•Appreciates Buhari For Supporting AfDB Presidency Bid
Dr. Akinwunmi Adesina, at the weekend in Abuja challenged the incoming administration of Nigeria to urgently check the cost of governance in the country, which he described as “way too high.”
Delivering the inauguration lecture for the New President of Nigeria on May 27 in Abuja, the nation’s capital, said governance cost “should be drastically reduced to free up more resources for development. Nigeria is spending very little on development.”
He noted the country’s ranking of 167 among 174 countries the lowest human development index in the world according to the World Bank 2022 Public Expenditure Review report.
To meet its massive infrastructure needs, according to the report, Nigeria will require $3tr by 2050, lamenting that at the current rate, it would take Nigeria 300 years to provide its minimum level of infrastructure needed for development, by which time all living Nigerians today, and many generations to come, will be long gone.
To change the narrative, he called for more reliance on the private sector for infrastructure development, to reduce fiscal burdens on the government, while more should be done to raise tax revenue, thereby raising the low tax-to-GDP ratio.
“This must include improving tax collection, tax administration, moving from tax exemption to tax redemption, ensuring that multinational companies pay appropriate royalties and taxes, and that leakages in tax collection are closed.
“However, simply raising taxes is not enough, as many question the value of paying taxes, hence the high level of tax avoidance. Many citizens provide their own electricity, sink boreholes to get access to water, and repair roads in their towns and neighborhoods. These are essentially high implicit taxes. Nigerians therefore pay the highest ‘implicit tax rates’ in the world.
He urged governments “to assure effective social contracts by delivering quality public services. It is not the amount collected, it is how it is spent, and what is delivered. Nations that grow better run effective governments that assure social contracts with their citizens.”
Continuing, Adesina said there must be a rebalancing of the structure and performance of the economy, taking economic diversification from the realm of mere sloganeering, assuring that “the economy of Nigeria is one of the most diversified in Africa, with the oil sector accounting for only 15% of the GDP, and 85% is in the other sectors.”
Nigeria’s challenge, he believes, is not diversification, but revenue concentration, because “the oil sector accounts for 75.4% of export revenue and 50% of all government revenue. The solution, therefore, is to unlock the bottlenecks that are hampering 85% of the economy. These include low productivity, very poor infrastructure and logistics, epileptic power supply, and inadequate access to finance for small and medium-size enterprises.”
The AfDB boss said the nation “must also shift away from import substitution approach to export-focused industrialization. Nations do not thrive through import substitution; they thrive from export-bound industrialization.
“For faster growth, Nigeria must decisively fix the issue of power, once and for all. There is no justification for Nigeria not having enough power. The abnormal has become normal.
“Nigeria’s private sector is hampered by the high cost of power. Providing electricity will make Nigerian industries more competitive,” he stressed further citing the examples, he recalled that “with the support of the African Development Bank, Kenya, under President Kenyatta, was able to expand electricity access from 32% in 2013 to 75% in 2022. What an incredible achievement within 10 years!”
“Today, 86% of Kenya’s economy is powered by renewable energy. And in one project—the Last Mile Connectivity Project—the Bank’s support allowed Kenya to connect over 2.3 million poor households to electricity—that is over 12 million people provided with affordable connection to grid power.
Also, according to him, “in 2014, Egypt had electricity deficit of 6,000 megawatts, but by 2022 it had 20,000 megawatts of surplus power generation capacity. Amazing!”
While commending the outgoing government of Nigeria on the recent commissioning of the several power projects, he urged the incoming administration to “invest massively in renewable energy, especially solar. The African Development Bank is implementing a $25bn Desert-to-Power programme to provide electricity for 250 million people across the Sahel, including the northern parts of Nigeria.”
For inclusive development, he said Nigeria must completely revive and transform its forgotten rural communities, which have become zones of economic misery by making “agriculture their main source of income, a business and a wealth creating sector. To be clear, agriculture is not a development sector. Agriculture is a business. The development of Special Agro-industrial Processing Zones will transform agriculture, add value for agricultural value chains and attract private sector food and agribusinesses into rural areas. Special agro-industrial processing zones will help turn rural areas into new zones of economic prosperity and create millions of jobs.”
The AfDB, he assured, is “ready to help expand this to every state in the country. We are equally ready to help revamp agricultural lending institutions to help modernize the food and agriculture sector.”
