The Board of Directors of the Nigerian Economic Summit Group (NESG) has stated that economic growth slowed to 1.9% year-on-year in H1’20 representing its weakest level since Q2’18 as 29 percent of the economy contracted compared to 13 percent in the same period a year ago.
The NESG in a statement issued and signed by the Chairman, Board of Directors, NESG, Asue Ighodalo, said a review of performance by the various economic sectors showed that the top contributors to economic growth in H1’20 are: telecoms (52.5%), financial institutions (34.9%), crude petroleum and gas (24.9%) and crop production (24.4%).
The statement also stated that based on the International Monetary Fund (IMF) projection that the Nigerian economy would shrink by 5.2% in 2020, adding that there is positive inference to be drawn from more recent data showing growth in Value Added Tax (VAT) collection and Federation Account (FAAC) receipts.
The statement further noted that while VAT collection increased by 8.5% (year-on-year) to N651.8 billon in H1’20 from N601.0 billion in H1’ 19; the gross statutory revenue of N524.525 billion available in June was higher than the N413.953 billion received in the previous month by N110.573 billion, “coupled with the upward trend of oil price, these suggest that the degree of contraction anticipated in 2020 may be much lower than some of the available projections.”
According to the statement: “The importance of dealing with the challenge of inadequate revenue is highlighted by the high debt service-to-revenue ratio. While this ratio has improved to 72% in May 2020 from 99% recorded at the end of March 2020, it remains unsustainably high and undermines the ability of government to meet non-debt obligations such as provision of infrastructure, human capital development and protection for our nation’s large population of vulnerable people.
“Limited revenues also entrench the government’s dependence on borrowing from the Central Bank of Nigeria (CBN) with adverse consequences for the economy. As it acknowledges the federal government’s drive to improve revenue performance at all levels of the Public sector, the board advices that this drive should be done in such manner that the adverse effects of the COVID-19 pandemic on businesses (large and small, and households) is not worsened. Furthermore, attention must be paid to the efficiency and effectiveness of government spending.
“NESG commends the federal government for maintaining its commitment to the removal of fuel subsidy by allowing the fuel pump price to rise following the increase in the price of crude oil. As we look forward to a time when the government will not be involved in determining fuel prices, we encourage similar reform in the electricity supply industry. In the board’s view, only reform in the electricity sector will incentivize the required private investment, improve efficiency, raise output significantly and stabilize the market.”