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Business, Economy

Stakeholders Suggest Economic Agenda As FG Transitions from ‘Change’ to ‘Next Level’

FOUR years ago, President Muhammadu Buhari took over the mantle of leadership of Nigeria. His inauguration on May 29, 2015, was filled with fun-fair amidst high expectations from Nigerians that things will change for the better. The ‘Change,’ campaign slogan of his party, almost turned to the country’s second National Anthem. Buhari came with three major promises to Nigerians. These are: fighting insecurity, tackling corruption and reviving the economy. As he was inaugurated yet again for second term, the pertinent questions are: has the Nigerian economy changed for good? Has the Buhari administration delivered on these promises? Is the average Nigerian worse off, or better off in terms of affordability of basic needs of life: food, shelter and clothing? Is their improvement in security of life and property? Can Nigerians proudly say that leaders in the last administration were the crop of patriotic individuals that will salvage Nigeria? The list goes on.

Most citizens that opted for Buhari’s re-election felt the immediate past administration achieved some level of success. For instance, out of 190 countries in terms of ease of doing business, Nigeria’s position improved from 170 in 2014 to a positive 146 in 2019. Life Expectancy according to the National Bureau of Statistics increased from 52.55 years in 2014 to 53.43 years in 2019.

The monetary value of goods exported versus goods imported in 2014 was negative $6.4 billion, but as at 2019, Nigeria’s trade balance has turned positive to $23.5 billion. At the last lap of the administration’s life, Buhari increased minimum wage for government workers.

However, a herd of economists and even the International Monetary Fund (IMF) are of the opinion that Buhari’s administration grossly underperformed, and that instead of tapping into abundant resources in Nigeria to revive the economy, or implementing policies that will lift majority of the population out of poverty, the past administration foot dragged with persisting structural and policy challenges until the country into fell into recession.

Renown Economist and CEO, Financial Derivatives Company (FDC) Ltd, Mr Bismarck Rewane said out of 19 economic indicators including income per capita, inflation, misery index life expectancy and so on, measured by his company, 11 were negative while eight were positive under the past administartion. For instance, in 2014 inflation was as low as 9.60 per cent. As at April 2019, Nigeria’s inflation rate stood at 11.37 per cent. Income per capita was $2,726 in 2014 but has come down to $2,400 in 2019.

Wondering if the ‘next level’ agenda is not another old wine in new bottles, Rewane feared that Nigeria is still at risk of another recession, since recessionary gap is just 1 per cent. He wants the government to reduce subsidies gradually, invest in road and rail transport, concession Airports, block leakages and simplify tax administration.

The  IMF observed that there is still huge infrastructure gap and weak government institutions in Nigeria, but Mr Femi Adesina, Special Adviser on Media and Publicity to President Mohammadu Buhari believes that the administration has done very well in the past four years.

For him, “Those who do not see any good in something not initiated by them toil endlessly to hoodwink Nigerians into believing that nothing good is happening on the economic front. But facts are stubborn things. The more they try to deny the facts, the more they rudely stare at them in the face.”

Dr Andrew Nevin, Advisory Partner and Chief Economist at PriceWaterCoopers (PWC) Nigeria, in an interview with Nigerian Tribune expressed concern that  for a number of years past, Nigerians have been getting poorer and poorer per capita, as the growth of  Gross Domestic Prodcut (GDP) “is below our population growth of 2.7 per cent per annum.”

Nigeria  grew 2.7 per cent in GDP in 2015, meaning no growth in GDP per capita. It shrank in 2016, and grew below population growth in 2017 and 2018. “Now we begin 2019 with our GDP growth below population growth again, and 1Q 2019 annualized GDP growth of 2.0 per cent is a decline from our growth in Q4 2018,” Nevin analyses.

It is therefore no surprise that Nigeria is currently ranked the country with the highest number of extremely poor people. It was estimated in the last quarter of 2018 that 87 million out of the estimated 180 million population of Nigeria, representing 45 per cent of Nigerians, are currently living in extreme poverty.

Recently, the Chief Global Economist of  Renaisance Capital (Rencap) Mr Charles Robertson, put Nigeria’s population figures at over 190 million, warning that the rising population portends danger if economic opportunities are not created to make use of the latent energy and creativity of this population.

This figure has been estimated to hit 90.8 million people in extreme poverty. By this estimate, Nigeria was reported to have overtaken India to become the poverty capital of the world.

