Nigeria’s economic performance in the fourth quarter of 2024, marked by a 3.84% year-on-year GDP growth, the strongest since Q4 2021, has sparked a discussion about the nation’s economic trajectory and the policies needed to achieve its ambitious target of a $1 trillion economy by the end of the decade. While the growth, driven by both oil and non-oil sectors, is a positive sign, experts highlight a significant “output gap,” signifying the disparity between current economic output and the nation’s potential. This gap underscores the urgent need for strategic policy reforms to propel Nigeria towards its economic aspirations. The growth, though welcome, is insufficient for a rapidly growing population, and the devaluation of the naira has significantly impacted the dollar value of the GDP, emphasizing the need for policies that not only boost growth but also enhance productivity and improve per capita GDP.
A key concern raised by financial experts is the need to address the declining productivity in crucial sectors like manufacturing, industry, and agriculture. This calls for a comprehensive review and revamp of Nigeria’s trade and industrial policies, including a reassessment of the Harmonized System (HS) codes used for classifying traded goods. Realignement of industrial policies should focus on incentivizing investment, boosting productivity, and fostering sustainable growth within these critical sectors. Furthermore, existing investment policy incentives need amplification to attract more capital and drive economic expansion. Achieving the $1 trillion target requires a multi-pronged approach focusing not just on growth but on significantly enhancing the overall productive capacity of the economy.
A major recommendation for bridging the output gap is the implementation of deliberate industrial policies aimed at import substitution, echoing the successes achieved in sectors like cement, fertilizer, and petroleum refining. By focusing on specific sectors where Nigeria has the potential for domestic production, the nation can reduce its reliance on imports, conserve foreign exchange, and create new employment opportunities. This strategy requires a careful selection of target sectors and the development of comprehensive roadmaps for achieving self-sufficiency. The example of the sugar industry, with three major refineries owned by Dangote, BUA, and FMN, presents a compelling case for import substitution. These refineries possess the capacity to meet regional demand, creating an opportunity for Nigeria to become a regional sugar exporter and participate actively in the African Continental Free Trade Area (AfCFTA).
The sugar industry’s potential transformation hinges on developing a robust local supply chain. This necessitates focused policies that encourage Nigerian farmers to increase sugarcane production, thereby boosting agricultural productivity, creating jobs along the value chain, and reducing reliance on imported raw sugar. This model of import substitution, involving both large-scale industries and local agricultural production, can be replicated in other sectors to drive economic growth and address the output gap. The success of this strategy, however, depends on effective policy implementation and a conducive environment for both industrial and agricultural growth.
Looking ahead, achieving the $1 trillion economy goal requires a confluence of factors. Sustained government efforts to enhance security in oil-producing regions are crucial for maintaining the growth trajectory of the oil sector. Implementing a data-driven security framework and attracting investments in infrastructure can further boost oil production, potentially through the introduction of new oil blends. Beyond the oil sector, a stable interest rate environment, favorable government policies, and exchange rate stability are expected to drive sustained expansion across key industries. These factors, combined with the focused implementation of import substitution policies, can contribute significantly to closing the output gap and propelling Nigeria towards its economic target.
In essence, while the recent GDP growth figures offer a positive outlook, achieving the ambitious $1 trillion economy target requires a more strategic and comprehensive approach. This involves not just focusing on overall growth, but on addressing the underlying issue of the output gap by enhancing productivity, promoting import substitution in targeted sectors, and creating a supportive environment for both industrial and agricultural expansion. A coordinated effort across various sectors, guided by effective policy implementation and a commitment to long-term sustainable growth, is essential for realizing Nigeria’s economic potential.
