NESG projects 2.9% growth rate, 23.3% government revenue in 2021
The Nigeria Economic Summit Group (NESG) has projected a 0.9 per cent increase in Gross Domestic Product (GDP) in 2021 higher than 0.7 per cent predicted by Africa Development Bank (AfDB) and lower than 1.0 and 1.5 by the world bank and International Monetary Fund (IMF).
The growth will be driven by expansion in major sectors such as Agriculture, Telecommunications, Financial Institutions, Construction, Trade and Manufacturing although the growth in output will not be accompanied by a reduction in poverty, unemployment and underemployment rates, especially given the weak correlation between output and these indicators in the short term in Nigeria.
According to NESG in its economic outlook report for 2021 titled “4 priorities for the Nigerian economy in 2021 and beyond” the Nigerian economy would grow by 2.9 per cent in 2021 and achieve a sustained high growth rate up to 2025.
In addition to a high GDP growth, the country will achieve a more robust and resilient economy exemplified by improved external reserves and fiscal position as well as stable inflation rate. Government revenue is projected to increase by 23.3 percent in 2021 and is expected to increase further till 2025. Exchange rate will become stable and key inclusive growth indicators such as unemployment and poverty rates will gradually reduce overtime.
“With inflation at over 15 per cent, NESG said prices will continue to remain high as inflationary pressure will be driven by petrol pricing, increased electricity tariff, foreign ex- change challenges, insecurity and supply chain disruptions,” NESG said.
NESG also predicted foreign direct investments to improve although it maintained that foreign exchange will continue to present challenges to the country.
“We believe that investors will seek to take advantage of Nigeria’s large market, as well as leverage the opportunities that the AfCFTA offers.”
“Nigeria is also expected to narrow its trade deficit in the year as earnings from crude oil improve. However, reforms are needed to boost non-oil export earnings and attract significant capital into key sectors such as manufacturing, agriculture, trade and ICT”.
NESG also raised concerns about security, saying “insecurity has now become a major risk to doing business in Nigeria”.
It continued: “The challenge of insecurity became severe in 2020 with incessant kidnappings, robbery, theft and other forms of crimes in several parts of the country.
“This created panic among citizens and investors and is a major factor that limited huge inflow of private capital into crucial sectors of the economy. If unchecked, the insecurity situation will intensify and could slow down economic recovery in 2021.”
“Despite the rising cases of COVID-19 infections in the country, the group said it does not expect the implementation of lock- down and movement restrictions as experienced in April 2020. However, selected restrictions which will affect sectors such as education, transport, accommodation and food services, among others will be implemented.”
It further said it is expecting that government revenue base will improve this year after being constrained prior to COVID-19.
“Despite the revenue challenges associated with the pandemic, the government reaped some benefits from the tax reforms that came with the Finance Act 2019 particularly the increase in Value Added Tax (VAT). With the discovery of vaccines for COVID-19, the oil market is expected to marginally pick up. Non-oil revenue is also expected to improve in anticipation of an economic recovery in 2021”, NESG stated.