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Why An Economic Summit Is Imperative

Posted: Mar 6, 2016 at 6:52 am   /   by   /   comments (0)

It is a positive development that the Nigerian government is contemplating an extended dialogue on the country’s economy, aimed at tackling the confluence of economic predicaments confronting the nation. Given the waning hope of a quick rebound in oil prices, and improved revenue inflow to jump-start economic activities and dilate the welfare curves of citizens in the short term, this fresh effort has become imperative to rescue the economy from its perilous state and the ominous consequences.

Considering the seriousness of the economic issues involved, it is our cherished view that initiatives focused on finding long-term solutions to the hard-biting economic problems, demand urgency as the economy wriggles on the crucible of tough times unleashed by oil price shocks and other niggling factors.

Five and a half decades have passed without much structural change in the economy: crop production still dominates economic activity in the country, followed by trading and services. Oil, though with a much bigger share of total output today than it was in 1960, remains about the fourth largest activity sector. Manufacturing, construction, and solid minerals contribute less to the economy today than at independence.

In the absence of structural change for more than 55 years, Nigeria’s economic growth performance had sadly depended on the strength of the global economy, essentially transmitted through merchandise trade and commodity prices. Commodities, mainly crops, and later oil since the seventies, trading and commercial services had accounted for more than 90 per cent of the nation’s productive activity since 1960.

Crops, which dominated exports in the first decade after independence, had been replaced by oil as the dominant export earner in the past five decades. Yet, crops supply the bulk of domestic production, employment, trading and private income and spending today, while oil continues to post weak links with domestic production and employment, but generates the chunk of government revenue and foreign exchange for financing imports.

The economy returned to a steady growth trajectory in the first decade of the millennium, following two decades of stagnation from the late seventies to the late nineties that marked a return to the steady growth experience of much of the sixties and seventies.

With only commodities to export, it is not surprising that global economic stagnation in the eighties and nineties dovetailed into domestic economic stagnation and macroeconomic instability for the country. A weak global economy also meant weak oil and non-oil commodity prices on the world stage, as the country got miserable figures from its commodity exports, inhibiting incentives for their production. Crop and Oil production constricted over the period, government revenue and external reserves both dropped to insignificant levels, putting pressures on government debt, and on the unholy trinity of inflation, exchange rate, and interest rates.

Today, the economy is confronted with persistent difficulties in the business environment, especially in relation to insecurity in parts of the country, infrastructural conditions, foreign exchange crisis, funding issues, consistency of policy and the quality of institutions. Uncertainties and risks created by the political transition and the elections last year exacerbate the challenges.

Data from the National Bureau of Statistics (NBS), suggest that the country’s real Gross Domestic Product (GDP) dropped to 2.84 per cent in the third quarter of 2015, compared to 6.23 per cent in the same period in 2014. Sectors such as manufacturing and the services slid into recession after recording successive declines over the last three quarters in 2015. Even with the successful democratic transition that heralded a new political administration and presented a new wave of optimism on the back of the inherent goodwill of the administration at the federal level, business activities remained largely sluggish for a better part of 2015,following uncertainties around the general economic policy direction of the present administration. Nigeria currently has a high dependence of imports supported by the huge amount of foreign currency needed to facilitate these transactions

This underpins our demand that whether the envisaged summit takes exclusive or inclusive format, it must be the place and time to address the loathsome issues of mismanagement, corruption, impunity, unpatriotic acts, massive unemployment, nepotism, tribalism, militancy, and insurgency. In addition, targets and timelines and scoreboards must be set with a clear definition of responsibilities.

It is clear that the maladies that have tethered the economy to an ignominious spot today are products of yesterday’s negligence and failures, and would require well thought-out solution matrices that accommodate the perspectives of what had been, what is, and what ought to be.

We must also not forget that recommendations of earlier economic conferences, Vision 20: 2020 document, and the 2014 National Conference organized by the immediate past administration have suffered implementation fatigue that must be voided going forward.