‘How Nigeria can attain $1 trillion economy by 2030′

The government would need to unlock the huge long-term financing potential of the capital market and tie borrowings with infrastructure bonds to achieve a consistent 16 per cent yearly growth in the next six years to attain a $1 trillion economy by 2030.

There was the position of experts at the 2023 yearly conference of the capital market journalists in Lagos at the weekend.

A professor of finance and capital market, Uche Uwaleke, said with the country’s widening infrastructure investment needs and high public debt profile, mobilising long-term financing through the capital market and deploying domestic market borrowings into infrastructure bonds are critical to achieving the target.

Speaking on ‘Leveraging Capital Market in Financing the National Development Plan’, Uwaleke pointed out that despite the creation of a development plan designed to tackle the country’s huge infrastructure gap, Nigeria is still rated one of the lowest in stock of infrastructure to GDP among emerging economies.

He said: “To narrow the gap, the government, through the creation of the National Integrated Infrastructure Master Plan, proposed an investment of $3 trillion in infrastructure over the next 30 years, amounting to a yearly spending of $100 billion.

“This translates to a yearly investment of over N42 trillion which constitutes more than the size of the total annual budgets of the federal and sub-national governments. Financing this huge infrastructure gap presents a formidable challenge to the government given Nigeria’s low revenue to GDP ratio of less than 10 per cent making the capital market route inevitable.”

Uwaleke pointed out that the capital market is currently beset with myriads of challenges, which has continued to constrain its full development despite giant strides achieved in the last two decades, noting that the extent to which the Nigerian capital market can facilitate economic development is a function of its level of development.

He listed some of these challenges as including a weak domestic economy, poor savings mobilisation, small size relative to GDP, market concentration among others.

Uwaleke noted that economic growth in Nigeria has been weak, especially in recent times owing in part to the overreliance of the economy on crude oil.

According to him, while the unemployment rate has grown from 27.1 per cent in Q2 2020 to 33.3 per cent in Q4 2020, the situation is made worse by rising inflation, which results in negative real rates of return on investments in the capital market.

“In addition, the pursuit of low inflation and GDP growth has been hindered by a huge infrastructure gap, even as infrastructure stock represents only 35 per cent of GDP far below that of peer countries.

Uwaleke stressed the need to address the issue of rising cost of food prices, noting that this has continued to drive stagflation, a situation of high inflation with weak and tepid economic growth.

He urged the government to focus more on reviving the manufacturing sector and agriculture as key drivers of sustainable economic growth.