As today marks the beginning of 2020, I join other millions of Nigerians to wish you a very happy and prosperous New Year! Looking back at 2019, we made some progress from 2018 results, but can we say that it was a good year socio-economically? While we had marginal GDP growth, inflation also declined but has remained in double digit. We also had reforms and policies in different sectors such as oil & gas, agriculture, telecommunications and particularly in the financial sector with Central Bank of Nigeria’s bullish push for increased Loan to Deposit Ratio from 60 percent to 65 percent and possibly to 70 percent. In terms of Ease of Doing Business, we are also told that we have improved in the ranking even though the improvement is difficult to see when you interact with some federal, state and local government agencies.
As we enter 2020 Mr President, I am convinced that you want a better and prosperous Nigeria better than 2019. From different quarters, the economic outlook and the key factors that will shape our national growth and development outcomes in 2020 are being marshalled out and debated. We are told that a GDP growth of less than 3 percent is possible, inflation will remain at double digit and Naira will likely be devalued or forced to exchange within a band of N360-N375 to a dollar. While crude oil price and capital market may still experience volatile and sluggish growth depending on how the reforms and other global factors play out, unemployment will remain high with the manufacturing sector likely to be weak. Based on what we have heard and analysed, we will probably retain our position as the poverty capital of the world given our rapid population growth that will possibly outgrow GDP as was the case in 2018 & 2019.
Mr President, you will agree with me that if we remain the poverty capital of the world with over 100 million Nigerians described as extremely poor, it will be difficult to say that the reforms and policies are working or that you and your government performed well. With the enormous powers you have as the President of Nigeria and Commander in Chief of the Armed Forces that can be deployed to harness the immense opportunities and assets we have, Nigeria can achieve a GDP growth of over 6 percent in 2020 and beyond. All that we be required is to initiate and implement more bold reforms. I will explain some few macro ones.
As oil and gas remain our main source of revenue, it is the sector that requires most urgent and deep reforms. With the hope that all efforts will be mobilised to sign and start the implementation of the Petroleum Industry Bill (PIB), further reforms geared towards total removal of the subsidy and privatisation of NNPC need to be pursued with presidential vigour and speed. If the oil companies of other oil producing countries such as Saudi Arabia and Norway are declaring huge profits, there is no reason why NNPC should be declaring losses or questionable results. Further delay in the privatisation of NNPC might result to irreparable regrets and losses when Dangote Refinery starts optimal production. In addition to the privatisation of NNPC, the Bureau of Public Enterprises (BPE) should be properly encouraged to privatise many other underutilised and unused assets of the country. It is a better way of raising even more than $30 million than the present plan to borrow which I have on many occasions argued against. The present plan to borrow additional $30 million can only be described as lazy and coming from lack of deep thinking and planning. Given our current level of debt, there is no justification for additional borrowing!
Moreover, the documents for the additional loan show that it contains items that the Federal government should not be concerned about if it can initiate and implement the appropriate reforms. A very good example is the need for a loan to develop the mining sector. It is important to remember that Nigeria is a very plural society of about 200 million people and as such, the key question is what governance structure is most suitable for a country like Nigeria. From research and experience from many plural societies, the most suitable governance structure is a devolved system with limited powers at the centre (Federal government). Denial of this fact will not help the present government or any government.
To properly jumpstart sustainable economic growth of Nigeria, the items in both the exclusive and concurrent lists must be reviewed with more items move to the latter. This will help relieve the federal government of unnecessary burden or numerous tasks it is trying to undertake. Just as the mining sector should be moved to the concurrent list for the states to manage, so should the power sector. The states or regions should be allowed to generate, transmit and distribute electricity within their states or regions without first sending the generated power to Transmission Company of Nigeria.
To properly jumpstart sustainable economic growth of Nigeria, the items in both the exclusive and concurrent lists must be reviewed with more items move to the latter. This will help relieve the Federal government of unnecessary burden or numerous tasks it is trying to undertake
Still on the governance reforms, the current situation where our recurrent expenditure is higher than the capital expenditure is not sustainable. A key reform required is on how to reduce the cost of governance especially the federal. Is not possible to initiate reforms for only 18 federal ministers, one senator and three houses of representative members per state? I think it is possible and very feasible. Expectedly, if it is started at the federal level, the states and local government should be encouraged and pressured to follow. This will reduce the cost of governance by over 50 percent.
Of all the reforms, the most important and interestingly the easiest is the need to form an inclusive government that will give every part of Nigeria a sense of belonging. At the moment Mr. President, there is an increasing belief and discontent that your government is not balanced, inclusive and sensitive to our national peculiarities. There are so many other reforms, but the above macro ones will help to jumpstart the sustainable economic growth of Nigeria and send the right signals to both private sector and Foreign Development Investors that we are serious for business, growth and development. I pray and wish you and Nigeria a Prosperous 2020!
Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.
