By Eme Essien Lore
THE COVID-19 crisis is hitting Nigeria hard, slowing economic development and sending more Nigerians into poverty.
Having just recovered from an earlier recession, Nigeria entered the crisis much weaker than its peers, making growth prospects below what is necessary in increase per capita GDP.
Though the economy witnessed a 0.11 percent growth in fourth quarter of 2020, compared to a -3.6 percent decline in the third quarter, according to the National Bureau of Statistics, the economy contracted at -1.92 percent for the full year. Before COVID-19, the Nigerian economy was expected to grow by 2.1% in 2020.
Even before the pandemic hit, an estimated 40 percent of Nigeria’s population—almost 83 million people—were living below the country’s poverty line of about $380 per year, according to the 2019 National Bureau of Statistics report.
The impact of COVID-19 is expected to widen inequality and force families to make increasingly difficult decisions about how they allocate their limited resources.
The best way for Nigeria to speed recovery—and to build a more resilient, more inclusive economy—is to strengthen and diversify its export revenues and unleash its full potential to create jobs and opportunities.
Make no mistake, it won’t be easy. For decades, Nigeria has been almost totally reliant on crude oil, which generates about 90 percent of its export earnings. Leaning so heavily on oil has left Nigeria vulnerable to price fluctuations; the shock of the oil price collapse, triggered by the COVID-19 pandemic, is making a huge dent in the country’s export revenues.
Although crude oil will likely remain important sources of Nigeria’s revenues in the near future, the country’s rich agricultural and mineral resources, its potential to compete in the global petrochemicals sector and its young and entrepreneurial labour force, present golden opportunities for the country to bolster its private sector and build a more dynamic economy.
A new report from the International Finance Corporation, IFC, and the World Bank argues that Nigeria is uniquely positioned for strong economic growth and should focus on a wider private sector-led growth strategy to create jobs and reduce poverty and inequality.
According to the report, the Nigeria Country Private Sector Diagnostic, CPSD, Nigeria can accelerate growth by developing its agribusiness, mining, manufacturing, and digital economy sectors and by improving policy frameworks.
Agribusiness, for example, is an area where development gains can be made, and the poorest households enriched by improving access to skills, machinery and modern agricultural technology. Nigeria’s favourable climate and abundance of arable land support the cultivation of a wide range of foods, providing significant opportunities for private investment.
Nigeria’s mining sector also presents significant growth potential. With sizable deposits of more than 40 minerals, including clay, coal, gold and gypsum, the sector could generate billions of dollars in revenue and create thousands of jobs if reforms are enacted and infrastructure improved.
Opportunities in manufacturing could be seized by developing fully functioning free trade zones. Sub-sectors such as leather, chemicals and construction materials could make significant contributions to job creation. Government reforms targeted at the manufacturing sector could support and facilitate further investments that boost quality local production. Private sector initiatives like IFC’s Chemicals4Growth initiative to support the development of petrochemical clusters that rely on shared infrastructure, could have significant impact in the growth of the manufacturing sector.
Finally and perhaps most importantly, Nigeria could power future growth by fully harnessing the digital economy, including digital infrastructure, digital skills, digital platforms, and digital financial services. The digital economy cuts across all sectors. A recent report by IFC and Google explores how the digital economy offers leapfrog opportunities to address challenges faced by workers and informal businesses in Nigeria and across Africa. In Nigeria alone, informal businesses represent 92 percent of firms in the country.
Nigeria is a country overflowing with potential. Government will need a broad and deep strategy of reform—including reforms to the trade regime, exchange rate policies according to a World Bank report on how Nigeria can rise to the challenge in response to the impacts of COVID-19, and the electricity sector, for example—to tap the private sector’s potential to create opportunity, jobs and growth. Such reforms would send the signal to both domestic and foreign direct investors to turn the tide of what has been a period of declining investment.
IFC has long been a strong partner to Nigeria, supporting its private sector through both good and challenging times. During the COVID-19 crisis, IFC has stood with Nigeria’s private sector, providing financing through our global $8 billion fast-track financing facility to Zenith, Access and FCMB banks. These banks can now on-lend to thousands of small businesses facing working capital shortfalls due to disruptions caused by the pandemic.
I have no doubt that Nigeria’s already resilient private sector and economy—the largest in Africa—will help shepherd the country through the worst of the pandemic. Even so, this crisis should also serve as an opportunity for Nigeria to reimagine the future of its economy and implement the structural reforms needed to ensure it provides the jobs and opportunities that will uplift all Nigerians.
IFC stands ready to work with its public and private sector partners to help make this a reality.
*Lore is country manager of the International Finance Corporation, a member of the World Bank Group.