Shubham Chaudhuri, the Nigeria Country Director for the World Bank, stated that in order to unleash an additional 6.7% annual growth over the next 20 years, the nation urgently requires regulatory and policy reforms at the Federal and State levels.
This information was revealed by Chaudhuri at the interactive “Driving Business in 2023: Business As Usual or Business Unusual” event of the Indian Professionals Forum (IPF) Nigeria held over the weekend in Lagos.
With a population of over 200 million, a youthful entrepreneurial population, a thriving private sector, and a nominal Gross Domestic Product (GDP) of $440 billion in 2021, Nigeria, according to him, has the potential to be a worldwide powerhouse.
According to Chaudhuri, Nigeria must prioritize macroeconomic, institutional, and investment-accelerating reforms for the near and medium term.
He argued that the nation must adopt an exchange rate that reflects the single market, noting that despite an increase in oil export revenues, the Central Bank of Nigeria’s (CBN) foreign exchange holdings are declining and have done so in 2022, while the exchange rate on the black market has increased.
Premium Motor Spirit (PMS) subsidies, according to Chaudhuri, disproportionately benefit wealthier households and undoubtedly leak to surrounding nations. He claimed that because Nigeria’s gasoline prices are the lowest in the neighborhood and only benefit the wealthy, there are tremendous incentives to smuggle fuel to nearby nations.
In addition, Chaudhuri urged Nigeria to boost non-oil revenue by hiking the VAT and excise rates and improving tax management. He noted that the main risk to the fiscal and debt sustainability is Nigeria’s government revenues, which are among the lowest in the world and have decreased over the past ten years.
Despite rising oil prices, according to Chaudhuri, oil and gas revenues are declining. He added that only major efforts to increase non-oil revenues have prevented an even worse fiscal position.
Nigeria was also tasked by the national director of the World Bank with reducing the Federal Government’s reliance on CBN finance in order to control inflation. According to him, in October 2022, inflation hit its greatest point in 17 years, increasing poverty by an additional 5 million people and raising issues with food security.
According to Chaudhuri, the average cost of domestically manufactured staples has risen more quickly than overall inflation. He advised Nigeria to improve transport connectivity by lowering the cost of interstate transportation, remove import and foreign exchange limitations, and increase local value added in order to enable commerce.
Given that government spending is the lowest in the world, Chaudhuri encouraged Nigeria to improve the institutional infrastructure for financial intermediation in order to boost access to finance.
He emphasized that the public investment spending of the nation is insufficient to overcome the infrastructure gap, stating that at the current rate of capital spending, Nigeria’s infrastructure gap will not be closed for 300 years.
The absence of dependable power has hampered economic activity, Chaudhuri added, thus Nigeria should increase power generation by investing in infrastructure to avoid technical and commercial losses.
According to him, the annual economic losses due to unreliable power are pegged at four to seven percent of GDP, or around $29 billion.
In addition, Prof. Chris Ogbechie, dean of Lagos Business School (LBS), noted that by focusing on agriculture’s low-hanging fruit, the government can create jobs and raise the incomes of the 90 million people living in poverty in the nation.
He claimed that the government wastes a lot of money importing food while there are arable lands available to encourage people to cultivate food, turn Nigeria into an exporter, and create jobs.
Ogbechie, a professor of strategic management, stated in a presentation titled “Driving Business Success in 2023 – Strategic Imperatives” that high inflation, unemployment, and interest rates, as well as a declining exchange rate and a significant debt crisis, are driving the cost of operations in the business environment in 2023 in the wrong direction.
According to him, firms need directional beacons and purpose, relevant strategy, business model reinvention, visionary leadership, cost containment, customer-led innovation, and stakeholder involvement to navigate through complexity.