‘Adapt or perish’: Rewane warns of crunch time for Nigeria
With the economy in dire straits and several challenges awaiting the next government, Nigeria will have to “adapt or perish”, the Managing Director of Financial Derivatives Company, Mr Bismarck Rewane, has said.
The financial and economic expert mentioned suboptimal growth, spiralling inflation, rising debt service cost, weak foreign investment, high unemployment and poverty levels as major challenges that would confront the next administration.
“Nigeria’s economic situation is more dire than previous administrations,” he said in his presentation delivered at the Lagos Business School Breakfast Session Wednesday, a copy of which was obtained by Markets Reporters on Saturday.
He said the country’s fiscal deficit has consistently remained above the 3 percent of GDP threshold since 2019.
“Suspension of petrol subsidy removal [is] likely to push the fiscal deficit to 6 percent of GDP in 2023,” he said. “Dwindling revenues and high interest payments compounding fiscal pressures. Debt service costs gulped 96.3 percent of government revenue in 2022, up from 83.2 percent in 2021.”
Rewane-led FDC analysts said that using the lens of the last eight years and “the unfortunate events” at the presidential elections, “the outlook for Nigeria looks tough”.
In the presentation, he highlighted three possible outcomes: a tiger/breakout nation, a banana republic or a cassava republic/failed state.
He cited Singapore, Hong Kong, South Korea and Taiwan as tiger nations; Ecuador, Colombia, Chile, Brazil, Panama and Peru as banana republics; and Yemen, Iraq and Afghanistan as cassava republics or failed states.
“The term ‘Tiger nations’ was coined in the 1990s for Southeast Asian countries that achieved spectacular growth: compounded average growth of approximately 7.5 percent; income per capita now above $30,000. They all adopted similar policies: neo-liberal (open door policies), export oriented, investment-led growth strategy,” Rewane said.
He recalled that in 2005, Goldman Sachs identified Nigeria and 10 others as ‘Next Eleven (N-11)’ – countries with high potential of becoming the world’s largest economies in the 21st century alongside the BRICs (Brazil, Russia, India and China).
The other countries are Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Pakistan, Philippine, Turkey and Vietnam.
“Supported by macroeconomic stability, political maturity, openness of trade and quality of education, N-11 GDP could reach two-thirds the size of the G7 by 2050,” Rewane said. “Nigeria could miss this opportunity if hard decisions are not taken.”
According to the FDC analysts, Nigeria is the largest economy in Africa, with a nominal GDP of $500 billion, and there are huge growth and development prospects for the country.
They, however, said years of sub-optimal economic performance and missed opportunities “to press the reset button have come to haunt the African Giant”.
They said: “The outcome for Nigeria (Tiger, Banana or Cassava) heavily depends on the ability of the incoming administration to take audacious steps towards institutionalising the much needed reforms. The next set of policy makers have their work cut out for them and the first step is signalling with the aim of boosting investor and business confidence. The Nigerian government is too cash-strapped to revive the economy alone. Nigeria needs all the help it can get.
“From our little crystal ball, our verdict is that Nigeria will have to either adapt or perish in the coming days. In other words, It’s crunch time for Nigeria (make or break).”
