Financial experts debate solutions to revive Nigeria’s ailing economy

ONOME AMUGE 

Financial experts have voiced their concern that Nigeria is at a critical juncture, where the future of the economy hangs in the balance, and the country could face a dire economic future if decisive actions are not implemented to address the current economic challenges and prevent a serious economic crisis.

The experts recommended a number of specific measures that the Bola Tinubu administration should take to address the country’s economic challenges. These include blocking fiscal leakages, establishing an economic think tank with seasoned economists, and allowing the fiscal authorities to take the lead in developing a clear, well-communicated fiscal policy framework.

The experts’ recommendations were part of a broader discussion that took place at a recent webinar organised by Proshare, a leading financial market intelligence hub. The webinar, titled “Policy Crossroads: The Choice Between Strangulation and Expansion,” brought together economists and financial analysts to discuss the challenges facing the Nigerian economy and possible solutions. 

The online conference which was monitored by Business a.m. included renowned financial experts, including  Ayo Teriba, chief executive officer (CEO) of Economic Associates; Bismarck Rewane, CEO of Financial Derivatives Company;  Tilewa Adebajo, CEO of CFG Advisory;  Tope Fasua, special adviser on economic matters to the President (Office of the Vice President).

Others are; Ogho Okiti, CEO of Think Business Africa;  Yemi Kale, group chief economist & managing director for research & international cooperation, Afrexim Bank; and Teslim Shitta-Bey chief economist, Proshare Limited.

As Nigeria’s economic woes deepen, accompanied by a declining gross domestic product (GDP), high cost of living, coupled with a weakening currency and rising inflation, many citizens have begun to lose faith in the ability of the Bola Tinubu administration to deliver on its promises and lead the country towards economic development. 

Tinubu’s administration has come under fire for its policies, which critics say have exacerbated the country’s economic woes. Many had hoped that Tinubu’s election would bring much-needed change, but the reality has been a bitter disappointment. 

Consequently, the high cost of goods and services, coupled with low wages and rampant unemployment have created a perfect storm of misery for many Nigerians. And with little prospect of an improvement in the near future, many have lost faith in the government’s ability to turn things around, creating a sense of hopelessness and despair.

The experts had an unanimous view that the Bola Tinubu administration made the courageous but risky decision to introduce a series of policies that could have been effective under different circumstances. However, they admitted that the administration’s failure to consider the appropriate policy sequencing led to a deterioration in the disposable income of the citizens and a rise in poverty levels.

Despite the challenging economic environment, Fasua maintained a degree of optimism about the country’s future. He argued that while the current policies may cause short-term hardship, they are necessary for long-term growth and stability. He specifically mentioned fuel subsidy removal and currency floatation, which he said should be reassessed to ensure that they are having the desired impact

Rather than simply abandoning or reversing these policies, Fasua proposed that the government take a more analytical approach, re-evaluating the policies and exploring alternative solutions.

Fasua pointed out that in order to address the current challenges, there needs to be a change in behaviour among Nigerians. He argued that there is still hope, and that it is possible to turn the situation around. He cited the example of other countries that have faced economic difficulties in recent years, such as the United Kingdom, Japan, Finland, and Ireland, and noted that even Germany is facing challenges. He argued that the economic difficulties these countries are facing are partly due to the impact of the COVID-19 pandemic, and that Nigeria can learn from their experiences.

“We are actually at a crossroads, but it points to growth from where I see it. And it also points to a number of behavioural changes that we must now begin to embrace. And so, I don’t see despair. I think that it’s natural for people to be apprehensive but the government has only been in for nine months or thereabouts,” he said.

Meanwhile, Ogho Okiti’s contribution focused on the need to address the current macroeconomic instability in Nigeria. He argued that until the fire of instability is extinguished, the country will continue to face economic challenges. He highlighted the lack of confidence in the economy, as evidenced by the fact that investible funds are being directed towards the purchase of US dollars rather than towards productive investment. 

Okiti emphasised the need for concrete fiscal measures to address the economic challenges facing the country. He observed that over the past six months, there has been a disproportionate focus on monetary policy, with little attention paid to fiscal policy. 

