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Friday, November 10, 2017

Experts say structural reforms, political risk crucial to Nigeria’s future

The economists at the office of Pricewaterhouse Coopers (PwC) Nigeria believe the economy is on track for a broad-based recovery, but were quick to add that the management of political risk is crucial to Nigeria’s future, reports ITRealms.

The PwC experts in a new report Nigeria's economic recovery - Defining the path for economic growth’ an extract of which is made available to ITRealms.

The report, ITRealms gathered, noted that asides the improvement in real GDP following the exit from recession in the second quarter (Q2) of 2017, the performance across several other macro-indicators suggest that the economy has turned a corner.

“Some of these indicators include: headline inflation at a 16 month low at 15.9 per cent year-on-year in September, maintenance of trade surplus for 3 consecutive quarters, Purchasing Managers Index (PMI) remaining above the 50 points threshold for 6 consecutive months and the foreign reserves up to a 34-month high.

In addition, PwC further assessed the fundamental determinants of economic growth, with findings suggesting that economic freedom, consumption growth and investment share in GDP are significant drivers of the Nigerian economy.

The Partner and Chief Economist PwC Nigeria, Dr. Andrew S. Nevin, said, “We find that an increase in the economic freedom index by 1 point could lead to a 1.7 percentage points increase in Nigeria's economic growth. This underscores the role of economic policies as a major catalyst for economic development. Similarly, a one percentage point increase in investment share in GDP and consumption growth were found to be associated with 0.2 percentage points and 0.7 percentage points increase in economic growth respectively.”

To show Nigeria's potential economic performance over the next 5 years, the report, he said, presents three scenarios in which PwC examines the impact of political shocks, and the implementation of structural reforms and economic diversification on key economic indicators in Nigeria.
ITRealms equally reports that PwC in its analysis, assumed that oil continues to be the main driver of fiscal and export revenues over the forecast period.
“As such, the extent to which the Nigerian economy moves towards its near-term development aspirations is dependent upon the success of its import substitution policies,” part of the report read.

Andrew declared that in scene 1, real Gross Domestic Product (GDP) growth peaks at 7.0 per cent in 2022 and remains in line with trend, reflecting the implementation of structural reforms, and successful traction in the execution of import substitution policies.

“The resultant improvement in the macroeconomic environment leads to increased investment and per capita GDP. However, in scenario 2, the implementation of key reforms evolves at a slow pace and economic growth averages 3.3 per cent over the forecast period, reaching 5.0 per cent in 2022. A mix of political and security shocks in scenario 3 which bring about a significant decline in revenues result in no growth (0.0 per cent) in 2019. Subsequently, growth recovers to 4.3 per cent by 2022,” he submitted.


Chuks Egbune/GEE 
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