Nigeria:

Building Nigeria’s Productive Capacity

©2015, Bolaji Okusaga

Content

• Political • Economic

• 2015 – A year of transition

• Growing the Economy – 2015 and after

1. Political

Place in the World

Larger than Britain and

France combined

Over 1/5 of the people in Africa

Presidential System

The 1979 Constitution of the 2nd Republic was

modeled on the US model

• The 1989 Constitution followed the 1979 example

The 1999 Constitution of the 4th Republic

• an independently elected president

• bicameral National Assembly at the federal level serve 4-year terms

• House of Representatives: 360

• Senate: 3 senators from each of 36 states

Prevailing Issues

1. Boko Haram

The issue of National Security , internal

cohesion and harmony

Since 2010, a Terrorist group: Boko

Haram has been battling to have an

Islamic State in Northern Nigeria

2. The Integrity of Elections and the Electoral Process

There were allegations that the

2007 Elections marking the first Civilian to Civilan

Handover, were not credible

3. Corruption – Siemens,

Halliburton, Daimler and

others

There has been allegations of

Corruption involving Government

Officials and some Multi-National

Companies over Contract Awards

2. Economic

Nigeria – Demographic Profile

Population 170.2m

Pop Growth Rate 1.92%

Median Age 19.2

Literacy 68%

GDP $510b (2013 est)

Pop . Below Poverty Line 46%

Source: CIA World Factbook

0-4, 23.7m

15%5-9,

20.9m, 13%

10-14, 18.9m, 12%

15-19, 16.6m , 11%20-24, 14.5m

9%

25-29, 12.6m

8%

30-34, 10.6m 7%

35-39, 8.6m 6%

40-44, 7.0m5%

45-49, 5.7m4%

50-54, 4.5m 3%

55-59, 3.6m , 2%60-64, 2.8m 2%

65+, 4.8m 3%

Nigeria Population: Age Distribution

69% less than 30 yrs40% zero to fourteen29% between 15 – 29yrs

Source: http://www.census.gov/ipc/www/idb/country.php, http://www.nationmaster.com/graph/peo_per_liv_in_urb_are-people-percentage-living-urban-areas

Monolithic as oil gives over 90 per cent of the

country’s revenue

Fuel price influences other prices. It sells for

=N=87 per litre currently

The regime of Privatisation is on with telecommunications,

power etc

Inflation rate is 9.72 per cent

GDP growth rate is 5.5 percent

The Nigerian Economy

10

Nigeria Has a Large Market with Low Production

70% population under 45

Nigeria has a large indigenous consumer

market with very low local production

Strong pent-up demand for quality products• Foreign branded goods• Franchised foreign retailing• Automobiles• Consumer financial services

Nigeria’s Competitive Edge

Large indigenous consumer market

Abundant natural resources

Strong agricultural base

Hardworking and resourceful labor force

Central location in Africa

Access to the largest market in Africa

Nigeria Has Abundant Natural Resources• Large Petroleum and Large natural gas reserves

• Sixth Largest Crude Oil Producer in the World

• A huge variety of natural resources:

COALSouth East (Enugu)

GOLDSouth West and parts of North- Central

COLUMBITE AND TANTALITENorth Central especially around Plateau and Nasarawa States

BITUMENSouth West and Edo State

IRON ORENorth-Central, around Ajaokuta

URANIUMCross River State, Adamawa State, Taraba State, Plateau State, Bauchi State, and Kano State

Nigeria Has a Large Arable Land and Agricultural Base

• Nigeria has ecosystems, arable lands and yield gaps that can be exploited:

Well over two-third of the land is

cultivable: 30,850 thousand hectares

of Arable Land

Rainfall supports rain-fed agriculture

in the whole of Nigeria

Northern, irrigated agriculture

predominates in the area around the Lake T-Chad

Basin

Telecommunications• network is good and continually improving and expanding

Tourism • Tinapa, Obudu Cattle Ranch, Okomu Forest Reserve, Ikogosi Tourist Centre,

Yankari Games Reserve, Jos Wildlife Park, Olumo Rock, Erin Ijesha Waterfalls, etc

Transportation• All major Airlines of the world have bases in Nigeria• Road, Railway and Water transportation are also available for domestic and

international travels

Hotels• Five Star Hotels are in all parts of Nigeria including NOGA, Meridien, Sheraton

among others.

