Building prosperity in Nigeria: Jonathan administration leaders cite progress on all fronts (2)
Industrial revolution takes shape
Minister of Industry, Trade and Investment, Olusegun Aganga, observes that until President Jonathan launched his industrial revolution plan in the country, Nigeria was merely a consumer of finished goods. Under the Jonathan administration,
Aganga reports, the nation’s economic management team has carried out 62 economic and industrial reform programmes.
Out of the 62 reforms, 12 were game changers that have helped to redefine the investment climate within the last four years, says the minister.
For example, Nigeria has quintupled its number of automobile manufacturers since 2011. Aganga credits the Nigeria Automotive Development Plan for the industry’s expansion.
The plan seeks a total private sector investment of $300 million in the automobile sector by 2016.
“In 2012, we did a lot of consultation on the policy. In February 2013, the automobile policy was approved by the Federal Executive Council,” Aganga says. “Over 22 companies have signed with technical partners to produce cars in Nigeria.”
Aganga explains that compared to auto sector investment of $62 million over the previous ten-year period, $150 million has been invested in less than one year, with about $300 million expected in 2016.“The number of auto vehicle manufacturers in 2011 was four, and today we have 22,” Aganga says.
The country’s universities are aligning their curricula with the auto industry to further support its expansion. “The number of universities offering automotive engineering was nil in 2011, but today we have four,” Aganga notes.
Additional industry growth
Aganga reports that with the implementation of reforms in the sugar industry sector, a total investment of $3.2 billion has been made, compared to $100 million in 2011. The sector, which in 2011 employed only 3,850 workers, has created more than 80,000 jobs.
Investment has increased in the cement sector as well. Investment in the sector is now worth $15 billion, and cement-related jobs total about 2.2 million. The minister says the federal government will continue to support the sector, ensuring further reduction of the price of cement to make it easier for Nigerians to build their houses at affordable cost.
Non-oil exports generated $2.3 billion in the last year, Aganga says, crediting his ministry’s proactive trade policies and incentives.
He also says that in 2011, Nigeria exported non-oil products to 103 countries and territories out of 220. This shows significant improvement over the previous years.
Free Trade Zones and small-business initiatives
Investments in Nigeria’s Free Trade Zones (FTZs) now stand at $11.1 billion, and 35,120 new jobs have been created in the zones, the minister reports. His ministry is in the process of reviewing FTZ operations to make them more functional.
The Nigeria Industrial Revolution Plan (NIRP) and the National Enterprise Development Programme (NEDP) launched in February 2014 by Goodluck Jonathan are setting the stage for a new era of development for industry and micro, small and medium enterprises (MSME). At the programme’s launch in Abuja, Jonathan described the NIRP as a road map aimed at transforming the nation’s industrial landscape, boosting skills development, enhancing job creation and conserving foreign exchange. The NIRP will fast-track industrialisation, accelerate inclusive economic growth and create jobs. It is also designed to transform Nigeria’s business environment and stop the drain on the country’s foreign reserves with stepped-up local production. The plan identifies sectors in which Nigeria has competitive and comparative advantage, such as agriculture and agro products, metals and solid minerals, oil and gas, construction and light manufacturing services.
President Jonathan stressed that the NIRP would improve the nation’s investment climate and promotes the patronage of made-in-Nigeria products.
“The NIRP will also address the physical constraints that have consistently inhibited the growth of manufacturing by building industrial infrastructure, prioritising power for industrial use, reducing borrowing cost and mobilizing funds for the real sector,” Jonathan said. “It will help build our industrial skills, improve our investment climate, raise our product standards, link innovation to industry and ensure local patronage of made-in-Nigeria goods.”
Another goal of the NIRP is to increase the contribution of the manufacturing sector to GDP from the present four per cent to more than 10% over the next five years.
Jonathan expects it to boost the annual revenue earnings of Nigerian manufacturers by up to $28 billion.
Meanwhile, NEDP aims to reposition the MSME sector as the major driver of job creation and inclusive economic growth.
The federal government will continue to promote the patronage of made-in-Nigeria products through the implementation of local patronage policies and programmes.
A 2010 survey conducted by the Small and Medium Enterprises Development Agency of Nigeria and the National Bureau of Statistics showed that Nigeria had about 17 million MSMEs, employing over 32 million people, Jonathan reports. “If each of these 17 million MSMEs employs one additional person, we will create an additional 17 million jobs, thereby reducing employment in our country.
“The NIRP and NEDP will give additional impetus to our Transformation Agenda by ensuring…enterprise development and industrialisation,” the president says. “For our own part, the federal government will continue to support local manufacturers by buying vehicles that are made in Nigeria.
And as long as those vehicles are produced in this country, the federal government will buy them. So we also encourage the state governments to support the patronage of made-in-Nigeria products in their states.”
Tackling Nigeria’s industrialisation with electricity reforms
Nigeria has made the bold move to privatise its electricity sector. The country hopes that this, combined with other reforms, will revive its once-active industrial sector and create a leading manufacturing hub.
With its 2005 Electric Power Sector Reform Act, Nigeria unbundled its government monopoly, National Electric Power Authority (NEPA), into 18 successor companies. The Power Holding Company of Nigeria (PHCN) serves as the holding company. The Nigerian Electricity Regulatory Commission (NERC) was also formed, and the sector moved away from government ownership to the private sector- driven Nigerian Electricity Supply Industry (NESI).
On November 1, 2013, Nigeria handed over 11 power distribution and five generation companies to private owners. The successful unbundling of the former PHCN has received worldwide attention, with many international organisations describing it as a model that many African countries could adopt.
