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Nigeria’s Infrastructure Development Matters to Japan – Yutaka Kikuta


The new Ambassador Extraordinary and Plenipotentiary of Japan to Nigeria, Yutaka Kikuta, arrived in Nigeria recently to assume duty. In this interview, he speaks about the importance of the up-coming Tokoyo International Conference on African Development holding in Tokyo, between October 6 and 7; the trade relations between Nigeria and Japan among other other bilateral trade issues. Iyobosa Uwugiaren provides the excerpt:

Can you tell us more about the Tokyo International Conference on African Development (TICAD)?
The TICAD is not one of the donor-conference being organised by Japan for African countries; it is a high level summit/international conference on African development initiated by Japan in 1993, which is being co-hosted by Japan, UN, UNDP, World Bank, and African Union Commission (AUC). It is held every five-year till TICAD V (2013) and every three-year since TICAD VI (2016) and this year TICAD VII will be held in Yokohama, Japan. It is a kind of African-ownership discussion by African leaders with international partners and organised by Japan and other international organisations. TICAD is a process of engagement among African leaders and other international organisations on how to implement series of TICAD’s meetings, ministerial meeting to review and plan how to implement the decisions of previous TICAD and prepare for the coming meeting.

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Tell us the uniqueness and importance of TICAD?
It is unique in true sense of the world. It is a strong long-term commitment by Japanese government to fostering peace and stability in Africa through collaborative partnership. It started in 1993 and stresses the importance of Africa’s ownership of its development, as well as the partnership between Africa and the international community for African development. Let me also stress the openness and transparency of the meeting over the years in the exchange of views amongst the conference delegates, by all international partners involved, not only African countries but also international organisations, private sector, partner countries, including Asian countries like China; and civil society organisations. But the ownership is on the African leadership side; how African countries can develop in future and how international partners, including Japan can assist.

What role is the Nigerian government playing in this international meeting?
I need to draw attention to the importance of the TICAD. Nigeria is playing an important role. President Muhammadu Buhari attended the previous one that was held in Nairobi, Kenya in 2016. Japan is part of the process to see how we can develop Africa as a whole. However, the role of Nigeria is its decision, how it can be part of the conversation and implementation plans for the future development of Nigeria.

Was Nigerian government invited for the TICAD?
Of course; we have sent invitation to the government through the Minister of Foreign Affairs and we have received a kind of positive signal from the government that it will send a very high-ranking political officials for the meeting, and we are very much encouraged.

What are the expectations from the meeting?
Like I said earlier, the Ministerial Meeting is a kind of review meeting concerning what was committed in the previous meeting, in Nairobi, Kenya; and also, to discuss the agenda for the next year TICAD. It is a very important meeting in the TICAD’s process. The involvement of Nigeria in the process is very important, and it is for the future development of the country.

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Share with us your areas of engagement with the Nigerian government since you arrived the country?

This is my fourth month since my arrival. I arrived Nigeria on May 24, 2018 to take up this position. My engagement has been on three pillars: the first is economic; the second pillar is development and the third is enhancing the people to people exchange. In terms of development, we are supporting Nigeria in infrastructure development such as water, electricity, transportation, information communication technology, software development and others. I strongly believe that helping Japanese companies in Nigeria to develop is in the best interest of Nigerians. They can create many jobs; they can enhance and transfer technology development to Nigeria. The philosophy of Japanese government is that we work for the receipting country. In the development, there are many commitments that have been made by TICAD’s process.

In that process, we have our economic, development and skills acquisition cooperation/plans for each African country. In case of plans for Nigeria, we have mainly three pillars in our assistance towards Nigeria. One is infrastructure, the second is health and the third is a kind of emergency human-career aide through a long-term sustainable aid to the people. So, based on their philosophy and their discussion in the TICAD’s process, we develop our assistance plan for each country. The second pillar is the people to people exchange. Before I came here, I heard a lot about Nigeria by Japanese people. But my perception about Nigeria has since changed after my arrival. We should make effort to convey the real image of Nigeria to the Japanese people.

The information about Nigeria as economic and political powerhouse in Africa, its rich culture, music, movies and other are very scarce in Japan. It is only negative things like Boko Haram activities, crimes and other bad things that are available there. But after my arrival here, I found out that though Nigeria has its own challenges; I don’t deny it: Nigeria has a lot of challenges; Japan also has its own challenges, but Nigeria is charming and has great human resources, talented people, and young creative people. I will like to convey all these beautiful things to the Japanese people. I will also like to convey to Nigeria, the beauty of the Japanese people.