Contrary to existing beliefs, he said the best asset of Nigeria is not its natural resources, but its human capital, hence the need “to build up the skills Nigeria needs to be globally competitive, in a rapidly digitized global economy.
“We must build world class educational institutions, and accelerate skills development in science, technology, engineering, and mathematics, as well as in ICT and computer coding, which will shape the jobs of the future.
“There is an urgent need to unleash the potential of the youth. Today, over 75% of the population in Nigeria is under the age of 35. This presents a demographic advantage. But it must be turned into an economic advantage.”
He further called for the creation of youth-based wealth, rather than “the so-called “youth empowerment programmes”. Youths do not need handouts. They need investments. The current banking systems do not and will not lend to the youth. Special funds, while palliative in approach, are not systemic and are also not sustainable.
“What’s needed to unleash the entrepreneurship of the youth in Nigeria are brand new financial ecosystems that understand, value, promote and provide financial instruments and platforms for nurturing business ventures of the youth at scale.”
The AfDB, he stressed further, “is currently working with Central Banks and countries to design and support the establishment of Youth Entrepreneurship Investment Banks. These will be new financial institutions, run by young, professional, and highly competent experts and bankers, to develop and deploy new financial products and services for businesses and ventures of young people.
He called on Nigeria to establish the Youth Entrepreneurship Investment Bank, as part of helping the economy to soar, while building a resurgent Nigeria.
He appreciated the strong support of Nigeria’s outgoing President Muhammadu Buhari without which he would not have been president of the African Development Bank Group (AfDB) in 2015 and 2020.
Adesina, while giving an account of his stewardship announced that within the period, the group “was ranked this year by Publish What You Fund as the “Most Transparent Institution in the World.”
This, he noted, was in addition to last year’s ranking by the Washington D.C.-based Center for Global Development as the “Best Multilateral Development Bank in the World”.
“Dear Mr. President, as you leave, you can take pride that the mission for Africa is being well executed,” he said, congratulating the incoming President, “Bola Ahmed Tinubu, GCFR, who will take over the mantle of stewardship of Nigeria tomorrow.”
The election of a new President, he continued, “always elicits hope. Nigeria will be looking to you, as President Tinubu, on your first day in office, with hope.”
Reeling out his shopping list for the incoming administration, he expressed hope that it will assure Nigerian of “security, peace, and stability.
“Hope that you will heal and unite a fractious nation. Hope that you will rise above party lines and forge a compelling force to move the nation forward, with inclusiveness, fairness, equity, and justice. Hope that you will drastically improve the economy. Hope that you will spark a new wave of prosperity.”
Hope, he stressed, “must be brought to the present, as hope deferred makes the heart grow weary.”
The starting point, he continued further, “must be macroeconomic and fiscal stability. Unless the economy is revived and fiscal challenges addressed boldly, resources to develop will not be there.
“No bird can fly if its wings are tied. Nigeria currently faces huge fiscal deficits, estimated at 6% of GDP. This has been due to huge federal and state government expenditures, lower receipts due to dwindling revenues from export of crude oil, vandalism of pipelines and illegal bunkering of crude oil.
“According to Nigeria’s Debt Management Office, Nigeria now spends 96% of its revenue servicing debt, with the debt-to-revenue ratio rising from 83.2% in 2021 to 96.3% by 2022.
“Some will argue that the debt to GDP ratio at 34% is still low compared to other countries in Africa, which is correct; but no one pays their debt using GDP.
“Debt is paid using revenue, and Nigeria’s revenues have been declining,” he emphasized, regretting that “Nigeria earns revenue now to service debt—not to grow. The place to start is to remove the inefficient fuel subsidies.
“Nigeria’s fuel subsidies benefit the rich, not the poor, fueling their and government’s endless fleets of cars at the expense of the poor. Estimates show that the poorest 40% of the population consume just 3% of petrol.
“Fuel subsidies are killing the Nigerian economy, costing Nigeria $10 billion alone in 2022. That means Nigeria is borrowing what it does not have to, if it simply eliminates the subsidies and uses the resources well for its national development.”
He urged support for “private sector refineries and modular refineries to allow for efficiency and competitiveness to drive down fuel pump prices. The newly commissioned Dangote Refinery by President Buhari—the largest single train petroleum refinery in the world, as well as its Petrochemical Complex—will revolutionize Nigeria’s economy.