How to Accelerate the Growth of Nigerian Economy

By Bayo Ogunmupe

In the year 2021, the Nigerian economy recorded the highest growth of its GDP since 2014, beating the expectations of economists and the projections of the International Monetary Fund (IMF) and the World Bank. The economy grew by 3.4 percent in full year 2021 compared to a contraction of 1.94 percent in full year 2020, according to data from the National Bureau of Statistics (NBS). International financial institutions like the World Bank and the IMF had predicted the economy would record a GDP growth rate of 2.6 percent for its full year 2021. The Federal Ministry of Finance had estimated a growth of 2.5 percent while the projection of the Central Bank of Nigeria (CBN) was 3.1 percent. After two recessions induced by the pandemic, Africa’s biggest economy came out of its worst recession in 33 years growing by 0.11 percent in the fourth quarter of 2020. According to the full year 2021 report, the non oil sector grew by 4.4 percent compared to a contraction of 1.25 percent in 2020. However, the oil sector contracted 8.06 percent in 2021 compared to a contraction of 1.25 percent in 2020. Nigeria’s oil production declined to 1.50 million barrels a day in the fourth quarter of 2021 from 1.57 million barrels a day in the third quarter. Nigeria has not benefited from rising oil prices as she is battling to increase her oil production. Economic sectors such as rail transportation, solid minerals, electricity and gas grew 36.9 percent, 34 percent and 27 percent respectively. The laggards were oil refining-47.9 percent, crude petroleum and natural gas-8.3 percent and mining and quarrying-7.7 percent. The World Bank expects the economy to expand by 4.2 percent in 2022; the IMF 2.7 percent, the CBN 2.86 percent and the Federal Government projects a growth of 4.2 percent. But the President of the World Economic Forum Dr Borge Brende agues that the world needs an equitable, sustainable and resilient post-pandemic global economy. He says opportunity now exists to lay the foundations of a resilient and sustainable world economy. Truly, at this moment the world economy faces strong headwinds, there is an opportunity for world leaders not only to accelerate growth in the near term, but to lay the foundations for a sustainable economy for the years to come. In January this year, the IMF released projections indicating that global growth will slow from 5.9 percent in 2021 to 4.4 percent in 2022. This is half a percentage point lower than what had been forecast last October. Alongside this acceleration, economists believe persistent inflation will partially erase economic gains; with the expectation of rising interest rates slowing investment. On top of this, 60 percent of low income countries are in debt distress or at risk of debt interest. There comes the Russia- Ukraine war which at the moment of writing threatens the nuclear annihilation of the United Kingdom. These are momentous times, with no doubt great challenges. But there are opportunities for gains ahead. However, these depend if leaders put in place policies to revitalize economies and also address shared priorities in the near, medium and long terms; there is a chance to fuel confidence and build resilience –the key ingredients for economic growth now and in the future. One, we need inclusive growth. To achieve this in Nigeria, there is need to bring on more unbanked transactions via Small and Medium Enterprises growth through interest free and collateral free SME loans. Most immediately, Nigeria must ensure economic growth is more inclusive. Many advanced economies have promising forecasts, such as China which saw her exports jump by over $675 billion last year—a 26 percent increase on the year before. But there remains the recovery will take years in the emerging and developing economies. If inclusive growth is left unaddressed, the divergence will foster not just dire global economic consequences, but humanitarian ones as well. One way to advance a more equitable recovery is by committing to delivering sustainable investment to underfinanced economies. Here, however, Foreign Direct Investment (FDI) is showing signs of growth, as flows of finance were up 77 percent in 2021, surpassing their pre- pandemic level. Indeed, China experienced a record $179 billion of investment flowing into the country, amounting to a 20 percent year-over-year increase. Yet, global FDI is still fragile, as factors like the COVID19 variants and the Russia-Ukraine war and the rising energy prices can create obstacles to capital flows. Two, in the medium term, we need to empower digital transformation, because the global economy is undergoing rapid technological advancement which the World Economic Forum termed the Fourth Industrial Revolution. The coming ten years will require each and every company to ensure technology and innovation are part of its DNA. Indeed, an estimated 70 percent of new value over this decade will be based on business models that rely on digital applications. The recent shortage in semiconductors, and the resulting focus in the USA, European Union and China on manufacturing chips, is just one indication of the rapid digital transformation taking place. The digitization of the world economy is why China’s 14th Five Year Plan has called for the core industries of the digital economy to account for 10 percent of the country’s GDP by 2025, up from 7.8 percent in 2020. Yet, despite the growing importance of the digital, an estimated 2.9 billion people—over a third of the world population—have never used the internet. This is why last year the World Economic Forum brought together leading technology and financial companies, along with government entities, to launch the Edison Alliance, which is working to foster affordable digital access for everyone by 2025. Three, over the long term, we must commit to going green because climate change is the most important challenge of our lifetime. By some estimates, the global economy could face unprecedented consequences, shrinking up to 18 percent in the next 30 years, if decarbonization efforts are not taken. This does not include the devastation planet Earth would face in terms of biodiversity loss and the loss of human lives. Reaching net zero climate emissions by 2050 will require fundamentally transforming our economy, as companies and countries change their energy mixes, increase efficiency and invest in new zero-carbon solutions. But a green transition will add millions of jobs and trillions of dollars to the global economy. The First Movers Coalition—a group of 30 leading companies that was launched at COP26 by the WEF and the US Climate envoy John Kerry—is helping to deliver a green economy by boosting demand signals for new low carbon technologies. Thus, our priority should be a more equitable, digital and green economy. This forces us to rely on greater global cooperation because they are too large, too complex and too interconnected for one company or country to address alone. This why we must move away from a zero-sum mindset, in which global actors believe prosperity can only come at the expense of others. As China’s President Xi Jinping said at the WEF Davos Agenda in January: “The right way forward for humanity is peaceful development and win-win cooperation.”