Nigeria Employers’ Consultative Association (NECA) has called for policies that would support economic growth in the country.
In a recent statement, the Director General of the association, Timothy Olawale, stated that, “it is evident that the Nigerian economy is facing a grave risk of hedging into a deeper challenge if drastic and immediate economic transformation, focused and strategic engagement are not implemented. Coupled with the political will to achieve the set targets in the near plausible period.”
Olawale said the economy is currently grabbling with its worst recession twice in five years, coupled with skyrocketing inflation rate (nearing 15 per cent mark), high unemployment and underemployment rate (about 57 per cent), unstable crude oil prices in the global market and effect of the global pandemic, which portends danger for the economy, businesses and individuals.
According to him, of greater concern was the second wave of the Covid-19 that is ravaging Europe with consequential effect on the nation’s economic recovery efforts.
“As there is no one-size-fit-all approach in salvaging an economy faced with multi-faceted challenges like ours, we suggest a mix of fiscal, monetary and trade policies with political will in delivery the necessary actions,” he said.
The NECA Director General called for diversification of the mono-cultured sources of revenue, noting that with the unpredictable nature of global oil prices, it is more appropriate to hasten the process of diversification of the economy to expand the revenue sources, which is currently crude oil-based.
NECA noted that revenue from non-oil sector was more feasible and less volatile than the oil revenue, saying such would facilitate a buoyant and robust economy, which will reduce the need for external debt to the barest minimum.
Exploration of the various natural mineral deposits in the country for processing and exportation should be explored, he said.
“Government should curtail rising debt accumulation because of its obvious implications.
“Analysis of debt servicing provisions to revenue projections in the yearly budget over a five-year period has revealed that in 2016, 38.34 per cent of the year’s budget was earmarked for debt servicing. Similarly, in 2017 (36.2 per cent ); 2018 (30.7 per cent ); 2019 (32.14 per cent ); and 2020 (35.6 per cent ),” he said.
According to Olawale, this is not only worrisome but alarming.
“We believe that the growth of external debt stock and debt service payments is becoming a clog in the wheel of national economic growth efforts.
“Once an initial stock of debt grows to certain threshold, servicing them becomes a burden with debt crowding out investment and growth.
“It is obvious that, if the growing trend is unabated, Nigeria could face the gory experience of Greece (Euro-zone crisis of 2015),” he said.
“We strongly believe that borrowing to finance recurrent expenditures does not portray managers of the economy in the right light, and this could spell doom for the country.
“Public debts should be tied exclusively to capital projects with feasible income and debt repayment potential.
“By the revised budget 2020, debt servicing alone is about N3 trillion, which is 27 per cent of the total expenditure and 35.6 per cent of the revenue. With all the borrowings, there seems to be insignificant impact in some economic objectives as there is still widespread unemployment, high poverty levels, poor infrastructural development and poor health indicators,” he added.
Therefore, NECA urged government to reduce the cost of governance and improve revenue generation, noting that with the growing incidence of low revenue generation both at the federal and state levels, reflecting in high debt-to-revenue ratio, there was need to develop strategic and drastic measures in improving the revenue base.
“It is pathetic for any government to spend almost all revenue generated on debt servicing and recurrent expenditure, with paltry fund available for capital projects.
“While debt financing is globally acceptable for capital projects, everything seems to be wrong with borrowing for consumption and servicing previous debts,” the association added.