- Says size and direction of investment are crucial
- Country must boost aggregate demand, improve aggregate output
- Predicts 2.9% GDP growth in 2021 to 2.9 by 2025
- Indicators point economy was in dire straits pre-Covid
- Unemployment, poverty rates are sticky downwards
The Nigeria Economic Summit Group (NESG), foremost private sector-led think tank, released its macroeconomic outlook 2021 for Nigeria, in which it is strongly advising the country to pursue investment-led growth this year, so as to take the economy out of its current recession to recovery, stability and sustainability by 2025.
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The report titled: “4 Priorities for the Nigerian Economy in 2021 and Beyond” said Nigeria is at a critical point in its 60-year history; and that implementation of lockdowns and fall in crude oil prices led the economy into recession in Q3 2020.
NESG said Nigeria will likely exit recession in 2021: “All growth projections for the Nigerian economy in 2021 are positive,” the report said.
It predicted that the country’s GDP would grow by 2.9 per cent in 2021, with a worst-case growth of 0.9 per cent; against the International Monetary Fund’s (IMF) adjusted 1.5 per cent growth, the World Bank’s 1.0 per cent, and the African Development Bank’s (AfDB) 0.7 per cent growth predictions.
The NESG 2021 outlook report concentrating on what it called: “4 Priorities and Economic Transformation of Nigeria: a Theory of Change,” said that by end of 2021, Nigeria’s real GDP will be 2.9 per cent; inflation will cap at 14.5 per cent, while unemployment rate would rally at 26 per cent. It extrapolated further that by end-2025, the country’s real GDP growth would touch 7.5 per cent, inflation would drop to 11.8 per cent, while unemployment would have fallen to 19.3 per cent.
The economic think tank advised that Nigeria must boost its aggregate demand and improve aggregate output, adding that to achieve investment, the nation needs macroeconomic stability, policy and regulatory consistency, sectoral reform and human capital development.
The report noted that Nigeria’s macroeconomic instability became more evident in 2020, with the nation’s foreign reserves falling to $35.4 billion, against Indonesia’s which grew to $133.6 billion in the same year, despite Covid pandemic.
NESG, however, expressed deep worries that despite growths in the nation’s GDP, “unemployment and poverty rates are sticky downwards: over time there has been a weak linkage between economic growth and investment vs job creation and poverty reduction.”
The group said foreign direct investment (FDI) fell from $2.3 billion in 2014 to $0.8 billion in 2020 (Q1-Q3), while the country’s investment environment has not been friendly, despite huge potentials like: arable land, large population and market, mineral resources, strategic location. But structural factors remain evident: infrastructure, electricity, insecurity, limited attention to implement reforms across key sectors, FX management, policy and regulatory inconsistency, and the Nigerian “factor.”
The report cited a survey by the Nigerian Investment Promotion Council (NIPC) from investor-feedback: “Corruption, you can’t get anything done without paying a bribe; government is anti-big business; government agencies harass investors; poor private sector engagement in policy formation; painful, long, unpredictable government approval process; frequent policy changes make long term planning difficult; difficult operating conditions – erratic power, bad roads, poor public utilities; multiple taxes by federal and state agencies; lack of skilled labour, poor work ethic; security situation is getting worse; corrupt judiciary, too many sacred cows; road to Apapa cost us millions per day; insufficient investment incentive; difficulty with getting visas; access to long term capital is challenging; high cost of doing business.”
“Even in periods of positive growth, unemployment and poverty rates have trended upwards,” NESG said. For example, unemployment was 27.1 by Q2 2020; while number of poor people in Nigeria by 2020 was 90 million up from 83 million in 2019.
“To fix this challenge, Nigeria needs investment-led growth: two points are crucial – size of investment and direction of investment – the nature of the sector acquiring the investment,” the NESG outlook 2021 report said.