Wisdom Mbila

Here’s a look at how Nigeria’s Pension Fund performed in Q1 2019

The latest pension statistics have shown that the Nigerian Pension Fund asset crossed the 9 trillion mark in the first quarter of 2019. Most analysts have largely attributed this feat to the growing awareness campaigns which have influenced the willingness of Nigerians to take their retirement plan seriously.

Also, Pension data covering the first quarter of 2019 show that Pension Contributors in Nigeria rose to 8.57 million compared to 8.41 million contributors recorded in Q4 2018. From the foregoing, it can be seen that the number of pension account holders increased by 2% between Q4 2018 and Q1 2019.

However, even though the pension fund asset has reached the 9 trillion naira mark, the breakdown shows that it is largely dominated by total FGN Securities, which several analysts have flawed. Let’s take a look at the breakdown of Nigeria’s Q1 pension fund asset.

Pension contribution by age category

A closer look at the pension data shows that pension contributors within the age group 30-39 years are dominant with 36% (3.06 million) of total contributors in the first quarter of 2019. Between Q4 2018 and Q1 2019, contributors aged 30-39 years increased by 14,873.

  • Also, pension contributors within the age group of 40-49 years old stood at 2.40 million (28% of total) in Q1 2019, rising by 60,341 when compared to what obtained in the previous quarter (Q4 2018)
  • The total Pension contributors within the age bracket of 50-59 years ranked the third with 1.54 million (18% of total) as at Q1 2019. Comparing this to the contributors in the previous quarter (1.52 million), it implies the contributors within the age bracket rose by 60,341 in one quarter.
  • Similarly, contributors aged 60-65 years recorded a 24,161 increase in one quarter, improving the total contributors with this age bracket to 494,826.
  • A further breakdown shows that contributors within the age bracket 65 and above rose by 14,171 contributors in the first quarter to hit 494,826 contributors.
  • Lastly, contributors under 30 grew the slowest with 12,761 contributors with the last quarter, with a total of 816,656 contributors.

Pension Fund Assets Distribution

While the pension statistics remain abysmally low in Nigeria, another critical aspect of pension that analysts have flawed is the investment’s structure of the Nigerian Pension Fund. Over the years, a larger chunk of the pension fund has been invested in FGN securities, which are regarded as safe with low investment returns.

In the first quarter of 2019, FGN Securities still accounted for 72% (N6.5 trillion) of the total pension fund in Nigeria. Items listed under FGN securities include FGN Bonds, Treasury Bills, Agency Bonds, Sukuk Bonds, Green Bonds and so on. Next to the FGN securities is real estate properties with 2.56% (N231.37 trillion) of the total pension fund.

What the future holds for Pension Fund in Nigeria

Analysis of the age distribution of Pension contributors shows that the future still looks bleak despite increasing awareness among Nigerians. Within the quarter under review, contributors under 30 years added only 14,171. A closer look at the data shows that contributors less than age 30 ranks 4th highest contributors in all the six groups.

Ideally, the way pensions are designed, the younger the contributors the better the pension funds asset in any nation. This is because younger people contribute for longer periods, ensuring that pension fund assets are robust enough for investments.

On the other hand, contributors within the age bracket 30-39 years are dominant with 36% (3.06 million). This suggests that the Pension scheme in Nigeria is laced with a high level of growth uncertainties.

  • Again, despite the 8.57million mark contributors, this only represents 12% of the population of employed people in Nigeria.
  • According to the National Bureau of Statistics (NBS) unemployment data for the fourth quarter of 2018, the total number of Nigerians employed in both full and part-time stood at 69.6million.
  • It implies that 61 million employed Nigerians are not captured under the contributory pension scheme.

Fund Managers’ approach and way out

It has been generally argued that the “conservative” investment strategy of pension fund administrators (PFA) who invest almost exclusively in FGN securities, is the major reason for the low rate of return.

  • While this is worrisome, analysts have also put forward that fund managers are not to blame so much for this, as the regulation requires them to allocate a sizable portion of their assets to fixed income securities.
  • Also, the rationale of trying to preserve the pension fund has always been to invest in secured fixed income securities and this in the meantime is paying off.
  • While one resonates that it is a risk management strategy for fund managers to invest in secured fixed securities, the government and the fund managers should review approaches to ensure that pension asset growth is not sacrificed under the guise of secured investments.
  • Lastly, the dwindling rate of under 30 pension contributors requires urgent action, otherwise, the future of the Pension scheme in Nigeria would further remain bleak.

