Nigeria can stimulate growth and avoid a recession

By Loretta Aniagolu

A few days ago, the Minister of Finance alerted Nigerians to the possibility of a recession due to the drop in oil prices and to the other negative effects of the current viral pandemic. This meant that the Federal Government of Nigeria, FGN, had accepted and adopted, hook line and sinker, the narrative of Western governments and verdict of multilateral agencies, predicting recession for Nigeria, without us considering the gulf of differences that exist between Nigeria’s economic situation and that of most industrialized nations, or closely evaluating our options. So, Nigeria with its wealth of over 150 million people, comprising at least 90 million dynamic and vibrant youth, with less than 10% of its infrastructure adequately developed (a clear opportunity for growth), had accepted that in its monolithic economic existence, it was willing to accept the prospect of a recession!

Rather, than taking this negative view, I believe the FGN now has a significant opportunity to turn Nigeria into a new destination for private investment.

For most developed countries, growth has peaked in several sectors, requiring ingenuity and innovation for such countries to achieve even one percent real growth. Nigeria, on the contrary, has many growth gaps and “unfulfilled needs”, which translate into brilliant opportunities for development. Indeed, in our present circumstances, FGN should seek out and implement ideas and strategies that would accelerate real economic growth, targeting a  minimum Gross Domestic Product, GDP, growth rate of at least 6% from 2021. It should avoid misguided borrowing, a good portion of which may end up being misappropriated.

To reinforce my perspective, I will just offer a couple of examples in the construction industry, which on its own, could drive real growth by at least 6% in 2021, let alone when accompanied by other sectors, to create multiple and simultaneous impact on our economy.

FGN can commit to start the upgrade of its airports, bridges, ports, railways and major highways, to international standards by the next dry season/construction cycle (September – October), and to achieve this through concessions, given to large, reputable companies, with proven capacity and similar performance in other parts of the world. These concessionaires shall pay for the construction of those facilities, operate them for a number of years (with an entitlement to the revenue generated from the assets during the course of the concession) and eventually return them to the FGN at the end of the concession. This could be achieved and construction can commence by December 2020.

These concessions will not only create thousands of jobs, but the multiplier effect on other sectors will be enormous. Furthermore, it will generate revenue for the FGN (say, $1 million fees for every 50 kilometre, 7-year concession) stimulate real growth, reduce corruption and crime, as well as, boost investor confidence and attract capital from all over the world. Furthermore, the concession fees could be used to set up a sustainable welfare system to lift and support our indigent citizens, while the freed-up infrastructure funds from our budgets could be applied to transform our health and education sector, reform the Nigerian Police and support the judiciary, to further boost investor confidence.

In addition to the concession alternative, housing construction presents another quick win. The gap in the housing sector, an estimated 17 million to 22 million homes, can be effectively exploited for job creation, as the construction of 100 houses produces a minimum of 500 jobs in Nigeria. Since millions of hardworking Nigerians live in substandard accommodation, in accordance with internationally accepted standards, transforming their living quarters will not only aggressively grow the economy, but it will redesign our city landscapes, enhance our skylines and bring many social benefits. To achieve this, developers need access to borrow low interest funds from the Central Bank of Nigeria, CBN, through commercial banks and home buyers should easily obtain mortgages from Primary Mortgage Banks, backed by the Federal Mortgage Bank of Nigeria, FMBN and Nigerian Mortgage Refinance Company (NMRC).

To ensure that the housing sector plays its stimulant role, the FGN should compel both the FMBN and NMRC to produce a quarterly minimum of 20,000 mortgages nationwide, starting from December, so that by March of 2021, this single sector should be able to generate a minimum of 100,000 direct jobs and thousands more indirect jobs. Such a target given to FMBN and NMRC should compel the two institutions to increase their performance and reduce the frustration developers and buyers face because of processing delays, which sometimes can take years. Furthermore, it should compel the institutions to find creative ways, including collaboration with government agencies, like the Nigerian Pension Commission, the Nigerian Stock Exchange and private investors (both domestic and international), to increase the stock of mortgage funds, as well as, develop a viable secondary mortgage market. With mortgages available to buyers, developers can confidently borrow to build different levels of homes for deserving Nigerians, reinforce the dignity of our citizens, change our city landscapes, reduce crime, generate jobs across the nation and upgrade our urban centres.

Finally, these are just two examples of the many opportunities that present in Nigeria, requiring only changes in FGN policies, without any budgetary expenses. Other viable areas exist, ranging from Nollywood, Information Technology, IT, integrated waste management to the small artisans and retailers, whose simultaneous activities can be choreographed to stimulate growth, improve living standards and generate thousands of jobs. Nigeria and indeed, Africa, is being tested by this new world order that is emerging. Who would have guessed that a virus will be the one to slow down the Western economies and offer Africa as a real investment alternative? We should take the baton today, run with it, delete the prediction of doom and usher in a prosperous 2021!