•Says Nigeria at risk of major economic crisis
The failure of the fiscal policies is the reason Nigeria has continued to struggle with a high unemployment rate, heavy debt burden and stagnant growth.
Director-General of the West African Institute for Financial and Economic Management (WAIFEM), Dr Baba Musa, made the assertions last week in a lecture at the launch of a book: ‘Macroeconomic and Public Financial Management in Nigeria: Essays in Honour of Ndubisi Nwokoma’ held at the University of Lagos.
The book was written by Ndubuisi Nwokoma who just retired as a professor of economics at the University of Lagos.
Musa, whose lecture was on ‘Macroeconomic Policy and Effective Management of Public Finance for Sustainable Development’, noted that though Nigeria has been celebrating the growth of gross domestic product (GDP) in the last five to 10 years, the economy has not grown in real terms.
He said Nigeria has been celebrating nominal growth of GDP but that when the high inflation is considered, the country has achieved nothing.
“Real GDP has shown that we have not progressed in output capacity of the economy because when we look at the component of the GDP, especially in the last 10 years what we see in terms of the management of the Nigerian economy is that the service sector contributes higher proportion to the GDP than agriculture, manufacturing and other sectors. The service sector contributes close to 52 per cent of the GDP of Nigeria”, he said.
Musa added that the implication of the challenge has led to high unemployment as the service sector is not a large employer of labour.
The economist said Nigeria should look at countries with low unemployment rates and learn how manufacturing and agriculture have contributed a larger share to output growth.
He said it is unfortunate that Nigeria spends over $8 billion yearly, more than the nation’s combined expenditure on health and education, on debt service.
According to him, this is a critical issue that demands the government’s immediate attention to solve the debt problem.
He said Nigeria is at high risk of economic downturn, energy supply shortages/cost of living crises, unemployment, public debt and inflation.
He noted: “These are all the risks highlighted in the 2024 edition of the World Economic Forum (WEF) global survey of risk perception. The macroeconomic environment of a nation is very important to any policy decision a nation is going to take, fiscal policy can be used to tackle our problems using government spending and taxation, and it can be used to redistribute income, encourage investment, and stimulate aggregate demand it can also be used to reduce the widening gap of market failure.
“If we have a good fiscal policy, we can help the issue of growth in Nigeria. But how has the fiscal policy performed in Nigeria? Using the misery index, in the last 10 to 20 years, the misery index which stood at 43.17 per cent in 2008 rose to the highest in 2023 at 88.25 per cent, indicating that almost more than half of the population is in multidimensional poverty. This shows that the fiscal policies have not been effective.”
He said the worst thing about fiscal policy in Nigeria is that the expenditure is far higher than the revenue, which shows that the cost of governance is too high.
“Since 2016, the revenue and expenditure gap has been so wide, which has led to borrowing to fill, looking at the current account position and overall surplus. On public debt management, it appears that we are concerned with only looking at the increase in debt without looking at the cause of the debt increase, such as inflation and exchange rate crisis,” he said.
Musa said the monetary policy has not achieved its desired objectives in the last five to seven years.
According to him, “despite the rate hike in recent times, headline, core and food inflation stood at 33.2 per cent, 25.9 per cent and 40.01 per cent in March respectively”.
“Therefore, monetary policy was unable to tame inflation. The economic growth has been fragile. The recent IMF forecast for 2024 and 2025 stood at 3.3 per cent and three per cent,” he said.
The lecture was organised by the Centre for Economic Policy Analysis and Research (CEPAR).
