Five Strategies to Elevate Nigeria’s GDP Growth Beyond 3% in 2025

Nigeria’s GDP saw a slight increase to 3.40% in the previous year. However, this growth is classified as suboptimal for the country’s population size, and nominal GDP has decreased significantly. Five strategies for stimulating further growth are proposed, including increasing investments, reforming trade policies, reducing excessive spending, optimizing government assets, and implementing industrial policies for import substitution.

Nigeria’s gross domestic product (GDP) grew to 3.40 percent last year, an increase from 2.74 percent in 2023, despite facing significant macroeconomic challenges. However, this growth is considered insufficient for a nation with a population of around 200 million people, particularly as GDP per capita has reached an unprecedented low. Meanwhile, nominal GDP figures show a significant drop, decreasing from $363 billion in the previous year to $195 billion, largely due to drastic currency devaluation.

To achieve meaningful GDP growth beyond the 3 percent threshold, Nigeria must prioritize attracting both domestic and foreign investments. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises, emphasizes the need for a more favorable investment climate in the real economy rather than continuing investment in high-yield financial instruments that do not contribute significantly to overall economic expansion.

Additionally, the government should undertake a comprehensive overhaul of its trade policies, including the reform of HS Codes and realigning industrial policies. Adebajo notes that these changes are essential to address declining productivity within the manufacturing and agricultural sectors, thereby facilitating more robust economic growth.

Fiscal responsibility is another crucial aspect, as Nigeria’s current debt stands at approximately N150 trillion, with a worrying N40 trillion deficit over two years. Adebajo points out that the allocation of N16 trillion for debt servicing in the 2025 budget exceeds the combined budgets for defense, education, health, and infrastructure, underscoring the need for fiscal restraint to alleviate this burden.

The government should also strategize to optimize its capital structure by divesting from certain assets. This tactic could help reduce the national debt and move towards achieving investment-grade credit ratings, thus fostering greater investor confidence and enhancing economic productivity.

Lastly, Nigeria’s government must implement intentional industrial policies aimed at increasing import substitution. By replicating successful models in cement, fertilizers, and petroleum refining, the country can reduce reliance on imports and stimulate local industry. Adebajo suggests focusing on developing local supply chains for sugar production, a potential avenue for foreign exchange earnings and job creation in agriculture.

In summary, Nigeria’s GDP growth remains below optimal levels despite recent increases. To enhance growth beyond 3 percent, the country must focus on attracting investments, reforming trade policies, exercising fiscal responsibility, optimizing governmental assets, and implementing robust industrial policies. These steps will not only address current challenges but also foster a more resilient and productive economy for the future.

Original Source: businessday.ng