The Three Problems Blocking Nigeria’s Economic Breakthrough - Bismarck Rewane

Added: 2026-05-31

[00:00:09]Welcome back to Business Week on Arise News. 3 years into his presidency, Tunibu's shock therapy reforms have rewritten Nigeria's macro story. We know what the numbers are. I'm not going to get too much into that because I have the person who's going to help me unpeel back the layers over the last 3 years and it's none other than Bismar Rawani CEO of financial derities company. Help us read three years of data and make sense of it. I called it shock therapy because it really was fuel subsidy narrow float you know tax reform all at once. Uh but then the other numbers tell a different story the poverty figures.

[00:00:46]But what do you make of all of it?

[00:00:49]Well, the reality is that there's sequencing, >> there's policy change, there's institutional reform, and then there's impact and lags.

[00:01:00]>> So, the way to look at it is that when you look at the numbers, 2023, your nominal GDP was 229.

[00:01:08]>> We have the figure on screen, the data, >> $229 billion. M >> it's gone up all the way to 431 no 431 trillion naira >> now that is huge right but has this growth translated into welfare and happiness and prosperity for the people no so the way to look at it is that GDP per head >> was as $2,000 in 2023 it has come down to $1,083 and has gone up to 1,224.

[00:01:45]>> So basically um what has happened is that these reforms have increased government revenue >> right >> significantly.

[00:01:54]What has the government done with it?

[00:01:57]That's the point. So revenues high fed high right uh but quality of life still.

[00:02:07]>> So is that a problem of the quality of spending? quality of spending >> of the revenues >> and we and for us economists we look at it from two angles. There are injections and leakages. Injections are when people invest when government invest >> then you have that multiplier effect.

[00:02:25]>> But leakages are withdrawals from the system. Leakages have a negative multiplier. So what has happened is that because institutional reform has been delayed, >> right? We are now beginning to see massive leakages in the system right and those leakages are having a negative multiplier and is ending up leaving the people stranded.

[00:02:46]>> So that is the point. So how do you deal with that? We can talk all we long want about the problems. We know what the problems they are well documented.

[00:02:55]There's in fact what we call um analysis paralysis. Right. Okay.

[00:03:00]>> Now let what to do about it. Now you see that if you look at the income per head is increased by a factor but also the debt per head.

[00:03:11]>> Yes. Let's chart right at the bottom of the >> bottom. So you have debt per head has increased from $449 per head >> to 498 to $500 per head. Right? So when you see that the external reserves have increased from $32 billion to $50 billion >> but your total debt has gone from 108 all the way to 141. So it washes out >> right so increase in reserves increase in debt increase in spending but no corresponding increase in productivity.

[00:03:46]And you know your point about the leakages is interesting because I'm I'm like these leakages plugging them will be critical. I'm even looking at the fiscal deficit here which was one of the most shocking lines for me.

[00:03:57]>> We've gone from a deficit of about 11.3 trillion >> to now almost 34 trillion.

[00:04:03]>> Yes. But imagine if you didn't do what reforms your deficit would have been three times this.

[00:04:11]>> Right. So, so it's necessary but it's not sufficient. Some of the policy changes are necessary but not sufficient.

[00:04:20]>> What makes a necessary condition become a sufficient condition is the ability to execute efficiently and ensure that you track and monitor the impact.

[00:04:29]>> Absolutely.

[00:04:30]>> What's happening now is that we're not seeing the tracking of the impact and the lags are getting longer.

[00:04:36]>> Absolutely. to and that is why today when we've had this oil windfall because of what's happening in Iran, we are not seeing the impact now because we've just gone into a normal mode of spending and spending inefficiently. So there's suboptimal suboptimality of spending and unfortunately we're going into an election season. So you can't even begin to to interrogate the spending anymore because all the most of the spending will go some of it great but some of it will leak because of >> so so you know looking at all these things together some would argue that perhaps the president is optimizing for macro stability and foreign investor investors coming at the expense of broadbased growth. Do you see that kind of feature in terms of the nature of policies being pursued? No, it's not a zero sum game.

[00:05:27]>> You need that foreign investment. You need domestic investment, right? And you need to see the impact and you have to manage it efficiently.

[00:05:36]>> What is happening today is that >> if you look at I think you were speaking with Ali.

[00:05:42]>> Now look at Nigeria's stock market. That data is not here. Stock market capitalization was >> 60% yet today. It was 24.

[00:05:50]>> No, look at 2023. We're talking about almost about 70 trillion naira.

[00:05:57]>> Today we are at 160.

[00:05:59]>> We more or less have doubled and yet we've not even listed the refiner.

[00:06:06]>> So you it tells you that investors see the opportunities and are basically expecting institutional reform to see that people can execute. Institutional reform means the judiciary so that if there are disputes people can can you know the remedies to disputes. So all of this mean a lot. But if you go back and see what the price of a liter of petrol in 2023 was maybe 200 or 300 naira. Today we are at 1,300.

