Taking The Road Less Travelled: Nigeria’s Re-engineered Economy and The Economic Recovery and Growth Plan By Niyi Akinsiju

Taking The Road Less Travelled: Nigeria’s Re-engineered Economy and The Economic Recovery and Growth Plan

By Niyi Akinsiju

Last week, Mrs Eme Essien-Lore, the Country Manager for International Finance Corporation, a member of the World Bank Group, announced that the group has endorsed Nigeria’s Economic Recovery and Growth Plan (ERGP). She further asserted that Nigeria will soon recover from its economic recession; “if the plan, which is comprehensive, ambitious and thoughtful, is put into action.”

 

This put paid to the worries expressed in some quarters doubting the capabilities of the Nigerian economic team to produce a compact and workable economic blueprint. The World Bank and the Africa Development Bank were reported to have demanded for the document and had allegedly hinged the approval of the country’s expected request for loans on the robustness and workability of an economic blueprint.

 

Though the ERGP is yet to be formally presented to the public, the Federal Government exposure of the content has done a lot to rest the contrived doubt over the capacity and capabilities of its Economic Team which is chaired by the Vice President, Prof. Yemi Osinbajo.

 

Whatever may be the impish intention of doubt casters on the Federal Government’s announced desire to raise about $30billion from international development and finance institutions, the ERGP has substantially laid the doubts to rest.

 

With the ERGP, there are timelines and Key Performance Indicators (KPI) to establish verifiable, and of course, interrogative milestones in Nigeria’s journey to exit recession and onto the highway of growth. But, perhaps, more than the expectations from the implementation of the ERGP is the provable fact that the President Muhammadu Buhari’s led Federal Government has actually wrought a re-engineering of the Nigerian economy over the last 14 months as the Government makes to reinvent a new Nigerian economic template.

 

The ERGP is actually the distillation of six stand alone policies into one document. This makes the realisation of the goals of the Plan possible because the stand alone policies are, in reality, reference manuals.
As it were, there are no obvious reasons to exercise any form of reservation over its (ERGP) implementation. Indeed, some milestones enunciated in the documents are near being realised.

 

More than 600,000 farmers were engaged in farming in 2016, they produced close to three million tonnes of processed rice. This makes achievable the 2018 target date of self sufficiency in the production of rice. The Minister of Agriculture and Rural Development, Chief Audu Ogbeh recently observed that more than 400,000 farmers became millionaires in their farming endeavours last year.

 

This year looks to be more profitable in farming. The price of fertiliser, a major input in soil farming, has been slashed by close to 50 percent from a high of N10,000 to a pegged rate of N5,500. This is made possible by the recent renewed capacity to produce fertiliser domestically. Already, more than 15 of the 38 once moribund fertiliser blending plants have fired back to life with the others at different levels of resuscitation. Credit, for this should be accorded President Buhari who leveraged his relationship with the King of Morocco to secure a highly concessionary supplies of phosphate, the critical raw material in the fertiliser blend, all other inputs in the blend are available locally. This, plus, the all year farming through the facilitation of dams supporting irrigation, Nigeria should be able to produce its national consumption threshold of seven million tonnes of rice by 2018 and five million tonnes of wheat by 2020. The country will be saving about $7.5billion, sum routinely spent on importing these commodities annually.

 

Also already in the works is the strengthening and alignment of fiscal, monetary and trade policies and reducing overheads as envisaged in the ERGP. The Finance Minister and the Governor of the Central Bank of Nigeria are reported to be in consultation over the alignment of monetary and fiscal policies. This is coming on the CBN unremitting defence of the Naira against other currencies. The ERGP targets the free float of the Naira against other currencies by 2020 and creating transactional predictability around foreign exchange. The CBN is apparently knocking on the foreign exchange street market (black market) to close the wide gap between the interbank foreign exchange rate and the street market rate preparatory to a free float.

 

On the fiscal side, the Federal Inland Revenue Services (FIRS) has announced an additional 840,000 new corporate entities that have been brought under its official tax coverage, this is even as the tax administration body has announced the implementation of the Voluntary Assets and Income Declaration Scheme (VAIDS). This scheme, which targets a one billion dollar income to both the federal and state governments, is a specialised scheme that seeks to encourage high net worth individuals both in-country and abroad to self declare their material worth for the purpose of taxation. The outlook is to increase substantially, Nigeria’s low tax to GDP ratio stated at a lowly 2 percent of GDP currently.

