Building prosperity in Nigeria: Jonathan administration leaders cite progress on all fronts
“AN exciting transformation is taking place on the continent of Africa,” said Nigeria’s Finance Minister, Dr. Ngozi Okonjo-Iweala, in an October 8 address to the Atlantic Council. Under President Goodluck Ebele Jonathan’s administration, Nigeria is leading that transformation.
“In the decades of the 1980s and 1990s, we saw an Africa that was heavily indebted, with an average debt-to-GDP ratio of 75%,” Okonjo-Iweala said, describing an Africa “plagued with slow economic growth of about two per cent annually, hyperinflation—with inflation rates as high as 48% on occasion—and rampant poverty, an Africa troubled by civil wars and political strife, and an Africa in desperate need of donor aid and assistance. “Fast-forward two decades, and the story is remarkably deferent,” said the finance minister.
Economy: fast-growing with low debt
“We see now an Africa whose economy is growing faster than most economies in the world, with better than five per cent annual growth in GDP,” Okonjo-Iweala continued.
“We see an Africa with low debt, averaging about 32% of GDP—which is certainly much lower than those of developed countries, including the U.S. and several in Europe—low inflation at single digit on average, and a middle class that has nearly tripled in size, from about 126 million people (or 27% of the total population) in 1980 to nearly 350 million people (or 34% of the population) by 2010, according to the African Development Bank.
“We see an Africa that is obviously enjoying a peace dividend and better governance, with democracy now entrenched in most countries,” Okonjo-Iweala continued. “We see an Africa that foreign investors are now courting, with FDI (foreign direct investment) increasing from $9 billion in 2000 to about $50 billion by 2012.
“Africa has come a long way. It has gone from a lost cause to an almost-hot prospect. Now you may think this sounds strange, when all everyone is talking about is the Ebola crisis and flashpoints of insurgency like the Boko Haram in Nigeria and al-Shabab in Kenya. You might also think it sounds strange with conflict in Central African
Republic and South Sudan.
“Yes, these are certainly challenges. Ebola could be devastating if not decisively dealt with as a global challenge. The IMF estimates 1.5% to 3.5% o” the growth rates of Liberia, Guinea and Sierra Leone. Nigeria and Senegal are relatively unscathed. But if not stopped, Ebola will travel, as we have seen, and could cause considerable harm.
“But Ebola is not a problem that is permanent. It is a problem that can be managed, so don’t expect it to reverse Africa’s growth trajectory. Boko Haram and al-Shabab are real problems, but again, the pushback is beginning.
What is interesting is that the existence of these problems has not managed to turn back the tide of a better-performing Africa.”
Nigeria: An Example of “Africa Rising”
Okonjo-Iweala described Nigeria as “perhaps one of Africa’s most successful stories.” The return to democratic rule at the turn of the millennium brought with it better macroeconomic management and a series of reforms that unleashed economic growth, with GDP growing at an average seven per cent per annum during the last decade, she said. This growth was driven by the non-oil sector, particularly telecommunications, manufacturing, construction, and wholesale and retail.
Today, Nigeria is the largest economy in Africa and the 26th largest in the world, with a GDP of $510 billion and perhaps the most diverse economy on the continent. Only 15% of its GDP comes from resources (mainly oil and gas). The services sector accounts for 51%, agriculture 22%, telecommunications 8.7%, manufacturing 6.7% and the Nl million industry (known as Nollywood) 1.2%.
Nigeria, with about 170 million people, has nearly 20% of the African continent’s population and it is also its largest market. A recent report by the McKinsey Global Institute counted almost 40 million Nigerians in the consuming class, defined as households with incomes exceeding $7,500 a year.
At a recent forum in Abuja, Nigeria’s ministers of finance, works, and trade and investments presented scorecards that addressed Nigeria’s progress in these vital areas since President Jonathan took office in 2011.
Nigerian economy grows to largest in Africa
Okonjo-Iweala said that under President Goodluck Jonathan’s administration, Nigeria’s economy grew to the largest in Africa, burgeoning from a GDP of $46.4 billion in fiscal year 2000 to $510 billion in 2013.
She said that the Nigerian economy was comparable in size to those of countries such as Argentina and Austria. Nigeria’s average growth rate—more than seven per cent in the last five years—is higher than the average for sub-Saharan Africa.
Economic indicators improve
Nigeria’s credit ratios also have strengthened. Debt-to-GDP ratio declined from 21% to 11%, and the planned budget deficit for 2014 was one of GDP.
More than ever before, Okonjo-Iweala said that the Nigerian economy was strong, with stable exchange rates and declining inflation. Currently, inflation is 7.9%, compared to 14.1% in June 2010. In fact, the stretch of single-digit inflation this year is the longest since 2008, reflecting President Jonathan’s policy during the last three years to reduce government recurrent expenditures in relative terms, reduce budget deficits and complete unfinished projects.
“For instance, annual borrowing was $3.2 billion in 2013 compared to $4.7 billion in 2011,” said Okonjo-Iweala. “Following President Jonathan’s reform programme and the huge potential in the Nigerian economy, Nigeria has emerged as the number one investment destination in Africa in the last four years. Nigeria attracted foreign direct investment of over $25 billion from 2010 to 2013. This is in addition to the significant and increasing domestic investments being made across sectors such as agriculture, manufacturing, petrochemicals, power and so on.”