The Service Sector

15

Nigeria’s Economic Performance Indicators

ECONOMIC GROWTH

The IMF projects a 7%

growth in Nigeria’s

growth for 2013 in its

country report

EXTERNAL RESERVES

External reserves fell

from $48.4bn in May last

year to $37.1bn as of May 27 this

year, representing

a 23.3 per cent drop.

EXTERNAL DEBT

External Debt Profile with ample fiscal

space

US$5.91 billion – 2013

INDUSTRIAL CAPACITY UTILISATIO

N

Over 50% (1st Half 2013)

Projected to grow given the Power

sector reforms

16Sources: CBN, DMO,NBS

Economic Policy Thrust

Ensure macroeconomic

stability & sustainable

growth

Carry-out structural reforms,• Privatization,

liberalisation, and deregulation.

Strentghen institutions,

support transparency, fight against corruption.

Create a Tax Economy that

supports Developmental

and Social Agenda

17

FMW

Nigeria’s Economic Blueprint

Making the Nigerian economy one of the top 20

by the year 2020 with a GDP of USD900bn

Attracting US$130billion private capital over the

next 10 years

Optimising key sources of economic growth by

enhancing production for real sector’s competitiveness

and for exports

Guaranteeing productivity by strengthening linkages

between key sectors of the economy

Fostering sustainable social and economic development by ensuring national security

and enhancing infrastructure.

The creation of a Sovereign Wealth Fund to help

bridge the gaps in terms of national investments and

cushion volatility as at when required

18

The Vision 20:2020

Doing Business in Nigeria% of sales, additional costs from :

19

Nigerian Competitiveness

20

Nigerian Competitiveness (contd.)

21

22

Nigerian Competitiveness (contd.)

Nigerian Competitiveness (contd.)

Nigeria remains a factor-driven Economy

Economy is dependent on Natural Resources

Crude Oil is yet to have a maximal effect on GDP

However there is a move towards an efficiency

driven economy through reforms and better macro-

economic management

Constraints of Doing Business in Nigeria

Weak Infrastructure, particularly power and transportation

Businesses have to provide alternatives to public services:-

• Alternative Power Generation (Nigeria is the world’s biggest market for private generators).

• Security Services• Courier and Postal Deliveries• Water Boreholes

Problems associated with export and import logistics-ports; customs; inspection services; etc

24

Constraints of Doing Business in Nigeria

Mostly Imported Inputs

Exchange Rate Risk• In December 2008, the Naira was devalued from N117/$ to N150/$ • With Falling External Reserves, further devaluation is a possibility and the Naira is clearly under pressure.• A gap (of N15-18) has re-emerged between official rates and the parallel markets where the $ now

exchanges for N165-170

High Interest Rates (Prime Lending Rates around 18%)

Unstable and Volatile Inflation oscillating between 10 and 15% (10.2% as at June 2011)

Strained Financial and Capital Markets • Capital market is slowly recovering from 2008 collapse• The fate of 3 banks taken over by the CBN remains unresolved• Indicators for private sector credit aggregates remain sub-optimal

25

Opportunities

It goes without argument that one major attraction of Nigeria to investors has been her huge and

growing population which represents a big market for any

manufacturer especially of FMCG products.

It is estimated that Nigeria’s population is currently in excess of 168million and growing at an estimated rate of about 2% per

annum.

With growing urbanization and growing middle class, this

translates to a very big and potential market for

manufacturers and service providers.

The experience of those that entered the market when the

telecoms sector was liberalized about 11 years ago attests to this

fact.

3. 2015 – A year of Transition

Political

Successful Elections held – the first transfer of power from one political party to

another.

Slow start to the new administration

The war on corruption commences with directives for remittal of government revenue to a single source – The Federation Account

However, expose of graft in by last administration is yet

to be brought to trial.

Economic

Crude Oil price benchmark in this year's budget was put at about 65

dollars per barrel, this price benchmark is clearly above the current price that Crude Oil is

trading in the international market.

Aside from slow demand for Crude Oil, another issue Is access to market for Nigerian Crude Oil

given America's discontinued patronage.

The smart alternative will be to diversify the nation's income base and stave-off risks associated with

having a mono-resource

Superstructure

Given the paucity of funds for servicing the super-structure from the Federation Account we are beginning to see States

and even the Federal Government default on Salaries and Emoluments to Public Servants, even as recurrent expenditure

continues to rise, preventing ground-breaking development programmes which can have a leap-frog effect on the

economy.

