The Nation Newspaper

Tag: diversification

  • ‘Lead campaign for diversification’

    The Federal Government has urged the Organisation of Trade Union of West Africa (OTUWA) to lead the campaign for the diversification of the economies of the Economic Community of West African States (ECOWAS) member-nations.

    The Minister of Labour and Employment, Dr Chris Ngige, made the call  when he declared open a three-day workshop of OTUWA, in Abuja.

    He said the diversification of the economy of the ECOWAS sub-region was imperative because of the adverse effects of the global economic downturn.

    He said the mono-economic bases of West African countries were largely responsible for their current economic woes.

    “ There is a big threat to the economy of the ECOWAS sub-region because of our largely mono-economic base. I am happy that your organisation has been able to live down its challenges.

    “ The revived OTUWA must, therefore, help the governments and employers in the sub-region to look elsewhere.

    “In Nigeria, we must look for other sources of revenue and the most easily identifiable one is agriculture and of course, mining. We are also diversifying in trade and services. And because of the availability of fertile land in West Africa, the same thing goes to sister countries.

    “OTUWA, which is our regional component of the World Union of Trade Unions, must, hence, lead this campaign for the diversification of the West African economy, ‘’ he said.

    Ngige urged the union to help the governments in the region to develop the requisite skills for the full maximisation of the utility of their cash crops.

    He said this would enhance local processing of the raw forms into finished products.

    He urged the union to be the catalysts in entrenching decent work environment in line with the ILO Convention, which all are signatories.

    The President of OTUWA, Mr Mademba Sock, listed challenges facing labour in the sub-region, saying the organisation was revived to fight the cause of the workers.

    Also, Mr Dennis Zulu, ILO Country Director in Nigeria, said the organisation asked member states to organise national dialogues to come up with suggestions that would be useful for its development initiatives.

  • Nigeria gets EU’s N5.6b for diversification

    Nigeria gets EU’s N5.6b for diversification

    The Head, Trade and Economics Section of the European Union (EU) Delegation to Nigeria and the Economic Community of West African States (ECOWAS), Filippo Amato, said the EU has provided 19million pounds (about N5.6billion) grants to Nigeria through the National Planning Commission (NPC) to drive the diversification of the economy from oil to non-oil.

    Speaking during the final national training on standards on code of practices for Nigerian agricultural products for exportation in Abuja, he said the grant was implemented through the Nigerian Private Sector Competitiveness Support Programme and aims to improve the business and investment climate through the improvement and implementation of regulatory reforms, especially in the areas of competition policy, land titling and business licensing with pilots in Kano State.

    With Standard and Quality Unleashing the Potential of Agricultural Products to Grow the non-Oil Export in Nigeria as its theme, the forum was organised in partnership with the Standards Organisation of Nigeria (SON).

    He said: “As you are aware, Nigeria in terms of population and economy is over 60 per cent of ECOWAS. The EU combined support to ECOWAS and Nigeria in the areas of Trade and Economic Development is over 1.3billion euros between 2008 and 2014. In energy, our current 10th EDF (European Development Fund) intervention is the Nigeria Energy Support Programme, that started in May 2014 and will finish in September 2017, with a 15.5 million euro funding from the EU. It is being implemented by GIZ. The project focuses on renewable energy, energy efficiency, rural electrification and technical skills development issues.

    “EU has helped Nigeria to establish the National Quality Infrastructure (NQI) working closely with SON, NAFDAC (National Agency for Food, Drug Adminsistration and Control), Consumer Protection Council (CPC), and other stakeholders to improve the quality of products manufactured, exported and exchanged in the Nigerian market and to protect consumer rights. In these projects, the EU is partnering with GIZ, DFID  (Department for International Development) and UNIDO (United Nations Industrial Development Organisation).

    “Although it was true that there were a number of food products (such as melon seeds, dried meat, palm oil) imported from Nigeria that were sometimes rejected at the EU border because they were found to contain dangerous substances for human health, the import suspension measure adopted by the EU only concerned dried beans.

    “The reason for the import suspension measure of dried beans is that since January 2013 more than 50 rejections have been recorded at the EU border in relation to this product originating from Nigeria, nearly all of them reporting the presence of the unauthorised pesticide dichlorvos at levels largely exceeding the acute reference dose tentatively established by the European Food Safety Authority.”

