Opinions are divided as to whether the nation’s economy lived up to par in the outgoing year. To some analysts, things are definitely getting better, while to some others, the economy, in terms of performance, leaves nothing to cheer about, reports Ibrahim Apekhade Yusuf
As the Chinese proverb goes, “May we live in interesting times.” But to economic analysts, who have since begun a post mortem of the outgoing year, which literally winds down in just about two days time, there is nothing really interesting about the year 2013. And their reasons are as numerous as they are poignant.
Year 2013 in perspective
From banking and other financial-related services, oil and gas, telecoms, aviation, power, transport, agriculture and rural development, works and housing, tourism, labour, real and informal sector, industry, to mention just a few, the argument in many quarters is that there is still a lot of room for improvement despite the federal government’s claims to the contrary.
Banking/financial services
The banking and financial services sector recorded a lot of activities in the outgoing year, from fiscal policy initiatives to introduction of new rules of engagements.
The ongoing cashless policy of the Central Bank of Nigeria (CBN) continued unabated, as the apex bank extended the policy to other states.
Specifically, the cashless policy, which was introduced in Lagos in January 2012, was extended to Abuja, Kano Rivers, Ogun, Abia and Anambra States last July with assurances that it would rollout nationwide before June 2014.
Deputy Governor of CBN, Tunde Lemo, who gave the assurance, explained: “We have been talking about how to enhance connectivity and one of the things agreed was to work with some service providers. But beyond that, we looked and decided what else to do, particularly outside Lagos now that we have rolled out the cashless policy to six other states. Today, we have licensed about 21 mobile money operators, so how do we now link mobile money to our PoS? If mobile phones can serve as touch points, our transactions would go up rapidly.
“We hope to rollout to all the states by the second quarter of next year and we hope that by next year, as we roll out more PoS machines, we have to see how we can integrate the mobile phones into the network because in the hinterlands, the challenges would be more.
The CBN also signed a contract of over $50 million (N8 billion) with DERMALOG Identification Systems for the deployment and implementation of a biometric system, which will help in resolving issues bordering on authentication, as well as check money laundering activities in the financial system.
The Nation learnt the cost of the project would be borne by the CBN and all the banks and not the customers.
DERMALOG is one of the world’s leading biometric identification companies and the largest biometrics manufacturer in Germany.
Sanusi said an effective biometric system would boost the country’s image internationally and help extend credit to people without worrying about where to find them and who they are as well as enhance access to finance.
The 2nd phase of the biometric data base is expected to be officially launched in February 14, 2014 across all head offices of banks and a branch of the banks, Sanusi declared.
Healthier banks?
First Bank, Zenith Bank, UBA, Access Bank and GTBank currently control over 70% of the market, and an estimated 80% of profits before taxes.
To some financial pundits, the banks seem healthier now than in 2011, with the capital adequacy ratio (CAR), liquidity ratios and the level of non-performing loans well within Central Bank recommendations.
But at the beginning of the year, one of the policies, which informed financial sector watchers fear may affect the bottom-line of banks, was the decision of the Bankers Committee to remove charges on ATM transactions.
According to the international financial advisory firm, Renaissance Capital, Rencap, the fact that individual banks will have to bear the cost of ATM transactions (the N100 ($0.67) charge) was a signal that banks had no choice but to prepare for additional costs.
For instance, Rencap said, “In our view, the banks with the largest ATM networks should be the least affected, as their customers are more likely to use their respective bank’s ATM machines. This should, generally, favour the Tier-1 banks over the Tier-2 and smaller banks. We would expect the banks to try and recoup these costs via other charges, which are either 1) unregulated, or 2) where the banks are charging below the allowable cap.”
The Tier 1 Nigerian banks, as defined by asset size and market share, are: Access Bank, First Bank of Nigeria (FBN), Guaranty Trust Bank (GTB), United Bank for Africa (UBA) and Zenith Bank.
Banks classified in the Tier 2 category in terms of assets and capitalisations are Diamond Bank Plc, Sterling Bank Plc, Fidelity Bank Plc, Skye Bank Plc, Stanbic IBTC Plc and First City Monument Bank Plc, among others.
The fear of the anticipated recourse to measures, which will amount to flouting the rules, was further accentuated by the possibility of a removal of commissions on turnover (COT), another source of revenue for banks.