Power sector reform
Nigeria’s Minister of Power, Professor Chinedu Nebo, reports that the nation’s move to put to good use its already completed and commissioned gas-fired power plants has been successful, with concrete arrangements now in place to make gas speedily available to all National Integrated Power Project (NIPP) plants.
The federal government has pursued vigorously the implementation of generation, transmission, distribution and gas to power projects under the aegis of NIPP, Nebo says.
Negotiations are ongoing with other front-runner IPPs, including Zuma Energy, Century Power, ExxonMobil (MPN), Ikot Abasi Power, and Omo Power (Geometric), says Nebo. He also reports that feasibility studies have been concluded for 10 dams for hydropower generation.
Coal to power
A coal-to-power committee has developed an action plan for a coal-fired power plant.
The committee has so far recorded modest achievements in facilitating investment in a coal-fired power plant by Zuma Energy and Pacific HTG Ltd. African Development Bank is providing credit support to the Nigerian Bulk Electricity Trader (NBET) in the form of partial risk guarantee for coal-based IPPs.
The Federal Ministry of Power, in partnership with the Federal Ministry of Mines and Steel Development, is currently developing bankable project documents to facilitate investment in coal to power.
“Licenses have been given to real investors who are ready to do coal to power,” says Nebo. “It is with the insistence of steel and mine. We are synergising with IPPs to actualise coal to power.”
Strengthening power-sector agencies
President Jonathan has strengthened various government power institutions, including the Nigerian Electricity Regulatory Commission (NERC), Nebo says. “We have successfully handed over the Trading Point Meter to operation participants in readiness for the Transitional Electricity Market (TEM). Workshops for training of participants on market rules, market procedures and a market payment system for efficient, all-inclusive, high quality performance have been organised.”
An Electricity Management Services Limited (EMSL) team was inaugurated on September 10, 2013. Its role is to carry out technical inspection and certification of all electrical materials, equipment and installations in the Nigerian electricity supply industry.
The inauguration of the National Council on Power (NACOP) followed on August 14, 2014. The National Power Training Institute of Nigeria (NAPTIN) has also been restructured.
More technical departments were added to the institute in line with the realisation of the Jonathan administration’s transformation agenda.
“Overall, the federal government is targeting 20,000 MW by 2020,” says Nebo, “and so we are working towards 75% coverage, to make sure that no Nigerian community is left in darkness.”
Response to lower oil prices
The Central Bank of Nigeria (CBN) responded to the drastic crash in the price of crude oil—Nigeria’s largest revenue earner—by releasing a set of tight monetary measures to prevent inflation and maintain monetary stability in the country.
The measures included raising the Monetary Policy Rate (MPR), the rate at which the CBN lends money to deposit banks, from 12% to 13%; increasing the Cash Reserve Requirement (CRR) on private-sector deposits from 15% to 20%, and devaluating the naira in its exchange with the U.S. dollar from N155 to N168 per greenback.
The CBN also advised the Federal Government to further cut down on the proposed oil benchmark for the 2015 budget—below the new $73 window—to be in a safer position, as the oil price drop appears to be consistent.
These measures came barely a week after the Federal Ministry of Finance announced fiscal austerity measures in reaction to the drastic drop in oil prices, which saw the federal government lowering next year’s oil budget benchmark price from $78 to $73.
CBN Governor Godwin Emefiele reeled out the measures at the end of a special Monetary Policy Committee (MPC) meeting, the committee’s last for fiscal year 2014 before the 2015 general election.
Emefiele, who also chairs the MPC, explained that the action was taken to minimise the impact of the oil price drop, discourage frivolous borrowing by politicians to spend for campaigns and shore up Nigerian foreign reserves, which dropped from a little above $40 billion to $36 billion at the end of October 2014.
“The robust output expansion amidst strong headwinds arising from a weakening of the international oil market gives credence to the efficacy of our macroeconomic policy,” Emefiele told journalists at a post- MPC briefing.
“The committee found credence in the permanency theory of current oil price dynamics in the fact that the political restiveness in the Middle East and North Africa (MENA) region has not created uncertainty in oil supplies, as both Libya and southern Iraq have open and strong supply lines in the market,” Emefiele said.
Also, the committee was of the view that the current challenge requires bold policy moves on both the demand and supply sides of the foreign exchange market.
“Bold policy and administrative measures in the management of the nation’s stock of foreign exchange reserves have become inevitable in order to align the market towards its long-run equilibrium path,” the Central Bank leader noted. He emphasized that the current situation demands that the CBN confront the issue of declining external reserves head-on in order to strengthen the value of the domestic currency.
“Consequently, stabilising prices and maintaining exchange rate stability and charting a sustainable path for medium to long-term growth are the immediate top priorities,” he said.
“In the committee’s opinion, a more flexible naira in the face of nonexistent fiscal buyers was the most viable policy option at a time of heightened demand pressure for foreign exchange and falling oil prices.
Also, given the level of excess liquidity in the banking system, it becomes imperative for the bank to address the sources of the foreign exchange demand pressure,” Emefiele added.
Nigeria’s bright future and challenges
Ultimately, there is a real contradiction here that needs to be addressed. Whereas the echoes of optimism in “Africa Rising” reverberate across the globe, the narrative on Nigeria—a key driver of the continent’s transformation— is often filled with tales of pessimism.
Yet the country’s future is very bright and its key economic indicators are sound.
• Trustfull is Editor, Emerging Markets, Forbes