On the Path to Sustainable Economic Growth


Experts say there is urgent need for comprehensive and coherent policies to address vulnerabilities in the Nigerian economy, report Ndubuisi Francis, Obinna Chima and Nume Ekeghe

Despite Nigeria’s exit from the economic recession it went into about two years ago, the country still faces a major challenge about how to engender inclusive and sustainable growth. The country’s exit from recession was driven mainly by an increase in crude oil prices as well its production capacity.

Nigeria’s foreign exchange (FX) reserves have risen to $47.3 billion as of April 5. The last time the country recorded FX reserves at this level was in July 2013. Accretion of the country’s reserves in recent months have been driven by its successful Eurobond offerings, coupled with higher oil production and prices

‘Resource Curse’

But recent disclosure by the National Population Commission that the country’s population currently stands at 198 million, with a large number of its citizens living below the poverty line, calls for concern.

With crude oil production capacity of about 2.5 million barrels per day, Nigeria ranks as Africa’s largest producer of oil and the sixth largest oil producing country in the world. The country is also the largest economy in Africa. However, regardless of its abundant resources, the country continues to face a myriad of problems.

Nigeria has also found it difficult to convert its unique advantages into economic and social benefits for majority of its citizens. In fact, Nigeria has been described as a prime example of resource curse, a situation where wealth from natural resources leads to poor economic growth and development and an increased likelihood of civil and ethnic tension.

Even though almost 90 per cent of Nigeria’s earnings are tied to oil, a recent report by the World Poverty Clock revealed that Nigeria had overtaken India as the poverty capital of the world. That is, the country has the greatest number of persons who live in extreme poverty, which is to say those that live on less than the equivalent $1.90 (N600) per day.

According to the African Development Bank, 152 million Nigerians, in an overall population of about 190 million, meet the criteria of absolute poverty. In addition, youth unemployment in the country is close to 80 per cent, which has resulted in increased levels of ethnic and religious unrest in the country.

Poor Infrastructure

More worrisome is the fact that power supply, which is a major growth enabler, has remained insufficient and continues to make efficient business operations in the country extremely difficult, thereby stifling economic growth. Although power generation capacity from the grid has peaked at about 7,000 megawatts (MW), distribution capacity is still around 5,000MW. The federal government currently estimates national energy demand at 22,230 MW.

Just like the power sector, the situation in other sectors, such as education, health, and sports, is not different.

These challenges have over the years prevented the country from achieving inclusive growth and experts have stressed that Nigeria can only achieve prosperity when government fashions out appropriate policies to address them.

This was the main focus of experts at the just concluded 25th seminar for financial journalists, organised by the Central Bank of Nigeria (CBN).


According to CBN Governor Godwin Emefiele, there is need for policy makers to be more vigilant to ensure the country does not slip again into a recession. Represented by the new Deputy Governor, Corporate Services, Mr. Edward Adamu, Emefiele was optimistic that inflationary pressures would continue to ease, and might return to very low double digit or high single digit levels during the year.

He stressed the need for the intensification of the strong policy coordination, collaboration and cooperation that flourished during the very difficult times. According to him, to sustain economic recovery and ensure inclusive growth, there is need for robust policy coordination between the key aspects of the economic policymaking space.

“This would include fiscal, monetary, exchange, and trade policies, which must be targeted at protecting farmers to boost agricultural output, support local companies and enhance manufacturing and industrial capacities, with a view to diversifying the economy away from oil and fossil fuels,” Emefiele stated. “Those of us who have been entrusted with leadership and policymaking responsibilities must neither become complacent nor over-confident. We must strive to improve and sustain the same policies that have gotten us this far.”

Emefiele reiterated that the CBN had been able to ensure exchange rate stability from over N525 to a dollar in February 2017, to about N360 to the dollar.

Foreign exchange supply has also improved since the establishment of the Investors’ and Exporters’ Window, with autonomous inflows of over $20 billion through this window alone from April 2017 to date, he said.

According to the CBN governor, “As sentiments improve on the macro economy and supported by proactive monetary, trade, industrial and fiscal policies, we expect a continued uptick in GDP growth with a positive spill over to improved employment rate.

“As policies to strengthen the agriculture and industrial sectors become more emergent, growth in these sectors will rise, further bolstering overall economy. As we entrench and sustain the transparency in the FX market, as FX reserves accretion continues, and market confidence and improved sentiments remain, we expect that the exchange rate will not only be stable but would begin to appreciate against major currencies.

“The adverse competitiveness outcome, which such appreciation may entail, would be adequately mitigated by proactive policies to ensure that our balance of payments position is not undermined.

“For one, our import bill may have fallen but our manufacturing and agriculture sectors still have a long way to go if we must attain self-sufficiency in those sectors.

“We must not be quick to discard the restrictive measures which aided our recovery simply because the metrics have improved.