The National Bureau of Statistics says Nigeria’s unemployment figure jumped by 30 per cent in 2018, to over 20 million people by the end of the year. Available records last year show that Nigeria’s poverty rate stands at 62 per cent.

 

May 29th inauguration day has come and gone. For Nigerians it is usually for a change of batons from the old to the new administration. As President Buhari took his solemn oath in a low-key celebration, most Nigerians were reflecting on the macroeconomic impact of his policies on their lives and wellbeing.

Will Team Buhari in the next four years do anything differently? Nigerian people have given them a second term and are hopeful that things which could not change in the past four years, will soon change for the better. But will it?

 

Economic indicators compared

When Mrs Risikat Ogunlesi, a fabrics trader in Oshodi Lagos traveled to Togo for shopping in preparation for trading in December, the Naira to Dollar exchange rate at the spot inter-bank market was N199 to a dollar. With US$2000 through her bank, (equivalent of N398,000), she bought enough fabrics and other items with which she stocked her shop and made sufficient gain which she was not willing to disclose. As at December 31, 2015 the  dollar exchanged for N199.268.

But on Monday, May 25, 2019, four years after, the Naira spot rate at the interbank market stood at N306.9 to the dollar.  On Friday, May 31 2019,  Mrs Ogunlesi was sober that even though she has remained in business, she needs as much as N613,800 to buy the equivalent quantity of goods she bought in Togo four years ago with N398,000.

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Just as Rewane described the experience of Nigerians as suffering and smiling, Mrs. Riskat’s exchange rate experience could be likened to what Nigerians go through in a bid to buy  most popular consumable goods. For instance, a bag of 50 kg of rice in 2014 was N9,500. In May 2019, it cost N15,000 to buy a bag of rice, representing a 59 per cent increase.  Beans was N14,000 per 50kg bag in 1014. Today, it costs N19,000 to buy a bag of Beans, representing a 36 per cent increase.

 

365 LB 7 – Home

Commodities     2014       May’19 %Change

(2015/2019)

Garri      3,500    6,500                  52

Rice (50kg)          9,500     15,000   59

Beans (50kg)      14,000   19,000   36

Gala       100         100         –

Palm Oil (25L)     9,000     9,000     –

Tomatoes (50kg)              4,300     18,000   319

PMS (N/ltr)         97           145         49

  • Source FDC, NBS

 

Nigeria’s GDP per capita, i.e. the average income per person in 2014 was $2,726 according to IMF. Today, it is  $2,400.  This is compared to GDP per capita for South Africa in 2016  at $5,273 . Electricity generation of 4,000 megawatts  in a population of 190 million people versus South Africa’s 40,000megawatts with a population of 50million is not encouraging. As of Q4 2016, Nigeria’s unemployment rate was 14 per cent with 29 million Nigerians without jobs. The latest NBS figures in 2019 show that unemployment rate is at 23.1 per cent, and underemployment rate of 16.6 per cent (totaling 39.7 per cent).

The country’s national debt is increasing, and Nigeria now spends more than 60 per cent of government revenues servicing the national debt. Nigeria as at last year, ranked 152nd out of 188 countries in the Human Development Index of the United Nations Development Program, and 187 out of 189 countries in the World Health Organisation rankings of national health care systems.

In the face of these not-so-encouraging indicators, energy experts are afraid that the future of oil on which Nigeria depends for 80 per cent  of its total revenue and 90 per cent of its foreign exchange (forex), is bleak.

Without sentiments, this should worry a government that is concerned about the future of the country. According to David Yager, a noted analyst of the global oil and gas industry, “The current discussion about the future oil is how soon will it be before petroleum becomes a sunset industry. If it  isn’t already, with  flat or falling demand. Carbon taxes electric cars. Renewable energy. Oil has no future ….”

Worried by Nigeria’s renewed interest in petrol and diesel, Senator Ben Murray-Bruce said that every sensible country is running to electric, while Nigeria is running to petrol and diesel.

“Why borrow almost $10 billion from China to build railways for obsolete diesel powered trains when some Western nations will even pay us to take their obsolete diesel trains? Do we think? New government should realize that this sobering and imminent reality has important implications for Nigeria’s political economy. Five countries already have served notice of their target dates intention to end the sale of gasoline and diesel cars:  Norway (2025), Germany and India (2030), France and the UK (2040), and the costs of renewable energy sources such as wind and solar are increasingly lower than oil, gas and coal.”