We need to develop a mechanism for information sharing between the two countries. With population of approximately 200 million people and its abundant natural resources, Nigeria is a great country. For us, Nigeria is an extremely important country to promote our diplomacy towards the African region. In this regard, it was my honour to come to such a great country and serve as an Ambassador representing the Government of Japan. If I look at its cultural aspects, Nigeria is a prominent cultural giant in the areas of literature, music and film, while it is also an information hub. It is famous for influential authors such as Prof. Wole Soyinka who is the first African writer awarded the Nobel Prize in Literature, talented music artists with Nigeria being the origin of Afrobeat, and its film industry known as Nollywood, which is often compared with Hollywood or Bollywood. Therefore, it is my pleasure to be able to work in such a culturally rich country and strengthen the bilateral relationship through cultural exchange.

What is the trade relationship between Nigeria and Japan like?
We attach great importance to the relationship between us and Nigeria because Nigeria is a very important country to Japan strategically as well as economically because as you well know, Nigeria is the biggest economy in Africa. 70 per cent of the GDP of the African continent is shared by Nigeria, and the population as you well know. Now Nigeria is allocated number seven in the world, and in the future, it will be India, China and Nigeria. Everybody knows that. Relationship including trade relationship or investment is important for Japan and Nigeria. Nigeria is a unique country to Japan; many people think that Japan sends a lot to Nigeria or any part of the world; but, we import a lot from Nigeria. Japan imports a lot more than we export to Nigeria; so, the trade balance is in favour of Nigeria. Every year, this trend is continuing in favour of Nigeria. And one of the greatest commodities we import from Nigeria is natural gas.

I am from Fukushima; seven years ago, we had a massive earthquake, tsunami and even the nuclear power plant explosion and Japanese energy resources need to sustain economic growth. Here comes Nigeria, we import a lot of natural gas from Nigeria, especially after the great East Japan earthquake, the amount increased, and we see it every year. Each country Nigeria sells its natural, it is Japan; you take your natural gas to other countries like Spain, but Japan is the highest. I think very few Nigerian people know this–that Nigeria currently supports the energy resources of Japan for the sustainable economic development of Japan, so we are very grateful to Nigeria.

How do you think Nigeria and Japan can sustain this relationship?
That is where we are working very much on. One possible area is continuation of this kind of trade. Now, a number of Japanese companies that are interested to have their businesses in natural gas resources from Nigeria are discussing contracts. Other areas that Japanese companies like you see here are Yamaha; automobile makers like Honda, and big names are coming to Nigeria. This shows the number of Japanese companies operating in Nigeria has being on the rise for many years. In late 1980s and 1990s, there were lots of Japanese companies operating here, the number reduced for sometimes but since 2009, it is on the rise again. And here as you know, these two years, Nigeria’s economy was on minus growth ratio. So, naturally the number has not increased; however, after the recession of Nigeria the numbers are picking up, and if you see those companies – Sony and Yamaha, are big names, and we have the records that the numbers are even on the rise again, and many other big names are looking at how to start their business in Nigeria. Before I came here, I had a lot of interviews in Japan.

I met with the leaders of the big Japanese companies and I felt that they are interested to start their business in Nigeria. They have not yet decided to come into Nigeria, but they have the great interest on how to explore the actuality on ground. Even commerce or trading companies or even start-up companies are quite interested to have their businesses start up in Nigeria. I recently visited Lagos and met with companies, and I felt very good with the attitudes of Japanese companies. I felt that if we handle those obstacles or barriers correctly, Nigeria and Japan have a brighter future in terms of trade relationship.

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You know very well that political stability in Nigeria also determines economic progress. Is there anything the Japanese government is doing to assist the democratic process in Nigeria, especially as we approach the 2019 general elections?
We will be happy to assist in whatever way we can; but basically, I will like to say that ensuring that there is free, fair, transparent, and peaceful process is the responsibility of the Nigerian leaders and the people. It is not the kind of aide that we can give.

It is not the responsibility of Japan to ensure peaceful election in Nigeria. I will like to say that Nigerian people have their stake to democratic election. But, if there is anything we can help, for example, sending election observer team, we will be happy to do that. Basically, Japan will join the international community to keep a close eye on the process, and if there is any need, we will issue a kind of message to the leadership of Nigeria. But, I will like to say, basically, it is Nigeria’s job.