    Amato said in order to allow the time necessary for Nigeria to provide feedback and consider the appropriate risk management measures, the suspension of imports of dried beans applies until 30 June this year, stressing that Nigerian authorities must provide an export control plan to assure that the beans exported to the EU comply with the EU Minimal Risk Levels for Hazardous Substances.

    He also said the key to economic development is not protectionism, but a good mix of policy measures and reforms capable of increasing the competitiveness of all sectors of the economy and consequently Nigeria’s trade relations with the rest of the world.

    He argued that one tool that would considerably enhance trade relations and increase the potential to diversify the exports from Nigeria to the EU, is the Economic Partnership Agreement (EPA) between the EU and ECOWAS.

    According to him, the criticism raised against this agreement is often due to an emotional and misconceived perception of the agreement.

    The agreement provides for the immediate removal of all tariffs on imports from West Africa to the EU, while it provides for a gradual reduction of tariffs on imports from the EU to West Africa over a period of 20 years and only for machineries, intermediate and capital goods, while allowing West Africa to maintain tariff protection over its agricultural products and consumer goods.

  • Tortuous road to diversification

    Tortuous road to diversification

    The diversification of the economy has taken the front burner, following oil prices slump. But, to experts, it is all motion without movement on that front. They believe that the government is not backing its plan with action. They warn that unless the government walks the talk, diversification may remain a conjecture. Assistant Editor CHIKODI OKEREOCHA reports.

    THE Minister of Solid Minerals Development, Dr. Kayode Fayemi, has never hidden his intention to see a buoyant and prosperous economy propelled by inflows from the non-oil sector, such as solid minerals, agriculture, manufacturing and tourism, among others.

    At various local and international fora, the minister has spoken glowingly of the bountiful potential in solid minerals and mining and the imperativeness of riding on the sector’s back to diversify the economy. For instance, earlier in the year, Fayemi, at his ministry’s budget defence, said the government planned to generate N250 billion from solid minerals this year.

    The minister also buoyed the hopes of Nigerians when, at last month’s maiden edition of the New Telegraph Economic Summit with the theme: “Nigeria: Beyond the oil economy”, he reiterated the government’s commitment to diversifying the economy, with emphasis on the solid mineral and agriculture sectors.

    Speaking on ‘Digging deeper for new wealth: Opportunities in solid minerals,’ Fayemi said there are abundant mineral resources across the country that if well harnessed will generate enormous wealth for the country, especially with the decline in oil revenue, which made the diversification of the economy’s revenue base imperative.

    However, while diversification has no doubt, become inevitable in view of the need to halt the economy’s fast sliding fortunes caused by the sustained decline in global oil prices, which has put Nigeria’s finances in precarious position, the perceived lack of sense of urgency in driving the process does not inspire much hope, among experts and stakeholders.

    Some experts and analysts, who spoke with The Nation, expressed regrets over what they regard as motion without movement in the economic diversification agenda. They noted, for instance, that the relevant Ministries, Departments and Agencies (MDAs) that should be directly or remotely involved in driving the diversification agenda, have yet to transform their intention to diversify into concrete, practical actions.

    For instance, Obiora Akabogu, a Lagos lawyer and public affairs analyst, said Nigeria has not been moving fast enough in the area of diversification.While describing the slow pace of diversification as “suicidal,” he said the requisite political will to translate policy statements into concrete actions is still lacking.

    As Akabogu pointed out, “there are certain things that could be done through executive fiat to kick-start the diversification process”. The Presidency, he said, “could forward an executive bill to the National Assembly (NASS) for modification or necessary amendment of the nation’s extant mining laws with a view to removing the hindrances to the maximisation of the potentials of the industry”.

    Akabogu was referring to the Petroleum Act 1969, which says that “All minerals belong to the Federal Government.” The 1999 Constitution (as amended) in Item 39 of the Second Schedule also reinforced this position by stating: “All mines and minerals, including oil and gas fields, belong to the Federal Government.”

    Akabogu told The Nation that the import of these provisions of the law is that the exploitation of solid minerals is on the Exclusive Legislative List, which means that only the Federal Government has the sole approving authority for mining licences and the regulation of the industry.

    Although Fayemi said states are now free to explore and exploit their mineral resources, Akabogu and indeed, other analysts and experts, argue that there is need for a review and amendment of the relevant laws to truly open up the industry. “But this does not seem to be a topmost priority to the present administration for now,” Akabogu lamented.