 

‘Next level’ growth desired by Nigerians

There is a consensus opinion that inclusive growth is Nigeria’s central economic challenge. Economists emphasize Inclusive economic growth because it focuses on equality of opportunity in terms of access to markets, employment, resources, and a regulatory environment that provides a level playing field for every citizen.

While it is one in which the poor are not left out or left behind, it seeks that outcome by creating productive employment and a steady increase in the productivity of labour, which is what creates wealth and raises the income levels of excluded groups.

Modern economists have identified four legs of development to include: human capital development; natural resource development; capital formation and technical development.

If these four legs should be developed to 50 per cent, there is no way  over 50 per cent of Nigeria’s 190 million population will  still live below the poverty line. A herd of economists and other stakeholders who were not satisfied with performance of the economy in the past four years, have at different occasions  given a roadmap  by which the “next level” government led by President Buhari should take as a democratic government, in order to deliver dividends of democracy to Nigerians.

A member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Adamu Edward Lametake at the  266th meeting of the MPC said most of the current projections of real GDP growth for 2019 fall between 2.0 – 3.0 per cent.

This according to him, is significantly below potential, and more importantly, growth needs to be better for the economy to generate the much needed jobs and achieve poverty reduction. Non-oil output, particularly agriculture and services, will need to be supported considerably to drive growth in 2019 given the weak outlook for the oil sector.

Asogwa Robert Chikwendu is concerned by  the continued dominance of the oil and gas sector in banks’ credit allocation to the disadvantage of the agriculture and manufacturing sectors. To him, this will not only frustrate government’s economic diversification trend, but will neutralize the intended effects of any monetary policy rates reduction.

On job creation, the first insight is to understand that governments by themselves do not create jobs in today’s world dominated by private sector-led economic activities. The private sector does. Government creates the conditions for job growth through sound economic policy.

When we consider that Nigeria’s population is projected to double by 2050, the implications of millions of young people entering the job market without a radical success in job-creation in Nigeria becomes clearer.

Some have argued that the growth of ‘yahoo yahoo’ industry and sports gambling can be attributed to joblessness.

The second insight is that for a country like Nigeria, job-creation cannot be addressed in isolation of the wider macroeconomic environment which is a product of economic policy. The new administration must initiate economic policies that encourage the growth of businesses and job-creation in rural areas in order to reduce the urban migration pressures that contribute to the high unemployment in Nigeria. This has been the case in Asia.

The education sector in Nigeria churns out millions of tertiary education graduates who do not have the productive knowledge and necessary skills to start their own businesses as entrepreneurs or to be more easily employed otherwise.

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Moghalu, wants the education system  to be overhauled to de-emphasize university degrees and promote the acquisition of vocational and entrepreneurial skills more conducive to self-employment, entrepreneurship, in SMEs, or increased adaptability to employment in agriculture or manufacturing

In Nigeria, governments subsidize consumption (fuel subsidies, fixed exchange rates) instead of production. The Northeast Asian governments provided subsidies to manufacturers that met specific export targets. In Nigeria, companies that enjoy any form of state support (even tax holidays) are not held to standards of performance and accountability.

The new government should not only look into this, it should provide enabling environment for both local and foreign investors. Good Roads network across the country is very important, security, infrastructural development; investment in human capital development among others is inevitable.

At Oxford Africa Conference 2019, as keynote speaker on the topic titled, “Asserting Africa’s relevance, locally, continentally and globally,” Arunmah Oteh speaking on the Way forward for Africa, said, “Indeed, Africa needs what I call the 3C leadership – Character, Competence and Courage in both private sector and public sector.” The “next level” government should assemble Nigerians with “Character, competence and courage,” to be able to delliver leadership that Nigerians crave for.

Sola Obadimu views Oteh’s advice in a more practical perspective. To him, “for this administration’s second term, PMB needs to decide whether he still wishes to maintain Power, Works & Housing as a single Ministry. He then needs to put people with problem solving mindset, drive & ability in charge of the Ministry or resulting component Ministries.

“We therefore need to resolve our infrastructural issues with more seriousness. We need achievers in problem solving to champion these result-oriented Ministeries. Professional advocates can head back to the courts to practise what they know best.”

While the IMF wants the new government to stop multiple exchange rates; improve tax collection; stop waivers and exemptions and tighten money supply, BismarkRewane wants the Buhari-led second term administration to strive towards unification of exchange rates to facilitate trade flows; leasing/sale of idle assets;convertion of power sector loans to equity; a shift of subsidies from wasteful consumption to critical social infrastructure (health, education).

