Giant of Africa: how Nigeria can meet the SDG targets by 2030

UGO
UGO
Jul 20, 2017 · 4 min read

Following a statistical rebasing exercise in April 2014, Nigeria became Africa’s largest economy, with its nominal GDP estimated to be $510 billion. Despite the nation’s vast wealth, there still remains widespread poverty and underdevelopment. In fact, according to the CIA World Factbook, 70% of the Nigerian population lived below the poverty line in 2010.

The Sustainable Development Goals (SDGs) were adopted by the United Nations in 2015 to replace the Millennium Development Goals (MDGs), which expired in the same year. The SDGs are a group of 17 goals and 169 targets with a 2030 deadline, focused on guiding governments’ efforts to achieve economic, social and environmental development.

As you would expect, such a comprehensive set of goals will require a lot of resources to be steered towards their achievement. While the financing required to achieve the goals exists in local and global markets, the challenge remains channeling them towards development projects that will ultimately lead to meeting the SDG targets.

Challenges

Bad governance remains on top of the list of challenges hindering Nigeria’s ability to raise enough finance to meet the targets. The lack of transparency spread throughout the political system means that billions are lost every year to corruption — billions that can be used to mobilize trillions of private investments in development projects.

Studies show that up to $50–60 billion in illicit financial flows leave Africa every year. In Nigeria, the main source of such flows is the mis-pricing of trade invoices (under-invoicing). There’s also widespread tax evasion, as tax experts find loopholes in the system. The fact that tax evasion is rampant in a country like Nigeria, where there already exists a large untaxed informal sector, means that the government misses out on a lot of potential tax revenue.

A third challenge is the ease — or unease — of doing business in Nigeria. In June 2016, The World Bank ranked the Nigerian economy as the 169th in the world in terms of the ease of doing business. Nigeria was also ranked as the 138th, 180th and 182nd economy in relation to starting a business, getting electricity, and registering property, respectively. This hinders the government’s ability to generate additional revenue from micro, small and medium enterprises (MSMEs).

Room for improvement

In the midst of these challenges remains room for improvement. According to the Heritage Foundation’s 2015 “Macro-economic Data report”, Nigeria’s tax revenue to GDP ratio stood at 6.1% in 2015. This ratio represents the percentage of the Gross Domestic Product (GDP) that the government is able to collect as tax in a year. For comparison, the average ratio of the Organization for Economic Co-operation and Development (OECD) member countries was 34.8% in the same year.

This gap represents room for improvement through the employment of better tax administration practices. It also represents an opportunity for the government to generate more revenue that can be allocated towards development projects.

What is required now is the political will to grasp this opportunity, and carry out the necessary tax reforms that will enable the government to generate more tax revenue from Africa’s largest economy. Any such tax reform should be geared towards achieving a more effective tax administration, by facilitating compliance, enforcing compliance and improving governance.

Looking forward

The opportunity exists to work with the Multilateral Development Banks (MDBs) — like the World Bank and the African Development Bank (AfDB) — and the International Monetary Fund, with the aim of ‘financing for development’. The business model of these institutions involves leveraging and multiplying capital, such that for every $1 capital paid in by shareholders, $2–5 is allocated towards development financing annually.

By teaming up with these financial institutions, the Nigerian government can take advantage of their offerings, which include working directly with countries, providing financial support, and sharing their expertise in the form of technical assistance and policy support.

There is a lot of work to be done, especially on:

  • Domestic Resource Mobilization (DRM), and effective allocation — which involves targeting the poorest people and communities to ensure that the funding reaches where it is most needed. DRM is particularly important, as domestic public resources remain the greatest source of development finance for developing countries, including Nigeria.
  • Improving the investment climate to attract and mobilize private investments. The MDBs provide assistance by ensuring macroeconomic stability through policy support, developing bankable projects, and mitigating risk. They also use several instruments to mobilize resources, including investment and project loans, equity investments and risk mitigation through guarantees. Guarantees are third party agreements to pay the lender in a situation where the borrower is unable to service debt.
  • Taking advantage of Nigeria’s large supply of renewable energy resources, and Funds looking to invest in projects that tackle climate change issues. An example of such a fund is the Green Climate Fund (GCF). The Green Climate Fund is a fund within the framework of the United Nations Framework Convention on Climate Change, founded as a mechanism to assist developing countries in adaptation and mitigation practices to counter climate change.

Conclusion

The SDGs are quite comprehensive. As a result, our ability to achieve them will depend on the levels of unprecedented cooperation among the MDBs, private sector, civil society, academic organizations, think tanks and governments. What we need to do now is work together to ensure that no one is left behind as we fight to end extreme poverty and boost shared prosperity by 2030.

Photo: The Lekki-Ikoyi Link Bridge, a recent infrastructure development project in Lagos State, commissioned on the 29th of May 2013 by the former Governor of Lagos State, Babatunde Fashola. Source-Independent Newspapers Nigeria

)
Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade