In his bold move to build a $1trillion economy, President Bola Tinubu has indeed taken some tough and unpalatable decisions in his almost two-year old administration. These decisions include the removal of fuel subsidy, the unification of foreign exchange market rates, floating of the naira and the controversial tax reform bills and others.
Some of his policies have, no doubt, led to rise in transportation costs, high petroleum products prices, rising cost of food items, services and high cost of living. His government has witnessed two major protests, the August 2024 hunger protest and the October 2024 #End Bad Governance protest. His tax reform bills have attracted strong criticisms. They have been vehemently opposed by many politicians in the North.
Despite the impacts of his reforms on the citizens, including economic hardship, growing hunger and misery, the President is adamant on going on with his reform agenda even though he recognized the pains Nigerians pass through, which he says will be temporary. He said this much during his maiden media chat. The President sees light at the end of the tunnel. He sees hope in the midst of adversity. He sees a brighter future after the gloom. He believes that his reforms will lead Nigerians to the Promised Land.
In spite of the President’s optimism, there are some factors that may vitiate the lofty economic vision, if government fails to address them. These include the unstable power supply, poverty, hunger and food insecurity, unemployment, rising insecurity, unstable currency, foreign exchange scarcity and rising cost of doing business. Ensuring adequate supply of electricity to the manufacturing sector and thousands of SMEs will surely stimulate the economy.
Currently, about 92 million Nigerians do not have access to stable electricity. This is in spite of the billions of dollars injected into the sector by succeeding administrations. The Olusegun Obasanjo regime reportedly pumped about $16 billion into the sector with modest achievement. While Nigeria generates between 3,000MW and 5,000MW of electricity for some years now, Egypt generates 58,818MW, South Africa 42,000MW, and Ghana 7,000MW. Outside Egypt and South Africa, Zambia, Gabon, Botswana, Zimbabwe are said to have affordable electricity. Also, in solar energy generation, Nigeria is also not doing well at 70MW. Instructively, South Africa came first in solar energy generation on the continent with 6,642MW.
Arising from the effects of government’s recent economic policies, there has been volatility in the exchange rate, leading to scarcity of forex. This has particularly been inimical to businesses due to unpredictable value of the naira when placed alongside major foreign currencies, especially the US dollar. With import-dependent economy, the costs of goods and services have risen astronomically. Even the industries, which depend so heavily on imported inputs and machinery, the cost of doing business has been on a steady rise.
Moreover, the hike in electricity tariff has worsened the situation. Since most companies depend on self-powered energy for most of their operations, the rising cost of fuel and diesel has increased their costs of production and by extension the costs of their products. Doing business in a challenged economy such as ours is daunting. The Manufacturers Association of Nigeria (MAN) has predicted that forex scarcity and hike in electricity tariff may lead to the collapse of 40 percent of manufacturing plants across the country.
It disclosed that between 2018 and 2022, not less than 322 manufacturing plants shut down operations and some moved to other West African countries on account of inclement business climate. In the same vein, the World Trade Organization (WTO) revealed that while South Africa’s manufacturing value was $46billion in 2022 that of Nigeria was $3billion. The nation’s epileptic power supply and unfriendly business environment can possibly explain the poor value of our manufacturing.
If the Tinubu administration is desirous of making Nigeria hit the $1trillion economy by 2030 or earlier than that, it must begin to invest heavily in the power sector. The government can do so through massive investment in solar and wind energy which are highly resilient and sustainable. The further development of hydro and thermal energy sources will equally be helpful as well as exploiting nuclear energy sources. It is by maximizing the various energy sources that we can generate about 60,000MW or 70,000MW of electricity that can satisfy our energy needs.
Good enough, the government is very much aware of the energy needs and challenges. The Minister of Power, Adebayo Adelabu, said that the sector needs about $10billion investment every year in the next 5-10 years to provide steady power supply. The government plan to increase electricity supply to 6,500MW is laudable. However, the situation on ground with frequent collapse of the national grid, does not suggest that we shall soon meet that modest target.
Since oil, tourism and agriculture sectors will contribute so much to making Nigeria hit a $1trillion economy; the general insecurity in the country will greatly hamper the realization of that goal, unless relentless measures are quickly put in place to tackle it forthwith. Illegal refineries, oil theft and activities of oil pipeline vandals will reduce our projected revenue from oil. Similarly, the activities of illegal miners and ongoing banditry in the North-West region will affect the revenue expected from the mining sector.
The general insecurity across the country is expected to affect tourism and reduce the anticipated revenue from that sector. Some states in the South-East are already losing businesses and direct foreign investments on account of insecurity, kidnapping, wanton killings, and other factors. The South-South has its own peculiar security challenges, especially oil bunkering and stealing, kidnapping and pipeline vandalism. The North-East has been the epicenter of Boko Haram insurgency. It has seriously affected the capacity of the zone in agricultural production.
The North-Central, the food basket of the country, has witnessed the gruesome cases of bloodbath arising from clashes between killer herdsmen and local farmers. Some bandits and killer herdsmen have made inroad into some South-West states leading to bloody clashes and killings. Although the federal government is working hard to curb insecurity, it must do more to realize the $1trillion economy. Without farmers going to their farms, our plan for food security will be a ruse. And without stable electricity, hitting the $1trillion economy will be a mirage.