Nigeria’s Economic Recovery And Growth Plan (ERGP), 2017 – 2020: Structural Outlook And Implementation Challenges
It is an established fact that Nigeria is the giant of Africa. However, like most developing countries, Nigeria is faced with several development challenges. The most recent is economic recession, accession by a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in a real Gross Domestic Product (GDP), real income, employment, industrial products and wholesale – retail sales” (National Bureau of Economic Research, 2017). The current administration recognizes that the economy is likely to remain on a path of steady and steep decline if nothing is done to change the trajectory; therefore, the vision of the ERGP is for sustained inclusive growth. There is an urgent need as a nation to drive a structural economic transformation with an emphasis on improving both public and private sectors efficiency. It aims at increasing national productivity and achieving sustainable diversification of production, to significantly grow the economy and achieve maximum welfare for the citizens, beginning with food and energy security (Anyanwu, 2017).
The Economic Recovery and Growth Plan (ERGP), a Medium Term Plan for 2017 – 2020, builds on the Social Investment Programme (SIP) and has been developed for the purpose of restoring economic growth while leveraging the ingenuity and resilience of the Nigerian people – the nation’s most priceless assets. Consistent with the aspirations of the Sustainable Development Goals (SDGs), the ERGP initiatives address three dimensions of economic, social and environmental sustainability issues.
It is the structural changes and economic hardship occasion by economic recession that informed ERGP in Nigeria. Recession refers to a slowing in economic growth of a country. Azoaka (2017) explained that economic recession being witnessed by Nigeria in recent times stems from the turmoil in global commodity markets, witnessed in the second half of 2014 which brought their full weight to bear on the Nigerian economy in 2015. Oil prices fell 66.8% from $114/ barrel recorded in June 2014, to $38.0 by December 2015. Prices fell even further in 2016, to $32.6 as at 3rd February, 2016. Beyond commodity markets, recent developments in the global economy created a trifecta of headwinds that the nation has to contend with (NBS, 2017). Nigeria Bureau of Statistics (2017) went further to amplify the cause of this trend by aﬃrming that the return of Iran to the global economy implies substantially larger crude oil supplies are to hit the global market in the near term, and thus the current consensus that oil prices are likely to remain “lower of longer”. The issue of lower commodity prices has been further compounded by the United States Federal Reserve (FED) raising key interest rates, after several years of a very accommodative monetary policy as a result of the global recession which began circa 2008.
In December 2015, the FED raised the Federal Funds Rate by a quarter-point. Furthermore, the economy of the Euro Area, a key importer of Nigerian exports is still on the mend. According to recent statistics from the European Commission the Euro Area is expected to grow by 2.0% in 2016, up from 1.9% in 2015. Accordingly, the government had used the 2016 budget as an opportunity to reset and redirect the macroeconomic dynamics of the country. The attempt to consolidate expenditure using the Treasury Single Account to plug leakages (even if this is only at the federal level) is a welcome first step. It was expected that the proposed 1.6 trillion which was invested in capital projects and other initiatives in particular in Power, Works and Housing were likely to bode well for the economy (NBS, 2017). In addition, the establishment of the Eﬃciency Unit to identify and surgically eliminate ineﬃciencies without hampering productivity is also another development (EU, 2016).
STRUCTURAL OUTLOOK FOR THE PLAN
By 2020, Nigeria will have made significant progress towards achieving structural economic change and having a more diversified and inclusive economy. According to Anyanwu (2017), the Plan is expected to deliver on the following key outcomes: Stable Macroeconomic Environment: The inflation rate is projected to trend downwards from the current level of almost 19 per cent to single digits by 2020. It is also projected that the exchange rate will stabilize as the monetary, fiscal and trade policies are fully aligned. This outcome will be achieved through policies that seek to remove uncertainty in the exchange rate and restore investors’ confidence in the market.
Restoration of Growth: Real GDP is projected to grow by 4.6 percent on average over the Plan period, from an estimated contraction of 1.51 percent recorded in 2016. Real GDP growth is projected to improve significantly to 2.19 per cent in 2017, reaching 7 per cent at the end of the Plan period in 2020. The strong recovery and expansion of crude oil and natural gas production will result as challenges in the oil-producing areas are overcome and investment in the sector increases.
Crude oil output is forecast to rise from about 1.8 mbpd in 2016 to 2.2 mbpd in 2017 and 2.5 mbpd by 2020. Relentless focus on electricity and gas will also drive growth and expansion in all other sectors.
AGRICULTURAL TRANSFORMATION AND FOOD SECURITY: Agriculture will continue to be a stable driver of GDP growth, with an average growth rate of 6.9 per cent over the Plan period. The Agricultural sector will boost growth by expanding crop production and the fisheries, livestock and forestry sub-sectors as well as developing the value chain. Investment in agriculture will drive food security by achieving self-suﬃciency in tomato paste (in 2017), rice (in 2018) and wheat (in 2020). Thus, by 2020, Nigeria is projected to become a net exporter of key agricultural products, such as rice, cashew nuts, groundnuts, cassava and vegetable oil.