What do you think is the future of Nigeria?
Many ambassadors I met here explain to me how to see the glass: glass half full of water or glass half empty. But, I take the view that Nigeria has good potential for the future. Of course, you have many challenges, but you have great human and natural resources. You have the potential for the future and Japan is very happy to assist in any way. We are trying to help those who try their efforts at self-help, and that is Japanese philosophy; we just don’t give fish, we teach people how to catch the fish.

Since you came to Nigeria, is there anything you find strange?
No; actually, my previous post was New Delhi in India; so, I didn’t find any problem adapting myself to the life here. Rather, I find it enjoyable, especially for the people. Nigerian people have smiles and very good sense of humour. When I throw any jokes, I got great response from the people. I think the human resource is the asset you have for the future, and at the same time, increase in population in the future will cause great challenge — on how to feed those young generations; how you can keep the jobs for those young generations; that is a very important challenge to Nigeria. If it doesn’t go well, it could lead to social instability, crimes and unfortunately serious terrorist activities. So, I do hope, and I have the confidence that Nigerian people together with the assistance of the international community, will face those problems and find a solution. That is my view.

Iyobosa Uwugiaren

Ghana Gets World Bank USD $30 Million Support


The World Bank has approved a $30 million International Development Association (IDA) credit to support the Government of Ghana strengthen its financial sector stability.

The support is also to improve inclusiveness for users of formal financial services and the financially excluded, particularly women, rural communities and farmers.

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Commenting on the gesture, the World Bank Country Director for Ghana, Henry Kerali said,

“This project will support Government’s plan to undertake reforms to deepen financial markets, promote inclusion, enhance the supervision and regulation of specialized deposit-taking financial institutions in line with Ghana’s National Financial Inclusion and Development Strategy.”

A statement from the World Bank to Citi Business News said: “The Ghana Financial Sector Development Project, is a key component of the World Bank Group’s comprehensive portfolio supporting financial stability, financial inclusion and private sector competitiveness.”

It added, “It is expected to help regulators strengthen their oversight of the financial sector for a sound and stable sector. This will enable ordinary Ghanaians develop trust in the sector and benefit from access to savings and financing for investments. It will also support the education of consumers on their rights and equip them with skills and knowledge to make informed choices in the use of financial services.”

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Meanwhile the project will also promote financial inclusiveness by mainly supporting rural and community banks to expand financial services to rural areas and the underserved segments of Ghanaians.

For his part, World Bank Practice Manager for Finance & Markets, Douglas Pearce remarked,

“The increase in access to financial services is expected to create economic opportunities and contribute towards ending extreme poverty and promoting shared prosperity.”

The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives.

IDA is one of the largest sources of assistance for the world’s 75 poorest countries, 39 of which are in Africa.

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Resources from IDA bring positive change to the 1.5 billion people who live in IDA countries. Since 1960, IDA has supported development work in 113 countries.

Annual commitments have averaged about $18 billion over the last three years, with about 54 percent going to Africa.

World Bank Ghana

China’s Belt And Road Initiative Opens Up Unprecedented Opportunities


It was the best of times, it was the worst of times. A tale of two world leaders, U.S. president Donald Trump and China president Xi Jinping—both of whose countries have among the world’s best economies right now. But whereas Xi is playing Santa Claus to the rest of the world, doling out loans to finance-starved countries, Trump is playing Scrooge, waging an economic war with Canada, the European Union, China and others.

Respected economist Art Laffer, whom I’ve written about before, has always supported leaders who ignite global trade rather than close off its borders. A full-blown trade war, Laffer said recently, would be a “curse” on the U.S. economy.

Post-World War II, it was the U.S. that led global trade and infrastructure build-out—the Marshall Plan in Europe, the Interstate Highway System domestically. Both projects required massive amounts of commodities and raw materials, and employed hundreds of thousands of people.

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Today, of the two leaders mentioned above, it’s Xi who has a clear foreign policy when it comes to trade and infrastructure.

U.S. Fund Flows Into Africa Are Slowing

Case in point: This week, Beijing will host the Forum on China-Africa Cooperation (FOCAC). The summit, which takes place once every three years and is attended by representatives from 52 African countries, touches on areas as diverse as technology, trade, infrastructure, diplomacy, culture and agriculture.

During the last forum, in 2015, China pledged as much as $60 billion toward Africa’s development in interest-free loans. The Asian country, in fact, has increased its investments in the continent around 520 percent over the last 15 years, according to Global Trade Magazine.

As just one example, Kenya agreed to let China finance and build a standard gauge railway (SGR) connecting two major cities at a cost of $3.8 billion. Contracted by China Road and Bridge, the Mombasa-Nairobi SGR is Kenya’s largest infrastructure project since it declared independence from the U.K. in 1963.