    Insisting that a review and amendment of the relevant mining laws “is not only long overdue, but also a matter of urgent national importance in view of the persistent dwindling oil revenue”, the public affairs analyst said it is about time the authorities woke up to the reality that diversification remains a viable alternative to economic recovery.

    Indeed, the sustained decline in global oil prices, which started mid June 2014, has left Africa’s largest oil producer, gasping for breath. The development, which is unprecedented, has unleashed fiscal and economic consequences of unimaginable dimension.

    Apart from inducing a sharp drop from the Federation Account, which necessitated a huge financial bailout for some state governments, the nation’s foreign reserves have dropped significantly. Even the Federal Government now finds it extremely difficult to meet most of its financial obligations.

    President Muhammadu Buhari recently brought the nation’s grim economic prospects nearer home when he said 27 out of 36 states are broke and unable to pay salaries. The president, who made this known in Abuja a fortnight ago at the second National Executive Committee meeting of the All Progressives Congress (APC), however, said his administration was battling to stabilise the economy.

    The President said: “On the economy, the fall of oil prices after Nigeria has made itself a mono economy is a disaster. I wonder why people could not believe that in Nigeria, about 27 out of the 36 states have difficulties in paying basic salaries of their workers.

    “If from 1999 to at least 2003, oil was above $100 per barrel and an export of about two million barrels per day, how come Nigeria failed to make some arrangements to cushion the effect of a probably volatile oil market?”

    Fayemi seemed to have the answer. Hear him: “… over the past six decades, Nigeria has been a largely mono-resource dependent economy, with crude oil now contributing over 90 per cent of our export earnings. As a prodigal generation, we wasted years of oil boom after oil boom, failing to leverage what should otherwise be a blessing, neither improving the standard of life and living of Nigerians nor saving for rainy days.

    “The resource trap was sustained over the years till the dramatic reversal of our fortunes in recent times, with falling oil prices in the global market and prevailing challenges relating to the oil and gas industry now making it imperative on us to pursue the diversification of our economy’s revenue base.”

    Despite admitting that the past six decades have been largely wasted by successive administrations that failed to leverage on the nation’s vast natural resources to diversify the economy from the oil & gas sector, experts said the government was yet to walk the talk on diversification. “The government is yet to take the bull by the horns as far as diversification is concerned,” Akabogu said.

    He pointed out, for instance, that while Egypt, Kenya, Gambia and South Africa rely almost exclusively on tourism, Ethiopia relies on revenue from aviation, with Ethiopian Airline providing the bulk of the country’s foreign exchange, aside coffee.

    He, however, lamented that despite having the technical know-how and parading natural resources that would make other countries green with envy, Nigeria lacks the right leadership and the enabling environment viz-a-viz favourable government policies to exploit them.

    Partner and Head of Mining, PricewaterhouseCoopers (PwC) Nigeria, a consulting firm, Mr. Cyril Asobu, said despite launching the roadmap for the development of the mining sector since April 2012, it has remained on paper. “It’s time to begin to put these things into action. We have to put some political will around all these. It’s a long term thing, but we have to start now,” he said.

    Asobu spoke at a stakeholders’ forum in Lagos with the theme: ‘Nigeria: Looking beyond oil.’ At the forum organised by the Lagos Chamber of Commerce and Industry (LCCI) with PwC Nigeria, the leader of PwC Nigeria Mining Sector Group said: “Although, Nigeria is not a mining destination, there has to be renewed efforts to sell ourselves.”

    The need for Nigeria to market itself is also not lost on the President, Dangote Industries Limited (DIL), Alhaji Aliko Dangote. This must be why the serial Pan-African investor believes that the current low oil price environment should not be seen as a setback, but an opportunity to galvanise the country into broadening its revenue base through diversification.

    The president of the indigenous multinational, who spoke at the recent Economist Conference in Lagos, said: “This is the right moment to pursue the diversification of the economy, which we have been talking about.”

    He, however, echoed the collective fears of Nigerians over the possibility of successfully pushing the diversification agenda through. Hear him:  “I know that once oil gets back to $80 per barrel, we would relax and go back to the same improper behaviour. But I think this is the right time to change that attitude for good.”