“At the CBN, we will continue to fine-tune our policies and strategies based on our understanding of evolving developments and supported by in-house technical analysis and simulations. We will remain proactive in ensuring that the welfare of Nigerians is optimised at any point in time.”

Emefiele pointed out that at the last Monetary Policy Committee (MPC) meeting, the CBN had “signalled that we will sustain the tight policies that have helped rein-in inflationary pressures”.

This, according to him, was the reason members of the committee decided to keep the Monetary Policy Rate (MPR) at 14 per cent.

“We will also continue the transparency that has attracted inflows of FX into the country while keeping FX supply to the market adequate,” he said.

Sustainable Growth

Director, Monetary Policy Department, CBN, Mr. Moses Tule, said the apex bank had undertaken several development finance initiatives as part of its drive towards ensuring sustainable growth. Tule said a key project here was the Anchor Borrowers’ Programme (ABP), which financed rice production. He explained that rice importation was one of the key foreign exchange drainers that the CBN identified. “So, we financed the domestic production of rice in order to lower the cost of importing rice, create employment for domestic agents locally and to reduce the price you and I purchase in the market,” Tule, who was represented by a Principal Economist in the Monetary Policy Department, CBN, Dr. Godfrey Uzowanne, said. 

He stressed the need for the government to embrace a savings culture. “We need, as a matter of fact, to save today, so that we can always have something to fall back on to reverse that downward trend to avoid revert back to recession.”

Tule said there was need for the federal government to ensure that it fully implemented the Economic Recovery and Growth Plan (ERGP) to drive sustainable growth.

“Monetary policy is an important tool of macro-economic management. It, however, has some limitations because it depends on fiscal policies, business confidence, and public expectation to manifest as expected,” he explained.

On his part, Acting Director, Infrastructure Concession Regulatory Commission (ICRC), Engr. Chidi Izuwah, stressed the importance of Public Private Partnership (PPP) to drive sustainable growth in any economy. Izuwah, who was represented by Director, Planning and Research Department at the ICRC, Dr. Chiedu Ndubisi, said, “PPPs are not the only solution to addressing infrastructure in Nigeria, but they become relevant because the government does not have money.

“If you compare Nigeria’s budget and the portion of it that is related to infrastructure and our infrastructure needs, it only comes to about two per cent. So, what it means we have to look at the growth of PPPs.”

He noted that despite its potential and endowments, the Nigerian economy had not been able to climb out of its dependence on oil.

According to Izuwah, “We have been trying but we still haven’t gotten there. The poor infrastructure has restricted the economy and also reduced our competitiveness.

“PPPs have a lot of advantages. If you get the private sector to bring out its money, it would ensure that it finishes its projects in good time to earn money. That characteristic of PPP makes it ideal for infrastructure development, especially, in developing countries.

“Any government that is keen on efficiency would adopt PPP. In Nigeria, there is already a framework for the development of PPPs.”

In his own contribution, Head of Banking and Finance Department Nasarawa State University, Keffi, Professor Uche Uwaleke, said fiscal discipline was essential for Nigeria. “The summary is that we have exited recession, technically speaking, but vulnerabilities till remain in most areas,” Uwaleke said. “Yes, we have higher oil prices and outputs and new foreign exchange ventures, in particular, the I and E window of the CBN, tight monetary policy and the CBN intervention in agriculture has contributed to stability in the forex market, improved capital inflow, increased forex reserves, which has gone beyond $47 billion and higher stocks prices relating to where we were in 2016.”

He added, “However, in spite of all these positive macroeconomic indicators, we have not been able to reduce unemployment. Unemployment is as high as 28 per cent. If you combine 18 per cent unemployment and underemployment rate it is as high as 40 per cent. That is why we need to have fiscal discipline.”

Directors of the International Monetary Fund (IMF) recently emphasised the need for the Nigerian government to pursue growth‑friendly fiscal adjustment, saying it would help frontload non-oil revenue mobilisation and rationalise current expenditure in the country. According to them, this is necessary to reduce Nigeria’s ratio of interest payments to revenue to a more sustainable level and create space for priority social and infrastructure spending.

The fund’s directors had proffered the advice in its latest Article IV Consultation with Nigeria.

“The implementation of an automatic fuel price‑setting mechanism, sound cash and debt management, improved transparency in the oil sector, increased monitoring of the fiscal position of state and local governments, and substantially scaled-up social safety nets should support the adjustment,” the IMF stated.

The IMF directors welcomed Nigeria’s exit from recession and the strong recovery in foreign exchange reserves, helped by rising oil prices and new foreign exchange measures.

The preponderance of opinion is that Nigeria needs to articulate broad policies that would stimulate productivity, create employment, increase incomes, and facilitate growth. Time would tell how far the current economic policies can go in this regard.