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Much ado about Nigeria’s economic recovery and growth plan



Last year, when Africa’s largest economy Nigeria sunk into its worst recession ever, an immediate economic recovery plan was expected from the government in response to the critical situation. Unfortunately the sluggishness that has characterized the President Muhammadu Buhari administration manifested itself again.

A wholesome strategy for charting the way forward did not come until April this year – 4 quarters after official acknowledgement of the recessive status of the economy. In classic Nigerian style, the 4-year Economic Recovery and Growth Plan (ERGP) was launched with much pomp and fanfare. The event was a star-studded one.

The president’s cabinet and anyone you would imagine in the economics and public finance nexus was there. The ERGP had a three-thronged approach supported by enablers and a clear delivery plan which involves restoring growth through Monetary and fiscal stability, external balance, economic growth and diversification; Nigeria Investment in the Nigerian people – Health, education, social inclusion schemes, job creation and youth employment schemes; Building a globally competitive economy by Improving the ease of doing business, investing in infrastructure and promoting digital led growth.

There’s just a little problem. The ERGP is expected to return the growth of the nation’s economy by 2.19 percent in 2017 and 7 percent by the end of the Plan period in 2020– 2 years after the president’s current tenure. For this bogus plan to materialize, Buhari needs to return to office or his party All Progressives Congress (APC) win at the 2018 presidential elections since there’s never a continuity of programs when there is a change of government.

But even under the People’s Democratic Party (PDP) rule between 1999 and 2015, there wasn’t a continuation of program. The President Olusegun Obasanjo government from 1999 had a financial bolstering plan, paying off Nigeria’s foreign debt and saving up nearly $30 billion in Excess Crude Account from oil earnings. But during President Jonathan’s government, the savings were squandered and Nigeria returned to debt. Now, 66 percent of the country’s earnings services foreign debts.

Feyi Fawehinmi, one of Nigeria’s leading economic commentators says it is impossible for the government to achieve 7 percent economic growth by 2020 as planned. On his blog he wrote:

“One of my favourite American economists, Tyler Cowen, recently wrote a book where he complained about how America had become a complacent country. He illustrates this with data showing that in 1962, only 30% of the American government’s spending was spoken for before the fiscal year. By 2014, that number had reached 80% and is getting worse. In other words, all sorts of interest groups and entitlements have claimed so much of government spending in advance that it is very hard for the government to do ‘big things’. Nigeria today is not much different. 66% of current government revenues goes toward servicing debt. Typically, 80% of the government’s budget is spoken for before it is passed by salaries and other recurrent expenditure. The crucial difference is that America has all those roads, bridges, electricity and railways it had built before getting to the point of stasis.”

Nigeria is going to need to do some big and painful things as shock therapy to achieve high growth trajectory again. The alternative is stasis. The most disturbing risk of the ERGP 4-year plan are the very managers of the economic move. Many know the antecedents of Governor of the Central Bank of Nigeria, Godwin Emefiele.

He was Nigeria’s largest loaner Zenith Bank’s MD who was whisked in by the previous government when the then CBN governor Sanusi Lamido blew the whistle of $20 billion theft in government coffers. No one can vouch, except those who recommended him as elections moved close for the Dasuki scandal job, that Godwin was ready for the increasingly complex world of Central Banking.

It is a well-known secret, that Godwin Emefiele held an internal meeting with Zenith Bank staff the weekend after his appointment, weeping for joy. He had never expected he would assume such elevated position and responsibility. Upon election, many expected that Buhari would have had a tea meeting, early on, telling him confidence was lost and he should honourably resign. Instead, he kept him.

When Buhari was going to bring in a fiscal manager, he found Kemi Adeosun, a local state Commissioner of Finance, at a time Nigeria was roaring into a slump.

One would not have expected anything less than a proper Goldman Sachs or hedge fund star, a brilliant academic, ready to put calls across the world. While it was good for Minister of State for Finance to worry on cost of pencils and erasers in government, this is Nigeria for heaven’s sake. For a country the calibre of Nigeria, her Finance Minister’s profile can’t be beneath Okonjo-Iweala, the country’s former Minister of Finance and World Bank MD, or Olusegun Aganga, Oby Ezekwesili, etc.

A lot of people even anticipated that Okey Enelamah (who led Nigeria’s arguable biggest private equity, the African Finance Corporation) would be Finance Minister, but Buhari surprised everyone, sadly. Immediately oil price started tanking low, the eggheads at IMF saw it; they saw the weaknesses in the economy.