Given this scenario, Nigeria will need to review its "Feeding-Bottle" Federalism by streamlining its political structure and

right-sizing the Public Service.

4. Proposed Policy Engagement Solution

Sectorial Contribution to GDP

SECTOR CONTRIBUTION 2013

1. Agriculture 21.97

2. Wholesale and Retail 16.75%

3. Crude Oil and Natural Gas 14.4 %

4. Services a. Telecommunication and Information Services b. Motion Pictures, Sound and Recording

50%

5. Finance and Insurance 3.37%

6. Manufacturing 6.81%

7. Building and Construction 2.09% to GDP

8. Real Estate 8.01%

Source: Bureau of Statistics

Total Size of Economy in 2013 – 510 Billion Dollars

Implications of Current Sectorial Contribution to GDP

The Need to raise

Industrial capacity in

the Economy

Agriculture accounts for almost quarter of GDP

however weak infrastructure and a lack

of a value chain approach to sector

development militates against growth

Petroleum Industry’s rating is poor given the

fact that the down-stream sector remains largely undeveloped

Mining is basically absent on the radar because of a lack of

policy and regulatory environment to harness

this great potential

Hotels and restaurant account for a very

minuscule fraction of GDP because of

infrastructure deficits and a largely

undeveloped Tourism Industry

Growing the Economy through Production

World over, Manufacturing and Productive Activities plays a major role in the

improvement of a nations economic fortunes

Following the examples of the Asian Tigers Nigeria

intends to initiate an active campaign towards driving in

In-bound Manufacturing opportunities

Critical Success Factors

A holistic approach, where Nigeria would tie into the on going reforms of the Federal Government, by lending a voice to the call on Nigerians in

Diaspora to come back home, and in so doing, begin a decision towards taking an economic stake in Nigeria

Subtly projecting the advantages of taking an economic stake in Nigeria, while bringing out the benefits of Nigeria

Manufacturing opportunity

Attempt a comparative analysis of Manufacturing opportunities and the offer from Nigeria– to

aid in decision making process of the prospects

Ensure ease of accessibility to Manufacturing opportunity, convenient and affordable

structure and process

Entrench and sustain a platform for prospect

management through hot toll free lines and other

on-line platforms

Work in alliance with Nigerian ambassadors in select countries

for endorsement and support

ThrustEstablish the need to raise the stake of

manufacturing in the Nigerian

economy

Use policy to strengthen

Manufacturing and Production

Leverage unique selling point

Background to Policy Engagement

Bridge Gaps

Create a Policy

Engagement structure

Engender Connection

Understand and tap into

needs of Policy

Makers

Ensure Access

Ensure access

through strategic

policy engagement

The Need for Policy Engagement

Policy Engagement Strategy

Infrastructure /Agric/ Industry

Production Hub

Pan-Africa Trade

Job Creation

Strategic Policy Goals

Build Strong Presence in the Trade Space - DISRUPT

Import Substitution Pan Africa Trade

Agriculture to Industry AgendaSupport Agriculture Beyond the Food Security

Drive Sustainability in the Agriculture – Industry Eco-

System

Collaborate and Deliver Value

Mine and Manage Data on Constituents

Begin at the Primary End of the Value ChainFARMERS

Organise Farmers into Groups

Support through Extension Services and distribution of

high yield inputs

Collect Data on Farmers

Collection of Data for Loyalty Schemes,

Research /Capacity Utilization and

Production Upgrade

Allow Policy Community Access

to Data

Create a basis for collaboration on

development issues

Begin at Primary End of the Value Chain - Farmers

From Data-base Management to Knowledge Economy in the Agric Eco-

SystemSupport and sponsor key initiatives in the Agriculture

sector working with Global Development Partners

Focus

Production, capital and knowledge

issues

Forestry and conservation

issues

Agriculture labour

practices

41

From Industry to Trade

Support and sponsor key initiatives Related to Trade

Focus Smuggling and Illicit

TradeCounterfeiting

Standardise Local

Production

42

Possible Opportunities from Agriculture Policy Engagement

Enabling legislation

Support to create trade flow

of Cash crops

Taxation and Fiscal Incentives – e.g a possible

benefit from the Export

Expansion Grant

43

Thank you