Dr Biodun Adedipe, the founder and CEO of B. Adedipe Associates Limited, has said Nigeria’s fiscal problems cannot be solved by financial adjustments such as borrowing and non-FDI capital flows.
The economist, who stated this recently while delivering his keynote address at First Bank 2023 Economic Outlook in Lagos, added that devaluation and interest rate adjustments will become nothing but an unending cycle that will end up impoverishing Nigerian corporates and households.
The needed solution: Adedipe argued that the enduring solution to Nigeria’s fiscal problems would be pragmatic measures to address structural deficiencies. He said the economy is desperate for growth, and the big number in Nigeria is food inflation, at 24.13% year-on-year.
- “Food security should therefore, come big in Nigeria’s economic development agenda – availability and affordability, which are two of the four categories of the EIU Global Food Security Index, in which Nigeria ranked poorly in the 97th position in 2021 and 107th in 2022 out of 113 countries. The other two categories are quality and safety and sustainability and adaptation,” Adedipe stated.
Nigeria’s economic potential: He said the Nigerian economy is diversified, with opportunities in every sector of the economy. He stressed that agriculture, which contributed 29.67% to the GDP of the country, and trade, and ICT, which contributed 15.35% apiece respectively, remained dominant in the third quarter of 2022. Commenting on Nigeria’s prospects for growth, Adedipe said:
- “Our latest forecasts indicate a sharp, long-lasting slowdown, with global growth declining to 1.7% in 2023 from 3.0% expected just six months ago. He said the deterioration is in virtually all regions of the world; per capita income growth will be slower than it was during the decade before COVID-19. The setback to global prosperity will likely persist.
- “By the end of 2024, GDP levels in emerging market and developing economies (EMDSs) will be about six per cent below the level expected on the eve of the pandemic. Median income levels, moreover, are being eroded significantly by inflation, currency depreciation, and under-investment in people and the private sector.”
Forecast for the economy: For Nigeria, the complexion of the economy will be predicated on rising production costs, an under-performing oil and gas sector, insecurity, and floods, underscored by policy uncertainty.
Adedipe forecasted oil and gas growth to be restrained, persistent fuel and foreign exchange shortages, and a weak fiscal position. Also, growth in agriculture will be softened, he said.
He said the rate of inflation is expected to moderate at 17.76%. He also stated that monetary policy normalization could start as early as Q2, but assured for HH2, with downward adjustment for MPR certain for H2, expected at 13.5%.
He added that bank lending will remain double-digit, but continue to respond to the rate of inflation.
- “Accelerated manufacturing and focused export promotion will bring some stability to the naira exchange rate, officially likely at about N480/$ and roadside at N705/$,” he stated.
Adedipe said expected growth will be supported by a largely youthful and rapidly growing population, which is currently 6th in the world, with the median age at 18.1. He also said rapid Internet penetration will play an important part in determining the complexion of the economy. Nigeria is ranked 8th in the number of global internet users.
- “Strengthening innovation culture, driven by the survival instinct, strongly evolving payments infrastructure, volume, and value, as well as increasing attention to global competitiveness and ease of doing business will drive the economy,” he added.
