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How Nigeria’s N170trn dead capital can lift 93m out of poverty - BUSINESSDAY

JUNE 11, 2019

…value 19 times more than 2019 federal budget


Nigeria is so broke yet so rich. If Nigeria leveraged a whopping N170 trillion lying fallow in dead capital, it could lift 93 million of its people out of extreme poverty, create jobs and rely less on expensive borrowing.

Dead capital are assets that cannot be easily transferred, where title is uncertain, so cannot be converted to their most valuable social and economic use, and cannot be used as collateral, so prevent investment in other businesses.

The Nigerian economy slowed in the first quarter of 2019 by 2.01 percent from 2.38 percent recorded in the preceding quarter, data from the National Bureau of Statistics (NBS) show, while the World Bank Group forecast an annual growth rate of 2.1 percent for country in 2019.

This implies that at the current annual population growth rate of 2.7 percent, Nigeria will keep getting poorer and would take about 100 years to double Gross Domestic Product (GDP) per capita at 3.5 percent annual growth rate.

Besides the over 93 million Nigerians currently living in extreme poverty – $1.9 a day – which keeps rising, over 20 million of Nigeria’s working-age population sought for jobs but could not secure one as of the third quarter of 2018, according to NBS data.

To reduce this growing unemployment and extreme poverty, Nigeria’s economy is expected to grow 6-8 percent per annum. This could only be achieved if the country invests at least 26 percent of its GDP size into the economy every year.

At the current annual level of N129 trillion GDP in nominal terms in 2018, a total investment of at least N34 trillion channelled into the Nigerian economy per year would help the nation overcome its poverty and unemployment challenges.

While revenue continues to dwindle on the back of falling prices of crude oil – Nigeria’s main source of foreign exchange earnings – in the international market, causing domestic savings to grow lean, Nigeria would most likely find solace in foreign investment which include both direct and portfolio.

This is because Nigeria “currently does not have enough domestic savings for this – we only have about half the investment required”, said Andrew Nevin, chief economist at PwC Nigeria. But since seeking foreign capital could further worsen Nigeria’s N24.39 trillion total public debt as at December 2018, it challenges Africa’s largest economy to look within and leverage the value in its untapped domestic capital inherent in its economy.

“This means if we could unlock N10 trillion a year of this and invest, it would make an enormous contribution to the Nigerian economy,” Nevin said.

Just like the story of a young man held back by capital to start up his impressive business despite inheriting his late father’s landed property, growth in different sectors of the Nigerian economy has been hampered with the real estate sector being the worst hit.

With Nigeria’s 17 million housing deficit and growing need for housing since every individual deserves the basic needs of life which accommodation and office buildings are part of, the ripple effect of making a right investment in the real estate sector of the economy would translate to creation of employment, a move that could cut down Nigeria’s record-high 23.1 percent unemployment rate.

Real estate creates immense employment benefits, from the construction material through to the construction which requires masons, plumbers, electricians, carpenters, and labourers, and to demand for home items as people furnish their homes, according to PwC.

OLUWASEGUN OLAKOYENIKAN


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