Nigeria's Economic Challenges: A Call for Industrialisation and Revenue Diversification

Strategic Insights -

Nigeria, Africa's largest economy, is struggling to achieve sustained growth and development. Emeritus Professor of Economics, Prof. Akpan Ekpo, has highlighted the need for the country to industrialise and diversify its revenue streams to build a strong economy. Ekpo, a former board member of the Central Bank of Nigeria and its Monetary Policy Committee (MPC), believes that Nigeria's manufacturing sector's contribution to the Gross Domestic Product (GDP) must reach 40 per cent before the country can achieve economic stability. Currently, the sector contributes less than 12 per cent to the GDP.

Key Takeaways:

  • Nigeria's manufacturing sector must contribute at least 40 per cent to the GDP for a strong economy, a target that is yet to be achieved.
  • The service sector's contribution of 55 per cent or more to the GDP is a false narrative that suggests the country has arrived, but in reality, it is a sign of an unindustrialised economy.
  • Nigeria's economy is agriculturally dominated and needs to transition to an industrialised economy with a strong manufacturing base to achieve growth.
  • The oil sector still dominates the country's economy, and its performance is not truly representative of the economy's overall performance.
  • Nigeria's public debt stock is increasing, and the rebased GDP has created space for more borrowing, but this could be a recipe for disaster if oil prices decline or if the economy experiences a shock.
  • The country's debt-to-revenue ratio is a major concern, and Nigeria should rethink its propensity to borrow to avoid a debt crisis.
  • The government's obsession with increasing public revenue is misguided, as it is largely being used to service debt and fund the political class.
  • Nigeria's foreign reserves and stable foreign exchange market may be illusory, and the country must have a productive economy that is not heavily reliant on oil exports to achieve true economic stability.
  • The N1,500 exchange rate is considered too high and has a pass-through effect on inflation, which affects the poor more than the rich.

Statistics:

  • Nigeria's manufacturing sector contributes less than 12 per cent to the GDP.
  • The service sector contributes 55 per cent or more to the GDP.
  • Nigeria's public debt stock is increasing.
  • The country's debt-to-revenue ratio is a major concern.
  • The N1,500 exchange rate is considered too high, causing a pass-through effect on inflation.
  • Foreign exchange stability is crucial, and Nigeria's reserves are not truly representative of economic stability due to their dependence on oil exports.

Sources:

  • Prof. Akpan Ekpo, Emeritus Professor of Economics and former board member of the Central Bank of Nigeria and its Monetary Policy Committee (MPC), quoted in an interview on Arise News Channel's 'The Morning Show.'
  • West African Institute for Financial and Economic Management (WAIFEM)