Banks also had to contend with the reality of the recent increase in Assets Management Corporation of Nigeria (AMCON) levy, which came into effect this year.
In its explanation of the emerging scenario, Rencap stated, “For most of the banks under our coverage, we estimate that the increase in the AMCON levy from 0.3% to 0.5% implies about a c. 3-4% increase in total operating costs, holding all other factors equal,” adding that to simply stand still, banks will be required to offset this increase by an absolute decline in their other operating costs.
“In our view, few banks will be able to achieve a 100% offset, resulting in some upward pressure on cost bases.”
The bridged banks
The three bridged banks (now owned by AMCON) tried to put the banks in strong footings before eventual disposal to interested buyers. According to the CBN, the banks were in very bad state before the bridging. Unfortunately, there is no public information about the current state of the banks’ financial performance.
However, given the record turnaround in its activities, Mainstreet Bank undoubtedly stands out among the three banks. The bank management has not only returned the bank to profitability but it has also put in place a cocktail of measures to reclaim its eminent position in the banking industry. The success recorded by Mainstreet, however, runs contrary to what obtains at Keystone Bank, which is being sought after by some foreign investors from South Africa.
Foreign direct investment
in stocks
The United States, US, invested $50 million in Nigeria’s economy in 2013 alone.
Confirming this development was Consul General, Jeffrey Hawkins, during a courtesy visit to the Nigerian Stock Exchange (NSE) last October.
He said that Nigeria was a growing economy and assured that the US government would help in growing the economy.
He pointed out that no country can progress without capital market investment, saying that the US was building a solid trade framework with the Nigerian government.
He urged the NSE to create a transparent environment that will attract investors to the Nigerian capital market.
The CEO of NSE, Oscar Onyema, while welcoming the US Consul General, said Nigeria has a strong relationship with the US government, saying that the Stock Exchange would support the relationship and economic activities between the two countries.
He added that the Exchange would also drive friendly portfolio investments from the deepest market (New York Stock Exchange) in the world to emerging market which has the highest return on investment in the world.
Relatedly, the Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, while scoring the nation’s economy high, easily alluded to the performance of its $1billion euro bond, which was oversubscribed by foreign investors, a development, she noted, is self-evident that the country is in perfect financial footing.
Alhaji Aliko Dangote
Alhaji Aliko Dangote, Africa’s billionaire, also made a good showing in the outgoing year with his investment in major commanding heights of the economy, including refinery,and manufacturing. His investments, according to analysts, raised the stakes higher for the economy.
Diminishing foreign reserves
The nation’s foreign reserves which had an appreciable outlook earlier in the year, suffered a downward spiral. From an all-time high of $56billion in mid 2013, it slumped to $44billion as at December 17, losing $700million in one month. The reserves, which stood at $44.8billion in November 18, maintained steady fall in the last three months. The reserves were at $44.6billion as at November 27, contrary to $45billion recorded in October 14.
Data obtained from the CBN website showed that at $45.2billion, the reserves had increased by $200million from October 14 to 28, before dipping further.
Soaring interest rate
A survey conducted by the World Bank in mid 2013 showed that the country boasts of the highest interest rate anywhere in the world. The benchmark interest rate retained currently is 12 per cent, which, experts have argued, is the highest in the world.
Hike in tariffs
An overview of the economy in the first quarter of 2013 showed that fiscal policy apparently leaned towards protectionism judging by the new tariff hikes for rice and sugar, with brown rice and polished rice attracting 100% levy, 10% duty while raw sugar attracted 50% levy,10% duty, refined sugar: 60% levy, 20% duty. The new tariffs, like the previous ones, the federal government noted was to protect “nascent industries” within the country.
Increased tariffs will likely push up consumer prices, as it becomes more expensive to import these items. Spending more money on basic items like rice and sugar could reduce disposable income.
Soaring unemployment
in 2013
Unemployment crisis reached an all-time high in 2013. The former Chairman of the Subsidy Reinvestment and Empowerment Programme (SURE-P), Dr. Christopher Kolade, was one of those who raised the alarm about the troubling unemployment situation as he lamented the high unemployment rate in the country, saying over 40 million Nigerians are jobless.
Those at the Nigeria Employers’ Consultative Association (NECA) were no less bothered about the worrisome unemployment situation in the country.
