What experts say is the way out of deepening poverty

Jesmin Rahman ahman is the International Monetary Fund (IMF)’S mission chief to Nigeria. She recommended a raft of fiscal policies that lift can per capita GDP growth in Nigeria during a recent webinar hosted by the American Business Council.

Here’s what she had to say:

Nigeria has always been to me a fascinating country with huge potential; there’s nothing it doesn’t have. Nigeria has a huge population, and natural resources, yet this is a country that when you compare to its peers on social indicators and living standards, it is not where it should be.

Per capita income used to be $7,000 in mid-1980s since then it has gyrated in sync with oil prices. There are quite a few challenges Nigeria needs to tackle if this course is to be altered. At the current population growth rate of 2.6%, Nigeria’s population is projected at 400 million by 2050. The labor force is growing very rapidly much of which is getting absorbed in either the informal sector or not employed at all. Informal sector wages are very low. Basic literacy among the young population is also very low. Six of out ten out of school children are Nigerians so these are very sobering statistics.

When you look at poverty rate, it is around 40% and given the population projection, by 2030, the World Bank estimates that a fifth of the world’s poorest will be housed in Nigeria. When you add regional dimension, the situation is even scarier because you will the concentration of all of these low statistics in one part of the country.

To turn Nigeria’s population into human capital so the economy grows, Nigeria needs strong job growth and investment in social indicators; education, health and some of the very basic services.

My colleagues in the IMF did a basic estimate of how much it would cost the country to reach the SDGS and they came up with 18% of GDP which would come largely from government even though donor community would help. This reemphasises the importance of growth because without stronger growth to raise revenues, and without those revenues, it would be hard to provide for these very basic and much needed things.

The second challenge is to reduce the dependence on oil. In some ways the Nigerian economy has achieved diversification. Oil only counts for 10% of GDP and 1% of employment so you can say that’s a kind of diversification but the non-oil economy depends heavily on the oil prices through direct and indirect linkages and oil also accounts for 50% fiscal revenues and over 80% of exports. Oil is also important for FX inflows even though remittances help. Because of this, in order to have any form of meaningful diversification, Nigeria needs to move on these fronts as well: diversify fiscal revenues and exports in addition to diversifying GDP base.

Nigeria’s DNA is oil and unless diversification is seen on both fiscal and external fronts, this perception is unlikely to change and this perception needs to change if we are to avoid the big cycles.

RCharles Robertson obertson, the global chief economist at Renaissance Capital, during a Financial Times summit as far back as 2018, said the country needs to grow by between 4-5 percent for per capita GDP to stop contracting.

“As Nigeria has grown at 2 per cent per capita since 1992, our medium-term base should be at least 4-6 per cent GDP growth,” Robertson said.

But Nigeria cannot match the 4-6 per cent per capita GDP growth of industrialising countries because adult literacy at 60 per cent is too low and electricity consumption is under half the minimum required level for sustained industrialisation, according to Robertson.

“To push headline GDP growth to 6.5-8.5 per cent would require an adult literacy campaign, a trebling of electricity consumption and a doubling of investment to GDP,” Robertson said.

RJohn Ashbourne shbourne, a senior emerging markets economist at economic consulting Capital Economics also shared the following views during the FT summit.

“The government needs to unlock private sector investment by improving the business environment and encouraging participation in the non-oil sector.

The country also desperately needs better infrastructure and reforms to the state-dominated oil sector.”

ARazia Khan azia Khan, chief Africa economist at Standard Chartered bank also had these to say:

“Nigeria has all the necessary building blocks to achieve much faster growth. With its low base, youthful population and scale, a growth rate exceeds the rate of population growth should be easily achievable.

It needs to develop more institutions that are more resilient than tends to be the case in typical resource economies, for example a tax base independent of oil and a banking sector that can meet the borrowing needs of the private sector. Nigeria has failed to make a transition away from being an oil economy.”

ROlusegun Omisakin misakin is the Chief Economist and Director of Research & Development at the Nigerian Economic Summit Group (NESG). His views are as follows:

“The effects of COVID-19 pandemic on global health and socio-economic conditions will remain for the foreseeable future.

For Nigeria, economic policies have to remain broadly expansionary to hasten recovery. Implementation of the Medium-term National Development Plans (MTNDP) and Nigerian Economic Stimulus Plan (NESP) will quicken the recovery in 2021.

More focus should also be on improving the business environment through reforms.”

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