Stakeholders at the just-concluded Nigeria Economic Summit (NES) have advised Nigerians to be ready to wait much longer for the realisation of the goal of becoming an industrialised nation, Crusoe Osagie reports
The Nigerian Economic Summit Group (NESG), the non-political private sector-led economic think-tank and advocacy group representing key sectors of the economy, held its 18th economic summit, and after the event said the country's hope of joining the top 20 global economies by the year 2020 may not be realisable.
NESG believes that at the current economic growth rate, Nigeria would be in the 27th position by 2020 and possibly attain the 20th position by the year 2035.
In its 2012 edition of the Nigerian Economic Scorecard developed by NESG's team of in-house research analysts, with input from an external faculty of leading Nigerian economists and business executives, a futuristic look at Nigeria's economic standing on the global scene in the year 2020 was taken in order to determine whether the country can realise its vision of being the 20th largest economy by the year 2020 as contained in the NV20:2020 document.
According to the NESG Chairman, Foluso Phillips, "We adopted the latest update to the IMF's World Economic Outlook Database (October 2012) containing economic data for 186 countries from 1980 and estimated to the end of year 2017. We filtered the countries by the gross domestic product (GDP) at purchasing-power-parity (PPP)."
Next he said that a six-year compound annual growth rate (CAGR) was calculated for each country's GDP from 2011 to 2017 because the year 2011 was found to be the median year across the countries at which point estimates were applied on actual data.
"Having calculated the six-year CAGR, we further applied this factor to project each country's GDP from 2017, which is where the IMF estimates end to 2020. Having derived each country's GDP in the year 2020, we then sorted the countries in descending order", Phillips added.
Based on their projections using the IMF World Economic Outlook database, their findings revealed that Saudi Arabia will be the 20th largest economy in the world by 2020, with a GDP of $1.2 trillion in purchasing power parity (PPP). Nigeria on the other hand would be the 27th largest economy in the world by 2020, with a GDP of $864 billion in PPP; falling short of being the 20th largest economy by a GDP of $316 billion.
Therefore, to become the 20th largest economy by 2020, NESG recommended that Nigeria needs to close a $730 billion gap, starting now.
This is calculated as the difference between the GDP of the 20th largest economy in 2020 - which is Saudi Arabia - and Nigeria's current GDP in 2012 estimated by the IMF as $450 billion in PPP.
"Otherwise, Nigeria could become the 20th largest economy by 2035, ceteris paribus. Only an accelerated pace of economic growth and reforms can shorten this time frame for the country," Foluso said. He pointed out the need for substantive reforms to ensure local oil refining capacity within the economy.
Beyond the need to ensure local oil refining capacity in Nigeria, the group stressed the compelling need to diversify away from the mono-productive oil base.
The group also carefully considered a report by the Economist Magazine stating that by 2035 America could become a significant gas exporter and could slash dependence on oil imports. With all sources of energy taken together America could hit net self-sufficiency by 2035.
This situation, NESG said, was of "critical importance to us as a nation given our dependence on oil for over 90 per cent of our revenue and given the fact that we are the 4th largest exporter of oil to America.
"America's eventual self-sufficiency in oil would lead to a loss of one of our largest markets and introduce more competition into the market. Therefore, this presents us with utmost urgency, the need to rapidly diversify away from oil sector dependence by boosting potential growth poles in the non-oil sector especially agriculture, manufacturing, power and transport," Phillips said.
The group also recommended an accelerated pace of reforms and growth to shorten the time frame, adding that a double digit growth rate from 2013 would double the size of the economy in 6 - 7 years
According to NESG, the primary indicator of economic performance is the number of jobs created annually. They stressed that with a population of 167 million, this represents a huge potential to develop a skilled workforce, which is necessary to support Nigeria's aspiration for double digit economic growth.
Key Growth Sectors
They therefore identified four key sectors for accelerated creation of jobs which are power, housing, downstream Oil & Gas and agriculture.
"The four sectors that we have identified for accelerated job-creating growth for our nation must of necessity have the following enablers. Massive investment in infrastructure; human capital development and reduction in cost of governance," the group said.
They pointed out that in addition to providing opportunities for job creation power enhances productivity and national competitiveness; and acknowledged the Federal Government's efforts at implementing the Roadmap for power sector reform.
The group commended electricity generation stabilised at about 4,200mw; effort ongoing to strengthen weak transmission network and the sale of PHCN successor companies.
NESG further recommended that the Bureau of Public Enterprise (BPE) and the federal government conclude negotiations with labour expeditiously; fast-track development of gas infrastructure to guarantee supply availability and complete and sell NIPP generating plants.