NECA President, Mr. Richard Uche, in his review of the Nigerian economy 2011 and 2012 budget noted that the past one year had indeed brought mixed fortunes for employers, with very little to cheer for the entire organised private sector even as he decried the rising job crisis.
Experts say the figure of 23.9 per cent unemployment published by the National Bureau of Statistics has probably risen, swelled by thousands that have since left school, completed the mandatory National Youth Service Corps scheme or been retrenched since the data was collated in December 2011.
Among the youths – the most productive segment of any population – over 50 per cent, according to the NBS, are said to be jobless though the World Bank puts the figure at 56 per cent. The Ministry of Labour and Productivity acknowledged in 2011 that over 41 per cent of Nigerian graduates can’t secure jobs after their youth service year.
Little wonder, analysts observed, is the reason why President Goodluck Jonathan bought into the cosmetic Youth Enterprise and Innovation (You-Win) programme sold to him by the Finance Minister and Coordinator of the Economic Management Team, Ngozi Okonjo-Iweala, which thankfully recorded its first 15, 000 jobs out of the projected 80,000-110,000 jobs over three years at the cost of N10 billion. The government is also promoting Community Services, Women and Youths Employment Project under the controversial Subsidy Reinvestment and Empowerment Programme that targets employing 320,000 unskilled youths, women and the physically challenged each year. Laudable as these seem, they are too little and are not even guaranteed to succeed. But with over 40 million educated youths roaming the streets in search of jobs, analysts have argued that it is bold measures and not cosmetic arrangements that can help to create jobs.
Telecoms
The nation’s telecoms sector was bullish in the outgoing year, with subscribers’ base increasing substantially. The Nigerian Communications Commission (NCC) also mandated that SMS rates must be N4/SMS or less for all networks (down from an average of N9).
The much-touted Mobile Number Portability, which was a major feature in the sector, however, recorded minimal progress, as only about 50,000 subscribers out of 10 million were able to successfully change from one network to the other after the introduction of the MNP.
The Executive Commissioner, Stakeholders Management, NCC, Mr. Okechukwu Itanyi, said the purpose of the meeting was to bring together consumers, service providers and regulators together in order to address consumer-related issues.
Itanyi, who was represented at the forum by the Deputy Director, Consumer Affairs, NCC, Mr. Femi Atoyebi, said many of the consumers willing to take advantage of the portability programme lacked the knowledge of the processes involved, while several others were flouting the instructions.
He said it was important for the NCC to address the problems of MNP because of its usefulness in reducing tariffs and bringing healthy competition to the industry.
Perhaps, one heart-warming decision by the NCC, which resonated very well with the public is the imposition of N5million and N500, 000 fines respectively on telcos which fail to address defects within its networks.
A cross-section of the public who commented on this development said it was perhaps the only achievement in the sector, but they were, however, quick to add that the fines may go in the way of others if not backed by enforcement by the NCC.
Controversial auto policy
The auto policy is perhaps one of the policies introduced by the federal government in last October, which generated a lot of heated debate.
Justifying the new policy regime by the federal government, Minister of Trade and Investment, Dr. Olusegun Aganga, had noted that the measures will help government to save as much as N550 billion ($3.5 billion) through the reduction of imports by increasing the import duties on second-hand cars by 48 per cent to transform the automotive sector, as part of its industrial revolution plan.
But stakeholders picked holes in the policy outright. For instance, members of Lagos Chamber of Commerce and Industry, LCCI, expressed concern over the auto policy, describing it as having potentially harmful effects on the economy and the welfare of Nigerians.
They said that Nigeria’s import dependency is only a manifestation of deeper issues of low productivity, weak competitiveness and flawed foreign exchange policy in the domestic economy.
A release from the Chamber by its president, Goodie Ibru, said: “The LCCI notes with concern the recent sharp increases in the import tariff and levies on motor vehicles.
“The policy has potentially harmful effects on the economy and the welfare of citizens.
“As a major stakeholder in the economy, the Chamber welcomes a policy thrust that seeks to promote self-reliance in the Nigerian economy because there is great value in domesticating spending.
“However, in pursuit of this laudable aspiration, proper policy sequencing is imperative.
“Import dependency is only a manifestation of deeper issues of low productivity, weak competitiveness and flawed foreign exchange policy in the domestic economy.
