How Nigeria's policies can spur growth

With Nigeria's second-quarter economic growth at 2.5 percent, President Bola Tinubu has instructed cabinet ministers to implement actions aimed at revitalizing the economy. Godfrey Mwanza, Senior Economist at Standard Bank, shared valuable insights on CNBC Africa regarding the country's economic landscape. As Nigeria grapples with various challenges, such as declining oil production, low tax revenues, heavy debt servicing, and weak investor sentiment, a comprehensive strategy is needed to steer the nation towards sustainable growth. Here are the key points discussed in the interview: Starting with the critical issue of oil production, which significantly impacts Nigeria's economy, Godfrey highlighted the importance of addressing security concerns to prevent vandalism and theft, thereby unlocking the full potential of the oil and gas sector. Enhancing security measures could catalyze economic growth by safeguarding valuable resources and attracting investment. Furthermore, the conversation shifted towards tax reforms and the need to expand the tax base by leveraging technology to include the large informal economy. With Nigeria historically recording low tax-to-GDP ratios, improving revenue mobilization through innovative solutions is essential for sustainable development. Additionally, the interview delved into the challenges posed by Nigeria's heavy debt burden, with over 90 percent of government revenues allocated to debt servicing. This limits fiscal flexibility and hinders public spending essential for economic stimulus. Moreover, the interview highlighted the struggle faced by consumers amid high inflation rates, escalating fuel prices, and a stagnant industrial sector, calling attention to the pressing need for strategic interventions to reignite growth across various sectors. Furthermore, the discussion touched upon the significance of foreign direct investment (FDI) and the role of policy reforms in attracting investors. To foster a conducive investment climate, maintaining transparency, implementing market-driven policies, and upholding the rule of law are vital for bolstering investor confidence. Lastly, the conversation revolved around Nigeria's currency, the Naira, and the challenges faced in stabilizing it amidst volatile FX reserves and economic uncertainties. While short-term fluctuations in the exchange rate may persist, addressing underlying economic fundamentals and reducing excess demand for foreign currency are crucial steps towards bolstering the Naira's stability. As analysts anticipate the impact of recent reforms to reflect in Q3 GDP figures, there is cautious optimism regarding Nigeria's economic trajectory. The cumulative effect of policy measures, including fuel subsidy removal and market-oriented reforms, is expected to manifest in improved economic performance. In conclusion, navigating Nigeria's economic challenges requires a multi-faceted approach encompassing security enhancement, tax reforms, debt management, investment promotion, and currency stabilization. By implementing targeted policies and fostering a conducive business environment, Nigeria can chart a path towards sustainable economic growth and resilience in the face of global uncertainties.