    Dangote said the government must come up with the right policies because “if we don’t do it now, we may not do it ever. While pointing out that low oil prices do not mean doom, as the price of oil fell to $9 between 1998 and 1999, he said what the nation needs to do is to block the leakages and pursue diversification. He also urged Nigerian businesses to take advantage of the opportunities in the West African sub-region. According to him, the sub-region’s population of 320 million is a big market.

    Apart from solid minerals, other sectors identified by experts as holding prospects of putting the economy back on track outside oil include agriculture, petro-chemical, manufacturing, tourism and Information Communications Technology (ICT).

    “Without doubt, we need to pay greater attention to manufacturing, agriculture and agro allied industries, ICT, entertainment, tourism and many other areas in the non-oil sector,” LCCI President, Mrs Nike Akande, said.

    The LCCI president added that a holistic and sustainable economic diversification strategy is desirable and in fact, inevitable at this time. “We need to put an end to the high dependence on oil. Strategic decisions and policies that will put the Nigerian economy on a path of sustainable recovery have become imperative,” she said, at the stakeholders’ forum.

    Sadly, however, experts have continued to bemoan what they describe as government’s lack of political will to translate its intention into practical actions and unleash the potentials in the non-oil sector. For instance, the Chairman, Agric and Agro-Allied Group, LCCI, Mr. Adeola Elliott, said despite the urgent need to diversify the economy, there is still lack of support for agric by the government.

    He said despite the fact that agric is a value chain, with lots of job and wealth creation potential, budgetary allocations to the sector hardly get to the real farmers. He said apart from the need for policy consistency in the sector, the establishment of farm settlements should be given the necessary support in the form of loans and trainings.

    However, the March 23 passage of the N6.06 trillion 2016 budget by the NASS, The Nation learnt, has been a shot in the arm of MDAs particularly those charged with driving the on-going diversification agenda. The hope is that the budget would give impetus to the MDAs to come up with concrete, measurable actions to wean the economy of its over-dependence on oil.

     

  • ‘Diversification ‘ll end economic woes

    A former Commissioner for Finance, Economic Planning and Budget in Lagos State, Dr Ismail Adebayo Adewusi, yesterday said the  solution to Nigeria’s current economic challenges lies in the diversification of the economy from oil to agriculture.

    Adewusi who spoke in Ibadan, Oyo State, said the mentality of exporting crude oil at the detriment of other economic ventures which had reduced the nation to a monolithic economy, was debilitating and needed immediate arrest.

    The politician who felicitated with his former boss, Asiwaju Ahmed Bola Tinubu on his 64th birthday and his immense contribution to the political development in the country, urged President Muhammadu Buhari to break from dependence policy of the past administrations in order to fix the wobbling economy once and for all.

    He said: “The only way we can improve this economy is to quickly do what I call the diversification thing. Let us quickly address the issue of diversifying our economy away from where we are.”

    “We have consistently canvassed for a diversification of the economy away from oil, because as long as this external shock from the global oil price continues, we will be having crisis managing our economy, especially in fulfilling government obligations. It is about time that we tackled this issue of diversification of the economy in a very serious manner.

    The immediate former chairman of Wemabod Estates Plc, a subsidiary of Odu’a Investment Company, also said that: “Commodity prices are declining internationally and oil, being the driver of the revenue of the Nigerian government has suffered very serious decline, and this has affected the capacity of government to provide resources to turn the economy around.

    “You would see that even in the 2016 budget, which is a budget of about N6trillion, it has a deficit component of about N2trillion, which is very substantial.

    “But the main issue facing Nigeria today is the problem of over reliance on this mono- cultural, mono-product economy, which requires that we diversify to agriculture.

    “Agriculture requires single digit financing. In terms of interest rates, agriculture with subsidy on inputs, fertilizers, seedlings, will go a long way. Even financing in terms of real channeling of financing intervention funds in agriculture will boost production, while providing opportunities for our youths to start something, rather than looking for jobs that are not there. These are the things we need to immediately embark on.

    “And the good thing about agriculture is that it does not take so long a time. If you plant maize today, in 90 days time, you begin to harvest. The rainy/planting season is here already, so, we need to immediately drive this process. It is not about mouthing it”, Adewusi stressed.ý

     

     

  • ‘Without diversification, Nigeria ‘ll remain in the doldrums’

    ‘Without diversification, Nigeria ‘ll remain in the doldrums’

    The General Secretary, National Union of Textile Garment Workers of Nigeria (NUTGWN), Comrade Issa Aremu, says the dwindling oil price has put Nigeria in its worst moment ever. He says the issue has made it difficult for both the Federal and state governments to provide critical infrastructure, pay salaries, among meeting other obligations. In this interview with AKINOLA AJIBADE, the NUTGWN scribe speaks on issues, such as corruption, and efforts made by Labour to facilitate the implementation of minimum wage. 

