The report highlights various factors impeding the country’s economic progress and provides recommendations to address these challenges.

Low Revenue-to-GDP Ratio

The report reveals that Nigeria’s revenue-to-GDP ratio is currently around 8%, significantly lower than the global average and behind the West African average of 13%. This low ratio indicates a limited ability to generate revenue, hindering economic growth and development.

Recommendation: To address this issue, the AfDB recommends implementing policies that support public-private partnerships (PPPs) and promote the export-oriented private sector. These measures would contribute to a vibrant and competitive economy, accelerate diversification, and boost exports.

Key Challenges to Non-Oil Sector Growth

The AfDB identifies several critical factors that impede the growth of Nigeria’s non-oil sectors. These challenges were highlighted by Mr. Lamin Barrow, Director General of the Nigeria Country Department of the AfDB Group, during the 2023 Nigeria Employers’ Summit.

Macroeconomic Instability

Barrow emphasizes macroeconomic instability as a significant obstacle to Nigeria’s economic progress. This instability includes factors such as inflation, exchange rate volatility, and fiscal deficits, which hinder sustainable growth and discourage investment.

Low Productivity

The report points out low productivity as a key challenge for Nigerian industries. The inefficiency and low output levels of various sectors limit their competitiveness and hinder economic growth.

Limited Access to Credit

Small and medium-sized enterprises (SMEs) face difficulties in accessing credit, which hampers their ability to expand and invest in productivity-enhancing measures. This lack of financing options stifles entrepreneurship and inhibits sectoral growth.

Inadequate Infrastructure

Nigeria’s inadequate infrastructure, including logistics deficiencies and particularly inadequate power supply, presents a significant barrier to non-oil sector development. Insufficient infrastructure limits production capacities, raises operational costs, and reduces competitiveness.

Recommendation: The AfDB stresses the urgency of resolving infrastructure bottlenecks to remove barriers to non-oil trade and exports. Mobilizing the private sector for infrastructure development is suggested to alleviate the burden on the government and expedite progress.

Fiscal Deficits and Food Imports

Barrow expresses concern over Nigeria’s fiscal deficits, estimated at six percent of GDP. These deficits are attributed to high public expenditure amidst declining revenue from crude oil exports. Additionally, despite Nigeria’s abundant arable land and favorable climate, the country continues to be a net importer of food.

Renewable Energy and Power Sector Reform

Barrow highlights the urgent need to address the longstanding challenges in Nigeria’s power sector. Successful examples from Egypt and Morocco, where clear and stable policies, supported by strong political will, led to remarkable turnarounds, are cited. Barrow recommends leveraging Nigeria’s abundant gas resources as a transition fuel and investing heavily in renewable energy generation, particularly solar power.

Domestic Resource Mobilization and Agriculture Sector

To enhance domestic resource mobilization, Barrow advises the Nigerian government to improve tax collection and administration, address leakages, and enhance the efficiency of public investment programs. He also emphasizes the need to boost agricultural sector productivity, develop value chains, and attract private sector investments in rural areas.

Conclusion

This analysis highlights the critical challenges impeding Nigeria’s economic potential and provides recommendations to address these issues.

The AfDB emphasizes the importance of implementing policies that promote public-private partnerships, enhance infrastructure development, improve power supply, and strengthen sectors such as agriculture and renewable energy.

By addressing these challenges, Nigeria can foster economic diversification, increase productivity, and achieve sustainable development.

Adeola Adenikinju, an MPC member, stated this in a statement at the most recent MPC meeting.

According to him, the banking industry assets rose by N14.36 trillion, while industry credit rose by N5.14 trillion in 2022.

“All measures of industry aggregates: assets, deposits, and credit rose year-on-year.

“Total assets of the banking industry grew by N14.36 trillion between the end of December 2021 and 2022.

“Similarly, industry credit increased by N5.14 trillion over the same period.

“In addition, total industry deposits rose by N7.08 trillion between end-December 2021 and 2022.

“In December 2022, a total of 130,854 new credits valued at N947.46 billion were granted to various customers”, he said.
The MPC member also disclosed that there was an increase in the maximum lending rate from 28.14 percent to 29.13 percent.

“Interest rate spread month-on-month widened to 23.42 percent in December 2022, as the maximum lending rate increased from 28.14 percent to 29.13 percent and average savings rate rose from 3.93 percent to 4.13 percent between November and December 2022, respectively,” Adenikinju added.

This information was provided to the State House reporters by Minister of Works and Housing Babatunde Fashola, Minister of Police Affairs Maigari Dingiyadi, and Media Assistant to the President Malam Garba Shehu.

Fashola said: ”Today, we have two more. So, the first that was approved today was the one by MTN Nigeria PLC, the telecommunication company to take over and complete the ongoing Enugu -Onitsha expressway.

”That road is a 110km, which is being dualized. So, you have 110km times two. The outstanding works aggregate to about 91 point something kilometres on both sides, if you accumulate it for those who use the road.

”You will see that the Enugu bound section has been largely completed but there’s a lot of work to be done on the Onitsha section.

”So this policy is going to allow a steady and sustained stream of funding to completion by MTN and the amount approved is N202,887,436,672,11 billion to complete the outstanding works of an aggregate of 91.9km on both sides.”

The minister also disclosed that the Council approved the reconstruction of Umuchi -Ususu-Umueme GZ Industries Road in Abia by a company known as GZ Industries, at the cost of N4.2billion through similar tax credit scheme.

He said: ”The second memo also was under the Tax Credit Scheme and while the first one was related to the road linking Anambra and Enugu states, this one is with respect to a road in Abia.

”Now the road is called Umuchi -Ususu-Umueme GZ Industries Road in Abia.

”The private sector beneficiary of the approval is a company called GZ Industries.

”GZ Industries manufactures aluminium cans for drinks. They have a factory in Agbara in Ogun and they have another one in Abia in this area. So, it’s a link road to their factory.

”The approval was for N4.205,454,855billion. The road is a 3.7km road. So it’s an access road to their Industry. Council approved both memoranda.”

LFZ is the infrastructure development company of the Tolaram Group and the first private free trade Zone in Nigeria. LFZ can sell all their goods in Nigerian customs territory with no state or federal taxes charged without an import or export license. They can also repatriate their profits and dividends.

The Exchange also hosted a Closing Gong ceremony to commemorate the listing of LFZ’s N25 billion 20-year, 13.25 percent Series 2 Senior Guaranteed Fixed Rate Infrastructure Bond.

It will be noted that the Company listed its first issue of N50 billion in bonds on August 8, 2022, through LFZC Funding SPV Plc. The bonds were N25 billion in 20-Year 13.25 percent Series 2 Senior Guaranteed Fixed Rate Infrastructure Bonds Due 2042.

Speaking at the listing of the second tranche, Jude Chiemeka, Divisional Head, Finance Markets, NGX, praised the company for the historic transaction and praised the Nigerian debt market as a legitimate source of domestic capital for Nigerian infrastructure development.

The CEO of LFZC, Mr. Dinesh Rathi, stated: “This bond is a part of N50 billion bond program, which we had initiated last year and this current listing entails the series two of N25 billion long term bonds, a 20 year fixed rate instrument and the longest tenure bond in Nigeria’s debt capital market.”