Meanwhile, U.S. fund flows to Africa have been receding, and they’re expected to slow even more during Trump’s administration.


Xi isn’t doing this out of the goodness of his heart, of course. China, having been Africa’s largest trading partner for nine consecutive years now, likely expects its investments to pay diplomatic and economic dividends for many decades to come.

Even Trump’s own commerce secretary, Wilbur Ross, acknowledges that the U.S. must do more in Africa. “By pouring money into Africa,” Ross wrote on CNBC in August, “China has seen an opportunity to both gain political influence and to reap future rewards in a continent whose economies are predicted to boom in the coming decades,” due mainly to a younger demographic.

The Belt and Road Initiative Will Affect 60 Percent of the World’s Population

The most well-known among China’s projects is the Belt and Road Initiative (BRI), one of the most ambitious undertakings in human history. The biblical-size trade and infrastructure endeavor—a sort of 21st century Silk Road—could cost 12 times as much as what the U.S. spent on the Marshall Plan to rebuild Europe following World War II. The BRI has the participation of 76 countries from Asia, Africa and Europe, and is poised not only to reshape globe trade but also raise the living standards for more than half of the world’s population.

According to the International Monetary Fund (IMF), the “BRI has great potential for China and participating countries. It could fill large and long-standing infrastructure gaps in partner countries, boosting their growth prospects, strengthening supply chains and trade and increasing employment.”

The BRI, which turns five years old this fall, announced in 2013, will have a strong presence in Eastern Europe, also a prime destination for China FDI, as the countries there offer a wealth of metals, minerals and agricultural products.

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According to Stratfor, Chinese companies have invested as much as $300 billion in Eastern Europe over the past decade. Last May, China and Ukraine agreed to cooperate on joint projects valued at nearly $7 billion, and in November, it was announced that China Railway International and China Pacific Construction would build a $2 billion subway line in the Ukrainian capital, Kiev. More recently, Chinese engineers with China Harbor Engineering completed a $40 million dredging operation in Ukraine’s Yuzhny Sea Port, allowing it to receive larger ships.

Like the Marshall Plan before it, the BRI will require tremendous amounts of commodities, metals and fuel.

In 2011, members of our investment team and I had the opportunity to see one of China’s high speed trains firsthand. The train averaged 185 miles per hour during our 923-mile trip from Shanghai to Beijing. As I wrote then, “I’ve traveled to all corners of the world and have seen many things during my travels, but viewing China’s explosive growth as it flies by you is something I will never forget.”

U.S. Investors Hiked Exposure to China

In light of all this, there’s no lack of negative news on China right now. I see headline after headline on the country’s “slowing economy” and “weakening consumption,” but like most things are in the media, these proclamations are overblown.

Look at China’s purchasing manager’s index (PMI). Fresh data out last Friday showed that manufacturing expansion in August accelerated slightly faster than in the previous month. The PMI hit 51.3, up from 51.2 in July and beating analysts’ expectations of 51.0. This was the 25th straight month of economic expansion, despite what I earlier described as the Trump-Kudlow trade war with China.

Also, as the Peterson Institute for International Economics (PIIE) wrote last week, “there is no empirical evidence that consumption in China is weakening,” contrary to what “official” retail sales data show.

The PIIE’s Nicholas Lardy cited Alibaba’s recent announcement that sales rose 60 percent in the most recent quarter compared to a year ago—“a sign that Chinese retail sales data likely do not fully capture China’s burgeoning digital retail.”

“In any case,” Lardy continued, “retail sales are an increasingly less useful measure of consumption, as China’s large and still growing middle class is spending a growing share of their rising income on education, health care, travel and other services that are not captured in official data on retail sales.”

Savvy investors, I believe, get it and can see the opportunity in the world’s number one economy, as ranked by purchasing power parity (PPP). Reuters reports that, in the week ended August 22, U.S. investors poured $572 million into funds that invest in Chinese equities. That was the most for such funds since January.

Although some expect Trump to impose tariffs on $200 billion additional Chinese imports, perhaps as early as this week, “investors are expecting Beijing to continue counteracting the effects of the [trade] dispute with increasingly relaxed monetary and fiscal policies,” Reuters says.

