These are desperate times
“Desperate times call for desperate measures” is a popular saying attributed to the Greek physician and philosopher, Hippocrates, and it is equally applicable in today’s Nigeria.
However, Nigerian policymakers who determine the direction of the economy, boldly influencing the quality of life of the citizens, need to be cautious about the level of desperation in reaction to the depth of the problem. It is important because Nigeria is already on edge; one misstep, and the economy erupts.
A good starting point for them is understanding and solving the underlying structural problems that make the economy weak and stunt its growth prospects. What the past three years has shown is that Nigeria’s economy is fragile and highly vulnerable to external shocks, and there’s a huge need for fiscal and monetary policy coordination to boost market confidence.
Leading indicators are negative
The economic indicators are mostly negative at this point in time. GDP is sluggish (3.2% in 2022) when it should be in double-digits, inflation is astronomical (22%) when prices are falling globally, the external debt to export ratio is 64.9%, signaling an impending debt service crunch, and there are too many uncertainties and worsening volatility in the oil markets.
In terms of solving the underlying economic defects, how fast and far policymakers can go is constrained because of low revenues. More so, there’s only so much fiscal policy authorities can do in sensitive times such as we have today. What this means is that for the government to do its job of keeping the pulse of Nigeria strong, it will have to woo investors. And this begins with monetary and fiscal policy harmonization.
For God’s sake, stop doing dumb things
The goal is to ensure that they send the right signals to investors through pro-business, pro-investment, and pro-growth policies. The time for erratic policy pronouncements and dissonance with public policy is over. If the government can get this right, investors, popular for taking risks, will begin to move the needle, bridging our infrastructure gap of $2.3 trillion in no time. As echoed by Fareed Zakaria, of CNN, we must “first stop doing the dumb things and then start doing the smart things before doing the modern things”.
In this edition of the FDC Bi-monthly bulletin, the FDC think tank provides policy options available to the government to boost investment inflows, alongside strategies for achieving macroeconomic stability.
Enjoy your read!