Fire razes Orita-Aperin market in Ibadan, as goods worth millions of naira destroyed

IBADAN-GOODS worth millions of naira were on Friday midnight destroyed at the popular Orita-Aperin market in Ibadan, following a fire incident that its course was yet to be known.

This sad development came after a couple of weeks a similar fire incident occurred at the Onipepeye bridge, along Lagos/Ibadan express way, where some people were burnt to death. While speaking with newsmen at the scene of the inferno on Saturday, the Babaloja of Orita-Aperin, Abiodun Ahmed, said that goods worth millions of naira were lost, adding that the cause of the incident was yet to be known.

According to him: “The fire started by 12 midnight on Friday, and we immediately called on Oyo State Fire Service but unfortunately, when they got here, the nuzzle of their truck was not functioning, so we have to resolve to self help by putting out the fire ourselves, or else, the loss would have been more than this.”

The Babaloja noted that most of the owners of the shops affected by the fire just bought goods into their respective shops, adding that, that was what made the total value of the goods affected by the fire to be much. “The shops that were affected include shop of a jewelry seller, shop of a food ingredient seller, shop of a provision seller, red oil seller and herbs seller, among others, five million, six hundred thousand was the worth of jewelries that got burnt, and most of the goods affected in the shops of the herbs seller can not be replaced because they were ancient goods that can not be seen on market again.”

He, however, appealed to the Oyo State Government to come to their aide because the loss was too much for the victims to bear. One of the victims, who’s shop was also affected by the fire, Latifat Adegbola appealed to the Oyo State Government to assist them financially because the money they used to procure the goods that were lost was collected based on interest. “All my goods has been consumed by fire and the remaining ones are useless, we are calling on the state government to come to our aide so that we can survive.”

Also speaking to newsmen was a pepper and onion seller, Mariam Oladepo, who said she lost goods worth one hundred thousand to the inferno, adding that her shop has been raised by the fire and nothing remains for her and her children to feed on again.

The market women however alleged that the fire would have not gone to that extent if the Oyo State Fire Service truck that was deployed to the scene of the incident functions properly.

SOURCE: www.vanguardngr.com

Why Nigeria’s economy cannot grow – Dangote

The President of the Dangote Group, Aliko Dangote, says the availability of consumer credit facility is an important option in fighting corruption in the country.

Mr Dangote said this on Saturday in Lagos at a consultative roundtable titled, “Going for Growth” with some economic stakeholders.

He said that the Central Bank of Nigeria (CBN) and commercial banks should develop consumer credit products to encourage low-income earners to engage in loan taking.

He also identified a lack of policy implementation as the biggest challenge in the country.

“How do you have economic growth without power? So, no power, no growth because without power there can’t be growth.

“Egypt increased its electricity by 10 gigawatts, which is equivalent to 10,000 megawatts in 18 months.

“In Nigeria, we have been struggling for 18 years without adding 1,000 megawatts and we have spent about three times above Egypt, why?

“So, I think we all need to be concerned about that.”

Mr Dangote advised that the country needed to promote import substitution for foreign exchange accumulation through proceeds from exports.

He called for a public-private partnership to boost the non-oil sector of the economy and added that Nigerians should invest in the development of the non-oil sector which had been left in the hands of foreigners.

“Government need to encourage non-oil sector growth rather than depending on proceeds from crude oil to pay salaries.

“Proceeds from crude oil sale should be for major investment in the country,” he added.

He urged the federal government to improve more on the power sector, saying “no business will thrive with business owners generating powers themselves.”

Mr Dangote said that all stakeholders must come together and support the government in finding a solution to power challenges in the country.

Apart from power, Mr Dangote suggested that government focuses more on three areas which include finance, manufacturing and agriculture.

According to him, Asian Tigers concentrated on these three sectors for them to be where they are.

He further urged the government to focus more on the fiscal policies for the country to move to the next level.

The business mogul said by next year, the country would have exported eight million tonnes of cement to African countries from the present six million tonnes.

Mr Dangote added that Nigeria would also be the biggest exporter of fertilizers in Sub-Sahara Africa.

Also speaking, the Chairman of Zenith Bank Plc, Jim Ovia, noted that government policies had supported the production of petroleum, cement and fertilizers.

