Achieving Sustainable Economic Growth – Punch Newspapers
ENJOYED by the 5.01% jump in gross domestic product in the second quarter of this year, President Major General Muhammadu Buhari (retired) and his team were in celebration mode, attributing their efforts loud and clear. for the feat. With bad news cascading on all other fronts, the National Bureau of Statistics report revealing a third straight quarter of growth is naturally turning the regime on. Reality dictates caution, however. As the economy picks up again after the COVID-19 collapse, the big challenge ahead is to put the country quickly and radically on a path to sustainable inclusive growth to reduce poverty and unemployment.
The NBS report was adamant that the growth seen since the last quarter of 2020 is due to “the return of business and economic activity to close to levels seen before the implementation of COVID-19 restrictions.” She explained that this gradual return to business activities, as well as local and international travel, was the source of significant growth. Therefore, the growth of 5.01% in the second quarter was a marked departure from the second quarter of 2020, when the economy contracted by -6.10%, by -3.62% in the third quarter of 2020 and of the meager growth of 0.51% in the first quarter of 2021. Real GDP growth from January to June increased by 2.7% compared to the contraction of -2.18% in the first half of 2020.
After having recently presided over two recessions, the regime has been euphoric. Buhari credited the 6.74 percent real-term expansion of the non-oil sector, the fastest rise in the sector since the third quarter of 2014, 9.27 percent growth in the services sector (its highest performance in a decade), and the 14.99 percent nominal GDP growth from the second quarter of 2020, to its policies and the “hard work and commitment” of economic managers. He believes his economic sustainability plan hastened the way out of the recession and continued to impact key growth drivers like agriculture, ICT, transportation, electricity and manufacturing. The ministers also discussed the success of stimulating the non-oil sector.
Their enthusiasm is not universally shared. To be sure, the pandemic has wreaked havoc around the world, with the global economy contracting by -3.5%. The World Bank / IMF’s World Economic Outlook forecast of 5.6 percent growth this year is driven by only a few countries that have deployed effective medical interventions and have strong structural economic characteristics. Otherwise, creative and strong action is needed here, not celebration.
The economy is very disjointed, with virtually nothing to show in the commodity space aside from hydrocarbons. These fundamental structural economic deficiencies must be addressed in order to achieve sustainable growth and eradication of poverty.
A quick checklist: The unemployment rate is prohibitive at 33.3 percent. The World Bank claims that 98 million people or 47.3 percent of the population live in poverty, reaffirming Nigeria as the global seat of poverty. The naira plunged again recently to a record low to trade at 530 naira against US $ 1, invariably boosting inflation in an import-dependent economy. Inflation is 17.75% and food inflation is 21.83%, which means that millions of people can no longer afford three meals a day.
Economists have long warned emerging economies to be wary of “growth without development”. Experts like Jeffery Sachs, president of the United Nations Sustainable Development Solutions Network, urge countries to measure growth by the number of jobs created, the number of people lifted out of poverty and the quality and capacity of its institutions and infrastructure to stimulate and support inclusive growth. . Ranked 161st out of 189 countries on the 2020 UNDP Human Development Index and with a per capita income of $ 4,910 in purchasing power parity, Nigeria is poor and in desperate need of sweeping reforms. In contrast, the United Arab Emirates are ranked 31st with a per capita income of $ 67,462, Malaysia is 62nd with an ICP of $ 27,534 and Brazil 84th with an ICP of $ 14,263.
The industrial base is weak, accounting for only 6.0 percent of economic activity. Highs in the economy like oil and gas are dominated by government, and the huge infrastructure deficit requires $ 3 trillion to be repaired by some estimates. Electricity supply averages 4,000 megawatts, compared to 175,407 MW in Brazil, 58,095 MW in South Africa and 55,210 MW in Egypt. Until the quagmire of power is repaired, the transition to industrial power remains a mirage.
Despite the slight improvement in the non-oil sector, the country remains dependent on oil revenues. Despite the declining level of production, petroleum still provides 90 percent of export earnings and 65 to 70 percent of the budget. The purchasing managers index, which fell to 49.6 in December, reflects a slow recovery in factory production.
The way forward is obvious: the government should move from short-term and choppy measures to comprehensive programs integrating short, medium and long-term planning. First, as multilateral agencies have long demanded: remove “binding constraints”. Among the 10 identified by the World Bank are: excessive dependence on oil revenues, poor governance and accountability, an infrastructure deficit, corruption, a restrictive administrative structure and insecurity. Buhari is expected to liberate the economy through a swift and transparent privatization and liberalization program to facilitate private investment in railways, ports, airports, iron and steel, and the middle and downstream oil and gas sector. Privatization and asset sales, liberalization and tax reforms are some of the “fruits at hand” that should be harnessed to spur sustainable growth and job creation.
Build the stimulus program around the “four tracks” recommended by the World Bank: breaking dependence on oil, strengthening human capital, promoting growth led by the private sector and rebuilding social contracts: job creation, reduction poverty and export and income diversification should be the ultimate goals of all policies.
Extraordinary measures should be adopted to overcome insecurity and secure the country, reform the tax system and delegate power to states. Without a return to federalism, the economy cannot sprint. The current “unitary federation” seriously inhibits productivity, investment and innovation and reinforces poverty. Corruption must be tamed; foreign investment must be attracted; states must function as self-sufficient economic units. Governance must be improved so that rational scientific considerations take precedence over regional, ethnic and religious considerations in decision-making.
BuharI should reach out to all stakeholders, bring the organized private sector into planning, and move beyond insularity and state instincts.
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