Nigeria’s GDP has grown to 3.40 percent, yet this remains insufficient for its large population. A significant nominal loss in GDP highlights currency issues. Key strategies for growth include increasing investments, revising trade policies, managing debt, optimizing capital structure, and implementing import substitution in targeted industries. These actions aim to stimulate economic growth beyond 3 percent by 2025.
Nigeria’s GDP has recently shown positive growth, rising to 3.40 percent last year from 2.74 percent in 2023. Yet, this growth is deemed insufficient for a nation with a population of 200 million, particularly as GDP per capita has reached a record low. Furthermore, the economy has experienced a significant nominal downturn of $168 billion, primarily due to currency devaluation, which has dramatically affected economic stability.
Adetilewa Adebajo, CEO of CFG Advisory, commented on the concerning GDP growth rate, stating, “The GDP growth numbers are suboptimal for a 200 million population growing at 3% as GDP per Capita has fallen to an all-time low, with an economy struggling with stagflation.” He highlighted the crucial ‘Output Gap’ that reflects Nigeria’s inability to reach its full productivity potential.
To stimulate its economy, Nigeria must significantly increase both domestic and foreign investment. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises, emphasized the need for a more appealing investment climate, stating, “More domestic investment and more foreign investment, especially foreign direct investments are needed… not good for the growth of the economy” when returns on financial instruments outpace those in the real economy.
Revamping trade policies and addressing productivity in manufacturing, industry, and agriculture are also vital, according to Adebajo. He suggested revising HS Codes and improving investment incentives to boost overall productivity. This overhaul is essential to foster economic growth effectively.
Nigeria’s escalating debt, now approximately N150 trillion, poses a serious obstacle. With a substantial budget allocation for debt service exceeding the combined total for defense, education, health, and infrastructure, careful fiscal management is required. Adebajo noted, “While the sovereign risk spreads have fallen… our credit rating remains at junk bond status.”
To counter these challenges, the government must optimize its capital structure by divesting from certain assets to lessen its debt burden and achieve better credit ratings. A focus on policies that enhance productivity and employment is crucial for closing the output gap and promoting economic growth.
Implementing strategic industrial policies aimed at import substitution is another key factor for positively impacting GDP. As Adebajo pointed out, Nigeria must emulate existing successes in sectors like cement and fertilizer production. He advocated for government support for local sugar refineries to eliminate raw sugar imports, which would foster local agricultural productivity and job creation.
In summary, Nigeria’s GDP growth has shown promise but remains inadequate for its large population and economic potential. Increasing foreign and domestic investment, revising trade policies, managing fiscal spending, and implementing import substitution are critical strategies for boosting GDP beyond the current threshold. Moreover, optimizing government finances and enhancing local industrial sectors can help close the output gap and stimulate economic improvement in the coming years.
Original Source: businessday.ng
