Removing the obstacles to doing business in Nigeria in order to attract the investment capital needed to soothe an ailing economy was the recurring theme as private sector participants brainstormed at the “Realities of COVID-19” webinar organised by BusinessDay.
Faced with the double whammy of the rampaging COVID-19 pandemic and an oil price downturn, Africa’s largest economy is exposed, with decades of poor economic choices returning to deepen a potentially ugly crisis.
Both the International Monetary Fund and McKinsey Consulting are tipping the economy to contract by more than 3 percent this year, the biggest decline since 1987. Slower economic growth means companies would cut back on output and there’ll be staff layoffs.
“The question is no longer whether the economy will enter a recession or not, it’s certain; the worry now is whether the economy can avoid a depression,” said Andrew S. Nevin, chief economist at consulting firm, PricewaterhouseCoopers (PwC).
A depression is a severe and prolonged downturn in economic activity. In economics, a depression is commonly defined as an extreme recession that lasts three or more years or which leads to a decline in real gross domestic product (GDP) of at least 10 percent in a given year. Depressions are relatively less frequent than milder recessions and tend to be accompanied by high unemployment and low inflation.
“This is when the government needs to answer critical questions around why Nigeria gets way less investment capital than it requires and find a way to solve that to help the economy,” Nevin said. “We need to make progress in diversifying the economy and improving the ease of doing business.”
Nigeria’s investment stock as a percentage of GDP is a paltry 10 percent, according to World Bank data. That’s less than half of the African average of 25 percent.
The need for Nigeria to adopt an investment-led strategy in growing the economy and providing jobs for its teeming population is hardly new counsel.
For one, the country’s multiple exchange rate practice is a reason Nigeria is not able to mobilise sufficient foreign capital, according to Toyin Sanni, CEO of Emerging Africa.
“We need a more realistic foreign exchange rate and an end to the multiple rates,” Sanni said.
Sanni also urged the government to court domestic capital.
“One thing we failed to learn from the 2008 global recession was the importance of leveraging domestic capital,” she said.
Nigeria is now left ruing its avoidable economic mistakes from failure to diversify and build a resilient economy by the COVID-19 pandemic.
A BusinessDay poll on how the government can provide the right stimulus package required to soften the blow of the pandemic in the economy returned with 85 percent saying the government should focus on a mixture of saving jobs by bailing out hardest-hit industries by the virus and making social welfare interventions for the poor.
As much as 82 percent also voted for the government to allow states to have more autonomy to leverage on their natural advantages as a way of facing the revenue crisis while 14 percent said the government should adopt austerity measures.
The immediate responsibility of the government, according to Nevin, should be to ensure it gets “resources to the bottom of the pyramid and keep food supply chains working”.
Lanre Sotunde, chief financial officer of Optima Energy Group, urged the government to take on more expansionary fiscal policies like reducing taxes and lowering the cost of borrowing for small businesses.
Jude Chiemeka, divisional head of trading at the Nigerian Stock Exchange (NSE), suggested that the government allow the private sector to play a bigger role in increasing investment in infrastructure.
“There’s a large pool of domestic capital waiting to be deployed,” Chiemeka said.
Nkemdilim Begho, managing director of Future Software Resources, said the government and the private sector needed to leverage more digital technologies to ensure business continuity.
Nigeria had as at April 26 reported 1,273 cases with 40 deaths.