Nigeria then and now
In her October 8 speech to the Atlantic Council Africa Centre, Okonjo-Iweala summarised the problems Nigeria faces while maintaining her optimism that the Jonathan government’s reforms will solve them.
“Nigeria is certainly an economic powerhouse and deserves to be a member of clubs of its peers like the G-20. But more often than not, Nigeria is underrated, with its sore points magnified beyond belief, particularly in the Western media. My country receives little or no praise, even when things are done right, but is left battling with prejudice (that portrays it as) a country where nothing works.
“Take as an example the recent fight to contain the deadly Ebola virus. The efforts of Nigerian medical personnel that prevented the early spread of this deadly disease to the United States are rarely acknowledged.
“The individual, now known as the index case, who brought the disease into Nigeria from his own country, Liberia, was actually on his way to the U.S. when he took ill and was quarantined in a hospital in Lagos after he was found to have been infected by the deadly virus. Sadly, members of the medical team that looked after him also died. They are the true heroes of this global war against Ebola.
“A total of 19 confirmed cases were found in Nigeria—most of them primary contacts of this index case. Seven of these people died, while 12 recovered, thanks to the work of our medical personnel. Hundreds of people were quarantined for periods of time in an effort to curb the spread.
“For about a month now (October 8, 2014), no new cases of the Ebola virus have been found—which for a country of Nigeria’s size is truly remarkable. And I believe this is due to the measures put in place by our government. Had the Nigerian government been slow to act or ineffective to tackle the spread of the virus, the reality would be much worse. “Nigeria has also supported other West African countries who are struggling to contain the disease with a $3.5 million grant. Yet, until the past week, Nigeria did not receive much credit for these efforts.”
Nigeria’s advances in housing infrastructure, industry and business
In her speech to the Atlantic Council, Nigeria’s Finance Minister, Dr. Ngozi Okonjo-Iweala, explained, “in the housing sector, we launched another revolution, the Nigeria Mortgage Refinance Company (NMRC), in January 2014 to facilitate and guarantee mortgage liquidity to qualified financial institutions in a bid to close the housing gap.
“Through supporting mass housing programs, we hope the NMRC will provide up to 200,000 affordable mortgages within the next five years. When we advertised for 10,000 mortgages, we received over 66,000 applications.
“We expect to create hundreds of thousands of jobs—good jobs for plumbers, carpenters, welders, architects, surveyors and designers in the housing sector. America and the UK have long understood the value of the housing sector as a social good. We are only catching up now—reforming our land use and land titling systems, putting foreclosure laws in place to make it possible,” Okonjo-Iweala said.
Road and Rail Developments Nationwide
Works Minister Arch. Mike Onolememen said his ministry has made significant strides in road development since President Jonathan’s election in 2011.
The ministry restructured the existing two highway departments into 12 departments. Each of Nigeria’s six geopolitical zones now includes a department of highway construction and rehabilitation to supervise and manage highway projects, as well as a private-sector team to monitor ongoing highway construction and rehabilitation works and render independent quarterly reports.
Road-Sector Reform Bills approved
A road-sector reform committee, composed of registered engineers and other Nigerian experts, is charting a road map for reform. Nigeria’s Federal Executive Council recently approved the committee’s draft bills creating a federal road authority and a national road fund.
Onolememen said the new bills would not only attract the private-sector funds required to fill the funding gap in the development of Nigeria’s road infrastructure, but also would lead to the creation of more business opportunities for engineering professionals and other Nigerians.
The Works Ministry has introduced an important new system that restricts government payments to contractors. It permits payment only for permanent road works, reducing or eliminating government losses attributed in the past to corrupt business practices.
Rehabilitation, reconstruction and expansion
The ministry has completed 62 road rehabilitation, reconstruction and expansion projects and has made progress on many more. When President Jonathan took office in 2011, just 16% of Nigeria’s roads were driveable. Today, that number has increased to 70%. Of 35,000 km of federal highways, the ministry has improved 20,500 km—16,000 km since 2011.
Travel times on most of Nigeria’s arterial roads have improved dramatically, reducing fuel consumption and maintenance costs for drivers, increasing socioeconomic integration and empowering Nigerian citizens. Even some transport companies have reduced their fares in response to these efficiencies.
New requirements for the use of bitumen emulsion in all road projects—and the abolition of kerosene—comply with the Kyoto Protocol, which discourages the emission of gases that increase global warming. The use of modified asphalt also will increase the longevity of road pavement.
And, to improve the timeliness of road maintenance, the Federal Roads Maintenance Agency has begun daily surveillance on all federal roads.
Major Rail Line construction announced
After the conclusion of the government forum in late November, Nigeria and China announced a landmark $11.97 billion construction contract to build a high-speed railway along Nigeria’s coastline. China Railway Construction Corp. Ltd. will build the line, which links Lagos in the west and Calabar in the east.
Nigeria’s Minister of Transport, Idris Umar, described the rail line as green and efficient transportation that will promote economic development along its 1,402 km route through the oil-rich region of Nigeria.
The rail line will traverse 10 states and include 22 stops. The construction project will create about 200,000 local jobs, directly or indirectly. When complete, the railway will provide about 30,000 permanent jobs.
“This will open the eyes of investors and encourage them to do more business here,” said Boyo Evah, an area economic analyst.
“We hope more initiatives like this will be extended to other regions in Nigeria.”
TO BE CONTINUED
• Paul Trustfull is Editor, Merging Markets, Forbes