Mr Ovia commended the government on broadband penetration in the country, saying it had boosted banking activities.

He supported Dangote on the need for consumer credit and said banks were doing their best on it.

Mr Ovia, however. noted that the process had been slow because of the challenges associated with people given accurate data for Know-Your Customers (KYC) process.

Also, the former Managing Director of Stanbic IBTC, Peterside Atedo, urged the CBN to continue with the effort taken in reducing inflation rate from 18 per cent to as low as 11.37 per cent as at April 2019.

Mr Peterside said the CBN should use the same pace to bring the country’s inflation rate to a single digit.

Cory Booker unveils plan to combat housing ‘affordability crisis’

(CNN)Presidential candidate Sen. Cory Booker unveiled a housing plan Wednesday to address an “affordability crisis” in the US, shining a national spotlight on an issue that has been at the center of his political identity for more than two decades.

“Making sure all Americans have the right to good housing is very personal to me,” the New Jersey Democrat said. “I’m determined to tear down the barriers that stand in the way of every American being able to do for their families what my parents did for mine.”
Booker’s plan, modeled after legislation he previously introduced in the Senate, focuses on a renters’ credit that he says would lift 9.4 million people out of poverty. In that regard, his proposal is similar to a plan by his 2020 rival Sen. Kamala Harris, a California Democrat who has centered her own housing policy on a subsidy for low-income renters.
But Booker’s blueprint goes further than Harris’, with sweeping changes to restrictive zoning laws, coupled with federal incentives to build more affordable housing. Advocates have called for such changes in cities like Los Angeles, where homelessness has spiked sharply amid rising housing demand and prices.
Booker would also expand the right to counsel for low-income tenants fighting eviction, while targeting discriminatory and predatory housing market practices, and funding grants to combat homelessness.
Although this marks the first time he has highlighted these proposals as a presidential candidate, it’s far from a new policy push for Booker, who has homed in on the issue for decades.
After graduating from Yale Law School in 1997, Booker moved into a public housing complex in Newark called Brick Towers, where he began working as a tenant advocate taking on slumlords. He continued living there as he ran for City Council and later mayor, until shortly before the rundown building was demolished in 2007. He still lives in the same neighborhood today.
But as Booker often mentions on the campaign trail, housing was a personal issue for him even before he moved to Newark. When he was a baby, his parents integrated an affluent New Jersey suburb, enabling his brother and him to attend high-achieving public schools.
In his new plan, Booker would expand the Fair Housing Act to include discrimination based on sexual orientation or gender identity.
“Access to safe, affordable housing can be transformative in the trajectory of people’s lives,” Booker said. “My parents knew this when they moved my brother and me to a New Jersey town with good public schools in the face of racial discrimination. The tenants I represented against slumlords when I first moved to Newark knew it too. So did my neighbors in Brick Towers.”
In Booker’s plan, renters who spend more than 30% of their before-tax income on housing expenses would be eligible for a credit. His campaign cited a Columbia University study showing the policy would help more than 57 million people.
His proposal would seek to increase the supply of affordable housing with a carrot-and-stick approach, by tying federal infrastructure grants to demonstrated progress on the local level while committing $40 billion to building new units.
Booker also would incorporate an element of his criminal justice efforts into his housing plan by nixing a “one strike” eviction policy in public housing, in which a tenant and his family can be pushed out for a first-time offense, including drug use.
housing developer

Making career as real estate developer

Real estate business is becoming more lucrative than most other activities people engage in. In the recent past, may be, because people do not bother how they sleep and where they live, there was not much attention given to real estate. Today, the impact of technology has made it possible for people to learn how people of other climes live and sleep. Today also, it is no longer to learn how people sleep and where they live, it has gone further to include helping people to fashion how they sleep and where they live. It has become so popular that people now eke a living in that and continues in that way to innovate a competitive ways that suit different people with different societal status. People can now, opt to develop a property for another for a cost and continues to change the pattern as the client requests.

Many a time the popular question for those who wants to make career as a developer is, ‘how do I get started as a developer, as real estate agent and so on? It is usually followed by a string of other questions which amount to; Could you just draw me a map that will guide me through every detailed step to becoming a developer? Many people may choose to undergo a training in project development while others will like to undergo an apprenticeship just to learn the art and begin operation.