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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. Gross domestic product (GDP) is the total value of goods produced and services provided in a country during one year. Purchasing power parity (PPP) is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries. Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 6/30/2018. U.S. Global Investors, Inc. is an investment adviser registered with the Securities and Exchange Commission (“SEC”). This does not mean that we are sponsored, recommended, or approved by the SEC, or that our abilities or qualifications in any respect have been passed upon by the SEC or any officer of the SEC. This commentary should not be considered a solicitation or offering of any investment product. Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.

Time to explore opportunities in social housing


Great opportunities abound in the social housing sector of the economy but successive governments in the country have not been able to utilise these opportunities to the benefits of the public.

The social housing sector has all the hallmarks of a sector that will see increasing challenge over the next few years.

Recent industry debate has focused on the need for, and means to deliver, accelerated levels of consolidation through various activities. The need for social housing stock has never been greater, but there will inevitably be winners and losers as the sector works through its issues.

Social housing is an umbrella term used to refer to rental housing which may be owned and managed by the state, by non-profit organisations, or by a combination of the two, usually with the aim of making it affordable.

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Social housing may also be referred to as a public housing which may be a form of housing tenure in which the property is owned by a government authority, be it federal, state or local government authority.

When you talk about social housing for the masses, the words that come to mind are cheap, affordable, non-profit driven, mass produced houses that could be occupied by low income earners, who may wish to save towards eventually buying such houses over time.

Generally, social housing deals with housing solutions that are priced and financed in a way that would ensure low-income occupants could satisfy their other basic needs.

Even though the scarcity of affordable housing affects all segments of the society, it is notably low-income earners who are most affected. The way and manner government build estates does not show that the poor masses are borne in mind.

The property market ought to service the low income earners in the society. The Nigerian urban housing market primarily targets high income earners and thus leaves large parts of the Nigerian population excluded from formal housing provision.

In general, low-income households face a number of barriers such as weak individual purchasing power; lack of access to housing finance; unavailable complementary goods, such as land and infrastructure; and insufficient housing supply required to meet the actual demand of the urban poor.

Executive teams, boards and their lenders need to be proactive in assessing the impact of recent policy changes and their options and response to them.

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With the range of stakeholders and the clear public policy interest, it is likely to take significant time and effort to deliver credible solutions for those providers with the most challenged business models.

Social Housing, in its various forms, has been an increasingly important part of the UK provision since the boom in house building following the end of the Second World War.

There are a variety of private, public and charitable enterprises that build, manage and maintain housing stock, with standards and rent levels subject to a high degree of regulation.

As of September 2015, there were 1,783 Registered Providers (RPs) of social housing who were registered with the Homes and Communities Agency (HCA), the sector regulator. The sector supplied some 2.7m homes in England, representing an increase of 1.5 per cent on the previous year.

Much of the growth in the sector was attributed to the increase in Affordable Rent Stock to a new high of 123,000 units (Source: BBC, April 2015).

The creation and provision of social housing is towards ensuring housing affordability. Affordable housing is therefore defined as housing which costs no more than 30 percent of the income of the occupant household. This is the generally accepted definition of housing affordability.

Frankly speaking, Nigeria’s housing problem is derived from a historical lack of focus on housing development.

Over the years, the country has not been able to develop a viable and sustained housing finance system either because of lack of expertise, up to date and knowledgeable industry leaders especially in the policy making arms, lack of funding for relevant institutional agencies/department, political and selfish gains. Housing plays a special role in the social, political but more importantly economic dialogue in most societies.

Housing has been known to be a major component of creating stable and healthy communities and it is often the largest single category of household expense. For housing to be successful, a country like Nigeria needs to have a stable macroeconomic environment. Moderate to high inflation rates and nominal interest rates as witnessed in Nigeria are typical features of volatile economies.

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These features have strong effects of reducing the affordability of mortgages. A volatile economy also affects the supply of funds and the types of mortgages offered by lenders. In such an environment, lenders are concerned about liquidity risk and are reluctant to offer long term loans.

The solution to this, then, becomes government’s strong institutional intervention in terms of favourable policy drafting and implementation.

The coming on board of the Nigerian Mortgage Refinance Company (NMRC), is a commendable step towards scratching the surface of this challenge. This is despite the fact that the NMRC is dragging the feet in most of the roles it should take.

Another distinguishing characteristic of housing finance is the ability to mortgage the property to secure the loan. This means that the land laws and processes (title registration, foreclosure laws, etc.) have to be put in place to allow enforceability.

An accurate and comprehensive land registration system is a necessary condition for effective property rights. This is largely absent in Nigeria. However, it is important to mention that a few states have begun to address this problem through the setting up of several land registries at the state level.

