This week, World Bank released the Nigerian Economic Update; a document that critically analysis the performance of the Nation’s economy which also advice on employable modalities to effect growth of the economy. The document in summary threw more light into the efforts of the government, gains made and declines witnessed much of which are already in the public discuss among analysts.
For the fact that the nation’s bulk of revenue is from the oil sector naturally connote that behavior of crude oil price in the international market determines the direction of revenue accruable to the nation which in turn determine the growth pattern of the economy. In this discuss, the World Bank, examining the current global factors, see a possibility of the economy sliding back to recession. Two major reasons for this assertion are the erratic fluctuation of crude prices following global economic uncertainties, and the inability of the nation to withstand the revenue shock since foreign reserve is depleted.
The Bank projected a stable economic growth at 2.0 percent in 2019 and 2.1 percent through2021. Economic growth is expected to remain below population growth which is currently at 2.6 percent and reduce per capita from US$2,485 in 2018 to US$2,460 by 2021. This will push more Nigerians into poverty and further expand the number living under poverty line 2 dollar.
Nigeria need to Implement core structural reform to accelerate internal revenue generation and boost the nation’s productivity being key to put the economy on a fast lane growth.
Internal revenue generation has remained in the foremost alternative to foreign borrowing being currently employed by the government to fund critical infrastructure development. According to the report, activities that require such reforms are agricultural financing and the overall private sector credit. The crowding out phenomenon by the public sector must be reduced.
The place of productivity as a very key factor to boosting economic growth remain firm amidst every other narrative owing to the impact that factor transformation and allocative efficiency have on wealth creation for the nation. While tracing the productivity history of the country as well as comparing it to other economies, World Bank stated that;
“Low growth of Total Factor Productivity, TFP is driving Nigeria’s continued divergence from advanced economies … From the 1960s through the 1980s, the gap in output per worker between Nigeria and advanced economies primarily reflected Nigeria’s lower base levels of physical and human capital and the slow process of capital formation. Since the 1980s, however, that gap in labor productivity has been primarily attributable to Nigeria’s slow rate of TFP growth: Nigerian workers are now less productive primarily because the Nigerian economy is becoming less efficient at transforming labor, capital, and other productive factors into goods and services. The differences seen in TFP likely reflect greater inefficiencies in the use of production inputs by firms—a hypothesis widely supported by the international literature on misallocation of resources. In other words, low levels of TFP suggest that inefficient allocations of labor and capital are inhibiting the transformation of the Nigerian economy”.
The need to increase the productivity per individual becomes firmer by the day as entrants into the labour-age increases. The country’s working-age population is projected to grow by 35 million over the next decade. Nigeria need a new economic model based on productivity growth to save the nation from crises with dare consequences.
Factors that drive productivity in Nigeria among others are the nation’s stock of natural capital—specifically its oil and gas reserves which has influenced the evolution of both its economy and government institutions, policy measures which have exacerbated the misallocation of capital and labor by sector and accelerating the decline in economic efficiency, and government’s dependence on volatile oil revenues and limited institutional capacity which make the public sector less effective
Vivifying the impact of less productivity in Nigeria is the productive situation in the agricultural sector where for the past 20 years, value-added per capita in the sector has risen by less than 1 percent a year, and marginal yield is far below its potential.
World Bank noted that actions in the following areas will lay the groundwork for Nigeria’s transition to a new economic model based on efficiency improvements and diversification beyond the extractive industries:
- Promoting policy transparency and predictability will create the certainty necessary to make effective long-term economic decisions, encourage investment by reducing investment risk (Defining clear tax, exchange rate, inflation, banking, and other crucial policy objectives and demonstrating that policies are carried out in systematic, predictable ways would invite investment in local productive capacity.), and promote sustainable growth outside the extractive industries.
- Enhancing factor quality by investing in infrastructure, making land tenure more secure, improving educational outcomes and building skills, and liberalizing the trade regime will facilitate the efficient reallocation of factors and make Nigeria more cost-competitive.
- Reducing regulatory discretion will alleviate constraints on market entry and formalization, promote competition, and sharpen incentives to improve productivity.
- Improving access to finance will help establish a competitive playing field that enables new firms to compete with incumbents and allows more productive firms to scale up their operations.
The government of Nigeria need to consider the aforementioned in a pace that outweigh the current effort considering the formidable development challenges. The country has taken measures to
- improved regulation to make it easier for entrepreneurs to start and operate a business;
- launched a Central Portal for Government Services to improve transparency in public service delivery;
- ratified the Social Protection Policy and established a state and national Social Registry of poor and vulnerable households to enhance social protection;
- established a Basic Health Care Provision Fund; and improved payment service regulations to promote financial inclusion