June 29, 2021 / 9:09 PM / Ottoabasi Abasiekong for WebTV / Header Image Credit: WebTV
Nigeria's economy is opening up slowly from a COVID-19-induced economic meltdown which saw the economic output dip by -6.10% in Q2 2020 and by a further -3.62%in Q3 2020 before reversing by +0.11% in the last quarter of the year. The slide dragged the fiscal positions of several national and subnational economies down a rabbit hole as consumer spending fell and new investments virtually ceased. In Nigeria subnational economies were just as hard-hit by the pandemic as the national economy.
Dr. Ayo Teriba, a Nigerian economist with special interest in Public Sector Finance believes states must turn fiscal challenges into opportunities and strategic success stories. He highlighted the view at a recent discussion on H2, 2021 economic outlook for States. The fiscal strategist emphasized four pillars that should be adopted to navigate the fiscal turbulence at subnational levels.
According to Teriba, there exists possession-based strategies, place-based strategies, product-based strategies, and people-based strategies that subnationals could adopt to free liquidity and attract foreign direct investments (FDIs). Teriba noted that "FDIs are not moved by emotions but deals. Putting a competitive deal book on the table would lure investors like bees to a flowers sap". The economist insisted that the name of the game in attracting foreign investment capital was the presence of a digital data hatchery that would enable investors rummage through alternative investment opportunities and ascertain comparative risks and returns.
He noted that for the possession-based strategy, states need to look inward and explore turning corporate assets, companies, patents for licensing, land, and buildings into valuable assets that generate fairly predictable cash flows. His opinion was that several states do not know the market value of their corporations and it was important to leverage the capital market to list companies to determine asset values.
The economist was of the view that the more a state's corporate assets turn to financial assets, will boost revenue because of the securitization process through the market.
He added that Lands and buildings could be financialized in the way the United States transformed its real estate sector by unlocking its liquidity. Speaking on the concept of place-based strategies, Teriba called on state governments to give priority to transforming their city centres from their business districts to their inner cities.
This would involve improvement in the road network, effective urban renewal plans, providing picnic centers, top-end eateries, improved signages, ensuring a clean and secure environment. He observed that governments in developed economies are making a fortune from the transformation of city centers and inner cities.
In the area of product-based strategy, he noted that all the states in the country, were endowed with resources that key into Agric and Industrial manufacturing and it was time to unlock the potentials for growth.
The CEO of Economic Associates tasked states to identify the value of the products they are endowed with and showcase how they plan to develop them to commercial value. He added that by discovering viable products with the provision of incentives, states would attract real-time foreign and domestic investments.
Teriba while discussing people-based strategies emphasized the need for states to develop robust human capital development plans, that promotes skills development to create a productive population.
This would require significant investments in the education sector across all the 36 states of the federation. He cited examples of India, China, and the Philippines as countries that have invested heavily in developing their human capital.
Considering the gradual recovery of the Nigerian economy, he advised states to halt any plan of hiking tax rates but encouraged them to subsidize the income of citizens.