    How far has the Nigerian Labour Congress (NLC) gone in its campaign on the implementation of minimum wage for workers?

    Getting an act passed is one thing, its implementation is another. I have said it on several occasions that the Federal Government is keeping faith with the issue of implementation of the Act, specifying the minimum wage to civil servants, ditto the state governments.

    Also, many private-sector employers have also been compelled, by trade unions and other pressure groups to implement and pay their workers minimum wage. But there are few anti-minimum-wage governors. Happily, the workers and unions are engaging governments that disregard the rule of law with respect to the Minimum Wage Act.

    The point cannot be overemphasised; good governments must motivate the labour force for better productivity. We must ensure workers are paid well and on time. It should be noted that delay of salary for whatever reasons, including delayed payment of minimum wage, is the same as wage theft. The recalcitrant governors must know that the sub­sisting national minimum wage is due for review next year. The 2010 National Tripartite Committee on National Minimum Wage, headed by Justice S.M.A. Belgore (GCON), recommended that to avoid an ad hoc approach, the minimum wage is supposed to be reviewed every five years against the backdrop of increasing costs of living and deepening poverty of working people. The review is due this year. In some countries, minimum wages are adjusted almost every year to reflect the cost of living. Some countries have wage indexation according to which minimum wages are adjusted automatically to the rate of inflation.

    Many of the governors have said they can’t pay the minimum wage. Do you think there is sincerity in that admission?

    I think we have long crossed that bridge. Governors must respect the laws of the Federation. The National Minimum Wage Act of 2010 is an act by the National Assembly. Second, the negotiation lasted one year. The state governments were also part of the negotiation. You also remember that the labour demand was N50,000. It was a compromise to agree to N18,000. No employer, including the state governments, has any excuse to flout it. Some of these governors should get their priorities right; they should stop wasting or spending on executive indulgences such as private jets. They must also fulfill their obligations to their workers.

    One of the ways to judge the performance of the sitting President and all the state governors is their ability to resuscitate the collapsed industries in the country. Any state government that cannot pay salary has no reason to be in business of governance, and therefore, any governor that cannot pay the salary should resign.

    Nigeria is playing with fire because 24 per cent of its population is officially unemployed, and 50 percent unofficially unemployed. Some countries have a total of only 12 per cent unemployment crisis, the people will be on rampage. Nigeria must begin to prevent this by reopening all closed factories to engage the teeming unemployed youths.

    Labour strongly supports the urgent need to rebuild Nigeria through targeted efficient massive productive spending. President Buhari must be weary of the emergency advisers who claim falsely that government has no business in business. “Government not only has business in business, the art of governance itself is a business that must be done.

    There is no doubt that the economy is going downward at the moment. What is the way out?

    I think it’s time for all of us to think outside the box of oil and gas. This is now the time to walk our talk. It is the time to diversify our economy. With the collapse of the price of crude oil, with the fiscal crisis now facing all tiers of government such that even the Federal Government is also struggling to pay salary. I think we don’t need any counselor to tell us that this economy is no more sustainable on the back of revenue from oil and gas, with the unstable nature of that sector. Even with the best prices for crude oil, oil and gas are exhaustible, that will always finish. But what will not finish is our capacity to turn abundant raw materials that we have in this country to goods both for domestic consumption and for export. That means the future of Nigeria lies in manufacturing. We need to reinvent industry in this country. There is need for the revival of all the moribund factories, thereby returning the nation to the 70s and 80s when Nigeria earned huge resources from manufacturing.

    How much do you think the ongoing insurgency in the Northeast has affected economic activities in that region?

    You cannot talk about economic activities when there are no human activities. We must urgently put an end to this insurgency. You also cannot industrialise in an atmosphere of violence and war. I commend the security forces on the fight against insurgency. However, security goes beyond this.

    What are the implications of high rate of unemployment to labour and the economy of Nigeria?