Others who have enough money usually open an office and employ professionals who may not have enough money to register and establish an office to run for them. Still, others choose to enter into partnership with the professionals to run the business. People who are interested in this line of work come from a wide range of starting points.  A lot of them already have a fair amount of skill in one aspect or another of the built environment.  They have been a contractor, broker, planner, activist, architect, or property manager.  They know enough about how things work to recognize that they have a lot to learn outside of the field that originally led them to development.

Some experts have categorized these groupings variously to include but not limited to site selection, urban design, site planning and civil engineering. The price paid for securing land is the single most critical variable in beginning stages of a real estate project. Therefore, understanding what the site can and cannot do and how a building sits on the site to create value are paramount considerations. These four skills help a developer compare many sites against each other, fit in with the neighborhood, and deal with soil, water and utility conditions. There is what is referred to entitlement that refers to what the owner of the land is entitled to do with it, which is typically governed by the local municipality’s zoning code. A developer must evaluate what can be done with a site under the existing rules of setbacks, parking requirements, building size and height – or measure the risk associated with changing its classification or getting a variance. Equally as important as the written word is knowing the people who administer the processes involved in obtaining approvals.

There is the real estate deal structure, pro formas and finance that takes care of the  money and contracts, the heart of any real estate project. In a typical arrangement, the project has an operating partner, the person in charge of the whole process, and a capital partner, the person supplying seed money for a percent return on their investment. Together, they will seek additional financing from a bank or other entity in the form of a loan. A pro forma is a spreadsheet that tracks how the development makes money in rent or sales and how that income is distributed to its partners and the bank. We still have those whose specifications are to do the building designs.

These people are known as the architecture, electrical, mechanical and structural engineering, etc. This is the know-how that makes a building perform well and be dignified. A deep understanding of building codes can help the small developer optimize the size and functionality of individual units while avoiding costly construction methodologies or mechanical systems. Context appropriate exterior detailing and quality material selection can both gain favor with the neighbors and help the building stand the test of time.

The Construction and construction management is another segment in the lot. There are two key groups who make the construction or renovation of a building happen: skilled tradesmen and project managers. Leveraging the knowledge and work effort of the electricians, plumbers, welders, carpenters, roofers and installers is either a general contractor or construction manager. Regardless of the size and type of project, small developers need to carefully manage the process and risks involved in construction with thorough planning and contingency reserves. The marketing, sales, leasing and property management are other groups one can major in. Once you have a building, it must be sold or frequently leased and maintained.  Real estate agents and brokers handle many of the steps to attracting tenants or buyers and prepare the appropriate paperwork to ensure qualified applicants. If the developer is retaining ownership of the property, someone must answer the calls to unplug toilets and plan for big replacements like water heaters and roofs. That’s the realm of a property manager.

 

Project and business management is also a critical aspect and also very cardinal in the built environment sector. There are many details to keep track of and people to communicate with to make a real estate project move forward. Also, someone needs a good handle on business finance to guide the cash flow throughout the lifecycle of a project. The small developer needs to make intentional decisions about where along the development process they will make money and structure their tax and business arrangements to maximize those positions. Very few people master all of those skills. If you start with small projects, you can gain an overview, and understanding when they are needed at the various stages of a project.

You get a sense of the basics for each skill set.  If you don’t have the skill which the project requires, you can’t go without.  So you should borrow or rent the needed skill.  Look for people who are genuinely interested in your project and who are actually happy to teach you about their specialty.  A developer does not have to know everything, but they should have a good idea who to call or team up with before it is too late.ome, too. Optimistically, this will mean better protection for buyers and less asinine regulation on real estate professionals. The real revolution has just started and we will see explosive growth. Like in so many industries, change for real estate professionals is not always bad. These changes will produce more transactions because the process will become easier, and those who embrace these changes will win. Most importantly, the consumer will win because they will have more transparency and control.

Source: sunnewsonline.com

Tokyo proves that housing shortages are a political choice

In the debate about how to solve the housing shortage in UK cities, foreign examples, especially in the rest of Europe and English-speaking countries like the US and Australia, often pop up to show what we can do better. But recently, some of the most exciting ideas in housing policy and planning reform have started to come out of Japan.

The Centre for Cities recently visited Tokyo, Sendai, and Onagawa Town through the Japan Local Government Centre on the Japan Study Tour to find out more about how cities function in one of the most urbanised countries on the planet – and what we can learn from them here in the UK. Here’s what we found.