[00:06:37]Right. Okay. But we have supply. So what has happened is essentially if you look at the economy there's been a what we call a shift in the aggregate supply curve in certain products in foreign exchange there's a shift in the aggregate supply curve so it's now priced efficiently and you've seen it's been stable and appreciating >> right >> in the money markets it's priced properly so you can see it above the rate of inflation the price of petrol the price of diesel and so once you shift the aggregate supply curve in you know reform the institutions um people are guaranteed the supply that sector is in equilibrium. M >> so the sectors that are not in equilibrium which is a big problem here power >> indeed >> right and to some extent managing fiscal resources of Nigeria in other words also known as corruption right >> so because power then you have security all of this has have at the bottom of it corruption so but if you can take all of this in the same time deal with then you will see that all of a sudden you find the economy in equilibrium and then you can now deal with what we call what we can call a fair wage >> because in all of these things you know wages have not actually caught up with prices.

[00:07:57]>> Yeah. So the way I look at it and you look at the economy, we have to deal with that and we have to come to terms with the fact that if we can actually move the aggregate supply C especially in power you're talking about uh Dangote going to 20,000 megawatt >> if you don't privatize the transmission lines and all that you're not going to get that far. But if you have special packages like this 20,000 megawatt targeted at certain areas in say Lagos, Ogo and one other area, it is expected that the power that was coming from the grid to these areas will now go to the public >> and that 20,000 megawatt typically you can say that every,000 megawatt of power will increase GDP by about 0.25 to 0.5.

[00:08:45]So if you did 20,000, you're talking about almost four or 5% increase in GDP.

[00:08:50]So if you add 5% GDP growth >> to the current 4%, you're already at 9%.

[00:08:56]That is that's a miracle.

[00:08:58]>> Yeah. So I have to ask you because you referenced Dangote's uh plan for 20,000 megawatt. You know, >> the government's fiscal focus on stabilization in some ways has starved us of the capital investment we need for infrastructure. So with the Dangote example, are you saying that the private sector is the one going forward that has to invest in those infrastructure projects for us to see any progress?

[00:09:22]>> No. The way I see it is that the federal government of Nigeria is 49% shareholder in LNG.

[00:09:28]>> They're benefiting from it. We have LNG and it's profitable. It's giving revenue. The Nigerian federal government or Nigerian state government can invest as investors without trying to >> control it. No, no, no control. Take a back seat, but enjoy the benefit. Look at Le Petrochemical. Yeah.

[00:09:47]>> River State government has been benefiting from it from the for the past maybe 20 years.

[00:09:52]>> They're getting a revenue and there's there's hardly any crisis at the le because the people know that that's the golden goose. So if you say Nigerian government NPC is trying to take exercise options in the Dangote reference of course. Right. So you if you if you go through that path and see that everywhere there's been massive investment and solving the problem >> then people have come to accept that okay I'll buy my diesel at 1,800 is expensive but maybe I use my generator more efficiently.

[00:10:28]>> Uh they're doing something on petrol on a vision well you can see all of that happening >> right? So fertilizer. So I I see that there's a market solution, right, which is economic optimality, no problem at all. And then you now begin to look at inflation, right? Which is where I'm I'm going to spend a few minutes.

[00:10:54]>> Inflation is um the disinflation that we've seen inflation has come all the way down from 30% depending on what methodology you use now to 15.6 or 15.

[00:11:04]So we go up to 16%.

[00:11:07]Compared at a time when the US inflation is going up going from 3.8 to about 4%.

[00:11:12]It means that we're doing some things right. Two things we're doing right. One we are managing money supply. Two we are keeping the price of petrol and diesel more or less flat.

[00:11:22]>> Yeah. Now but the big problem we have today is that if anything changes right the we are importing commodities at prices and cost lower than the cost of producing them. So you'll find that whilst you are bringing down prices artificially because of imports right the guys who are producing locally are going out of business. Yes. Now, so you are going to have high unemployment, suboptality, but you will have artificially low prices.

[00:11:54]>> This then brings back that conundrum of growth versus uh development. But I I wanted to ask you because you you mentioned some of these dynamics now, if all prices fall back significantly. I don't think in the near term we're likely to see that. Do the reforms collapse or have there been enough structural changes for us to see some durability in the current trajectory?

[00:12:15]Well, you see in the current environment you're either insulated or isolated.

[00:12:21]Now Nigeria is partially insulated.

[00:12:24]>> Okay.

[00:12:25]>> The buffers that we need, there are buffers in the external reserve but also we have debt >> and definitely Nigeria needs to go to the market again to raise additional debt. Now the question is that the price of oil earlier this year we're talking about maybe average of $60 a barrel. Now even if it comes down let us say with all sense of modesty we come down to say $80 a barrel.

[00:12:54]>> At $80 a barrel we are about almost 50% higher than what we're projecting at the beginning of the year. But what what have we done with the the windfall >> and what has happened to the people who have the citizens who are having a shortfall income shortfall?

[00:13:11]>> It is recycling this money very quickly and efficiently >> with minimum leakages that would would solve the problem >> especially to the infrastructure investments.