The economists also wants the President to immediately choose his cabinet as the first official duty and finalise key appointments in June. He wants portfolio and personality changes but policy continuity, but fears that execution of policy and response to shocks will be the major challenge.

In its latest report on the Nigerian agricultural sector, PWC noted that the Nigerian agricultural sector is replete with diverse opportunities.

Therefore, the ‘next level’ government should be able to effectively harness these opportunities to drive agricultural development and expand agricultural export.

For instance, analysis by the Nigerian Export Promotion Council (NEPC) shows that the total amount of estimated untapped potential by 2021 for Nigerian exports of cocoa beans to the ten best markets (Germany, Malaysia, Singapore, Turkey, Netherlands, Italy, Japan, France, Mexico and Indonesia) is around $425 million.

In the same vein, the estimated worth of cocoa butter for the top ten markets was put at $81.9 million, while the value for untapped potential in the market for cocoa paste by 2021 stood at $6.3 million. The untapped market potential for sesame seeds to the top 10 markets (China, Japan, South Korea, Mexico, Poland, France, Lebanon, the United States, Canada and the UK) is estimated

at US$170 million. According to the NEPC, the largest estimated untapped potentials for Nigeria is in China, which accounts for an estimated 65 per cent of total potential value.

China is currently the third largest agricultural export destination, after Turkey and Japan.

Overall, PWC observed that  agriculture experts are of the view that the country has the potential to generate US$40 billion annually from export of agricultural goods.

Government should address, inadequate storage facilities and poor distribution network because lack of adequate modern storage facilities for agricultural produce has led to

Significant post-harvest losses on account of produce perish-ability. The

Federal Institute of Industrial Research, Oshodi (FIIRO) puts Nigeria’s post-harvest losses at $9 billion annually. In the same vein, poor distribution network of farm produce from the major food belts is equally hampering the quality and quantity of agricultural exports in the country.

finance conference

The power of ‘power’

Nigerian economy has the potential to grow between 10 and 12 per cent if the perennial power outage suffered in the country is sorted out. This was how a renowned economist and former Chairman of the asset-management division of the Goldman Sachs Group, Mr. Jim O’Neill views Nigeria’s growth trajectory, while insisting that this transformation would double the size of the Nigerian economy in six or seven years.

Speaking on a BBC programme titled: “The MINT Countries: Next Economic Giants,” monitored in Lagos, O’Neill revealed that about 170 million Nigerians share the same amount of power that is used by about 1.5 million people in the United Kingdom.

Indeed, many a small scale businesses are craving for at least four hours of daily electricity supply and will satisfactorily run at a profit, while creating unimaginable number of jobs.

To underscore the importance of power, the Association of Bureau De Change Operators of Nigeria (ABCON) has called for radical implementation of the power sector reform programme to ensure access to stable electricity supply for households and businesses.

The association in its Economic Report for the first quarter of 2019, noted that Nigeria’s score of 35 in terms of ease of getting electricity, as indicated by the World Bank Ease of Doing Business report, is lower than the average for Sub-Saharan Africa and much lower than the other comparable middle-income countries, with South Africa having a score of 63 and India having 85.

Nigeria has also been advised to look into renewable energy. The US Department of Energy statistics recently reported that “more workers directly employed by the clean energy industry than by the fossil fuel industry.”

The Labour Network noted that “both the solar and wind industries are creating jobs 12 times faster than the rest of the economy,” and added that “the number of U.S. jobs in solar energy now exceeds those in oil and natural gas extraction.”

The Economist at RencapMr Charles Robertson believes in the long-term focus on real-time industrialization. This according to him, can deliver a growth rate of between 7 per cent and 11 per cent, which will exceed the pace of population growth currently 3 per cent, or higher than the country’s recent GDP growth rate of 2.31 per cent.

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In terms of infrastructure, Robertson stressed that Nigeria needs to double electricity consumption from the national grid, and double the investment share of GDP.

The economist called for a shift in spending on consumption to that of investments, which is vital to spurring economic activities in the country.He wants policy makers to do everything possible to improve the ease of doing business in the country, to attract investments.

Also, to the CEO of  Rencap Nigeria MrTemi Popoola, “This is the right time to begin to focus on policies that will deliver inclusive growth in the next four years. We believe that diversification from oil dependency is inevitable given how little oil Nigeria exports per capita. To fully unlock Nigeria’s economic potential, some structural constraints must also be removed: adult literacy needs to improve to 70-80%, electricity consumption needs to treble and investments need to double from 13% of  GDP in 2017 to at least 25%”.