    There are a lot of implications. Unemployment reduces national productivity. If more people are employed or gainfully engaged, there will be an increase in national productivity. We must not also forget the adage: ‘an idle mind is the devil’s workshop.’ When more youths are engaged, there would be less insecurity, hooliganism, thuggery, kidnapping and other violent crimes. The engaged people will concentrate more on their jobs and how to improve their productivity and welfare than being lured into becoming agents of societal and self-destruction.

    We must understand too that all factors of production are critical to development. In particular, technology can provide more efficient production methods like machines and computers. Capital and finance are also significant for states that are being run on debts and bonds. But, it is the human resources and skilled labour in particular, which are most critical to manage these other resources to improve the quantity and quality of production and quality of life.

    Indeed, it can be argued that where critical human resources are lacking in quality, other factors of production can hardly add value to development. States can borrow billions of naira, as most states do, but the human managers might divert the funds for the indulgence of the leaders, such as buying private jets, rather than improving the basics like potable water and good roads.

    What happens to Nigeria’s 170 million human resources is as important as what happens to 2.5 million barrels per day. It is certainly a scandal that we are losing as many as 900,000 barrels of crude oil to theft. This is unacceptable for a nation with almost 200,000 military personnel and an Army that is ranked as the fourth in Africa and 34th in the world.

    Nigeria recently joined the world to mark the industrialisation day. What can we do to revive our moribund industrial estate?

    Yes, we celebrated the African Industrialisation Day recently. This year we used that event to raise the awareness level on the need for Nigeria to try to produce what it consumes and it must consume what it produces. However yearly, we should use the day to see how we can increase manufacturing value added to this country. In the 1970s and 1980s, manufacturing sector was contributing close to 25 per cent of our GDP. The country was active in all sectors, Nigeria was getting active in automobile, we used to have Peugeot, Steyr, even producing trucks in Kano, we used to have Volkswagen, the Toyota brand was about to come in that time. In the 1980s, we were the third largest producer of textile, Nigeria had shares in Dunlop, Michelin, they were all here before, we must bring them back, that is the future.

    We should always use the Industrialisation Day to reflect, that day, from the President, his deputy, governors, should set aside at least one hour, to visit the old industrial estates, which the founding fathers of this country put in place. They should go to such places as Ilupeju, Ikeja in Lagos State, and take inventory how many factories are left, how many are under lock and key. In Kano, we have Sharaddar and Bompai, in Kaduna, we have Nassarawa, Kakuri among others.

    In Port Harcourt, there is Trans-Amadi, it’s a huge industrial estate. That was the design, to be purely for production. All our elected leaders should go there, they would be shocked, how many factories are working, and how many factories are under lock and key. We talk so much about the collapsed textile industry, because it’s labour intensive, virtually all industries have collapsed in this country, we must revive them. So for me, the advice to the president, and all our elected leaders is not for them to be agonising about the collapse of the price of crude oil, my advice for them is to organise their policy thinking process, to move from oil and gas to non oil sector, which should be driven by the manufacturing. Even, we can also make the oil and gas to be value adding, why exporting crude oil and importing petroleum products, when we can refine them.

    Refinery itself is value adding for petro chemicals. Those are the area we can create jobs, decent work, not just any kind of work. The kind of jobs we have now in the oil and gas is far from being decent. We can have more sustainable jobs if the refineries are working. I strongly believe that the future lies in growing the real sector of the economy. How can we drive that, there cannot be industrialisation without electrification. So, we must hit the ground running to make sure that these distribution companies, generating companies, deliver electricity to the industries at affordable price. You cannot run this economy or grow in all sectors with generators, so something must be done.

    As organised labour, we marked that day, with lecture and rally, geared towards revival of the industry. We made case against struggling and called for patronage of made in Nigeria goods, as well as the electrification of the country. I am optimistic, because Nigeria was once an industrialised country, and before it returns, it must prepare for real industrialisation.

    The issue of smuggling has been a major challenge. What is your take on this?