 

A revolutionary Federal Government capital raising instrument is the recently introduced Federal Government Saving Bond. This financial product ultimately challenges Money Deposit Banks to a duel over retail savers and investors. The Federal Government Saving Bond will trigger a saving culture among Nigeria’s bottom of the pyramid economic class.
The minimum entry point for the savings bond is N5,000 and units of N1,000 thereafter to a maximum of N50,000,000. The 13% interest rate on the bond shames the miserly 4% interest rate paid by banks on saving. The bond has a two-year tenure with interest rate paid quarterly and it’s sold to the public once a month.

Meanwhile, with the savings bond, the Federal Government will mobilise cheaper funds compared to raising funds through treasury bills and FGN bonds that come with interest rates in the 18 percent to 22 percent band. In the same breath, millions of Nigerians with a direct stakeholder mentality in the wellbeing of the country is created because they have, by personal choices, invested in the Nigerian state.

 

In truth, the FGN savings bond redefines financial inclusiveness and helps to substantially empower retail savers and investors because it can pass as collateral and security for loans from any banking category.

 

Another set milestone in the ERGP is the attainment of 10 gigawatts electric power generation and distribution by 2020. One gigawatt of electricity equals 1,000 megawatts. At present, Nigeria generates just above 4,000 megawatts of power (4gigawatts) mainly from about nine gas fired thermal power plants supported by power generated from the Kainji and Shiroro hydro power plants.

 

It would seem an impossible task, given the historical deficit we have always recorded in power generation to achieve the 10 gigawatts target. But then, the Federal Government has prepared the ground for the realisation of this power generation with the 700 Megawatts Zungeru hydro electric power project and the 360 Megawatts Guarara II hydro electric power project both estimated to be delivered in 2019 plus the massive 3,050 Mambilla hydro power electric project with target delivery in 2020. Collectively, this will add more than 4,100 Megawatts of power to the national grid.
Obviously, the expected streaming of the hydro power projects effectively establish a new energy mix of power generating template with the inclusion of renewable energy like the 200 Megawatts expected from near completed solar power plants and windmills power projects in Katsina and Ibadan, Oyo State.

 

To resolve the loss of generated power associated with the obsolete transmission lines and power stations, the Transmission Company of Nigeria said it has received approval from the Federal Government to begin a pilot funding scheme of 200 million dollars for the refurbishing of its existing lines and substations. This avails a more efficient delivery of electric power across the country.

 

The targeted 100 percent domestic refining of petroleum products by 2020 is not an overtly ambitious goal as highlighted in the ERGP. A major factor for Nigeria’s inability to refine petroleum products in its four refineries has been a continuous incapability to maintain the refineries in Warri, Kaduna and Port Harcourt and unbridled vandalization of crude oil bearing pipelines to the refineries. It seems the scenario has changed for the better over the last four months or thereabouts with vastly reduced cases of pipelines vandalism and a renewed commitment by Nigerian engineers in the employ of the refineries working to bring about the turnaround of the refineries. This will save huge cost outlays usually paid to contractors for Turn Around Maintenance of the refineries.

As projected in the ERGP, Nigeria can achieve the production of 60 percent of its petroleum products needs by the end of 2017 and close it up at 100 percent in 2018 when the 650,000 barrels a day Dangote refinery is streamed. It is apparent that Nigeria will, indeed, be a petroleum products exporting country by 2020. The country would not only be saving trillions of Naira in importing petroleum products annually, it would be exporting petroleum products to earn foreign exchange.

Add these to the hundreds of billions of Naira being expended on the Federal Government initiated Social Intervention Programmes plus the more than 2,000 kilometres of roads that would either be constructed or rehabilitated this year, including the first phases of rail lines in the Lagos-Kano standard gauge rail line and the Calabar-Lagos line projects, which has kicked off, it won’t be hard to acknowledge that the Federal Government has embarked on a wholesale re-engineering of the Nigerian economy. This, certainly creates effective scaffolds for the implementation of the ERGP.

High Chief Niyi Akinsiju, a Policy Analyst, writes from Abuja

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