Some of the policies that PwC Nigeria would like Nigeria to consider include:

The Chief Economist at PriceWaterhouse Coopers (PWC) Nigeria, Mr. Andrew Nevin wants the new government to reform the Land Use Act so that Nigerians can see a much more robust real estate sector and tackle the 17millio housing deficit. He also wants decentralization of the power approach so the power crisis can be addressed at the local and state level, stressing that  new technologies (including offgrid solar) provide many more options to produce electricity at a reasonable cost according to local conditions

Nevin wants unification of the exchange rate so that foreign investors are not confused and the potential for abusing the forex system is eliminated. In addition, States would receive more Naira from the Federal Allocation, thereby alleviating some of the difficulties in paying State salaries

He wants the fuel subsidy eliminated and the savings channeled into infrastructure, healthcare, and education, even as some form of the Petroleum Industry Bills (PIB) should be passed so that investment starts to flow again to oil and gas. As part of this, NNPC according to him, should consider structural changes that clarify its roles as a regulator and its roles as an operator.

“In addition to these structural changes, the Federal and State Governments consider a more active and strategic approach to the Nigerian Diaspora. Remittances – estimated at $25billion in 2019 for the official flow – are Nigerians largest flow of forex, and the Nigerian Diaspora is large and very successful. Better engagement with the Diaspora would result in a flow back to Nigeria both of resources for investment and also skills and capabilities from the Diaspora to help build Nigeria,” Nevin stated.

Nigeria like Ethiopia has a vast but untapped renewable energy potential. Under a long-term development strategy, the government should outline a National Electrification Program (NEP), targeting universal access by 2025 through a 65 per cent on-grid, and 35 per cent off grid combination. The goal should be to transform the country into a regional energy hub by 2030.

The country can tap into the Sustainable Energy Fund for Africa (SEFA), managed by the African Development Bank. For example on 17 May 2019, AFDB approved a $995,000 grant to support the roll out of a sustainable procurement framework for Independent Power Producers (IPPs) in Ethiopia.

The ‘next level’ government should not surrender, like Professor Chinedu Nebo, former minister of Power to the fact that “eveil spirit is behind darkness in Nigeria.”

The government must not only reform the sector, it must also have that will to confront people who do not want steady power supply because they are involved in the sale of generators.

 

Conclusion

Moghalu believes that Nigeria’s Economic management should be overhauled. The President should establish a full-time Council of Economic Advisers, headed by a Chairman that will serve as Chief Economic Adviser that researches and monitors the economy 24/7 and advises the President on actions to take to enhance economic growth.

“From 2019, the Federal Government of Nigeria should establish a concrete economic diversification plan with a concrete path to a post-oil future for Nigeria, based on emerging global trends.

“From crude oil-revenue dependency to excessive recurrent expenditure, from political interference in the central bank to returning Nigeria closer to debt peonage, Nigeria’s political leaders have stymied Nigeria’s economic development through a combination of incompetence and the servicing of their vested interests,” the professor submitted.

The ‘next level’ government should remember that all 191 United Nations  (UN) member states agreed to achieve by the year 2015, the Millennium Development Goals (MDGs), but Nigeria did not do well in terms of achieving the eight goals.

Again, in September 2015, the UN General Assembly adopted the 2030 Agenda for Sustainable Development that includes 17 Sustainable Development Goals (SDGs). Building on the principle of “leaving no one behind”, the new Agenda emphasizes a holistic approach to achieving sustainable development for all.

Goal 1 of the SDG remained goal 1 of the MDGs; poverty eradication. To think that Nigeria was last year designated as world’s  headquarter of poverty shows that the government has done little or nothing in  that regard. So, the incoming government cannot afford to pay lip service to the issue of poverty reduction.

The goal 2 which is  zero hunger is a function of goal 1 while goal 3 which is Good Health and Well-being is a repetition of goal 6 as a second chance to countries like Nigeria that performed poorly in terms of the MDGs.

Nigeria cannot afford to continue to pretend not to know about all these goals even as it relates to the human development index.

The Human Development Index (HDI), is another measure used by the United Nations Development Program (UNDP) to measure level of development of a country based on the health of people, their level of education attainment and their standard of living. It  is one of the best tools that combines all major social and economic indicators that are responsible for economic development.

Source: tribuneonlineng.com

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