Economists at the multinational accounting and management firm, PricewaterhouseCoopers (PwC), have projected Nigeria’s annual Gross Domestic Product, GDP, of USD500 billion when corruption is reduced.
They also stated that a more efficient tax system would boost the economy with annual non-oil revenue of about USD 104 billion.
These form part of the recent report of the PwC released yesterday which outlined about five ways Nigeria could drive inclusive economic growth. These, according to the report include: improving tax collection, economic diversification, eliminating corruption, easing the constraints to business, and increasing labour productivity. On improving tax collection the report said “Nigeria is a low-taxed economy compared to its peers with the tax-to-GDP, ratio estimated at just 8 per cent, the second lowest in Africa and the fourth lowest in the world.
If these could be increased to the Sub-Saharan African economies’ average of 18 per cent of GDP, Nigeria could potentially raise its tax revenues to around $104 billion.
The report further stated: “Higher tax revenues would reduce government borrowing and encourage financial institutions to offer funds at lower interest rates, thereby boosting the real economy and economic diversification.”
The report reiterated Nigeria’s potential advantages for future growth to include a large consumer market, a strategic geographic location as a hub for Africa, and a young and entrepreneurial population. It added: “The first step in harnessing these opportunities requires deliberate efforts to improve value-adding activity in the non-oil economy, particularly in agriculture and the services sectors.”
On corruption, the report stated: “If Nigeria reduces corruption there would be a significant opportunity to boost GDP levels. For example, if corruption in Nigeria could be reduced in the long-run to estimated levels in Malaysia, we estimate that annual GDP could rise by over $500 billion by 2030. Deliberate efforts to reduce corruption will complement the Nigerian government’s diversification drive.”
On ease in doing business in Nigeria PwC stated: “A weak business environment is holding back Nigeria’s economic growth potential and slowing down the pace of development. Nigeria ranked 169th out of 190 countries in the World Bank’s 2017 Ease of Doing Business Index, lower than Niger, Madagascar and Sierra Leone.
“Other than protecting minority investors and getting credit, Nigeria ranks low on all other indicators and will need to particularly focus on improving electricity supply, simplifying the tax collection process and improving trading across borders so as to leverage its position as the hub of West Africa.”
On labour and productivity, the report stated: “Nigeria has the advantage of a large workforce of over 70 million, but the majority are under-skilled. It is imperative to equip workers with the skills needed to keep pace with an economy in transition like Nigeria. Average productivity of a worker in Nigeria is very low at US$3.24/hr relative to US$19.68/hr in South Africa and US$29.34/hr in Turkey.”
Meanwhile, the report also projected the global economic growth to average around 3.5 per cent per annum over the years to 2020, slowing down to around 2.7 per cent in the 2020s. The economists stated that the emerging market growth rates will moderate as these economies mature and the scope for rapid catch-up growth declines.
According to report: “All of these portend challenges for policy makers. In order to realise their great potential, emerging economies must undertake sustained and effective investment in education, infrastructure and technology. The fall in oil prices from mid-2014 to early 2016 highlighted the importance of more diversified emerging economies for long-term sustainable growth.”