Nigeria: How the government can reverse the decline in agriculture’s contribution to GDP

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The Nigerian economy has transformed dramatically over the past six decades from a predominantly agrarian economy to one largely driven by services, oil and gas, which is not healthy for the economy.

An economist and founder of the Center for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, in an exclusive conversation with Daily Trust on Sunday, said it was not late for the federal government to reverse the contribution of the agricultural sector to the Gross Domestic Product (GDP) which has grown from around 60 percent in the 1960s to around 23 percent today.

The service sector, he said, has grown considerably since independence and now contributes more than 50 percent of the country’s GDP. These, he said, are indications of a significant structural change that has taken place in the Nigerian economy since independence as the service sector’s contribution to job creation and government revenues has greatly increased. increased over time.

While the Nigerian economy has recorded an impressive growth rate over the past decades; there are a few cases of sluggish growth, as the challenge of creating an inclusive growth path remains a major concern. “While the economy has experienced a positive growth trend over the past six decades, especially during the oil boom era, the impact of poverty, inequality and job creation has been very minimal. This is what is characterized as growth without development, ”said the economist. noted.

Analyzing current economic concerns, Yusuf, former director general of the Lagos Chamber of Commerce and Industry (LCCI), said the country’s macroeconomic management framework continued to pose serious challenges for investors in the economy. One situation, he said, was made even worse by the shocks and disruption inflicted by the COVID-19 pandemic.

According to him, the challenges of macroeconomic management have manifested themselves over the years in the weakness and depreciation of the currency, the high inflationary pressure, the high debt profile, the volatility of exchange rates, the liquidity crisis on the foreign exchange market, the increase in the budget deficit, the acceleration of the growth of the money supply following the increasing financing of the deficit by the CBN.

He noted that there are also deep concerns about the investment climate issues, highlighting a high infrastructure deficit, customs clearance issues that have continued to worsen, low productivity in the real sector in large part. partly due to infrastructure conditions, regulatory challenges and policy inconsistencies.

In addition, the persistent importation of petroleum products continued to put pressure on foreign reserves and weakened the ability of the CBN to support the foreign exchange market as petroleum refineries have remained underperforming over the years.

Charting the way forward, Dr Yusuf stressed the need for urgent action to ensure a better macroeconomic management framework to stabilize the exchange rate, eradicate the challenge of illiquidity in the foreign exchange market and d ‘stem the current depreciation of the Naira. .

He further noted that it is imperative to have urgent reforms in the foreign exchange market with more emphasis on supply side strategy; stressing the need to revisit the current disproportionate emphasis on demand management of the foreign exchange market.

In addition, he urged Nigeria to strengthen its strategies to attract private sector capital to complement public finance for infrastructure.

Regarding debt financing, Dr Yusuf said there is a need to reduce the level of debt financing, especially the reliance on commercial debt to finance government operations, as public debt is already at a low level. an unsustainable threshold.

Steps, he said, should be taken to attract foreign currency through a strategy to secure new investment opportunities to stimulate foreign capital inflows into the economy. “We should be looking for more equity than debt capital. There is a need to review Nigeria’s trade policy to support the growth and sustainability of investments, while fiscal policy must support investment and not become a brake on investment ”,

“The international trade process needs to be reformed to prioritize trade facilitation, as the current obsession with income generation harms international trade processes and has a negative impact on domestic and foreign investment. Therefore, the focus of Nigeria Custom Service, Nigerian Ports Authority, shipping companies, terminal operators and port security agencies must evolve in favor of investment-friendly international trade processes, ”he said. he pointed out.

The economist mentioned that the security situation which has continued to deteriorate must be urgently addressed in order to create more investor confidence. He added that more emphasis should be placed on the quality of intelligence in the war on terror.

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