“We just keep printing money and that has led us to where we are. The problem is a fiscal problem. We can have monetary outcomes. But our major problem is a fiscal problem,” he said.

Okiti drew an analogy between the Nigerian economy and an individual or business. He noted that individuals and businesses must live within their means, and that borrowing without paying attention to their budget can lead to problems. He argued that the same logic should apply to the Nigerian economy, and that the government needs to make tough choices about spending and investment in order to achieve long-term stability and growth.

He argued that comparisons between Nigeria and developed economies such as the UK and Germany are not entirely accurate. He pointed out that while these countries may experience occasional economic downturns, they have the resources and institutions to recover relatively quickly. In contrast, he argued that Nigeria faces more fundamental and deep-rooted problems that will take longer to resolve.

Also speaking, Ayo Teriba argued that instead of subsidising the price of goods and services, Nigeria should target subsidies to the poor and vulnerable through social spending programmes. In addition, he suggested that the government could attract private investment in public assets through a process of financialisation, which would unlock the value of these assets and boost foreign direct investment inflows.

Teriba stated that the current situation in Nigeria is not just a crossroads but a dead end, requiring drastic changes to get the country on the right track.

“The only asset in Nigeria’s balance sheet is debt. The country is borrowing more against declining income. The country can turn to assets, especially real estate within two to six months, to sell and shore up reserves,” he said.

During the discussion, Bismarck Rewane expressed concern about the lack of action from the federal government and called for an immediate assessment of the policies currently being implemented. He said that while the country’s economic problems are well known, the situation has been allowed to deteriorate for decades. Rewane argued that the problems cannot be fixed overnight, but that the government must take immediate action to begin addressing them.

According to Rewane, Nigeria’s economic growth, while strong in theory, has not led to the expected job creation and improvements in living standards. He noted that this is due to the lack of inclusivity, which means that economic gains are not being shared widely enough. He further highlighted that despite the potential for economic growth, it is not translating into real improvements for most Nigerians.

Rewane observed that some of the most important economic sectors, such as crude oil production and refining, have been in recession for some time. He explained that these sectors are the main drivers of economic growth and have been referred to as the “golden goose” that lays the eggs. However, he argued that there is little connection or synergy between these sectors and the rest of the economy.

“Nigeria’s effective interest rates are significantly lower than the rate of inflation. Though in recent weeks, there is upward movement of effective rates but still far away from the rate of inflation, “ he stated.

Rewane further stated that the loose monetary conditions in Nigeria are a direct result of the lack of integration between different economic sectors. In fact, he argued that the country’s monetary policy is actually more of an easing than a tightening, which creates its own set of problems. 

When it comes to the external sector, Rewane emphasised the importance of examining investment inflows and determining whether they have been increasing or decreasing over time. He pointed out that this is key to understanding whether the country’s exchange rate is driving inflation or whether inflation is causing the exchange rate to depreciate.

Rewane also highlighted the lack of transparency in the country’s external reserves data, noting that the reported figures are in gross terms, and it is not clear what the net numbers are. He argued that this lack of transparency makes it difficult to understand the true state of the country’s external reserves and to accurately assess the country’s external position. He suggested that policymakers are often focused on addressing symptoms rather than the underlying structural issues, which makes it difficult to address the country’s economic problems

“We are at a crossroad. The options are few and the choices are hard,” he added.

On his part, Yemi Kale pointed out that the country is not really at a crossroads, because a crossroads implies that there are multiple options available and the country has not yet decided which path to take. Instead, he argued that the country has already taken a path, and the focus should be on assessing the effects of that path and making course corrections as needed. 

Kale further emphasised the need for policy coordination and a resetting of the country’s economic framework in order to target key sectors. He pointed out that there is no structured system in place in Nigeria to ensure that policies are working together towards a common goal. 

“You create a budget that does not match the other policies. You create a  policy that contradicts existing policy and this gives that impression of lack of coordination  or lack of harmonisation. When that happens, people start betting against the economy and just exacerbate the situations where we are, “ he stated.