The Chief Executive Officer of The CFG Advisory, Tilewa Adebajo, has stated that the Nigerian economy can hit $6 if its potential is properly harnessed.
He stated that the June 2024 edition of the Finance Correspondents Association of Nigeria bi-monthly forum in Lagos on Thursday.
He noted that the potential of the country’s economy was about $5tn-$6tn, adding that if the government could bring inflation down to around 11 per cent, the economy would grow at about eight per cent.
Speaking on the topic ‘Nigeria’s Fiscal Environment in an Era of Monetary Policy Tightening’, Adebajo highlighted that the country’s debt servicing now exceeded recurrent and capital expenditures.
He said that was coming at a time when the country’s Foreign Direct Investment was under $1bn, which put the country in a position where it used the majority of its revenue to service debt.
He stated, “Nigeria’s debt levels are now clearly unsustainable. Add to this $10bn from the 2024 budget deficit, and the question begs: is Nigeria heading for the default direction of Ghana, Zambia, and Ethiopia? The discussion on restructuring both domestic and external debt must commence alongside the ongoing economic reforms and revenue drive to avoid Paris and London Club imposition.”
Adebajo suggested that Nigeria should negotiate with creditors to restructure and extend the maturities of debt, allowing for more manageable repayments and reduced interest rates.
He added that with a significant infrastructure deficit and growth challenges, Nigeria was set to become the third-largest economy in Africa, behind South Africa and Egypt.
Explaining the current state of Nigeria’s economic indicators, Adebajo regretted that the economy was still in a state of stagflation, amid reforms to achieve a sustainable growth trajectory.
He noted that the introduction of the Nigerian Autonomous Foreign Exchange Market and the removal of fuel subsidies had seen the FAAC account increase by 130 per cent from May to November 2023 to over N1tn.
“FDI is at an all-time low of under $1bn; power transmission and distribution infrastructure are still very poor, impacting industry and economic growth; the macroeconomic situation has declined over the last seven years with a loss of $180-200bn in GDP, currently at US$390bn.
“GDP growth of three per cent is not sustainable for our population of 200 million; Nigeria requires 8-10 per cent GDP growth for sustainability; 135 million Nigerians are in the poverty trap, with 40 per cent unemployment and very low job creation and industrial productivity. Dwindling reserves and increasing credit default swap premiums have resulted in Caa1 junk bond rating status for our international credit ratings,” the economist stated.
He believed that while the fundamentals of the Nigerian economy remained sound, poor economic leadership in the past had failed to realise potential and grow the economy.
“With a new and highly rated economic management team in place, expectations are high. The success or failure of our business projections and the economy will depend on their commitment and sincerity to implement and deliver on their reform policies. The goal is to drive our economy out of stagflation and attain sustainable GDP growth targets,” he emphasised.
Proffering solutions, Adebajo said the government should implement fiscal discipline by reducing non-essential government spending, eliminating wasteful subsidies, and improving the efficiency of public services.
“Expand the tax base, improve tax collection, and introduce new sources of revenue, such as value-added tax and property taxes. Improve transparency and accountability in government spending to build public trust and attract foreign investment. The central bank should continue to employ tight monetary policy to combat inflation, which is often associated with stagflation.
“Maintain positive real interest rates to attract foreign investment and encourage savings. Maintain a competitive exchange rate to stimulate exports and reduce reliance on imports. Collaborate with regional and international organisations to access financial assistance, expertise, and market opportunities. Engage with the public, businesses, and civil society to gain their support for economic reforms,” Adebajo recommended.
https://punchng.com/nigeria-has-potential-for-6tn-economy/