It is pertinent that the states are encouraged to get these initiatives to a cruising altitude. At the Federal Mortgage Bank of Nigeria (FMBN), tireless efforts are being made to also contribute to solving this problem through the bank’s centralised repository land and assets registry system.

At the Federal level, creating or sponsoring a Mortgage Electronic Registration System as is done in the United States and other emerging markets will also help to increase the ability to mortgage properties.

Social housing delivery is therefore housing delivery that not only provide good quality and affordable housing, but allocates its benefit equitably between the rich and the poor. It also regenerates the environment rather than destroying it.

Also, it empowers the poor to have access to decent homes at affordable cost rather than mitigating or excluding them. In sum, it can be described as housing delivery system which gives priority to the disadvantaged groups, enlarging their housing choice and opportunities and giving
them a say in decisions that affect their housing needs and lives (Agbola and Alabi, 2000).

Maduka Nweke

World Bank Endorses Plan For India To Become Higher Middle-Income Country

“With a fast-growing economy, global stature, and its unique experience of lifting the highest number of poor out of poverty in the past decades, India is well-positioned to become a high middle-income country by 2030,” said Hartwig Schafer, World Bank South Asia vice president.

A day after Prime Minister Narendra Modi said India will become a $5 trillion economy by 2022, the World Bank board today endorsed an ambitious five-year Country Partnership Framework (CPF) for India, which aligns with New Delhi’s objectives of high, sustainable and inclusive growth.

Aimed at supporting India’s transition to a higher middle-income country by addressing some of its key development priorities — resource efficient and inclusive growth, job creation and building its human capital — the framework is expected to bring between $25-30 billion in financial support from the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).

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“With a fast-growing economy, global stature, and its unique experience of lifting the highest number of poor out of poverty in the past decades, India is well-positioned to become a high middle-income country by 2030,” said Hartwig Schafer, World Bank South Asia vice president.

“It’s a five-year framework that commits the World Bank’s engagement in India, both in areas where what we’ll do, how we will work in these areas and the level of financial commitment. This is the first country partnership framework written with India,” Junaid Ahmad, Country Director, World Bank, India, told news agency PTI in an exclusive interview.

“The CPF was preceded by a systematic country diagnostic or SCD that offered a narrative about India. What are the challenges going forward in terms of the growth of India? And what are the challenges that India faces in achieving the twin goals that the World Bank has put for itself, which is reduction in extreme poverty and the increase in shared prosperity,” Mr Ahmad said.

Soon after the World Bank endorsed the CPF for India, Ahmad said, the Board recognises the incredible growth and development of India over the last several decades.

“It recognizes that India has gone from a low-income country status to a low-middle income. And now India is entering the economic transformation from low-middle income to high-middle income (country). This CPS is about how can the Bank support this transition,” he said.

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Noting that the systematic country diagnostic is a highly consultative document, Mr Ahmad said, the CPF is a joint document with the Indian government.

“I complement the World Bank Group for aligning the CPF with India’s development and investment objectives of high, sustainable and inclusive growth,” said Subhash Chandra Garg, Economic Affairs Secretary, in a statement.

Observing that the systematic country diagnostic basically said India’s big story is steady growth from very low several decades back to a steady growth of seven per cent plus, Ahmad said, this document also showed that the growth is quite diversified. “Some of it is based on export. A lot of it is based on an internal consumption and investment, unlike say China, which is highly export led growth. So India’s is more broad based, diversified growth path,” he said.

“Over time, this growth has become more stable and is resilient. Recently there were shocks on the economy, which included demonetisation and the GST implementation and there was this fall in the growth. But it is now rebounded, and not only has it gone back to seven per cent, this quarter it is at eight per cent,” Mr Ahmad said.

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Based on the systematic country diagnostic goal of taking the Indian growth rate to eight per cent plus, the World Bank argued that there were several areas of engagement that were very important: natural resource management, jobs and competitiveness, and human development, he said, adding that the framework addresses these issues.

“The first point we make is India needs to unleash the power of markets and private sector. It needs to leverage private sector and in particular private capital. The challenge for the Bank is how do you take the little amount of money ultimately you’re putting into the country and you go from being a lending bank to being a leveraging bank,” Mr Ahmad said.

He said complementing transformational national programs, the Bank will also develop strategic state partnerships to address state-specific development priorities and support implementation capabilities at the state and the local level.

“The future of India lies in the states of India. The country’s transition to high middle-income status will be determined in large part by the effectiveness of India’s federal compact. In this context, an important focus of the CPF will be to deepen engagement with India’s states and invest in the institutions and capabilities of the states and local governments to address their development priorities,” Mr Ahmad said.