There were no savings buffers, poor Niger Delta engagement to firm oil production and the dependence on oil was evident to all. When Christine Lagarde landed, it was clear that she came for serious business.

But Nigerians would prefer to be emotional than face the facts. The economy was quietly sinking but the idea of accepting IMF’s help carried a stigma (you can’t blame the correctional days of Structural Adjustment Program (SAP)). Nigeria’s economic team brought out Powerpoints and thick plans to affirm that all was right.

Christine’s words: “Frankly, given the determination and resilience displayed by the presidency and his team, I don’t see why an IMF programme is going to be needed..” However, Kenya that is not vulnerable to oil shocks put up a standby $1.5bn facility in case of currency shocks. Rather than being honest and accepting the real situation, some people started selling Indian $15bn cash advance to Nigeria and Chinese Yuan support.

The monies that would have changed hands in consultancy would be unbelievable. Seun Onigbinde, CEO of Bill and Melinda Gates Foundation-backed BudgIT and a vocal economic transparency expert suggested that he “would have gone for a $10bn IMF facility—$5bn for currency stability & $5bn for import substitution plan heavily invested in machinery that completes Nigeria’s value chains and industrial parks.

“This government is not honest on the hole we have sunk in or they weren’t smart to see it,” he concludes. Understandably, the government has finally rolled out a recovery plan because investors have affirmed that they won’t borrow Nigeria $30bn if she can’t produce an economic plan. That $30bn has a pile of Chinese money that won’t come in cash but in infrastructure.

If the Chinese build all the railways and roads, plunging the country in deeper debt, will those infrastructure projects generate sufficient revenue to offset them? If Nigeria borrows $30 billion when her current exposure is $24 billion, is the government not heightening the economy’s vulnerability to currency crisis? The challenge here is that current government is in its final lap of governance.

The cacophony for next year is for the elections and placement for politicians. Where is the long term and institutional approach to see this entire plan through? Nigeria won’t be great if government approach is like someone dieting and checking the scale every hour.

There has to be a long term shot to this. Who will do the work? The risk exists – it is that of getting that World Bank cash, Chinese Roads, doubling our foreign debts but the government undoes everything with clueless leadership in another four years. If the government doesn’t institutionalize this, it falters again.

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Nigeria’s economy to experience higher growth if liquidity can be unlocked



“Unlocking Liquidity will restore growth and stability for Nigeria,” Ayo Teriba, Economist and CEO, Economic Associates.

If Nigeria is to achieve sustainable economic growth and stability in its economy, unlocking liquidity must be given top priority.

Dr. Ayo Teriba, an economist and CEO, Economic Associates, made explained this point at the Q2, 2019 one-day quarterly conference on Nigeria’s economic outlook in Lagos.

He decried the fact that Nigeria was at the low end of the liquidity ladder in Africa, arguing that the situation had to be addressed urgently.

Liquidity he pointed out was critical to increasing the nation’s external reserves that serve as a buffer against shocks in commodity prices.

One of the ways he believed Nigeria could improve its liquidity, is by attracting capital inflows, which was important considering the revenue challenges of the government.

In the evolving race for global liquidity, Teriba made a strong case for the alignment of policies to strengthen liquidity.

According to him, “The Federal Government is focused on growth, while the Central Bank of Nigeria is concerned about stability. There is no express concern about liquidity”.

He was of the view that liquid markets are about making sure that there are buffers against shocks, and for Nigeria, having more capital inflows was important than outflows.

Speaking further Teriba identified the various options for unlocking liquidity in the economy, which include;

Privatization: Which implies partially selling its equity across all State-Owned Enterprises, SOEs to retain a minority stake. (Brownfield Foreign Direct Investment Inflow)

Liberalization: This implies the development of idle land and building and unbundled infrastructure projects. (Greenfield Foreign Direct Investment Inflow).

Commercialization: Getting rental income from wholesale leasing of idle lands and buildings.

Securitization: This suggests securitization of future income streams from all financial and non-financial assets.

Teriba called for a strategic reform of revenue generation in the federation and across all tiers of government.

The economist stressed the need for Nigeria to move beyond exports, taxes and debts towards rental income and equity. He stressed that Nigeria had a lot to gain from securitizing its assets.

Some of the assets he identified for the government to consider are the following;

Corporate Assets: Which are government wholly-owned or majority equity holdings in State-Owned Enterprises, SOEs.