    We must fight smuggling because the truth of the matter is that Nigeria has become a dumping ground for most of imported goods, that’s bad enough. But it’s even worse that most of these imported goods do not pass through the Customs, they don’t pay revenue, they don’t pay duties to the Customs, which means government loses revenue. But above all, they undermine domestic goods, with cheaper goods. Because without duties, by the time they get here they become more cheaper than our own. And for poor economy, it means purchasing power is low. Consumers just want to buy any goods, irrespective of quality. In the process, they kill our industry, they also kill our jobs. What I am saying is that we have to revert to a situation in which domestic market, will dominate almost 90, if not 100 percent now dominated by imported dumped smuggled goods. Nigeria is endowed with huge market, 178 million people, that is the largest market in Africa, but which goods are we buying? Are we buying made in Nigeria? Because every time you buy imported smuggled goods, we are creating jobs overseas, one is also making their industry to prosper. So something must be done, and the first challenge is to tackle smuggling.

    On this I want to commend, the new Comptroller-General of Customs, Colonel Ahmed Alli, who has taken over now with the task of reforming and restructuring the Customs. I can see that the impact is already being felt. First, we have to re-orientate the Custom men that anytime they look the other way round, when goods are being smuggled into the country, they are undermining their own work, they are also undermining their own economy and undermining the country.

  • Diversification: Push for adequate taxation takes centre stage

    Diversification: Push for adequate taxation takes centre stage

    Attempts to shore up the country’s revenue with the upward review in taxes have always been resisted. Experts say only fiscal diversification can rescue the economy, which has been weakened by tumbling global oil prices, Assistant Editor CHIKODI OKEREOCHA reports. 

    Not a few Nigerians have resisted previous attempts by successive administrations to broaden the nation’s revenue base with the introduction of new taxes. They have always argued that the government has not been able to justify what accrued to the coffers in the past.

    The endemic corruption in tax administration, which hindered past administrations from making judicious application of revenues generated in the past to improve socio-physical infrastructure has also not helped matters.

    Besides, Nigerians were reluctant to buy into government’s proposal of widening its tax net as a way of diversifying the economy from oil.

    Some have also cited the weak manufacturing base, which according to them, rendered the economy unproductive and therefore not supportive of remittance of new taxes by impoverished operators.

    However, despite these misgivings, tax experts and some real sector operators have pitched tent with the government. They are insisting that there is no better time than now to embark on fiscal diversification of the economy.

    The experts told The Nation that the prevailing economic realities have made the payment of more taxes inevitable, considering the urgent need to mitigate the crippling impacts of dwindling revenue triggered by crashing oil prices at the international market.

    One of them, Mr. Taiwo Oyedele, said fiscal diversification, which involves increasing tax revenues from the non-oil sector to reduce reliance on oil revenues for financing spending has become imperative.

    Oyedele, who is Head, Tax & Regulatory Services, PriceWaterhouseCooper (PwC), explained his support for such position. He said that as at 2014, the contribution of taxes to Gross Domestic Product (GDP) ratio was estimated at eight per cent, making it the second lowest in Africa and the fourth lowest in the world.

    Oyedele, who spoke in Lagos last week at a stakeholders’ forum on the state of the economy on the theme: ‘Nigeria: Looking beyond oil said despite the fact that Nigeria’s population is thrice that of South Africa, the Rainbow nation rakes in more revenue from tax than Nigeria.

    The forum, organised by the Lagos Chamber of Commerce and Industry (LCCI) in collaboration with PwC Nigeria, was organised to provide a platform for experts to brainstorm on how the country can wriggle out of its economic challenges through diversification.

    In his presentation, Oyedele said that at eight per cent, Nigeria’s tax to GDP is also lower than those of other African countries including Kenya and Angola.

    Both countries boast of tax to GDP ratio of 17 per cent and 43 per cent respectively.

    According to him, Nigeria is trailing far behind the United States (U.S.) China and Germany, which paraded tax to GDP of 17 per cent, 23 per cent and 45 per cent. He added that the ease of paying taxes in Nigeria remains one of the lowest in the world, raking 181 out of 189 nations assessed.

    He argued that the trend accounts for why oil related receipts continue   to dominate budget revenues. In 2014, oil related receipts accounted for 80 per cent of the country’s total earnings.

    “Non-oil revenue remained largely unchanged as a share of non-oil GDP at about 3.3 per cent over the past four years to 2014,” Oyedele said,

    Describing development as regrettable despite a flourishing non-oil sector, Oyedele blamed it on the existing tax system, which comes across as cumbersome and ambiguous for tax payers to comply with.

