valuable resource – its people.
Nevertheless, all hope is not lost.
An important first step in the process of rescuing the economy of our nation is the realization that political will for restructuring is necessary for progress. There must be an urgent will to address pressing issues such as the nation’s reliance on oil earnings, the archaic land use act and the non-practice of fiscal federalism, all of which combine to hinder the nation from realizing its potential.
Furthermore, all levels of government must incentivize and encourage private sector participation in various sectors of the economy and infrastructure development. The government must create an enabling business environment for small and medium-sized enterprises to thrive by making Nigeria a progressively easier place to do business. Far-reaching reforms which will encourage industrial manufacturing, technology and innovation insectors where Nigeria can develop sustainable competitive advantages must be delivered. Non-oil sectors of the economy, in particular manufacturing and technology, must be actively encouraged via the implementation of supporting policies, while subversive acts such as multiple taxationof businesses and regulatory overreach must all be eliminated.
In addition, the nation’s ticking time bomb of youth unemployment must be resolved through the enactment of viable job creation policies and enhancement of labour productivity. This however will not be possible without sustainable investments in education and infrastructure development. Investments in education, particularly STEM education, are critical in order to prepare the young generations for the jobs of the future. In addition, there is a need for concerted effort to grow the economy. Given the current population growth and unemployment rates, the economy will need to grow 6-8% annually to reduce youth unemployment.
The need for infrastructure development for economic growth cannot be overemphasized. Therefore, while the federal government’s current focus on infrastructure development is laudable, the government must also realise that its resources are limited. Thus, it must encourage private sector participation in infrastructure development via public-private partnerships, concession agreements etc.
Subsequently, Nigeria’s ballooning debt problem must be swiftly addressed. The nation is currently expending bulk of its revenues on debt servicing, thereby leaving nothing for infrastructure development which in turn leads to the government taking on more debt to fund projects. If left unchecked, the national debt stock might soon reach the level last attained prior to the debt relief in 2005.We only need to look at countries like Venezuela, Greece, and Zimbabwe to see how dangerous a public debt crisis can be. Therefore, the rising national debt volume must be tackled with urgency, perhaps starting with reducing government spending on recurrent expenditure.
Overall, fiscal prudence and investments in education and infrastructure are key to unlocking Nigeria’s potential. However, this is only achievable with political will, implementation of market reforms and creation of policies which will improve the living conditions of a rapidly growing, young population.
The future of Nigeria is dependent on this. Otherwise, fifty years from now, we might still be describing Nigeria with the word potential.
Twitter – @LanreRufai_
Rufai holds a first class degree in Management and Masters degrees in Management and Finance. He is a finance and strategy analyst and can be found on Twitter @LanreRufai_.