Nigeria needs ‘ ambitious fiscal reform’ to achieve sustainable, 3.1% growth
Asustainable economic growth rate that could push up the output by 3.1 per cent is possible this year. But it will require a “balancing ambitious fiscal reforms”, PWC has noted in its Nigeria Economic Outlook 2024 released yesterday.
President Bola Ahmed Tinubu rolled out his economic reform agenda, starting with the removal of fuel subsidy, even before he settled down for the responsibility of governance. But sustaining the bold reforms and building on them stands out in the economic projections for the year, from the World Bank, International Monetary Fund ( IMF) to indigenous economic growth and now PWC.
The global accounting firm also points out the effective implementation of this year’s budget as a key parameter that would help the country to achieve sustainable growth, saying the success in this regard will determine how much difference the proposed reform will make on the economy.
The report also stresses the importance of aligning fiscal and monetary policy to stabilise prices and achieve short- term goals.
“Nigeria's ambitious revenue targets for 2024 depend heavily on oil prices and reform implementation. Historically, actual revenue realised has averaged less than 70 per cent of the total budget. Achieving budgeted oil revenue in 2024 will depend on OPEC oil production quota, international oil prices, improved security in the oil- producing regions and geopolitical factors,” the report stresses.
It calls out the shortcomings of monetary tools in checking the soaring inflation and notes that the Central Bank of Nigeria ( CBN) will need to “independently pursue inflation goals, emphasising inflation control and maintaining a stable financial system” to achieve a reasonable success in its price stability objective. It also highlights the importance of a stronger handshake between fiscal and monetary authorities to achieve the CBN’S inflation target pegged at 21.4 per cent.
“CBN clarity of policy, transparency of market operations and consistent communication will enhance stability to exchange rate price discovery and market activities,” it states.
According to the firm, foreign portfolio in vestment ( FPI) flows to the capital market may remain cautious due to residual challenges in the economy. The outlook may also be negatively impacted by downgrades from FTSE Russell and
MSCI, following delays in capital repatriation.
Yet, it expects FDI inflow to improve on the strength of expansion in the formation and communication technology ( ICT) and manufacturing sectors.
Other constraints to the economy, according to the projection, are limited fiscal space for public investment and difficulty attracting private investments. These, it notes, will affect the ability to the needed essential infrastructure improvements.