POWER AND PETROLEUM PRODUCTS SUFFICIENCY: The ERGP aims to achieve 10 Gigawatt (GW) of operational capacity by 2020 and to improve the energy mix, including through greater use of renewable energy. The country is projected to become a net exporter of refined petroleum products by 2020.
IMPROVED STOCK OF TRANSPORTATION INFRASTRUCTURE: By placing transportation infrastructure as one of its key execution priorities, eﬀective implementation of this Plan is projected to significantly improve the transportation network (road, rail and port) in Nigeria by 2020. Given the scale of investment required to deliver this outcome, strong partnership with the private sector is expected to result in completion of strategic rail networks connecting major economic centres across the country, as well as improved federal road networks, inland waterways and airports.
INDUSTRIALIZED ECONOMY: Strong recovery and growth in the manufacturing, SMEs and services sectors are also anticipated, particularly in agro-processing, and food and beverage manufacturing. Ongoing strategies to improve the ease of doing business will boost all manufacturing sector activities. Overall, the ERGP estimates an average annual growth of 8.5 per cent in manufacturing, rising from -5.8 per cent in 2016 to 10.6 percent by 2020.
JOB CREATION AND YOUTH EMPOWERMENT: The implementation of the Plan is projected to reduce unemployment from 13.9 percent as of Q3 2016 to 11.23 per cent by 2020. This translates to the creation of over 15 million jobs during the Plan horizon or an average of 3.7 million jobs per annum. The focus of the job creation eﬀorts will be youth employment, and ensuring that the youths are the priority beneficiaries.
IMPROVED FOREIGN EXCHANGE INFLOWS: The reduction in the importation of petroleum products resulting from improvement in local refining capacity following the implementation of the ERGP is projected to reduce demand for foreign exchange. The economic diversification focus of the Plan is also projected to translate into enhanced inflows of foreign exchange from the non-oil sector.
On the whole, Nigeria is expected to witness stability in exchange rate and the entire macroeconomic environment. The country will also witness a major improvement in economic performance which should result in the following, amongst others:
- Reduction in importation of food items and refined petroleum products,
- Improved power supply,
- Higher quality transport infrastructure,
- Expansion in the level of industrial production,
- Improved competitiveness,
- Greater availability of foreign exchange,
- Job creation, reduction in poverty and
- Greater inclusiveness in the spread of the benefits of economic growth.
Unlike previous government policies and plans, the ERGP outlines a proposed delivery strategy which, amongst other things, establishes clear accountability, sets targets, allocates resources to established priority areas, creates enabling policy and regulatory environments, monitors and drives progress and ensures effective communication. Whilst Nigerians continue to wait on the implementation of the Plan, it remains to be seen if the ERGP can deliver on its promise given its relatively ambitious timeline and the many other challenges to overcome. What appears to be clear however is that the ERGP, if successfully implemented, would have tremendous effect in almost every sector of the Nigerian economy while leveraging on science, technology and innovation. Although the timeline for achieving most of its priority objectives appear ambitious, the Plan undoubtedly presents significant trade and investment opportunities for both local and international investors and businesses at a time when this is sorely needed (Templars, 2017).
These challenges according to Sanusi, (2010) have remained largely unresolved owing to the myriad of problems:
- MACROECONOMIC CHALLENGES: The Nigerian macro economy is still characterized by structural rigidities, dualism and the false paradigm model. Generally, the sectors of the economy are in silos to the extent that the primary sector does not relate meaningfully with the secondary sector and the same for the secondary and the tertiary sectors. Agricultural produce end up as final consumer goods as only a small quantity is processed or used as raw materials for local manufacturing industries. Also, the products of the extractive industries are exported in their raw forms without local value addition. Given the higher incomes in the oil and gas sub-sector of the extractive industry, attention is concentrated there to the almost total neglect of the mainstream economy. Consequently, the economy is broken into the very rich (relying on the oil and gas industry) and the very poor (relying on the mainstream economy) with almost a complete vacuum in-between these two. The false paradigm model also plays out in the economy in the sense that while the few very wealthy group clamour for relevance in the context of ‘expert’ advise, the very poor suffer from ignorance, disease and malnutrition. Thus, there is no structural change and, hence, the attitudinal changes expected of economic transformation are absent.
- INFRASTRUCTURAL CHALLENGES: One of the main challenges’ facing the economy is poor economic and social infrastructure: bad roads, erratic power supply, limited access to portable water and basic healthcare, and much more. Building a vibrant economy or restoring growth to a sluggish economy takes resources. To ensure long-term growth and prosperity, Nigeria must use its resources wisely, invest in advanced technology and rebuild the infrastructure without which the economy will not gain from the ‘power of productivity’. A nation enjoys higher standards of living if the workers can produce large quantities of goods and services for local consumption and extra for export. The deficiencies in the economy lead to low productivity, poor quality products and non competitiveness in the global marketplace.
