By Merit Ibe
The Centre for Promotion of Private Enterprise (CPPE) has remarked that reforms were imperative to scale up productivity in the non-oil sector of the economy to enhance its contributions to revenue and foreign exchange earnings.
Chief Executive Officer of CPPE, Dr Muda Yusuf, who made the statement following the National Bureau of Statistics report of the 4.03 percent GDP growth in the third quarter, said however, there were lingering concerns around the inclusiveness of the growth and the productivity of the non-oil sector of the economy which accounts for 92.51percent of the GDP.
According to him, these concerns were underpinned by the weak contribution of the non-oil sector to foreign exchange earnings, revenue and quality jobs, adding that it is also underscored by the weak global competitiveness of the non-oil economy.
Explaining that the non-oil sector which accounts for 92.51 per cent of the GDP while the oil sector accounts for 7.49 per cent is a reflection of the dominance of the non-oil sector, Yusuf added that reforms would make the economy more sustainable and stable.
Yusuf said it is also a reflection that economic players were much more active and involved in the non-oil economy. “However, the paradox is that the oil sector still accounts for over 50 per cent of revenue and over 90 per cent of our foreign exchange earnings. This is a manifestation of the low level of productivity in the non-oil sector.
“There is a need to de-risk investment in the real sector of the economy to reduce the dominance of the service sector in the economy. We cannot afford an economy that is very weak in production and the associated competitiveness challenges. This is the sustainable pathway to promote the self-reliance and backward integration agenda.”
The economist recommended further that there should be deliberate policy to plug into the global value chain rather than be consumed in building a wall around the domestic economy.
“There is need for periodic impact analysis of policy measures and intervention programmes to ensure the delivery of desired outcomes.
“There should be regular engagement with stakeholders across sectors to get feedback from investors and stakeholders to gather empirical evidence to enhance the quality of fiscal and monetary policies. Such interactions are also imperative for regulatory feedback.”
Yusuf added that the service sector continues to dominate the contribution to GDP with a 49.65% contribution in Q3. This structure, he said is an indication that productivity is much higher in the service sector compared to other sectors like manufacturing and agriculture.
“Flexibility is easier in the sector. This enables investors to reflect the changing economic circumstances in their business model.
“Challenges of infrastructure, especially roads, railway and power are much less in the services sector. Infrastructure demands are not as high as what you have in the real sector.
“ Investment risk in the service sector is for most part lower than in the real sector.
“ Gestation period for investment is shorter in the service sector than in the real sector.
“There is greater ease of entry and exit.