27th February, 2024
By Oluwagbenga Oyebanji
A projection of strong economic growth indicates that Nigeria’s economy will rebound 2024, according to Standard Chartered, IMF, Word Bank and other reputable rating agencies. The implications of reforms are always challenging in any economy and the response of Nigerians is expected. The government slacked in providing soft landing for the citizens after the introduction of the needed reforms to put the economy on the path of strong economic growth. These economic reforms are needed to unlock the true potentials of Nigeria’s economy.
The biggest economies in the world at a point made some hard choices, Britain, US, China, and Japan. The President of Nigeria on his inaugural speech on May 29, 2023 made a strong policy statement of subsidy removal and months after the foreign exchange was floated. The cost of living became unbearable, dragging more Nigerians into murky waters of struggling and survival. Twenty four years of uninterrupted democratic experience birth the toughest moment in the history of Nigeria’s economy. Previous administrations were indecisive about subsidy removal and unifying the foreign exchange rate. Though the policies are tremendous but it was rather impulsive considering the post cash withdrawal policy of the CBN and the effect it had on the informal sector of the economy during the 2023’s elections.
Britain had her share of sweeping economic reforms in 1986, when Margret Thatcher deregulated the UK financial markets and privatized state owned enterprise allowing market forces to take center stage leading to an economic success, in what economic and social analysts termed Big Bang. Ronald Reagan brought Reganocomics into America’s socio-economic landscape. His reforms started with tax cuts for businesses, households, and investments. He reformed regulations that stifled businesses and start-ups. He championed a private sectors led economy. He vigorously reduced government spending on social security to reduce crowding out and credit rationing allowing financial institutions to focus on the private sector. Ronald Regan turned America into the darling of investors for both FDI and FPI, and his government enacted policies that promoted conducive environment for the private sector.
Reforms are challenging but properly implemented has an impactful effect on the citizens. One of the monsters crippling the Nigeria’s economy is the cost of governance, reducing it is a wise thing to do. Presently, Nigeria is servicing its debt with 98% of government’s revenue. The budget for the year 2024 is N27.5trillion and 70% of the budget went to recurrent expenditure which has been the culture since 1999. The full implementation of Oronsanye report is a step in the right direction. Nigeria has 541 statutory and non-statutory parastatals, commissions and agencies. The Oronsanye’s report forecasted that cost of governance would be reduced by merging and scrapping some redundant agencies.
Restructuring the economy takes gut, and Argentina is already reaping the benefits. President Javier Milei of Argentina assumed power December 2023 and he quickly commenced on economic reforms by reducing cost of governance. His economic reforms focused on reducing public spending to 5% of the GDP. The Argentine’s success story is a model for all the emerging economies. PBAT should quickly privatize all the SOE. The four refineries, Ajaokuta Steel Company, the power sector, generation, transmission, and distribution must all be privatized.
Beyond the economic reforms should be restructuring the economy along devolution of powers which allows the people of Nigeria to participate in governance. The Nigeria’s Constitution has two legislative lists which is Exclusive and Concurrent. The lists have 98 items of powers. The Federal government exert powers over 68 items on the exclusive lists while the states exert powers over 30 items on concurrent lists. The implication of that is federal government’s policies are too far from the people. The enormity of Nigeria’s full economic potentials would not be actualized if the constitution is not amended along devolution of powers.
The conversation of building a strong economy that caters for all should be the priority of the Red and Green Chambers of the Parliament. Constitution amendment is required to make Nigeria a true federal state that gives preference to the wish of the people. The Tinubu led government must work with the two chambers to fashion out policies that would create conducive environment for ease of doing business.
The Presidential Committee on Fiscal Policy and Tax Reforms led by Mr.Taiwo Oyedele, stated that multiple taxation is a vice that makes doing business difficult for Nigerian people. He also argues that there are over 60 taxes and levies collected by federal, state, and local government officials. He opined that all the taxes should be less than 10 to increase government’s revenue, reduce government debt and deficit. The Fiscal Policy and Tax Reforms team led by Mr. Oyedele also recommended Emergency Economic Intervention Bill for increase in personal income tax threshold and personal relief allowance. The report also recommended tax breaks for the private sector in respect of wage increase to low-income earners.
Agriculture contributes over 40% to the GDP and employs 70% of the workforce. Tackling insecurity and investing in profitable high growth and sustainable agribusiness is the secret of creating youth employment and empowerment. Nigeria is endowed with an agriculture friendly climate environment, maximizing the potentials for food security and infrastructural development is the cure to youth restlessness.
Building a trillion dollar economy is possible by 2030 which would make Nigeria among top 25 global economies in the world. This audacious ambition by PBAT is possible if reducing inflation, maintaining a balanced exchange rate and promoting ease of doing to engage the entrepreneurial spirit of Nigerian youths. Value creation must be the center piece of Nigeria entrepreneurship story for this audacious ambition to be actualized. Nigeria has the capacity to create the economic miracle 21st century in the next 6years; because the economy has enormous human capital which is the Nigeria people.
According to Lee Kwan Yew,” The ultimate test of the value of a political system is whether it helps that society to establish conditions which improve the standard of living for the majority of the people.”