Experts from various sectors undertake a review of the Nigerian economy in 2013 and the likely direction that it will head to this year in this piece by EVEREST AMAEFULE, IFEANYI ONUBA and OKECHUKWU NNODIM
How did the Nigerian economy fare in 2013? The answer to this question depends on where you stand. While government officials contend that the nation did tremendously well in the course of the year, experts are cautious in assessing the performance of the economy in the period under review.
Finance
Presenting the government’s score card for the year 2013 in Abuja on Tuesday, the Minister of Information, Mr. Labaran Maku, reeled out statistics to buttress the point that the government did pretty well in the management of the economy during the year.
At 7.2 per cent, he said Nigeria’s Gross Domestic Product was one of the fastest growing in the world.
According to him, the exchange rate of the naira to the world’s major currencies has been stable as inflation rate has been in the single digit all year.
He added that as of May 2013, the country’s foreign reserves were $48.4bn, up from $32.08bn in May 2011. However, the reserves have been falling since May 2013, closing the year at $43.7bn on Monday, contrary to the minister’s posturing.
The national debt burden, Maku added, remained low at a debt-to-GDP rate of 21 per cent compared with the South Africa’s 42.7 per cent; United States’ 106 per cent; United Kingdom’s 90 per cent; and Japan’s 225 per cent.
Experts, however, are of the view that the country’s economy is struggling to leverage its vast resources as shown by major macroeconomic indicators.
They are quick to point out that in spite of an impressive growth in GDP, the life of an average Nigerian has not been lifted as the number of citizens living in extreme poverty remains extremely high at more than 100 million people.
They contended that while the Federal Government’s overall spending in 2013 was not significantly higher than it was in 2012 due to tight controls in expenditure, there was a need to channel more resources to developmental projects in 2014.
These, they noted, would help to address the lopsided manner in which the country’s GDP had been growing.
Those that spoke on the subject were the Registrar, Institute of Chartered Economists of Nigeria, Mr. Peter Ikpamejo; Registrar, Chartered Institute of Finance and Control, Mr. Godwin Eohoi; Head, Research and Strategy, BGL Securities Plc, Mr. Femi Ademola; and President, Nigerian Economic Society, Prof. Akin Iwayemi.
They argued that while the country could boast of over $43bn in foreign reserves, GDP growth rate of about seven per cent, investment commitment of about N15tn within the last two years, and a single digit inflation rate of 7.9 per cent, unemployment and poverty rates rose in 2013 by 23.9 per cent and 69 per cent, respectively.
In the same vein, the country witnessed a massive drop in revenue owing to crude oil theft and pipeline vandalism in the course of the year, thus leading to the depletion of excess crude savings from about $11.5bn at the end of 2012 to less than $5bn on November 14, 2013.
Ademola said while the government, through the Central Bank of Nigeria, might have achieved its objectives of price stability significantly with 11 months of single digit inflation in 2013, the required improvement in aggregate demand driven was currently constrained by the tight monetary policy environment.
In other words, he said despite the continued strong national output growth, the economy’s aggregate demand at the household level might be curtailed with implications for inclusive growth desired by the government.
He concluded that given the commitment of the CBN to move the country firmly into a low-inflation environment in the medium term by formally adopting an inflation target of between six and nine per cent in 2014, the monetary policy stance was likely to remain non-accommodating in the short term through the first half of the New Year.
Ademola said, “The year 2014 is, however, a penultimate year to the general elections, which portends significant threat to effective public administration. It could also affect the government’s capacity to effectively deal with the issues of security, oil theft and vandalism, and fiscal policy implementation.
“A protracted decline in oil price in 2014 may also affect the country negatively as the fiscal buffer – the Excess Crude Account has been depleted to $3.30bn. Inflation rate is expected to stay within the single digit level in 2014 and within the CBN’s target of six to nine per cent.”
Eohoi said inflation targeting, increase in foreign reserves, exchange rate stability, job creation and attraction of foreign direct investment should be the focus of government in 2014.