[00:13:18]>> Absolutely. So now, so you see what you have politicians, election spending, this is um, you know, sound bites.

[00:13:29]People say that you if you talk about the political solution to an economic problem. No, the reality is that in politics and that we're in the season, it's all about the cleanest dirty shirt, right? It's not there's no >> kind of oxymoron, >> right? So that that's what we are. So we have we have to assume that all politicians are the same no matter what happens right but the private sector solution of investment and converting where we should focus on focus on >> hopefully the conditions remain right for for that private sector investment now with every reform cycle you know you always ask is this pain temporary or permanent now at year three looking at the GDP growth do you think we can break out into that 6 to 7% >> growth >> band for growth cuz we're currently in the 3 to 10% send back.

[00:14:17]>> I I've just told you about the power because the small and medium scale enterprises, your artisans and others will benefit from power. But if you're pricing gas >> the way it is because right now we are not this tariffs are not cost reflective, right? So if you're pricing gas efficiently and doing all of that then you can get supply. Once the supply is there and the quality of supply is there in power, the quality of supply is there in petrol and diesel, the quality of supply is there in other things, you can then begin to look at the wage structure to see whether people can right and take advantage of the African continental free trade agree area agreement. Right? So I asked you before I got in here that what are we doing about Ebola? Right? That's another big risk that and everybody's out in the Congo for the African Development Bank meetings.

[00:15:09]>> Yeah. In the Congo, Brazville. Brazil >> which is next door to the DRC.

[00:15:12]>> No, there's only one little river that separates them, right? So >> there's no question about it.

[00:15:18]>> That would be a a sort of black swan for us regionally.

[00:15:21]>> No, no, but I I'm saying that but this particular strain does not have there's no um what do you call it? No vaccine for it. um they say it's not as lethal.

[00:15:32]It kills but not as much as the prior time. But the African economy is more integrated now than it was in 2014. So we have to deal with that.

[00:15:41]>> Yeah. So having said that the way I see it is that post election right Nigeria's investment in GDP if we do the power reform that we're trying to do right in in addition to the forbearance >> we get power up by maybe 10,000 megawatt from it current level >> that gives us at least a 3 or 4% growth bump there uh >> added on top of what we have what we have So we're looking at 6 to 7%.

[00:16:13]>> Yeah, we can we can begin to do that in 2027 2028.

[00:16:19]>> At the same time, because the currency is stable and we have created an efficient market in the foreign exchange market both technically and fundamentally, then we begin to see that stabilize and therefore we will not suffer a massive devaluation of the currency and prices begin to be stable.

[00:16:37]But now how can people afford? This is where I was coming from.

[00:16:41]>> Right. The affordability crisis. We have an affordability crisis. And the difference between the rich and the poor. I don't say I would say the rich and very poor because there's a poverty issue. There's a security issue >> and then there's an income apart from income inequality. You have income opportunity.

[00:17:01]>> The the data is 140 million Nigerians are now below the poverty line and real wages have actually collapsed.

[00:17:07]>> Yes. M >> so it and that's the point because it depends on from from what prism you're looking at it >> if you're in government circles where policym people talk about there are many things we are doing we are but those things are not having impact and it's unfair to look at just the government from that the federal government's share of total revenue is about 53 54% on a good day so the state government the local government and the level of fiscal rascality that takes place at the state and local government level is it's open season out there. It's barbarians at the gate now. So how do you deal with that?

[00:17:47]Because behind all of the insecurity problems you have is the corruption problem because you think you are spending but you're not getting anywhere.

[00:17:56]>> And as long as that happens and every you know we don't deal with the corruption level and the leakages you're not going to get the full impact of the injections. And so it's it's a it's a tall order, but I think that I I'm expecting that after the elections, the government will settle down and call a spade a spade and then go ahead and deal with professional issues professionally.

[00:18:25]>> And so so essentially, Mr. story one as we bring the program to the end. You seem to be scoring this government about you know sort of 50% out of 100 but you also seem to almost have resigned our fate over the next 12 months. You're already looking at post elections because you're saying we're not likely to see any major progress in the next 6 to9 months as a result. What what I what I'm saying is that the momentum of the policies and all that will slow down >> will slow down but it will see us through but >> there's nothing you can do in a political season because we don't know what is the predictables versus the imponderables >> and therefore that we don't know so let us assume that you know that what we are seeing is that again politics I said at the beginning is that the cleanest dirty shirt is what we have all politicians are going to tell you what you want to hear, >> but they do what they want to do.

[00:19:18]>> Indeed. Well, you know, I I would describe this as some cautious optimism.

[00:19:22]Your analogy of barbarians at the gate.

[00:19:24]Hopefully that gate stays stays erect and gets us through this election cycle.

[00:19:30]Always so fascinating and interesting and insightful to be hearing your views, Mr. Bismakan, CEO of financial derivatives company and one of Nigeria's most renowned economists. If you want to continue the conversation, please do meet us online so we can continue any topics of interest to you. That's all we have time for on business week this week. I'm Ro Akin with Fani. Do have a lovely rest of the weekend.