- POOR INSTITUTIONS AND CORPORATE GOVERNANCE: Another important challenge to sustainable economic growth in Nigeria is lack of effective institutions and good governance. These factors have been hindering various efforts and reforms of the government to stimulate economic growth for sustainable development in Nigeria. The prevalence of weak institutions and poor corporate governance as well as poor ethical standards in most public and private organizations, hinder the attainment of the goals of economic policies in the country. Poor corporate governance has adversely affected the quality of institutions to the extent that public and private institutions are used for selfish interests, thereby, making regulation and law enforcement ineffective.
- CORRUPTION CHALLENGES: Although corruption is a global scourge, Nigeria appears to suffer particularly from it. Everyone appears to believe that the nation has a ‘culture of corruption’. Over the years, Nigeria has earned huge sums of money from crude oil, which appears to have largely gone down the sinkhole created by corruption. In an article, “Oil giant that runs on grease of politics,” Nigeria was described as a rich nation floating on oil wealth “but almost none of it flows to the people” (San Francisco Chronicle, March 11, 2007). Corruption has denied Nigerians the value of the petro-dollar that has accrued to the country over the years. The failure of infrastructure, political and ethical standards as well as moral and educational standards can easily be traced to corruption.
- LOW QUALITY OF EDUCATION: Education is an important factor in economic growth and development. But the nation’s educational system has been facing myriad of challenges, which prevent the country from achieving its economic objectives. The problems include inadequate funding and planning and management, inadequate infrastructure, irrelevance of curricula to industrial needs, and inadequate commitment on the part of students and teachers, among others. All these have combined to hinder the production of a high quality work force to propel the economy (UNESS for Nigeria: 2006-2015). As Dike (2006) noted, the state of a nation’s educational sector, among other things, determines the economic health of the nation.
- THE DUTCH DISEASE: Since the oil price boom of the early 1970s, the country abandoned the agricultural and industrial sectors of the economy to the old and weak. Both the public and private sectors of the economy concentrate their efforts in the oil and gas industry to the extent that the mainstream economy is denied funding, requisite investment and even managerial capabilities. Thus, the mainstream economy has become uncompetitive globally while the country has turned into a trading outpost for foreign companies. This has hindered the much-needed transformation of the economy in the last four decades.
- POOR INVESTMENT CLIMATE: The consequence of all that have been said above is the poor investment climate in the economy that has rendered the economy uncompetitive. In the absence of adequate infrastructure (power, roads, water, etc.) the cost of doing business in the country remain high, forcing to neighboring countries even companies that had existed in Nigeria for upwards of four decades.
Conclusion and Policy Recommendations
The ERGP has several development opportunities for Nigeria. Diversifying and strengthening the Nigerian economy is the first and most considered option in achieving the objectives of the growth plan. There are potentials in the oil and gas sectors, agriculture and manufacturing, telecommunications and tourism, among others. In support to the position of Anyanwu (2017), the growth prospects and economic recovery can be achieved and sustained if:
- The economy is diversified from the primary products and away from crude oil and natural gas; to other sectors such as agriculture, manufacturing, solid mineral, services, tourism and trade. The downstream petroleum sub-sector is deregulated and encouraged the setting up of private refineries;
- Efforts are sustained to maintain peace in Niger Delta to boost crude oil and gas output;
- Electricity supply is increased to 15,000-25,000 MWh between now and 2020, to boost manufacturing capacity utilization and activities in other critical sectors;
- Other key economic and social infrastructures are improved to facilitate the performances of other sectors.
- Agricultural output is increased barring adverse weather conditions, with continued implementation of various government programmes, especially preserving, processing and marketing activities; to add value to agricultural output.
- The banking sector reforms and efforts to resolve liquidity challenges are sustained to channel credit massively to the real sector of the economy.
- The growth in the services sector is sustained, by increasing the local contents of the industry and by expanding the tele-density of the country.
- The balance of trade is persistently positive, as it has been in the last five years.
- External reserves can be substantially built up to boost the credit worthiness of the economy and attract foreign investment.
- Government sustains the current reforms in the various sectors of the economy to achieve rapid growth and development.
- The existing democratic governance is sustained, rule of law, justice, fairness and equity and inclusive growth are given priorities they deserve in Nigeria.
- Strengthen law enforcement institutions and sustain fight of corruption.
- Put in place definite effort to reduce cost of governance and restructure government expenditure pattern in favour of capital expenditure.
- Motivate the SMEs and enhance good governance.
- Full implementation of the Budget 2017 to achieve sustainable development.
Dr Bassey Anam
Institute of Public Policy &
Administration, University of Calabar
Tel: +234 7067021763