“It is inappropriate to begin the pursuit for a self-reliant automobile sector with the imposition of high import tariff on vehicles, when there are fundamental supply side issues to resolve. Without a good foundation the superstructure cannot stand in any economy.”
LCCI suggested that “there should be robust consultation with stakeholders in the entire value chain of the automobile sector to develop a sustainable road map for the development of the sector, which shall also take account of appropriateness of timing and sequencing of policies.
“The framework for the utilisation of the automotive development fund should be reviewed to ensure proper targeting for the development of domestic capacity for the automobile sector.
“The focus of policy at this time should be on the development of a strong supply side capability, especially in the iron and steel, petrochemical, glass and other ancillary industries.”
It said that the recent tariff review would lead to the escalation of smuggling of motor vehicles with corresponding loss of revenue to government.
The Chamber added that ethical players in the sector will be crowded out of business because of the weak institutional capacity to ensure compliance with the new tariff, as well as the porosity of the borders.
Trail of controversies
in aviation
Aviation sub-sector had its fair share of controversies in the outgoing year, as the Minister of Aviation, Stella Oduah, literally leaped from one bobby trap to the other.
Just as the dust generated by the airport remodelling exercise was yet to die down, SaharaReporters broke the news of the purchase of N255million two bullet-proof BMW cars by the NCAA for the minister’s riding pleasure, just as airlines were still struggling with high levels of taxation, high interest on loans/financing, and high maintenance costs.
Some airlines, like Dana Air, were forced to shut down operations by the NCAA for flouting extant rules.
Perhaps, the latest information from the sector is the federal government’s plan to merge Aero and Air Nigeria to become Nigeria’s new national carrier, Nigerian Eagle, a development which has continued to generate controversy among stakeholders.
Privatisation of PHCN/sale
of power plants
The power sector witnessed a flurry of activities, one of which was the sale of 10 new power-generation stations built by the three tiers of government through the Niger Delta Power Holding Company Limited (NDPHC).
The stations, which have a combined design capacity in excess of 5,453 megawatts, are Alaoji Power Plant, Aba, Abia State; Ihovbor Power Plant, Benin City, Edo State; Calabar Power Plant, Calabar, Cross River State; Egbema Power Plant, Owerri, Imo State; Gbarain Power Plant, Yenagoa, Bayelsa State; Geregu II, Ajaokuta, Kogi State; Sapele II, Sapele, Delta State; Olorunsogo II, Olorunsogo, Ogun State; Omoku II, Port Harcourt, Rivers State; and Omotosho II, Okitipupa, Ondo State.
The country has spent over $8 billion building these plants and is expected to make $6 billion from divesting 80 per cent of governments’ shares in them. Expression of Interest (EoI) for the facilities closed by 5pm on Friday, July 19, 2013, and 110 private companies beat the deadline.
The Bureau of Public Enterprises (BPE) later announced a shortlist of successful bidders on August 8, 2013, with the hope that the stations would be transferred to the highest bidders between June and July 2014.
The BPE also hinted of plans for the 10 National Integrated Power Plants (NIPPs) across the country to be privatised in January 2014.
The Director General of BPE, Mr. Benjamin Dikki, disclosed this last Monday in Abuja at the signing of Share Purchase Agreement (SPA) for the sale of the remaining two former Power Holding Company of Nigeria (PHCN) firms.
The firms are the Afam Power Plc in Delta State and the Kaduna Power Distribution Company which were sold lately to Televeras and Northwest Power Limited respectively.
Dikki said that the planned sale would complete the power privatisation agenda of the government.
According to him, the government will continue to make such investment until there is enough power for the people in the country.
Discordant tunes on
state of economy
While giving his perspective on the nation’s GDP growth, Mr. Henry Boyo, an economist, said it was wrong to confuse cosmetic changes for reality.
Specifically, he said, most of the permutations about GDP growth, whether at the state or national level, need to be properly re-examined.
According to him, “You can’t have a successful economy when the level of unemployment is high. GDP growth rate is not reflected in the level of employment. When there is no industrial consolidation, it is true that the country may have achieved 6-7 per cent GDP growth but when you consider the untapped socio-economic potentials which can possibly make us get an excess of 15 per cent GDP every year, then you can say we still have a long way to go.”
