Nigeria stuck in economic morass, says NESG

Nigeria requires tough choices to turn the page on the current economic morass in which it is stuck, the Nigerian Economic Summit Group has said.

The NESG said even though the economy continued to recover in the first half of the year, economic growth was dominated by sectors with low contributions to output and weak job-creating capacity, while the oil sector remained in recession for eight consecutive quarters.

“Today, the country is stuck in an economic morass. Most macroeconomic indicators are spiralling out of control, inflicting severe hardship on more Nigerians,” the private sector-led think-tank said in a communique from the meeting of its board of directors on July 26.

As the world faces a food crisis linked to the Russia-Ukraine war and the lingering effects of COVID-19 on the global food supply chains, the situation is even more dire in the Nigerian context, it said.

The group cited the “compounding effects of the unchecked insecurity and inadequate efforts to mitigate the impact of climate change – specifically the severe droughts and floods affecting our farming communities”.

It said the unstable micro and macro-economic environment and poor infrastructure had further restricted local efforts to drive value addition and processing.

“The resultant effect is that Nigerians continue to spend close to 60 percent of their household income on food, the vast majority of our population cannot afford a healthy diet, and double digits rates of food inflation have further worsened this situation,” the NESG said.

It recommended a decisive action to tackle the government’s revenue challenges, which it said could not be divorced from leakages through the large-scale crude oil theft, difficult operating environment for businesses, and lack of innovation in tax collection/administration, among others, that have resulted in low accretion to the nation’s revenue base. 

It said: “We strongly believe these leakages have continued unabated because of the absence of sanctions and ineffective tax systems.

“We must return to the path of debt sustainability in the face of dwindling revenues not to create a debt burden for future governments and, indeed, future generations.  We must prioritise our expenditure, limit our spending to items we can sustain, and eliminate wastage and graft in government.”

The NESG said governments, across all tiers, should lead by example through a drastic reduction in governance costs (such as running costs of the legislatures, the proliferation of government agencies, etc.) to reflect the austere times we face. 

It said: “We strongly advise greater transparency and simplicity in the management and communication of various subsidies (petroleum products, electricity, etc.) to establish their true costs that benefit the people.

“Urgent action is required to ensure food self-sufficiency by prioritising critical value chains and supporting private sector-led interventions to curtail this crisis and build a vibrant and sustainable food ecosystem in Nigeria based on consistent incentives and sanctions.”

The group said failure to address the current prevailing condition of multiple exchange rates continued to reduce the much-needed flow of foreign investments and official diaspora remittances.

It said international investors, being savvy and rational, would not invest where there is a real risk to their ability to access and repatriate investment proceeds or when the functional currency is in sporadic depreciation. 

“Multiple foreign exchange markets with significant price differentials create room for speculation, round-tripping, cronyism, and outright graft – with an attendant adverse effect on the economy.  There is no better time to harmonise the FX rates than now,” the NESG added.

According to the group, the country is at an inflection point, and the actions (and inactions) of leadership will have significant implications for the direction of inflection.

“It is still possible to turn the tide, and it is not too late to bring the nation out of the current quagmire.  Our appeal to Mr President is that a lot can still be done to turn the curve within the remaining ten (10) months of this administration. This requires tough choices and decisive actions, with no sacred cows,” it said.