Financing for Development: Getting Nigeria out of Recession

Financing for Development
Getting Nigeria out of her first recession into
the path of economic growth

Overview of the Nigeria Economy
• Nigeria is a country with over 179 million people and blessed with
vast mineral resources particularly crude oil.
• It is a middle income, mixed economy and emerging market, with
expanding manufacturing, financial, service, communications,
technology and entertainment sectors.
• In 2016, the Nigerian economy shrank by 1.5% being its first
contraction/recession in over 20years with blame on tight
monetary liquidity and a slump in oil earnings which accounts for
more than 95 per cent of exports and foreign exchange earnings
while the manufacturing sector accounts for less than one percent
of total exports.

Figure 1.1: Real GDP Growth Rate, 2005-2016
Source: Nigeria Bureau of Statistics

Overview Cont.
• The economy is expected to rebound this year on
higher oil earnings and fiscal spending. The recovery,
however, is fragile and depends mostly upon policy
action by the government to unleash growth in the
non-oil sector.
• In March, 2017, the government published the much-
anticipated Economic Recovery Growth Plan (ERGP) - a
reform plan that envisages jumpstarting the ailing
economy by selling state assets and liberalizing the
naira, among other measure.

Recession: What does it mean
• A recession is perhaps rather simply a reduction in
economic activities, particularly in trade and industry;
it is generally accompanied by rising inflation.
• Inflation is a rise in prices due to a reduction in a
currency’s purchasing power. It is situation of too much
money chasing few goods which creates a knock down
effect which reduces economic activities.
• To beat a recession, there should be an increase in
economic activities.

Obstacles to unlocking
financial opportunities in
Nigeria
• Access to Finance
• Weak infrastructure
• Corruption
• Inconsistent government
policies
• Over regulation by
Government e.g.
regulation of petrol prices
• Poor tax administration
• Insecurity in the North-
East

Boosting GDP growth
• For the government to restore the economy to a path of
sustainable and inclusive growth to achieve international
development targets, such as the UN SDGs, they should
embark on the following to be able to achieve growth;
– Co-opting the private sector:
Economic recovery and transformative growth cannot be achieved by the
government alone. Unlocking the opportunities in Micro, small and
medium enterprises should be harnessed.

- Allowing the markets to function:
The government has no business in business. Market forces should be allowed to
regulate prices among market participants. The issue of the Nigerian government
regulating the price fuel through subsidies should be looked into as this can be an
avenue for corruption to breed. Ensuring this can save up revenue for the
government to invest in other areas for development purpose. There should
therefore be minimal regulation from the government.
Boosting GDP growth Cont.

– Domestic Resource Mobilization:
The government should know that domestic resource mobilization
(DRM) provides the largest resource amounts to fund their national
development plans. One way this can be achieved is through
improving the tax system. The tax system must be fair and efficient in
other to achieve growth.

– Stabilizing the macroeconomic environment and the
investment climate to attract private sector financing:
For this to be accomplished the government should ensure monetary,
trade and fiscal policies are well aligned for effective coordination.
– Ensuring energy sufficiency (power and petroleum
products):
For any economy to grow, the issue of power must be addressed as
this would ease the cost of doing business. Efforts have been made by
the government to privatize the power sector but this has yielded
little or no result. The government should put more efforts in power
generation, increase oil production and also her refining capacity.

– Improving infrastructure:
In line with the foregoing investment in infrastructure in the areas of
transportation - roads, rail, ports, health, education, broadband networks
etc. should be encouraged. The government can achieve this through
raising funds internally as well as internationally through external
borrowing. For example;
• Foreign Direct Investment (FDI)
• Remittances
• loans
– Driving industrialization:
Since the recession, the manufacturing sector has remained vulnerable
due to lack of access to foreign exchange used for the importation of raw
materials. The government should ensure ways to ease this problem
while also focusing on Small and Medium Scale Enterprises e.t.c

– Achieving agriculture and food security :
The Nigerian economy was first agrarian before the discovery of oil. According to the
ERGP report, the agricultural sector grew by 4.88 % in Q3 2016 and by as much as 13
per cent in previous years, suggesting immense unrealized potential. Investments in
Agriculture can guarantee food security, have the potential to be a major contributor
to job creation, Adequate attention should be given to this sector so that the fight
against poverty can be successful. This also can be a source for foreign exchange.

• Corruption:
Corruption is a persistent phenomenon in Nigeria as well as its biggest challenge.
The country has been ranked high in corruption by notable organizations that
monitor corrupt practices around the world. This must be addressed for any
meaningful economic reform to be effective.
• Insecurity:
The insecurity problems and challenges faced in Nigeria since the insurgence of
boko-haram activities in the North east cannot be over emphasized. There is also
the problem of armed robbery, kidnapping, herdsmen attack and religious
insurgency. Apart from their serious threat to lives and properties, they also hinder
business activities and discourages local and foreign investors, all which stifles and
retards Nigeria’s socio-economic development. The government will do well to
address this in order to be successful on their path to achiveving the sustainable
development goals.

Financing for Development: Getting Nigeria out of Recession

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