He said, “The CBN has done well in bringing under control the inflation to single digit. What we experienced in 2013 is the total control of inflation in the entire economy and you can see that inflation has been reduced and that is why people are complaining about paucity of funds.
“In the area of reserves, we had strong reserves in 2013 compared to 2012. But when you look at the exchange rate, there is still much work to be done because the policies being introduced have not actually taken us to where we should be.
“So, what we are expecting for 2014 is a stronger naira to the dollar. We want the CBN to achieve an exchange rate of about N130 to the dollar. We also want the CBN to boost the foreign reserves in 2014 as against what we had in 2013.”
On job creation, Eohoi said, “We have neglected other sectors of the economy for oil. We have various sectors that can create millions of jobs and guarantee inclusive growth for the economy.
“A lot of attention should be given to agriculture, especially in the area of agriculture value chains. That is where a lot of jobs can be created.
“We can encourage people to go into large-scale farming and provide a funding framework that will enable banks to provide funds at low interest rates for farmers. These loans should be easily accessible by farmers.”
On his part Ikpamejo commended the progress so far made in the reform of the economy, but added that government should come up with a programme for self-reliance for graduates.
This, he noted, would help to create jobs in the economy.
He said, “The Federal Government in 2013 did well in the area of infrastructure. Take for instance the privatisation of the power sector, which is critical to increasing power supply, as well as the ongoing projects in road and railway sectors.
“Also, lots of jobs have been created through the Subsidy Reinvestment and Empowerment Programme, but we need to come up with self-reliant programme that will help our graduates to become employed.
“There are lots of potential in the agriculture sector and the only way we can diversify our economy is to take advantage of the transformation in the agric sector.”
Iwayemi said for 2014, there was the need for the government to create an environment that could be predictable for policies and politics, adding that this would help to attract investments and create jobs.
He said currently, the high cost of capital was still discouraging the type of investment that would help to reduce unemployment.
“We need an environment that can be predictable for policies and politics and this will help to attract investment. But if an environment is full of uncertainties in politics and policies, and as we move on to 2014, then it is going to be a great challenge for development and growth for the nation,” Iwayemi said.
Aviation
Despite the Federal Government’s strides in the aviation sector, especially in the area of improvement in airport infrastructure, experts described activities in the industry in 2013 as mixed.
The government’s efforts at revamping the sector and making the skies safer after the June 3, 2012 Dana Air crash in Lagos were dealt a serious blow when an Associated Airline’s plane nose-dived less than a minute after taking off from the Murtala Muhammed Airport, Lagos.
The crash occurred on October 3, 2013, killing about 15 persons. The plane was conveying the corpse of a former Governor of Ondo State, Dr. Olusegun Agagu, from Lagos to Akure, while the Dana accident of June 2012 claimed over 150 lives.
Experts, who spoke with one of our correspondents, stated that although the sector recorded improvements in the just concluded year, the two crashes impacted negatively on the economic relevance of the aviation business.
There was visible upgrading of the Nigerian airports in 2013, especially the four major international airports in Lagos, Kano, Abuja and Port Harcourt.
This, however, increased calls for more work in terms of infrastructural development across all the airports managed by the Federal Airports Authority of Nigeria.
The year also witnessed the suspension of Dana Air’s operations by the Federal Government.
The suspension of Dana’s operating certificate in October 2013 led to the further depletion of the number of domestic carriers and their fleets.
In the last quarter of the year, a serious scandal involving the purchase of two armoured BMW cars for the Minister of Aviation, Stella Oduah, by the Nigerian Civil Aviation Authority for N255m rattled the sector.
The House of Representatives had faulted the minister on the grounds that the sum involved was more than what she could endorse without approval from the Federal Executive Council.
Speaking on developments in the sector and the way forward, the President, National Association of Aircraft Pilots and Engineers, Mr. Isaac Balami, observed that a lot of problems were exposed in the sector in 2013.
He said, “God has helped to open our eyes to tough areas in the sector that if only we can give more attention to, we will become better than most parts of the world.
