What should the next stage of Nigeria’s successful economic reforms entail? I propose in this article a citizen and analyst’s blueprint on suggestions for deepening and extending our reform agenda. The implicit objective behind these suggestions will be consolidating the current reforms and then extending reforms such that they stimulate economic growth, employment and development to other sectors of the economy and produce more broad-based growth and prosperity.
The objectives of President Tinubu’s oil and gas sector and exchange rate reforms were eliminating wasteful and corrupt subsidies on fuel and foreign currency; stimulating investment; optimising national revenues and spending; and creating more efficient markets without distortions from (usually corrupt) bureaucratic actions either in the central bank or at NNPCL. These bureaucrats may act corruptly not because of moral failings alone, but because the system provided compelling opportunities for graft. Now these enabling systems have been dismantled, and whether it is acknowledged or not, President Tinubu has dealt a major blow against the two largest sources of corruption in the country.
A further refinement may be to establish transparency around monthly disbursements at the Federation Account Allocation Committee to enable citizens and civil society to monitor resultant utilisation of higher resources among the three tiers of government. The reform objectives stated above have largely been achieved, and moreover, stability has been achieved in both fuel and currency markets. Nevertheless, we must stay focused on securing sustained investment in the upstream oil sector to achieve the government’s objective of increased oil production and maintain a free and competitive downstream sector.
A side-effect of the reforms has been higher inflation and increased poverty. Government policy is already focused on remediating both inflation and poverty, with focused CBN attention to the first, and several actions from the administration focused on social policies to support the poor- the Nigerian Education Loan Fund for tertiary education; (conditional) cash transfers to the poor and vulnerable to improve social outcomes; creating a credit economy to support consumption and improve standards of living; inception of free education in technical schools across the country; being examples.
However, there is still a significant way to go, especially in my view around skills acquisition and empowerment for the huge number of uneducated and untrained young people and adults all over the country, combating insecurity and stimulating employment. The sectors to look at for stimulating employment remain agriculture, construction, infrastructure, real estate, retail, mining and MSME development.
I find that many conversations about increased poverty in Nigeria are hypocritical, hyperbolic and politicised exclamations designed to inspire despair rather than attempts to find solutions, yet the problem is real and the government must remain focused on the subject. The most important evidence that we have succeeded with the FX reforms will be increased non-oil Foreign Direct Investment that restores Nigeria’s leading position in Africa in terms of global FDI. While this objective remains outstanding, there are improvements, and we must stay focused on this strategic intent. It might help if we articulate a clear and targeted strategy for foreign investment at the trade and investment ministry, and campaign vigorously for global investment based on that strategy.
I think all the elements for increased FDI in Nigeria are in place, with time and some push required. The other area that is ripe for a push is exports! With a weaker currency, the policy imperative is to grow exports and remittances. Some exports of certain agricultural commodities are already growing, and Dangote Refinery will also become a veritable export earner for Nigeria, but we need a wider, more deliberate strategy to grow exports. This will include addressing exporters’ pain points and removing bureaucratic and logistics constraints.
I have referred to sub-optimised sectors that can fuel both employment and economic growth, including mining, agriculture, housing, infrastructure and MSMEs. The Minister of Solid Minerals is already engaged in the work of reforming the sector.
The goal should be securing large global investors in Nigeria’s mining sector. I once asked a knowledgeable analyst what it takes to secure major investment in mining from the global mining centres, and the answer I got was long-term policy stability. Apparently, investors in the sector, not surprising, take a very long-term view, perhaps up to 50 to 100 years, because mining investment cannot be wound down quickly, once made. We have to communicate through laws, institutional reforms and systems, rather than individuals. Perceptions of political risk and regime instability would not help. I suspect we need a fresh, policy-based agenda for modernising and transforming Nigerian agriculture based on a value-chain approach and we must eliminate the constraint of insecurity.
With housing, it may be essentially academic and perhaps unrealistic to talk about the challenges of the Land Use Act and solutions to that, given its embeddedness in the Constitution and the attractiveness of the Act to the state governors. So, what else can be done to secure increased funding for housing and mortgages by the government, to some extent, but predominantly from the private sector? What can the government do to facilitate better access to land and more effective land administration? How can CBN sustain the push to reduce inflation until perhaps in the medium to long-term, to single digits, and therefore reduce interest rates and make mortgages more affordable? I know of an initiative between the private sector and the Ministry of Finance International called MOFI Real Estate Investment Fund, which is aimed at providing more affordable mortgages and I hope that it succeeds as a first step in this journey. The jury is still out on MREIF.
One strength of the Tinubu administration, apart from its successful macroeconomic reforms, is its determined push to strengthen investments in road infrastructure all over the country. The President has demonstrated this commitment and is willing to push the fiscal limits in doing this. While I understand and support this strategy, pushing aggressively for private sector and international funding for infrastructure- roads, seaports, airports and power, to supplement government funding will make the current strategy more sustainable.
A final word on power, which is a fundamental pillar of broad-based and inclusive economic growth, employment and poverty-reduction. I believe success in power rests on decentralisation of transmission, finding a pathway to sustainable tariffs (which may be after 2027), massive investments in generation, distribution and transmission, as well as in solar power infrastructure.
