As the Economic Recovery and Growth Plan (ERGP) and Vision 2020 winds down next year, the Federal Government is focused on a new long-term vision/projection that should direct government policy trust and galvanize economic growth, infrastructure revolution and sustained industrial growth.
Vison 20:2020, birthed by the then President Olusegun Obasanjo, hasn’t quite achieved what it set out to do. The vision states that “by 2020 Nigeria will be one of the 20 largest economies in the world, able to consolidate its leadership role in Africa and establish itself as a significant player in the global economic and political arena.” Other components of the vision include sustainable infrastructure and upscale industrial capability.
Nigeria came close to achieving the GDP component of the vision but still lost out; though it emerged the biggest economy in Africa by GDP size.
With rebasing, Nigeria moved to the 26th largest economy in the world, and the largest economy in Africa, ahead of South Africa. Nigeria at the time was worth N80.2 trillion, or $509.9 billion, rising from its original figure of N42.4 trillion, or $269.5 billion. Statistics by CountryEconomy show that Nigeria’s GDP figure in 2018 was $398,186 million, thus Nigeria was number 31 in the ranking of GDP of the 196 countries that it published. The absolute value of GDP in Nigeria rose $21,825 million with respect to 2017. Though Vision 2020 is ending next year, it’s unlikely its major targets would be met.
Perhaps, the hitherto slow-paced progress of the vision let the President Buhari-led government to introduce the Economic Recovery and Growth Plan (ERGP). The ERGP set out not only to consolidate the gains of the Vision 2020 but to achieve measurable milestones from 2016 to 2020.
The ERGP has achieved some successes in the ease of doing business, development of transport infrastructure, spur local agricultural growth, and has started a revolution in the solid minerals space among others. But there are huge open items that need concerted efforts to close, especially in the areas of exports, road infrastructure, power, MSMEs growth among others. To achieve these, a new target is being considered.
At the last Nigerian Economic Summit Group (NESG) held October 7th and 8th 2019 with the theme ‘Nigeria 2050: shifting gears’, it was recommended that a 31-year vision or economic rejuvenation plan which will focus on several sectors is critical. Participants considered vision 2050 as ideal but the recommended was subject to the adoption of the federal government.
Again, at the recently held PricewaterhouseCooper’s (PWC’s) executive session in Lagos on the Nigerian Finance Bill, 2019 and tax strategy, the question bordered on what to expect in terms of fiscal direction as the duration for the Federal Government’s policies such as the ERGP and, Vision 2020, among others, ends by 2020.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, hinted that plans have already started for Agenda 2040. This presupposes that the FG is looking at Vision 2040 instead of 2050.
She said the long-term plan for the vision 2020 and the medium-term plan of the ERGP are both coming to an end in 2020. The ministry has initiated the process to develop a new long-term plan.
She had also hinted that there is a national planning committee that has the mandate to recommend the horizon and thrust of this plan. But she’s also worried about diligent implementation.
“What we and other stakeholders have observed is that Nigeria is good at developing very good plans. The challenge is with implementation and results attainment. In cognizance of this, the new process will commence with a review of the expiring plans, and the new plans will be results focused. Another imperative is to ensure inclusive growth, and this makes our sub-nationals critical. This means that we need to design a plan that strengthens sub-national coordination,” she said.
On the fiscal direction, she stated: “The plan will continue to focus on revenue diversification in line with an economic diversification drive. The focus will be on ensuring domestic resource mobilization, especially from non-oil to ensure we have enough fiscal space to invest in key socio-economic growth levers and enabling business environment for businesses as we desire a private sector led vibrant economy. We want a system that is built on domestic revenues that stems proportionately from a well-diversified economy that is driven by a thriving, formalized private sector. We also want to create a fiscal system with enough fiscal buffers for rainy days.”
The ERGP that was a 4-year plan was launched in 2017 to restore growth, invest in Nigerians, and build a competitive economy. The main thrust was to take Nigeria out of recession and correct some of the weaknesses inherent in the country’s economy.
