Politics

‘Nigeria has potential for $6tn economy’

The Chief Executive Officer of The CFG Advisory, Tilewa Adebajo, has said that the Nigerian financial system can hit $6 if its potential is correctly harnessed.

He said that the June 2024 version of the Finance Correspondents Association of Nigeria bi-monthly discussion board in Lagos on Thursday.

He famous that the potential of the nation’s financial system was about $5tn-$6tn, including that if the federal government may deliver inflation right down to round 11 per cent, the financial system would develop at about eight per cent.

Speaking on the subject ‘Nigeria’s Fiscal Environment in an Era of Monetary Policy Tightening’, Adebajo highlighted that the nation’s debt servicing now exceeded recurrent and capital expenditures.

He mentioned that was coming at a time when the nation’s Foreign Direct Investment was underneath $1bn, which put the nation able the place it used the vast majority of its income to service debt.

He said, “Nigeria’s debt levels are now clearly unsustainable. Add to this $10bn from the 2024 budget deficit, and the question begs: is Nigeria heading for the default direction of Ghana, Zambia, and Ethiopia? The discussion on restructuring both domestic and external debt must commence alongside the ongoing economic reforms and revenue drive to avoid Paris and London Club imposition.”

Adebajo urged that Nigeria ought to negotiate with collectors to restructure and lengthen the maturities of debt, permitting for extra manageable repayments and diminished rates of interest.

He added that with a big infrastructure deficit and development challenges, Nigeria was set to develop into the third-largest financial system in Africa, behind South Africa and Egypt.

Explaining the present state of Nigeria’s financial indicators, Adebajo regretted that the financial system was nonetheless in a state of stagflation, amid reforms to attain a sustainable development trajectory.

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He famous that the introduction of the Nigerian Autonomous Foreign Exchange Market and the removing of gasoline subsidies had seen the FAAC account improve by 130 per cent from May to November 2023 to over N1tn.

“FDI is at an all-time low of underneath $1bn; energy transmission and distribution infrastructure are nonetheless very poor, impacting business and financial development; the macroeconomic scenario has declined during the last seven years with a lack of $180-200bn in GDP, at the moment at US$390bn.

“GDP growth of three per cent is not sustainable for our population of 200 million; Nigeria requires 8-10 per cent GDP growth for sustainability; 135 million Nigerians are in the poverty trap, with 40 per cent unemployment and very low job creation and industrial productivity. Dwindling reserves and increasing credit default swap premiums have resulted in Caa1 junk bond rating status for our international credit ratings,” the economist said.

 He believed that whereas the basics of the Nigerian financial system remained sound, poor financial management prior to now had failed to understand potential and develop the financial system.

 “With a new and highly rated economic management team in place, expectations are high. The success or failure of our business projections and the economy will depend on their commitment and sincerity to implement and deliver on their reform policies. The goal is to drive our economy out of stagflation and attain sustainable GDP growth targets,” he emphasised.

Proffering options, Adebajo mentioned the federal government ought to implement fiscal self-discipline by decreasing non-essential authorities spending, eliminating wasteful subsidies, and enhancing the effectivity of public providers.

“Expand the tax base, enhance tax assortment, and introduce new sources of income, akin to value-added tax and property taxes. Improve transparency and accountability in authorities spending to construct public belief and appeal to international funding. The central financial institution ought to proceed to make use of tight financial coverage to fight inflation, which is usually related to stagflation.

“Maintain positive real interest rates to attract foreign investment and encourage savings. Maintain a competitive exchange rate to stimulate exports and reduce reliance on imports. Collaborate with regional and international organisations to access financial assistance, expertise, and market opportunities. Engage with the public, businesses, and civil society to gain their support for economic reforms,” Adebajo really helpful.

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