Japanese homes are cheaper because they build more

Compared to skyrocketing housing costs in many Western cities, Japan has seen remarkable success in supplying affordable housing – even in cities with lots of economic growth. While average mean rents in London are upwards of £2,000, average rents in Tokyo are about £1,300 – even after Brexit-related depreciation of pound sterling.

This isn’t caused by social housing or danchi – less than 5 per cent of homes across Japan are socially rented, compared to about 17 per cent in England. And it’s not because Japan’s population is shrinking either – Tokyo’s population is still growing due to migrants from other parts of Japan and abroad.

Instead, it’s because the supply of housing in Japanese cities is responsive to local demand. While the UK saw about 194,000 houses start construction last year, Japan saw 942,000 housing starts last year.

Even though Japan demolishes and rebuilds lots of houses, the net increase in homes is still much larger than the UK – about 600,000 homes (Table 5) are added to Japan’s dwelling stock every year. Tokyo has added roughly 110,000 homes a year since 2003, compared to 20-40,000 a year in London over the same period.

These homes are often smaller than what we’re used to – the average property in Tokyo is 55 square metres, compared to 80 square metres in London. But this isn’t the full story. New supply in Tokyo responds to demand by building lots of smaller one-bed flats for singles, and young people can live independently without needing to share with housemates. This means that, even though average homes are smaller, the average Tokyoite probably has more housing floor-space per person today than the average Londoner because living with housemates is so uncommon.

 

Japan’s flexible zoning system is a different kind of planning

The planning framework that underpins this supply is a simple zoning system that allows by-right development, rather than one that relies on granting planning permission for each individual site. There are only 12 zones, defined according to the maximum nuisance level they allow, ranging from sleepy residential to polluting industrial uses. The key is that pretty much anything can be built, provided it does not exceed the zone’s nuisance level – so in areas zoned for high street usages it is possible to convert a hotel into housing and vice versa, but this is not possible in residential only zones.

This allows market supply to respond quickly as market demand changes and ensures development and density is driven by land values. If the demand to live in a city grows, older houses can be knocked down by landowners to provide more and better quality homes. In the case of apartment buildings, 80 per cent of the apartment owners need to agree to demolition and redevelopment. This is why Japan’s higher rate of demolition isn’t wasteful, as it enables an efficient supply of more and better quality housing.

Local taxes in Japan also encourage more homes

As a result, there is a clear difference in Japan between the value of land and the value of the property that sits on it. Like in other countries, the price of land in Japan reflects local economic strength and access to amenities and jobs. But unlike the UK, in Japan, the value of houses declines as they get older, because it so easy to supply new homes. Reflecting this, the property tax valuation of Japanese homes also declines over time, increasing the incentive for local government to build new homes to fund public services.

Japan shows how political choices cause Britain’s housing shortage

Of course, the planning system is not the only thing which is different. One factor is that the politics of housing are rather distinct – for instance, green belts around Tokyo in 1946 and 1956 failed because they were so unpopular with residents and local government.

But what Japan’s inexpensive homes and its alternative policy approach prove is that the housing shortage in British cities is not inevitable. Housing does not have to be expensive in prosperous cities. The housing shortage is something we have chosen to experience and can choose to change if we want to. If Tokyo managed to reform its green belt, twice, why can’t London or Cambridge?

We may not want to copy-paste everything about Japanese housing into UK policy. We may, for instance, choose a larger role for social housing, or slightly stronger heritage conservation. But for national and local policymakers trying to end the housing shortage, understanding Japan’s experience is essential if we want housing to be inexpensive for everyone.

Shelter Afrique seeks Sh9.8bn cash call arrears

Continental developments funder Shelter Afrique has urged its 44 shareholders to fulfil their Sh35 billion capital subscription to enable it carry out its mandate.

Speaking during the Ministers of Housing sideline event at the just ended 2019 UN Habitat General Assembly in Nairobi, Shelter Afrique CEO Andrew Chimphondah said its 44 members owed it Sh9.8 billion capital subscription arrears since the 2013 cash call.

The balance is from a fresh cash call to raise additional Sh25.2 billion made in 2017.

“The cumulative Sh35 billion arrears is the main challenge for Shelter Afrique to effectively engage financial markets for further funding,” said Mr Chimphondah.

Terming housing a human right, the CEO said the lender was holding talks with various States seeking fulfilment of their quota while urging others to increase their stake in the Pan-African company.

