Experts Proffer Solution to Nigeria’s Economic Recovery

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By Emma Okonji

Some analysts who spoke at the third Economic Outlook Forum, tagged 2020 Economic Outlook, organised virtually by Nairametrics, have proffered solutions to economic recovery.

They however differed in their projections on the economic recovery pattern of the country, and advised the federal government on how best to addressing the economic challenges.

While some were of the view that the recovery pattern may take the ‘U’ shape, where the recession period is longer and has a less-clearly defined trough, others predicted that recovery pattern would likely take the ‘W’ shape, where the recession is a double-dip recession, which explains that the economy falls into recession, recovers within a short period of growth, then falls back again into recession before finally recovering.

The financial experts who spoke were Partner and Chief Economist, PwC Nigeria, Andrew Nevin; Group Executive, Energy and Infrastructure, FirstBank, Bashirat Odunewu; Head of Research, Coronation Asset Management, Guy Czartoryski; Chief Commercial Officer, Mixta Africa, Rolake Akinkugbe-Filani and Senior Vice President/Head of Financial Advisory, Africa Finance Corporation, Fola Fagbule. Founder of Nairametrics, Ugodre Obi-Chukwu, moderated the session.

Nevin said despite the federal government’s expectation of a 4.69 per cent fiscal deficit to GDP in 2020, he anticipated both oil and non-oil revenue to worsen, and severe constrain of the implementation of fiscal policy targeted at expediting economic recovery.

“Without the COVID-19 shock, about two million Nigerians were expected to fall into poverty by the end of 2020, as population growth surpasses economic growth. With the pandemic, the recession is likely to push an additional five million Nigerians into poverty in 2020, bringing the total newly poor to seven million this year.

“This implies an increase in the total number of poor people in Nigeria, from about 90 million in 2020 to about 96 million in 2022. Having a vulnerable employment and being already poor, are factors that help explain this increase in poverty,” Nevin said.

On the way forward, he advised the federal government to unlock its dead capital in a meaningful way, and to also unlock value from government’s assets that are lying idle or under-utilised. The VAT reforms in the Finance Act 2020 should be implemented, and maintaining the increase in VAT rate to 7.5 per cent is key to recovery, he said.

“I am not trying to be an alarmist, but if the country does not take advantage of the period to accept the moment of truth, there will be pressure on the economy. So, I will opt for a U shape recovery” Nevin said.

Odunewu who said some factors like oil prices that hover around $40-$45 per barrel, would hinder the economic recovery, desired by the government, however, opted for a U-shape recovery pattern, adding that 90 per cent of the nation’s revenue still come from oil, and that low compliance of Nigeria to the OPEC cut deal has forced reduction in our oil production for the next few months.

Akinkugbe-Filani and others who chose a different path, said “the reality is that the nation still lives above its means, because she continues to borrow in a way that is not sustainable, and seeking an economic construct that may not be sustainable.”

She said: “I wonder the type of recovery we are looking at when the fundamentals of the economy have not changed. Regardless of the pandemic, we have always been a cyclical economy because of the oil price, the export driven oil, and the lack of value creation.

“For recovery from the pandemic, we need to create local demand for our consumption, so that we are not so vulnerable. I will love to see a U-shape recovery, but the reality on the ground will lead me to say that the recovery is between U-shape and W-shape.”

Fagbule of AFC who was optimistic about Nigeria’s recovery, said he believed in the U-shape recovery pattern for Nigeria. According to him, “The nation cannot recover without working on her trade and investment, as it is the only way out from the economic lull. He emphasised that government expenditure is never going to be sufficient to take Nigeria out of the woods, and it is time for the West African nation to emulate countries like Gabon, China and India, whose Investments contribute 30 per cent, 40 per cent and 31 per cent to their GDPs respectively, when Nigeria only does 14 per cent.”