THE Nigerian economy has Gross Domestic Product (GDP) of almost U$510 billion, according to the recently rebased exercise; the income per capita of her citizens has risen sharply due to the remarkable increase in GDP. The country is now a middle income economy with the inherent economic implications, for example, she is no longer qualified for
Examining the Human Development Index of
However, virtually all stakeholders agree that the real sector of the economy is 'dead.' Manufacturing contributes about five per cent to GDP; this is too low when compared to a benchmark of at least 25 per cent. There are no new factories that could employ the millions of skilled and unskilled persons willing and able to work; those investors who try to establish factories could not sustain them due to the socio-economic environment. There is so much talk about industrialization, entrepreneurship, etc but is the economy walking the talk? The agricultural sector which contributes about 47 per cent to GDP offers seasonal employment.
An emerging modern economy must place emphasis on wage/salary employment so that citizens can plan their lives and help reproduce and grow the economy. The agricultural sector depends on nature - good rainfall and increased acreage for increased output. The services sub-sector which has grown is more retail comprising more of informal activities.
The need to support ideas, innovations and knowledge to become products in the market requires funding. But lending rates are too high; lending rates (cost of funds) must be at a level that would encourage potential investors to borrow, invest, make profit and repay the loans; high lending rate of 27 per cent and 16 per cent for preferred customers (those already engaged in economic activities) would not grow the real sector. The lending rates have been too high for a very long time. It is time that the Visible Hand of government does something about it. The invisible hand (market forces) would not bring down lending rates; it may in the long-run when we are all dead.
The new Central Bank Governor stated in his maiden address that one of his objectives is to bring down lending rates; this is, perhaps the only sure way of optimizing the banks development functions within the neo-liberal economic framework. The Governor must be commended for being bold. He should be steadfast and work on reducing drastically the lending rates. The players in the banking and financial sub-sector will fight it. They would argue that it should be gradual and that macroeconomic fundamentals of the economy must move in the right direction and/or be conducive, among other reasons. How banks in
However, the economy needs re-vitalized real sector to solve the very serious unemployment problem; there is no doubt that the implementation of a developmental state economic framework would solve the unemployment problem faster than the neo-liberal approach. The unemployment situation has become a crisis and within the neo-liberal economic framework, the
The macroeconomic fundamentals are moving in the right direction according to information from government sources. The rate of inflation is single-digit (about eight per cent) and the forecast is that it would remain single digit for another two years; the deficit/GDP is within acceptable threshold (in fact less than two per cent); the foreign reserves could finance more than three months of imports; the current account/GDP is positive; the economy is growing, etc.
- Ekpo, a professor of economics, lives in
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