Nigeria’s GDP grew to 3.40% in 2023 but falls short for its population size, with GDP per capita at an all-time low. A nominal loss of $168 billion due to currency devaluation highlights economic vulnerabilities. Experts suggest increasing investments, revising trade policies, controlling fiscal spending, optimizing government assets, and focusing on import substitution to boost GDP growth.
Nigeria’s GDP has shown growth, reaching 3.40% recently, up from 2.74% in 2023. However, this rate is inadequate for a large population of 200 million, as the GDP per capita has hit a record low. The economy has also experienced a nominal loss of $168 billion, primarily due to the severe devaluation of its currency. Adetilewa Adebajo, CEO of CFG Advisory, emphasizes that the current GDP figures reflect an output gap, highlighting insufficient productivity and growth potential in Nigeria’s economy.
To enhance GDP growth, Nigeria must attract more investments, both from local and foreign sources. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises (CPPE), argues that creating a conducive environment for real economy investments is crucial. Currently, financial instruments yield better returns than investments in the real sector, which hampers overall economic growth.
Revamping trade policies is another essential step recommended by Adebajo, who suggests aligning industrial policies to address declining productivity in manufacturing and agriculture. This includes reforming HS Codes and amplifying investment policy incentives to stimulate growth efforts across these key sectors.
Nigeria’s growing debt, now about N150 trillion, necessitates controlling excessive fiscal spending. With a significant portion of the 2025 budget allocated for debt servicing, there are concerns over sustainability. Adebajo points out that despite a recent drop in sovereign risk spreads, the country’s credit rating remains at junk status, which impacts its financial stability.
To reduce its debt load, the government must optimize its capital structure by potentially selling assets. This aims to alleviate the debt profile and strive for an investment-grade credit rating. A unified government approach to enact policies that foster productivity and employment is critical to closing the output gap and stimulating the economy.
Implementing industrial policies for import substitution is vital for Nigeria to counter macroeconomic challenges. Adebajo advocates for replicating successes witnessed in cement and fertilizer industries by establishing a domestic supply chain for sugar production. This initiative can bolster agricultural productivity and create jobs, addressing both local and regional demand effectively.
Nigeria’s GDP growth currently falls short of what is required for its large population. Implementing strategic investments, reforming trade policies, controlling debt spending, optimizing government assets, and promoting local industries are essential paths to achieve sustained economic growth. By addressing these areas, Nigeria aims to close the productivity gap and enhance its economic performance beyond the current growth threshold.
Original Source: businessday.ng