He said the Bank was going for a “Lighthouse India” approach. “Lighthouse India basically means learning from the innovation of the states and sharing with other states. We also recognise that the learning is what India also has to offer the rest of the world. As it goes from low-income to middle-income to high-middle-income, its learning over its development path is going to be very valuable for other nations,” he said.

“The Indian economy has evolved to a level where the private sector can be counted on to close large developmental gaps. Through this the CPF, the WBG will help India leverage additional resources from the private sector to help India realize its full potential,” said Jun Zhang, Country Head, IFC, India.


Nigeria’s fear for its economy deepens as Q2 GDP weakens


Weak second quarter 2018 Gross Domestic Product (GDP) data released by the National Bureau of Statistics (NBS) a few weeks ago has heightened concerns over the nation’s economy. TONY CHUKWUNYEM writes

About a week before the National Bureau of Statistics (NBS) released second quarter 2018 Gross Domestic Product (GDP) data, the Statistician General of the bureau, Dr. Yemi Kale, had hinted that the numbers would fall short of expectations.

He reportedly stated that apart from the political and economic uncertainty over the general elections in 2019, what is contributing mainly to slowdown in the economy is impact of the herders/ farmers’ clashes on the agriculture sector, which is the biggest contributor to the GDP. The NBS boss was quoted as saying: “I am not going to give the final figure because the work is not even completed but from the numbers I am seeing, it is looking quite flat.

Surprisingly, but I expected the numbers should be much better, but it is looking very similar to the first quarter. I think the economy is still struggling out of recession and that is what the numbers are showing.”

In fact, the data released by the Statistics Office on August 27 showed that Q2 GDP growth declined to 1.50 per cent from 1.95 per cent reported for the first quarter of this year. The drop in Q2 GDP growth rate clearly came as a surprise to financial analysts, as they scrambled to offer reasons as well as assess the implications of the slower than expected growth.

Analysts’ reactions
For instance, commenting on the GDP data, analysts at FSDH Research stated: “The real GDP growth rate of 1.50per cent recorded in Q2 2018 was below the expectations of most analysts. The GDP numbers reflect the impact of the rising uncertainties in the country. The low growth and contraction across many sectors of the Nigerian economy also underscore the need for an urgent set of policies and engagements to rescue the economy.”

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According to the experts : “Although the fragile growth was driven by the non-oil sector, the fact that dominant sectors of the economy either recorded low growth or contracted in Q2 2018 indicates that urgent actions are required. Agriculture, which is the largest sector of the Nigerian economy at 22.86per cent, recorded a marginal growth of only 1.19per cent. “FSDH Research notes that the slow growth in the agriculture sector, if not checked, may lead to food shortage in the country and consequently escalating food prices and rising inflation rate,” the firm added.

Besides, it said that trade-the second largest sector of the Nigerian economy- contracted by 2.14per cent in Q2 2018, pointing out : “The weak purchasing power in the country (occasioned by nonpayment of salaries, high unemployment rate and high consumer prices) is responsible for the contraction in the Trade sector. “The current low GDP growth rate is not strong enough to stimulate credit creation. It has also increased the risk of doing business in Nigeria.

Therefore, urgent measures are required so that low GDP growth rate does not become a new norm in Nigeria.” Corroborating FSDH Research’s comments, Renaissance Capital’s (RenCap) Sub-Saharan Africa (SSA) Economist, Yvonne Mhango, stated: “The slowdown in Nigeria’s YoY growth to 1.5per cent in 2Q18, from 2.0per cent in 1Q18, was partly due to a 4.0per cent contraction in the oil sector, which masked stronger non-oil sector growth.

“It is notable that the biggest non-oil sectors – crop production, wholesale and retail trade and manufacturing – underperformed. We believe this is in part due to a weak consumer. Due to trade’s protracted slump, the sharper-than-expected slowdown in crop production, the peaking of oil production, and the weak consumer’s cap on manufacturing, we lower our 2018 growth forecast to 2.0per cent, from 2.9per cent previously. We also lower our 2019 forecast to 2.5per cent, vs 3.0per cent.”

The RenCap Economist also pointed out that wholesale and retail trade, the second-biggest sector, saw its contraction deepen to 2.1per cent YoY in 2Q18, vs -1.6per cent YoY a year. She adding : “We believe this reflects a consumer that is still weak.” Furthermore, the financial expert noted that while improved foreign exchange liquidity helped bring manufacturing out of recession in Q2 2018, “the weak consumer has capped its growth. This is affirmed by manufacturers’ taking out FX loans for working capital needs rather than capex.”

