An economist, Kazeem Bello, has recently shared his opinion with the press in light of the Nigerian President Bola Ahmed Tinubu’s statement that the country would rebate its economy to $1 trillion by 2026 and possibly grow it further to $3 trillion by the end of 2033. Tinubu stated this on Monday, October 23 at the Nigerian Economic Summit 29th (NES 29) opening ceremony in Abuja, Nigeria. In his statement, he said “this is what we’re working toward, and I want to ask the industry leaders in the room to commit to and strengthen their efforts toward our vision of a renewed hope.
According to Bello, who is the CEO/principal partner at Afrique Capital and Equity Funds Limited, the current administration has a chance to succeed if it is able to effectively take control of a sizable portion of the informal sectors. Or else, it risks making the same “mistake” as Goodluck Jonathan’s administration. He claimed that under the Goodluck Jonathan administration, the country’s economy was rebased way too quickly without meeting the prerequisite recommended by the International Monetary Fund (IMF) and the World Bank to implement such a significant economic practice.
Previous rebasement may have been done wrongly.
Nigeria GDP increased to $550 billion from around $360 billion right after the rebasing, making it the largest economy in Africa, surpassing South Africa. However, Bello questioned what the country has benefited in terms of real economic development since then. He said GDP has declined over the years and is now estimated to be around $440 billion. There are several inferences to be drawn from this, and it suggests the rebasement may have been done wrongly. Over the years, the poverty level has expanded with multi-dimensional poverty figures accumulating to over half of the population, unemployment rising, inflation becoming uncontrolled, wage system stagnate, and the price level rising to high level.
He hoped that the Tinubu administration would avoid taking the wrong step, otherwise, rebasing the economy would lead to a decrease in GDP by 2033. One of his recommendations is to develop a reliable data mining and storage infrastructure. Therefore, he recommended that the government discover methods of acquiring the required technology to capture a sizable fraction of the informal group. He claimed this was a primary factor in the economy’s decline from a rebasing of $550 billion in 2013 to its current level of a drop to $440 billion.
Declining Naira part of flaws of the previous rebasement.
Bello advised that the government should implement tax capturing and incentive mechanisms that are effective in boosting tax payment records and encouraging the informal sectors. One of the metrics for determining GDP remains the tax revenue system, however the informal industries are not recognized to contribute beyond the value-added tax due to a lack of tax administration. Losing so much in GDP numbers is possible in a scenario where over 70 percent of the production ecosystem is not taxed properly, he emphasized.
Furthermore, he suggested that the Central Bank must implement tailored reform in the foreign exchange market to bring about sustainable stability in the market. He claimed that the declining value of naira was a key aspect in the flaw of the previous rebasement. When the rebasement was carried out in 2014, the Naira exchanged for N165 to one dollar. Presently, the parallel market rate is floating around N1,150. If the economy is rebased at $1 trillion today and the naira continued to decline and settles at N1,800 over the next two years, it indicates that the GDP value of $1 trillion will fall to $555 billion, he said.
Govt advised to prevent agricultural production waste.
The economist further said the government should invest in infrastructure in order to boost the formal sector, which necessitates proper taxation in the sector. Another recommendation is for the government to do more to prevent agricultural production waste which cost the country over $50 billion per year due to poor infrastructure, inadequate storage space, and inadequate processing facilities. Bello noted that Nigeria might attempt another rebasement effort to harness the economic potential required to create genuine growth in the GDP estimates, considering many of these procedures.