“In fact, one of the reasons why the NCAA has not been able to cope with general oversight is because there is serious expansion and there are more airlines and aircraft coming into the sector. Therefore, there is a need for professionals who have worked with the airlines with technical skills to come in and support.”
Balami expressed confidence that 2014 would be better in the sector provided the Federal Government maintains its efforts at improving the industry.
Power
Perhaps, the biggest event in the nation’s economy in 2013 was the sale of the successor companies of the Power Holding Company of Nigeria to private investors.
Eighteen electricity firms were carved out of the PHCN as part of the process to reform the electricity industry. These included the Transmission Company of Nigeria, 11 distribution companies based on geographical coverage and six generating companies.
Ten new power plants constructed under the National Integrated Power Projects are scheduled to be sold in the first quarter of 2014.
Through the sale of the PHCN successor companies, the Federal Government realised more than $3bn, much of which was spent on settling the severance package of the workers.
However, after the sale of the power firms, not much had come the way of consumers as benefits. Towards the end of the year, noticeable reversal in power supply was noticeable in most parts of the country.
Government officials reckoned that it would take up to one year before the impact of the privatisation could be felt on the economy.
Experts, however, are worried about the capacity of the new firms to manage the power companies. Most of the new owners have no previous experience in managing power firms. More worrisome is that most of them do not have the financial muscle to turn the companies around. About 70 per cent of the money they spent on the acquisition of the power firms was borrowed from the Nigerian banking system.
Petroleum resources
The petroleum and natural gas sector experienced what experts described as mixed fortunes in 2013.
Although the Federal Government intensified efforts at stabilising crude oil production, the continued occurrence of pipeline vandalism and the resultant oil theft negatively affected the country’s ability to derive maximum revenue from the sector.
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, had during the presentation of her mid-term report in June 2013, stated that daily crude oil production averaged over 2.3 million barrels per day.
This, according to her, was despite the growing incidence of illegal oil bunkering, crude theft and pipeline vandalism.
The just concluded year also recorded the stable supply of petroleum products, although there was intermittent petrol scarcity occasioned by industrial actions that were mainly undertaken by workers in the sector.
Just as in the aviation sector, the petroleum resources industry also recorded a big scandal as the year was coming to a close.
This was after an online medium reported that the Nigerian National Petroleum Corporation allegedly diverted $49.8bn meant for the three tiers of government to an unknown account.
The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, raised the alarm in a letter he addressed to President Goodluck Jonathan
One of the issues that will shape the nation’s petroleum industry and indeed the entire economy in 2014 is the proposed sale of the country’s four refineries.
Rather than manage the refineries profitably, the government had resorted to importation of fuel and the payment of subsidy on petroleum products consumed locally, which led to massive corruption.
However, the oil workers are already threatening to embark on strike if the government goes ahead with the scheduled privatisation of the refineries in the first quarter of the year. How the government is able to resolve this impending imbroglio will shape the future of the industry in 2014 and beyond.
Communications
One of the issues that will define the telecommunications and information technology sector in 2014 is the plan of the Nigerian Communications Commission to auction 2.3GHz frequency spectrum licence in the first quarter of the year.
According to the NCC, there is considerable demand for high speed Internet services, which can be provided in the 2.3 GHz spectrum, whose licence will be on offer, as well as reasonable levels of competition, which mean there is considerable space for a new operator.
The auctioning of the new frequency is part of efforts by the Federal Government to raise broadband Internet penetration to a minimum of 30 per cent by the year 2017. It currently stands at about six per cent.
Related to this is the plan of the regulatory agency to issue seven regional licences for infrastructure operators. For this purpose the country has been split into seven regions.
The emergence of seven new infrastructure companies as well as the wholesale operator utilising the 2.3GHz frequency band is seen by many industry observers as a tonic for increased broadband penetration.
It is therefore expected that in 2014, the licensing blitz will herald a new era in the Nigerian communications sector, especially in the transmission of data. The NCC had in the past used the licensing process to redefine the sector.
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