In recent years, Nigeria has witnessed a significant shift in its economic focus from production to services, a trend that has raised concerns among economists and policymakers. On May 29, 2023, President Bola Tinubu announced an ambitious goal to grow Nigeria's economy to $1 trillion by 2030. However, the country's economic landscape has been tumultuous, with the Naira depreciating sharply from N450 to N1658.114 per dollar between May 2023 and October 3, 2024. This depreciation has contributed to a decline in Nigeria's GDP from $362.81 billion in 2023 to $252.74 billion, causing it to drop from the largest to the fourth largest economy in Africa, behind South Africa, Egypt, and Algeria, which have GDPs of $373 billion, $347.6 billion, and $266.8 billion respectively.
With a population exceeding 200 million, Nigeria is urged to prioritize tangible production to ensure sustainable development. This shift began with the Structural Adjustment Programme (SAP) introduced in 1986, which emphasized financial services over traditional sectors like agriculture and manufacturing. Notably, Donald Duke's tourism initiatives in Cross River State and the rise of Nollywood have further highlighted the growing importance of the service sector in Nigeria's economy.
Agriculture, once a powerhouse contributing 60% to Nigeria's GDP in the 1960s, has seen its share plummet to about 21% today. Meanwhile, the services sector now accounts for approximately 54% of the GDP, while manufacturing contributes a mere 12.68% as of Q2 2024. The International Monetary Fund (IMF) has suggested that developing economies can leapfrog to services, but this perspective is increasingly being challenged. Critics argue that Nigeria's heavy reliance on services has led to a dangerous dependence on imports and economic instability.
Eloka Anene, Chairman of Linea Group, emphasizes that Nigeria has the potential to become a world-class industrial giant but struggles with high unemployment and minimal industrial development. He advocates for industrialization as a means to create jobs and improve living standards. Linea Group, which has been involved in manufacturing for nearly two decades, focuses on sustainable practices while addressing key challenges such as inadequate power supply, raw material scarcity, and high interest rates. Anene argues that industrialization could lead to economic growth, a stronger middle class, and improved healthcare and education.
Financial experts at the recent FICAN 2024 conference in Lagos (September 28-29, 2024) believe that achieving the $1 trillion goal requires structural shifts in banking and finance. UBA's Oliver Alawuba emphasized the need for banking recapitalization to support economic transformation. The current economic landscape indicates that productivity growth is more achievable in manufacturing and agriculture compared to services. As such, experts are calling for an urgent course correction towards a production-focused economy. Strategic steps proposed include enhancing infrastructure, increasing access to finance, and developing a skilled workforce.
The Bank of Industry (BoI) has also emphasized the need for Nigeria to enhance its production capacity to reach the $1 trillion economy target. Dr. Isa Omagu, a divisional head at BoI, highlighted that insufficient production and reliance on imports hinder economic growth. He called for increased investment in agriculture, infrastructure, and services to reduce import dependency. BoI supports Small and Medium-Scale Enterprises (SMEs) with various funding initiatives, including a N200 billion integration fund and a N50 billion grant for rural SMEs, with 98% of the grant already disbursed. Loans for SMEs are available at single-digit interest rates over seven years.
In a related effort, the Chartered Institute of Stockbrokers (CIS) is mobilizing its members' financial expertise to support Nigeria's economic ambitions. The 28th Annual Stockbrokers Conference is scheduled for November 7-8, 2024, in Ibadan, Oyo State, with the theme 'Capital Market as a Catalyst for the $1.0 Trillion Economy.' This conference aims to discuss strategies for enhancing the capital market's contributions to economic growth, addressing policy frameworks, and promoting digital innovation in capital markets. The choice of Ibadan for the conference is strategic, given its attractions and networking opportunities. President Bola Ahmed Tinubu's vision for a $1 trillion economy will be a focal point of the discussions, highlighting the critical role of the capital market in achieving this goal.
Kelechukwu Mgboji, in a recent analysis, emphasized that President Tinubu's vision for a $1 trillion economy is currently a far cry from Nigeria's actual economy, which stands at about $300 billion. The Central Bank of Nigeria (CBN) has underscored the importance of bank recapitalization to support the real sector's needs, linking it to bank licensing and risk management. The challenges faced by the real sector, including inadequate policies to support production and financial inclusion, must be addressed. Collaboration between banks and fintech companies is seen as crucial for enhancing financial access, with dynamic policies required to achieve the ambitious $1 trillion target. [18b6d459][9a0c00e8][619ce58e][4b4c0f4c][f8ae4b88][0b782dd6]