Financial Assets: Which represent the government’s minority equity holdings in Joint Ventures and other companies

Tangible Non-Financial Assets: Taking the steps of commercializing and securitizing idle lands and buildings, amongst other assets.

Giving further insight on capital flows, he identified foreign direct investment, FDI and Remittances as the major types that Nigeria should utilize.

He gave an example of Saudi Arabia that has developed a privatization plan worth $ 100bn, which will bolster the liquidity of the Gulf nation.

Dr. Teriba also referenced the Liberalization and Privatization plans of India, that has positioned the densely populated nation, as one of the leaders in FDI.

The CEO of Economic Associates was of the strong view that Nigeria needs a robust strategy to attract more foreign investments to compensate for lost export revenues.

In an interactive session with participants, he called on Nigeria to explore how it can leverage the Diaspora remittances, noting Africa was one region that had a challenging environment for remittances. Currently has a foreign reserve of approximately $45bn which can triple within a year, if it prioritizes unlocking liquidity through the various capital inflow options available.

Coming into 2019, considering various views on FX stability and expected calmness in the polity post-election had revealed an improvement in economic growth over the year. Notably, growth was projected to be anchored on stronger performance in the non-oil sector as the lower investment in the oil sector– save for the addition of the Egina oil field – amidst shut-ins at key oil exporting pipelines will result in slower growth in the oil sector and by extension a much slower contribution to overall GDP. Notwithstanding, the optimism of stronger contribution from the non-oil sector, has boosted the impact of the innovative programmes by key industry players in the ICT on the overall subsector growth. Reflecting the improved activity in the ICT subsector in Q1 19, coupled with recovery in both the Agriculture and manufacturing sectors, economists expect a much robust growth in GDP over 2019 by 20bps to 2.2% YoY (FY 18: 1.9% YoY).

Starting with the harbinger of growth, some economists retain their surmise on most sub-sectors in the nonoil territory with slight changes to services – driving a nonoil sector growth of 1.8% YoY (FY 18: 2.1% YoY). While some made an upward adjustment to the growth assumption for ICT subsector, the high base of growth in the prior year, the lull in the real estate and slower growth of credit creation in financial services is expected to constrain the rate of growth for the overall services sub-sector. In the ICT subsector, the upward projection to the assumption emanated largely from the now telling impact of the innovative customer acquisition programs. For financial services, notwithstanding the recent policies aimed at enhancing private sector lending – there are not much traction, as banks remain cautious in growing their risk assets. Lastly, there’s a believe that activities in real estate sector would remain muted given its oversupplied state. That said, activities in services is expected to expand modestly by 1.7% YoY (FY 18: 3% YoY).

On Agriculture, there is an optimistic view of a recovery in crop production due to favorable weather and government intervention aimed at curbing ongoing conflict in the northern region. On the government intervention, the RUGA (rural grazing area) settlement program was recently proposed, which requires each state to provide lands for the herders to grow their cattle. Though the program was suspended due to kickbacks from various states, there are positivity on some form of concession by the State government given the critical nature of the sector. Further buttressing the point is the ongoing discussions on a peace pact between the Zamfara state government and armed bandits in a bid to improve farming activities in the state. That said, economists expect the sector to grow by 3.2% YoY (FY 18: 2.3% YoY).  Elsewhere, while the general elections slowed activities in the manufacturing sector, some economic pundits see some traction in the sector beyond Q1 2019. Further upside would be payment of the minimum wage approved at the start of the year and successful implementation of the presidential order to clear the Apapa gridlock which had been a strain on producers over the last two years due to difficulty in transporting raw materials. That said the manufacturing sector is expected to grow by 2.13% YoY.

In the oil sector, it was highlighted at the start of the year that the plausible risk to crude oil production would be the resumption of militant attacks during the first quarter of 2019 should the electoral process get violent. With militant attacks out of sight, there is no impending risk to overall production asides minor pipeline leakages. Asides that, additional 200,000bpd capacity from Egina oilfield which resumed operations in January further supports the stance of increased production. For context, while NNPC is yet to provide any data on Nigeria’s oil production this year, the channel checks with external sources reveals that actual production touched 2mbpd (condensates inclusive) in April. That said, it is expected average oil production to print at 2.04mbpd – 6.4% higher than the prior year. Thus some economists suggest that the Nigerian economy will experience a 2019 growth estimate of 2.2% as against an initial prediction of 2% as a result of improvement in both the oil and non-oil sector.

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