The ambitious target of attaining $1 trillion economy by the year 2030 as projected by the Federal Government may not be realistic if the government does not change its position and rejig certain policies to usher in growth trajectory in the economy.
A financial expert who spoke to our correspondent in Lagos recently, noted that the present economic realities have not encouraged growth given the high inflation rate, uncertainties in foreign exchange rates which have made the local currency, the naira vulnerable to other currencies as major setbacks that may work against the projection.
Dr. Afolabi Olowookere, the Managing Director/Chief Economist, Analysts Data Services & Resources Limited, who made the assertion advised the federal government to tinker with the current policies and speed up infrastructure development to encourage more investments, if it must realise the $1trillion economy projection, reports Daily Independent.
Examining current macroeconomic indicators, Olowookere noted that the country’s gross domestic product (GDP) grew from 2.98 per cent in the first quarter of the year to 3.19 per cent in the second quarter, noting that the forecasts in the short to medium term remained weak.
He said inflation and other socio-economic manifestations, such as interest rates could constitute obstacles to achieving the projection with “Inflation rate rose from 21.82 per cent in January 2023 to 34.19 per cent in June 2024 and declined slightly to 33.40 per cent in July 2024 and further to 32.15 per cent in August 2024.
“Inflation reached 32.15 per cent (YoY) in August 2024, driven mainly by food price inflation and loose financial conditions.
“With continued monetary tightening, IMF projects inflation would gradually decline to 24 per cent (YoY) at the end of 2024 and further to 14 per cent by 2027. Hence, interest rate is expected to remain relatively high in response to inflation and economic instability.
“Naira has depreciated by 71.15 per cent between January 2023 and August 2024, rising from N461/US$l to NI,598.1/US$, now around NI,650/US$. Naira will likely continue to face gradual depreciation pressures due to trade imbalances and inflation,” he said.
He emphasised that managing the economy under the current economic setting would, at best, grow the economy to around $450 billion by the projected 2030 date.
Reflecting on the current GDP position, the financial analyst identified the leading contributors to Nigerian outputs to include Agriculture, ICT, Trade and Manufacturing.
Olowookere, noted that the financial and insurance sectors account for 6.579 per cent of Nigeria’s GDP, but continues as the major driver of economic growth.
“It has remained the fastest growing sector in recent time. The performance of Nigerian economy has been mixed in the last one year.
“The performance of the financial sector and fiscal space has been largely positive. But changes in the real sector of the economy have not been impressive.”
On Nigerian insurance sector’s outlook and contribution to the GDP, Olowookere mentioned that the total assets in Nigeria’s insurance industry grew by 36.9 per cent in Q1 2024 from N2.4 trillion in Q1 2023 to N3.3 trillion.
“Non-life businesses accounted for NI.94 trillion while life businesses contributed NI.39 trillion. NAICOM sees the market as sound, stable, and profitable with a positive outlook.
“The insurance uptake remains stagnant and critically low as only 3.1 per cent of adults (3.4 million) were reportedly covered by a regulated insurance policy, according to EFInA2023 report.”
