On an inflation adjusted basis, the per capita income in Nigeria is the same as it was 40 years ago. If this is plotted on a graph, taking the two periods of 40 years ago and today on the timeline, the result would be a flat line. Nigeria’s inflation rate is at present 17.93% while the food inflation rate is 22.28%. Meanwhile, the GDP growth rate for 2021 is projected to be 1.8%, according The World Bank in their report dated June 2021. The International Monetary Fund’s projection for 2021 (dated April 2021) is 2.5%. The gap between the projected growth and inflation rates is huge.
If the outlook for Nigeria long-term growth is higher, then the current higher inflation rate may be excused. The outlook for higher growth is poor, while the higer inflation bites harder. This signals that Nigerians will continue to be poorer if output does not grow enough as high as the inflation rate.
There is another interesting angle. The real wage is so depressed and this makes labour cost to be relatively cheaper. In a normal situation, cheaper labour costs increase employment and should increase output. Again that is not happening as it should. One vital reason for this is lack of opportunity and bleak outlook for the sectors that employ labour.
Unlocking Nigeria’s potential is needed if the continued slide into overall stagnancy is to be stopped.The current government has been spending heavily on public infrastructure, especially rail and some road networks. It is expected that the infrastructure spending would enhance output growth and employment.
Yet, more sectors need huge infrastructure spending, which I believe the National or State governments do not have the sole capacity to sanction. This calls for more Public Private Partnership (PPP) models. It is the PPP models that can unlock more capital and grow the Nigeria economy given its state of finance and the outlook for the same. Concessional loans from multilateral agencies are good for public infrastructure that address public goods . Yet, a solid PPP model is needed for some of these infrastructure spendings. These models would increase Nigeria’s tax to GDP ratio currently around 7%.
Simply put, Nigeria needs foreign capital in hundreds of billions USD in the next 5 years for a start. However, for that to happen. The country would have to address its education policy to be in tune with the modern world, make its judiciary truly independent, ensure rule of law, a central bank that is truly independent and also focus more on its price stability and credible monetary mandates. In other words, Nigeria’s apex bank must be a strong tool for macroeconomic stabilisation in an evolving world order. Last but surely not least is the menace of corruption. Corruption is a huge leakage in the public finance system. Growing the economy means the fight against corruption must be sustained systematically.
▪︎By Shola Ogunniyi is
a Risk Advisor based in Lagos
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