Financial experts believe Nigeria has the potential to have a $6trn economy if inflation is controlled

FINANCIAL experts have forecast that Nigeria has the potential to have a $6trn gross domestic product (GDP) if the numerous sectors of her economy are properly harnessed and inflation is brought down to single digit figures.

On Thursday, the country's economic experts gathered at the  Finance Correspondents Association of Nigeria bi-monthly forum in Lagos to brainstorm. At the event, Tilewa Adebajo, the chief executive of  financial consultancy group CFG Advisory, stated that the Nigerian economy can hit $6trn if its potential is properly harnessed.

He noted that the potential of the country’s economy was about $5tn to $6tn, adding that if the government could bring inflation down to around 11%, the economy would grow at about 8% annually. Nigeria's GDP has stood between $475bn and $600bn over the last decade but inflation is currently soaring out of control at a whopping 33%, making any form of sustained prosperity difficult.

Speaking on the topic Nigeria’s Fiscal Environment in an Era of Monetary Policy Tightening, Mr Adebajo said the country’s debt servicing now exceeded recurrent and capital expenditures. He added this is coming at a time when Nigeria's foreign direct investment (FDI) is under $1bn, which put the country in a position where it uses the majority of its revenue to service debt.

Mr Adebajo said: “Nigeria’s debt levels are now clearly unsustainable. Add to this $10bn from the 2024 budget deficit and the question begs Is Nigeria heading for the default direction of Ghana, Zambia and Ethiopia? The discussion on restructuring both domestic and external debt must commence alongside the ongoing economic reforms and revenue drive to avoid Paris and London Club imposition.”

In addition, Mr Adebajo suggested that Nigeria should negotiate with creditors to restructure and extend the maturities of debt, allowing for more manageable repayments and reduced interest rates. He added that with a significant infrastructure deficit and growth challenges, Nigeria was set to become the third-largest economy in Africa, behind South Africa and Egypt.

Explaining the current state of Nigeria’s economic indicators, Adebajo regretted that the economy was still in a state of stagflation, amid reforms to achieve a sustainable growth trajectory. He noted that the introduction of the Nigerian Autonomous Foreign Exchange Market and the removal of fuel subsidies had seen the Federal Account Allocation Committee account increase by 130% to over N1tn.

Mr Adebajo added: “FDI is at an all-time low of under $1bn, power transmission and distribution infrastructure are still very poor, impacting industry and economic growth and the macroeconomic situation has declined over the last seven years with a loss of $180 to $200bn in GDP, currently standing at $390bn. GDP growth of 3% is not sustainable for our population of 200m."

Nigeria requires 8% to 10% GDP growth for sustainability, 135m Nigerians are in the poverty trap with 40% unemployment and very low job creation and industrial productivity. Dwindling reserves and increasing credit default swap premiums have resulted in CAA One junk bond rating status for our international credit ratings."

He added, however, that he believed that while the fundamentals of the Nigerian economy remained sound, despite the fact that poor economic leadership in the past had failed to realise potential and grow the economy. Proffering solutions, Mr Adebajo said the government should implement fiscal discipline by reducing non-essential government spending, eliminating wasteful subsidies and improving the efficiency of public services.

If Nigeria had a GDP of $6trn she would be the would be the world's seventh largest economy, just behind the UK, who currently sits in sixth place. At the moment, the world's big six, the US, China, Japan, Germany, India and the UK are the only economies with GDPs in excess of $1trn.