“We are keen on inviting new member countries to join as shareholders and our current target countries include Egypt, Angola, Ethiopia, and Mozambique.”

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.

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.

 

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.

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

Bank chiefs to go tougher on bad debtors

The Committee of Banks’ Chief Executive Officers in Nigeria has said that there is an urgent need for all banks to cooperate and collaborate to identify and go tougher on chronic debt defaulters.

The committee said this would go beyond publishing names of such defaulters in national media (which is inevitable), but involved all banks speaking with one voice, sharing information about those entities, and refusing to do further business with them until they settled their obligations.

The bank CEOs condemned the actions of bad debtors who now resorted to smear campaigns against banks and their chief executives in order to either delay repaying loans or avoid meeting their debt obligations completely.

During a meeting in Lagos to review what it called the “harassment and criminalisation of banks’ CEOs by law enforcement agencies,” the body noted that chronic bank debtors were now in the habit of enlisting law enforcement agencies including police, judiciary and state securities to harass and criminalise banks’ CEO, which was unacceptable.

The committee noted that the loan defaulters were known to have abused court processes as well as using social media to propagate their smear campaign against the banks.

A communiqué issued after the meeting noted that the activities by the law enforcement agencies and the bank debt defaulters were capable of adversely affecting the banking system through the CEOs’ reputation among international banks as well as destroy the economy.

They, therefore, called for the issue to be checked and managed.

In order to tackle what the body saw as an emerging threat to the banking business in Nigeria, the Committee of Banks’ CEOs outlined a five-step resolution of actions that banks would need to take.

The resolutions and planned actions were arrived at after members discussed and considered different options for dealing with the issue.

To avoid the kind of crisis that rocked the banking sector 10 years ago, the CEOs urged all agencies and stakeholders to step up and help fight the inherent menace of chronic loan defaulters.

According to the CEOs, the banking industry is the backbone of the Nigerian economy; therefore, it was the responsibility of all stakeholders, regulators, police, judiciary, corporate organisations and media to help save it from activities of delinquent debtors.

The group resolved that all cases of defaults would be presented and passed through the Bankers’ Committee Ethics Committee just as it intended to work with legal councils and come up with ways and strategies to manage related cases effectively without disrupting businesses and the system.

Nigerian bank’s non-performing loans stood at N2.245tn as of the end of September 2018, according to the National Bureau of Statistics.

The NBS revealed that in the period under review, the country’s gross loans stood at N15.861tn, while loans (after specific provisions) stood at N13.332tn.

According to the NBS, as of the end of June, non-performing loans stood at N1.939tn while gross loans and loans (after specific provisions) were N15.50tn and N13.587tn respectively.

The Asset Management Corporation had recently published a list of defaulters that it termed as delinquent debtors. They allegedly owed about N906.1bn.

Court orders forfeiture of N8.8bn worth properties to federal government

An Abuja high court has granted an order of interim forfeiture of 29 properties in different locations of the federal capital of Nigeria worth about N8.8billion to the government.

The Independent and Corrupt Practices and Other Related Commission (ICPC) applied for the interim forfeiture of the properties through an ex-parte motion.

27 respondents were listed on the motion including Shehu Yaradua Foundation, while others are companies.

ICPC counsel, Osuobeni Akponimisingha, said the twenty-seven respondents had denied ownership of the properties, in order to evade tax liabilities on the properties.

“The immovable properties have been confirmed unclaimed by preliminary investigation activities conducted by the applicant,” Akponimisingha said.

He said that the properties were alleged to have been acquired with proceeds of crimes.

Akponimisingha said the respondents may likely sell off the properties to unsuspecting members of the public if the court does not order the temporary forfeiture.

In an affidavit attached to the motion by one Iliya Markus, an official of ICPC, the court was told that the commission received a petition from the Presidential Advisory Committee Against Corruption (PACAC) about unclaimed properties allegedly acquired in the names of the respondents.

He said the petition had contained an initial 31 immovable properties but upon publication of notice on two national newspapers regarding the properties, two companies came forward to claim two of the properties.

The presiding judge, justice Husseini Baba-Yusuf said the court was satisfied with the argument of the ICPC counsel.

“An interim forfeiture order is hereby made,” Baba-Yusuf ruled.

The judge thereafter fixed September 23 as the return date.

Source: today.ng

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