NIGERIA'S 2014 ECONOMY: DEBOTTLING THE BOTTLENECKS
Early in the week, the Minister of Finance and the Coordinating Minister for the Economy(CME), Dr. Ngozi Okonjo-Iweala held a top level interaction with the creme of the private Sector in Lagos midwifed by the Nigerian Economic Summit Group(NESG). She made a presentation about the performance of the Economy in 2013 so far and gave some insight into Government thinking for 2014. In my view I think that her presentation was balanced.
The statistics which she reeled out, generally agreed with the report just released by the IMF following their recent article 4 review and consultations with the Government of Nigeria. The Economy has been growing in GDP at decent and competitive rate,in the 7% range, though below the the 9-11% recommended for Vision 2020. Inflation has decelerated to single digit( below 9%), which to me is a feat which needs to applauded, given where we were coming from in the last couple of years. The Banks are generally stable, with the help of AMCON, and interest rates are trending down. Nigeria's Eurobond and other International financial instruments are sought after by global investors, attracting competitive yields. Despite our subsisting internal challenges, Nigeria continues to receive the highest Foreign Direct Investment (FDI) in Africa,a significant proportion going to the non-oil sector; all these indicating the growing interest in Nigeria by the International Community. Government has increased focus and investment in the Agricultural Sector and with the completion of the critical segment of the Power sector Privitisation, there is real hope that the real sector( incidentally, manufacturing grew by over 8% in Q3) will accelerate in growth in 2014. But it was not all good news.
The CME admitted that there is a shortfall in National Revenue emanating from a decline in oil revenue caused largely by an embarrassingly high level of oil theft. This has led to the draw down of the Excess Crude Account(ECA ) to augment Federation account, though the States are still complaining of shortfalls in revenue. These short falls have impacted the capital releases to the MDAs somewhat. As at the end of Q3 this year, capital releases was at the 70% range. On how to stop this revenue haemorrhage, she said the Federal Government was making strenuous efforts to stop it. But some participants were sceptical and opined that they they did not think, enough efforts had been made. This oil theft and illegal bunkering has been with us for a long term and rather than abate,it has assumed such huge dimensions that it has become a major threat to National budgets.
Perhaps to find a way to compensate and shore up revenues, she announced an intensification of efforts to increase Tax revenue . Though she was careful to emphasise that tax rates rates will not go high, there is a certainty this new tax effort will ruffle many feathers, especially in the SME sector, which already feels over burdened by multiple taxes,even if many are illegal or inappropriate. Increasing tax income is usually an economic imperative even in the developed climes and is long overdue in Nigeria but launching into it at this time of shortfalls in oil revenue, not because our oil has has dried up, or because prices have fallen in the international oil market or even as a strategic effort to conserve our oil or the revenue, but in response to our inability to stop the oil thieves is being viewed by some Nigerians as the response of a man who can not stand up to the insult and challenge of his mate in the village square but returns home to beat up his wife,as a way of letting off his anger and regaining his ego. There is nothing wrong with expanding our tax base but it should not be a replacement for allowing thieves to deprive us of our National wealth and we keep acting as though we are helpless. I am thoroughly bewildered as criminals seem to have the upper hand. What do we have the Police, Navy, Army SSS,and the Civil defence for?
She also stated that despite the great interventionist efforts by government through SURE-P and other initiatives ( You-Win, community service, Graduate Internship Scheme(GIS), Ferma Public Works,etc), the Youth unemployment rate remains unacceptably high and appealed to the Private Sector to assist Government in tackling the problem head on. Commentators agreed that to create more Jobs, the Government needs to further free and expand the Economy. They pointed out that certain bottlenecks exist in the Economy which still constrict private sector activities. I shall return to these shortly. There was also the plan to make special developmental investments in the North East Region as part of the 'carrot' to help normalise the Security situation in that region. While this is a welcome effort, there is this feeling that we tend to be very reactive in the Country. We wait for Militancy in the Niger Delta to establish NDDC and the Ministry of Niger Delta. Now we are about to establish a special Developmental effort in the North East because of Boko Haram. Are we saying that every section or region must get into rebellion before we can pay attention to their plight. I am praying that the forthcoming National dialogue will fashion a way to ensure equitable development of all parts of the Nation to prevent perpetuating this patently destabilising trend.
The greatest bad news by my own reckoning from CME was the announcement that the Capital expenditure ratio will further decline in 2014 in favour of recurrent expenditure. All the hefty increases in the emoluments of Public and Civil servants that started in 2010, with their Pension implications are taking heavy toll on our income. And yet ASUU is insistent on forcing the federal government to swallow another poisonous pill. That will spell disaster for infrastructural development in 2014
DEBOTTLING THE BOTTLENECKS
Now let me now turn to some of the issues which I believe are still constraining the Economy which I believe should deserve governmental attention in 2014, if we intend to sustain our growth trajectory
PASS THE PETROLEUM INDUSTRY BILL(PIB) OR KILL IT FOR GOOD
I am amazed how both the executive and National Assembly have gone cold on the PIB. And yet investment in the golden goose- oil and gas by the IOCs has virtually stagnated over the last couple of years since the PIB story started. Is anybody worried that the IOCs are divesting and going to Ghana and Angola? Is anybody perturbed that jobs are being lost rapidly in the oil and gas sector?. Yes Nigeria may be receiving the highest FDI in Africa but that declined by a worrisome 21% in 2012. Can some one tell me why we must kill the only industry that is providing our life blood. Is it Politics or what? I request Mr President to make a decision and confront the National Assembly. If for any reason the bill is unapprovable, we can kill it and return to status quo. It is the uncertainty that is driving away the IOCs and investment. I am tired of this unending feud on the PIB. Perhaps I am an unusual Nigerian !
FREE UP GAS FOR POWER
If there divisive politics is holding back the PIB from being passed, then let us just extract the gas to power section and pass it into a law, thus freeing up the gas production and gas pricing. We need gas to power our power and other industrial plants. The present legal regime is a bottleneck for the huge investment required to make gas readily available to meet our Electric power ambition for example. Now that the Gencos have become private with very huge investment, then let us free up the gas market so that they can be assured of uninterrupted supply of the critical feed stock required for firing most of the thermal plants. This can come as a private members bill and with adequate lobbying could be passed in a matter of weeks. This should be a must in 2014.
PASS THE AMMENDED RAILWAY BILL
Movement of goods in our country is still heavily constrained by poor transportation infrastructure. For years our ancient rail system collapsed. Even now that it is resurrecting helped by the SURE-P funding, it is still to slow and too inadequate to support the emerging Nigerian Economy. Let us remove government monopoly and allow the private Sector to invest in Railways. As at now,even State governments have difficulty participating in this industry because of our archaic law. I am told that an executive bill to open up the Railways has been gathering dust in the National Assembly. And I am asking why ? Who is benefitting by the current situation where we build highways today and they get bad tomorrow because of high axle load on the roads. The National Assembly must be persuaded to pass the Railway Act in 2014
END THE UNENDING PORT AND CUSTOM REFORMS
In the last twelve years or more, we have been on Port reforms and custom reforms. Port users still complain of undue delays and continued sharp practices. Let us conclude these reforms and allow time for them to work. As suggested at the interaction,let us involve more Private Sector people in monitoring the performance of these reforms, before we launch into another round.
Mazi Sam Ohuabunwa OFR
Immediate Past Chairman, NESG