Ahmed observed that the Nigerian “economy has recorded nine consecutive quarters of GDP growth. Annual growth increased from 0.82 percent in 2017 to 1.93 percent in 2018, and 2.02 percent in the first half of 2019. “The continuous recovery reflects our economy’s resilience and gives credence to the effectiveness of our economic policies. We look to develop a new mid-term plan which is the Economic Acceleration Growth Plan to accelerate our growth rate to outperform the country’s population growth in order to successfully alleviate poverty,” she further hinted.
As part of efforts to ensure the new vision target crystalizes, she promises better coordination between the monetary and fiscal authorities. The minister was also optimistic about the impact of the recently inaugurated Presidential Economic Advisory Council (PEAC), into which she was co-opted, with renowned and seasoned economists, adding that other ministers will be invited as need be.
Industry watcher also noted that the recent appointment of the Special Advisor to the President (SAP) on Finance and the Economy – Dr. Sarah Alade – who has vast experience in monetary and fiscal policy, will add value to policy outcomes from the ministry and even during the development of the new vision document. She is a permanent interface between the PEAC and the Ministry of Finance, Budget and National Planning.
Speaking further on the new focus of the government, Mrs. Ahmed said the recent proposed VAT rate increase to 7.5 percent is a move to move away from having static tax laws. “This means that we will be observing our economic performance, global competitiveness, the economic and fiscal situation, enabling business environment and on an annual basis develop a finance bill that will accompany the budget. But for now, there are no plans to increase in view,” she said.
She also noted that the MSMES are targeted on tax reforms so they have less tax burdens and are able to grow faster. “The Nigerian tax laws are progressive while ensuring a competitive and enabling business environment. For now, there are no plans to make universal reductions but for the MSME sector.”
The minister also indicated debt burden won’t stand in the way of the proposed vision.
She also noted that the relatively high ratios of debt service to revenues are due to the growing debt stock, high domestic interest rates and low Federal Government revenues. This, she noted, is within the World Bank/IMF limit of 55 percent for countries in Nigeria’s peer group, as well as the West African Monetary Zone (WAMZ) Convergence Threshold of 70 percent.
The borrowing, in her views, is to augment for the revenue shortfall needed to invest in infrastructure for job creation and economic growth; continue with the initiatives and reforms aimed at increasing revenue which are expected to improve debt sustainability, reduce the debt service to revenue ratio and, over time, reduce the government’s borrowing needs, and continue with project-tied borrowing that is visibly linked to infrastructure projects.
“We are also rebalancing our debt as follows: 60:40 domestic: foreign ratio; 75:25 long-term: short-term domestic debt; 10 years average tenor of portfolio.”
Key stakeholders who spoke on proposed way forward recently at the NES25 said education and technology are key.
Most speakers agree Nigeria’s current education system can’t produce the right skills and competencies required to function in this technology driven world.
Mrs. Ibukun Awosika, the Chairman of the First Bank, said young people in Nigeria are receiving education in the areas they do not need. Awosika said there is a need to declare a state of emergency in Nigeria’s education sector. A call even the president agreed was necessary.
“We need an emergency in the education sector. We can achieve what we want to when we identify where we want to go. We must redefine the education we are delivering to our children,” she said further.
“We send children to school to study anything. They are not studying what they want. Nigerian graduates are wrongly trained in what they do not need,” she noted.
According to Awosika, Nigeria needs to identify where it wants to be to compete with top economies across the world going forward and this is core to the proposed vision.
Concerns around population growth were raised. Most speakers agreed population could be an asset but right now Nigeria’s is a burden because a significant number of the population is without proper formal education thus, they are largely unproductive. This concerned was waved into rising cases of terrorism, banditry and kidnappings.
The Emir of Kano, HRH Muhammadu Sanusi, who also spoke on the rising population of Nigeria projected to reach 400m 2050 said that the Nigeria’s growing population which is a liability now, can also be turned into an asset.
Emir Sanusi said all the issues Nigeria is facing, from Boko Haram, herdsmen, drug addiction, out-of-school children are all tied to the high population, and Nigeria must address population going forward.