The Chief Executive Officer of the CFG Advisory, Tilewa Adebajo, has said that for Nigeria to tackle its current inflation problem, the government must diversify its revenue base in order to bring in more funds for the government to grow the economy.
Adebajo made this statement in an interview with ARISE NEWS on Friday, where he also said that the government does not have the resources to invest in infrastructure, it has to bring in the private sector and attract Foreign Direct Investments (FDI).
Speaking on the recent report that put Nigeria’s inflation rate at 27.33 percent as of October 2023, Adebajo said that inflation is a result of cause and effect, as inflation has always fluctuated in Nigeria over the years.
He said, “What is the impact of inflation? Food inflation is the impact, food prices, the removal of the subsidy, and of course, 30 trillion of the ways and means financing. So, the effect of all these ways and means financing is being reflected in the inflation numbers. So, it’s not a surprise, so because you know, it’s cause and effect. But of course, we cannot continue to look at inflation in isolation. We have to take a look at the impact of inflation on interest rates, and we have to take a look at the impact of inflation on GDP growth, and that’s the sort of modelling that we have done in terms of the research that we are presenting today.”
He then revealed that in Nigeria, GDP and inflation have an inverse relationship. He further explained this saying, “In 2015, Nigeria’s economy grew about 8.5%. At that point in time, inflation was between 9 and 11%. Currently, inflation is at 27% and our GDP growth is at 3%. So, there is an inverse correlation between inflation and GDP growth. So, if you cannot grow your economy, you simply cannot afford inflation at 30%.
“So, Nigeria has, you don’t even have to go into single digit inflation, because Nigeria has proven that with 11% inflation, we can grow our economy at close to 8%, 9% is what we’ve done. And I think the correlation is there over a period of time, so, there’s certain things that we need to look at in terms of that relationship. So, that has been proven from the research that we have just done. So, in order for us to grow the economy and get out of stagflation, we need to tackle inflation.”
Adebajo then gave his opinions on what the government needs to do to grow the economy saying, “For me, clearly, what we need to do to make the economy productive is to invest in our power infrastructure. We have a problem with the transmission grid, and I think that if we can solve the problem of power, a lot of things in this country will sort itself out.”
He mentioned that Nigeria was spending a lot of its revenue on debt service, and said, “If all your resources are going towards debt service, there is very little room for recurrent expenditure. So that’s why I think it’s important that we need to begin to diversify our revenue base. [The report said] In 1977 with 2.5 million barrels of oil production for the first time we have not been able to cross that mark and currently oil production is at 1.3 million barrels, maybe 1.8, but what it says is that we have not invested in our oil and gas sector. So, it is also important that we need to invest in our oil and gas infrastructure, and it’s not something that government has the money to do.
“You need to bring the private sector in, you need to bring foreign direct investment in to make that investment in infrastructure because government does not have the resources anymore. So, concessioning’s are very important. We have to look at all the assets that we have, and we need to leverage on those assets, concession them out in an effort to raise revenue, because government cannot do anything anymore as we speak, so, everything has to be private sector led.”
Adebajo also said that he was happy with what the Minister of Finance, Wale Edun had said about Nigeria not being in the position to borrow again, saying, “While you might say your spending compared to your GDP or budget loans are low, it’s not the problem. All those things you are talking about, debt to GDP ratio- the debt management office unfortunately has been compromised from the ways and means financing proposition.
“Right now, I think what the Minister of Finance is doing is now putting the reality on the table to the senators, very clearly telling them that we cannot continue. America’s debt to GDP ratio is 101%, but America spends 8% of its revenue on debt service. Our own debt to GDP ratio is maybe on the fifties, but we are spending 98%, as the minister has said, of our revenues on debt service. So clearly, it’s not sustainable.”