Nigeria needs $47.6bn annually to accelerate economic transformation, says AfDB

Nigeria will need $47.6 billion annually until 2030 to accelerate its structural transformation process adding that the bulk of these needed resources are in supporting SDG9 on industry, innovation and infrastructure ($19.6 billion in 2030 and $ 3.4 billion in 2063).

This is as continuous increase in food prices and inflation would constitute major setbacks to achievement of the 3.2 per cent and 3.4 per cent 2024/2025 growth projection for Nigeria.

According to the ‘Nigeria country focus report’ which was launched by the African Development Bank on Thursday, with over 63 per cent of Nigerians still multidimensionally poor, 18 out of 36 states recording poverty levels that are above the national average.

It also states that given Nigeria’s current performance levels on these critical sectors and their projected values – assumed to change in line with GDP per capita, the annual financing gap to fast-track Nigeria’s structural transformation is estimated at $31.5 billion under the SDG framework in 2030 and $5.5 billion, assuming the Agenda 2063 deadline.

It stated that high poverty reflects the effects of economic shocks as well as policy and structural challenges in the economy that undermine the private investment to create quality jobs.

Presenting the report, the lead economist, Nigeria country department, AfDB Jacob Oduor, said that inflation is still an issue in Nigeria, as it remains higher than the West African average and African average. He stated that the country’s fiscal position is expected to narrow further, supported by the increased revenue coming from the maturing reforms that are taking place on the revenue side.

Oduor noted specific risks to look out for, including insecurity, which he said was affecting food production, agricultural production, as well as oil production.

“So looking forward to 2024, 2025, growth is expected to improve in 2024 to 3.2 and 3.4 in 2025. But this growth, even though it is better, is still lower than the West Africa average and the African average. So what we see currently with the escalation of persistent inflation and escalation of food prices, which are expected to dampen consumption, are probably going to be issues that may dampen this growth further.

“We also expect to see further pressure on the exchange rates, which have implications again on imported inflation with a high import bill being transmitted into the consumption basket of the general population. So generally, policy measures to foster high and resilient growth in the short term, currently the tight monetary policy in place should be maintained, but just cautiously not to increase the monetary policy rate too fast and too further, because that has implications on credit and that feeds back into production costs.

“And then secondly, as the reforms take shape, there’s also a need also for social protection, influencing those who are vulnerable and those who are adversely affected. But here also targeting of beneficiaries is important, so as to ensure social benefits only go to those who merit it,”he said.

According to the lead economist , Nigeria in the medium term, is expected to continue with its ongoing tax administration reforms in order to increase those in the tax bracket. He also highlighted improving security as a critical strategy for food production in the medium term as well as increased crude oil production to boost foreign exchange earnings.

In the long term, Oduor stressed on the need for infrastructure development, particularly in energy supply. These infrastructure he said would include developing refinery capacity to help not just maintain fuel prices at the pump, but also to deal with the implicit subsidy that the government currently shoulders.

“So when you have pump prices contained, then the expenditure of the government on the implicit subsidy, which is a concern for the fiscal space is going to be maintained,” he said.

Speaking further, Oduor noted that the pace of structural transformation has not been sufficient for industrial takeoff. This he said has led to the relocation of labour from agriculture to other sectors particularly services.

According to the report, more than half of Nigeria’s workforce (56 percent) are employed in three sectors that are less productive than the economy-wide productivity (agriculture, transport, and public service). Manufacturing and wholesale and retail trade, both of which are only 20 percent more productive than the economy-wide productivity, the total workforce employed in the five sectors is 80 per cent.