She predicted: “Other than a lift from an expansionary budget, we see limited upside to 2H18 growth.” Indeed, also commenting on the Q2 GDP numbers, experts at CardinalStone Research forecast a further drop in economic output in H2’18 due to poor growth in the agriculture sector.

They noted that a major reason for the decline in Q2 2018 GDP was the sharp slowdown in agriculture sector growth, predicting that they expect this factor to also negatively impact GDP growth in the second half of 2018.

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According to the experts: “The slowest agriculture sector growth in 14 years (1.50% YoY), weak crude petroleum and natural gas production dampened GDP growth in Q2’18. Although we expect a bounce back in the oil sector and healthy growth in services to spur growth in the final two quarters, we see poor agricultural growth weighing down GDP growth in H2’18. We forecast a further slowdown in growth to 1.4% YoY in Q3’18 and 1.75% YoY FY’18.”

Similarly, in an analysis of the GDP data posted on its website, Nairametrics stated: “The decrease in the GDP growth rate in the second quarter of 2018 (which is a second consecutive decline) is a negative development for the Nigerian economy, considering the fact that it recently exited recession in the same period last year.”

“The slump in the GDP growth rate in the second quarter of 2018 may not be totally unexpected, as the following may be adjudged as possible reasons for the fall in GDP growth rate: delay in the passage of the budget for a period of six months, during which the economy was almost at standstill and some companies halted their business decisions awaiting budget passage; decline in the importation of capital into the country by 12.53per cent in the period under review to $5.51 billion from $6.30 billion in the previous quarter of Q1 2018 and increased political tensions in Q2 2018 caused some investors to pull out their investment out of the economy.”

Significantly, the fall in Q2 GDP now appears to have made analysts confident that the Central Bank of Nigeria (CBN) will leave interest rates unchanged when its Monetary Policy Committee (MPC) meets next Monday and Tuesday.

Specifically, RenCap said: “The Nigerian economy under-delivered; growth came in weaker than we expected and the Monetary Policy Committee (MPC) chatter has swung from rate cuts to hikes. We no longer expect a rate cut in 2018, owing to emerging inflationary pressures, in part due to an expansionary FY18 budget. We now expect the policy rate to be held at 14.0% until YE19.”

In the same vein, even though he predicts that the MPC will leave rates unchanged, the Chief Executive Officer, Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, noted that the decline in Q2 GDP: “Supports the argument for a rate cut.”

In fact, the FDC CEO has been one of the most vocal advocates for a cut in interest rates, consistently making the case that unless the benchmark interest rate, the Monetary Policy Rate (MPR), which had been held at 14 per cent since July 2016, is reduced, the economy will continue to struggle.

According to him, interest rates have to be reduced so that operators in key sectors of the economy such as agriculture and manufacturing, which employ a high number of people, will be able to borrow at interest rates that they can afford. In a report released by his firm last June, he stated: “With the MPR stagnant at 14per cent, commercial bank official lending rates range from 20-25per cent per annum while microfinance banks offer as much as 40per cent to 50per cent. Thus, it is no surprise that while the economy is growing at 1.95per cent (Q1’18), interest-rate sensitive sectors such as trade, real estate and construction continue to contract.”

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Interestingly, assessing the Q2 2018 GDP data on a recent television programme, respected Economist and the CEO of Biodun Adedipe and Associates, Dr Biodun Adedipe, also called for more attention to be paid to the development of key sectors such as manufacturing and agriculture.

He said: “If you look at the GDP for the Q2 of 2018, the real growth was driven by the services sector and services are meant to build upon the foundation of agriculture to start with, then you build manufacturing on agriculture and services come on top of those two. Until we give good attention to agric and manufacturing, we may not get inclusive growth that we desire.”

Last line
Indeed, despite the concerns they expressed over the decline in Q2 2018 GDP, analysts at FSDH Research still took away some positives from the data.

They stated: “FSDH Research observes strong growth in the Information & Communication and the Construction sectors of the economy. The growth in Internet data consumption and increase in road and rail construction works across the country are the major drivers of the growth in the Information & Communication and the Construction respectively. We believe the two sectors can achieve higher growth rates given the enormous potential inherent in these sectors.

“Improvement in the business environment that can lead to job creation and payment of salary of workers, particularly among the state civil servants, will stimulate purchasing power.”


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