The NESG also pointed out that to close the gap of an estimated housing deficit of 17.2 million by 2020; the economy requires an average of two million housing units per annum.
"Evident opportunity for massive job creation can be achieved through social housing and private development schemes, NESG commits to working with Federal and State Governments in the areas of: financing solutions, land reforms and human capital requirements," the group said.
To underpin this job-creating growth, the group pointed out that there needs to be massive investment in infrastructure. Citing the China example, they recommended that the process be kick-started by government funding in the road sector re-construction and expansion of the major existing Trunk A roads in the next 24 months.
They also recommended that the federal government could issue Infrastructure Bonds to finance road construction.
In acknowledging the difficulty in getting private sector interest in non-commercially viable airports, NESG recommended that FAAN should therefore continue to manage these facilities while calling for the amendment of the NCAA Act to allow the regulator financial and professional autonomy.
They said that this would ensure that the regulator is able to attract professional management wherever they may be found.
In order to stimulate private sector interest in the railway sector, NESG recommended fast-tracking the process of amending the Railway Act 1955 while recognising the on-going refurbishments of the railway lines.
The Group, while applauding the ongoing reforms in the agricultural sector however, pointed out that commercial funding remains an ongoing challenge and also called for the fast-track implementation of the Abuja Commodities Exchange by Q4 2013 to actualise fair pricing, empower farmers and improve food security.
After the 18th summit it was agreed that the Petroleum Industry Bill (PIB) continues to be the major outstanding issue in unlocking the full potential of the industry
The Bill has already passed through 2nd reading in the House of Representatives with a Public hearing scheduled for the first quarter of 2013.
The NESG committed itself to facilitate stakeholders' fora that would harmonise divergent views before the public hearing, claiming that it remained supportive of the removal of subsidy on petroleum products; however they recommended that there should be wider public engagement/education.
Need for Change
The NESG also pointed out that the current cost and size of government was not sustainable at all three tiers and levels stating that the imbalance between recurrent and capital expenditure is a drag on economic growth and does not create jobs, and recommended fast-tracking the implementation of the Oronsanye Report.
In what seemed like signs of better things to come in line with the summit's recommendations, while declaring the 18th NESG open, President Goodluck Jonathan stated that in October this year, he formally presented the 2013 Budget to the National Assembly.
According to him, "The budget reflects our resolve to reform the budget process and structure, in line with international best practices. To scale up the share of capital expenditure, for enhanced investment in projects and programmes, we worked very hard to significantly reduce the proportion of recurrent expenditure in the total budget."
He stressed that his administration was not only determined to set the right priorities, goals and targets, "we are also determined to create the enabling environment for the private sector to thrive. All stakeholders, including civil society organisations (CSOs), will be involved in this drive for change and transformation of our great country."
"We are also committed to fast-tracking the deregulation of other key sectors such as transport - particularly rail and aviation, education and health. Since the ultimate aim of our deregulation efforts is to provide relief for the vulnerable in our society, we will continue to take measures to mitigate the effects of the reform measures. It is in this context that we remain firmly committed to the implementation of the SURE Programme, in particular component A, which is devoted to safety net programmes."
He stated that government already has a framework, which empowers the Minister and Deputy Chairman of the National Planning Commission to forward summit recommendations to the Federal Executive Council promptly.
"In keeping with my promise made two years ago, the recommendations of the 17th Nigerian Economic Summit were received and considered by the Federal Executive Council, as potential inputs into government's policy frameworks. Ministries, Departments and Agencies (MDAs) were also directed to implement relevant aspects of the summit recommendations."
"I assure you that the recommendations arising from this summit will be thoughtfully considered. By bringing together public and private sector stakeholders to discuss the economy and evolve common strategies and policy frameworks for repositioning the country for sustained growth, this platform has proven its authenticity and relevance," the President said.
He said that it was quite reassuring that the NES's technical inputs have informed a number of government policies and reform measures, stressing that the blueprints on the Transformation Agenda and the Nigeria Vision 20:2020 are living testimonies of this collaboration and synergy.
He stressed that the task of nation building was a shared responsibility, requiring both the leadership and the governed to demonstrate integrity and accountability in the conduct and management of national affairs.
He stated that the summit theme: 'Deregulation, Cost of Governance and Nigeria's Economic Prospects' captures the essence of his administration's Transformation Agenda, which has the goal of unlocking those critical sectors of the economy that will accelerate job and wealth creation in our country. In addition, President Jonathan pointed out that the theme captures Nigeria's commitment to good governance and efforts to fully realise her huge economic potentials.