    “Compared to an average of 16 per cent for emerging markets and 18 per cent for sub-Saharan African economies, there is massive room to improve tax receipts by improving compliance and broadening the tax base to include the informal sector, which is estimated at 58 per cent of GDP,” the expert recommended, pointing out that Nigeria’s tax revenue declined by 20 per cent to $30 billion two years ago.

    Some real sector operators have also thrown their weight behind the need to improve tax compliance and also broaden the tax base.

    To the LCCI President, Mrs. Nike Akande, the need for appropriate taxation has become imperative considering the dwindling revenue from the Federation Account and the failure of state governments to meet their obligations.

    Waxing patriotic, she spoke of the need to encourage individuals and corporate bodies to pay taxes.

    Her words: “Without adequate taxation the government would not be able to provide key infrastructure. Everybody that is in a position to pay tax should do so without prompting. That is the only way government can work.

    “The challenging economic environment provides opportunity for innovative policies that should encourage people to pay their taxes and for government to reward those who are faithful to their civic responsibility.”

    Incidentally, Mrs. Akande, a former Minister of Industry, is one of the tax ambassadors appointed by the Lagos State overnment.

    The award, which she earned for her diligence in income tax payment, may have been a shot in the arm, prompting her to be one of those leading the renewed advocacy for appropriate taxation.

    At the stakeholders’ forum, the LCCI president pointed out that the sustained decline in global oil prices since 2014 has boxed the nation to a corner and consequently led to various fiscal and economic challenges.

    Some of the challenges include: drop in foreign earnings; decline in foreign reserves; huge financial bailout for some state governments and unstable macro-economic environment.

    Mrs. Akande admitted the desirability of a holistic and sustainable economic diversification strategy.

    She said: “We need to put an end to the high dependence on oil. Strategic decisions and policies that will put the Nigerian economy on a path of sustainable recovery have become imperative.

    “Without doubt we need to pay greater attention to manufacturing, agriculture and agro-allied industries, solid minerals, Information and Communications Technology (ICT), entertainment, tourism and many other areas in the non-oil sector.”

    In her admittance of need for appropriate taxation, she, however, cautioned against multiple taxations.

    “Multiple taxation is unhealthy for the manufacturing sector”, Mrs. Akande said, calling for the harmonisation of taxes among the various levels of government to create an enabling environment for businesses to thrive.

    Imperative of tax harmonisation

    The position of other experts in tax administration must have brought about the imperative of tax harmonisation.

    They argue that if the country gets it tax administration right, revenue from tax alone could sustain the economy without oil.

    President, Chartered Institute of   Taxation (CIT ), Mrs. Somorin Teju, was emphatic that revenue from taxes could sustain the country, even if earnings from oil dwindle further.

    Recalling that recession was not alien to as had similar experience in 1991, which necessitated the introduction of Value Added Tax (VAT) to replace sales tax, Mrs. Somorin said that with the current fiscal challenges, the government could earn enough revenue to finance capital and recurrent expenditures in the budget from tax sources.

    She said: “The government has to pay adequate attention to tax. Without tax, I don’t see how government can do what it plans to do in a particular year. People must pay tax; businesses must pay tax, if they are making profit.

    “But, the tax must be based on the principle of progression, fairness, and equity among others. What we are going through, as a nation is not the first time.

    “It happened in 1991, when government set up a study group to look for alternative revenue sources, from direct to indirect taxes and to shift emphasis from oil. It was then VAT was introduced to replace sales tax. Since then, VAT has attracted lots of revenue. So, revenue from taxation alone will be sufficient for the country, with good attention.”

    According to the CIT president, taxation is based on income and profit. “If there is no income, there will be no tax. But when you are jobless and you have investment income, like rent from landed property, you have to pay tax”, she said, calling for reform and autonomy for states’ Inland Revenue Services for efficiency and better performance.

    Mrs. Somorin said: “The reform in the Federal Inland Revenue Service (FIRS) has made to become efficient as it attracted competent hands from other sectors of the financial institutions.

    “So, it became more efficient, when it became autonomous. The states Inland Revenue Services should be given autonomy also for them to be more efficient.”

    She urged Nigerians to be patient with the government, admitting that the country has been going through a temporary recession, which is global in nature.

    Those pushing for fiscal diversification as a viable option for the government to generate revenue from tax, toed the line the Managing Director, International Monetary Fund (IMF), Ms. Christine Lagarde.

    The IMF chief, during her recent visit, advocated the broadening of the country’s revenue base by increasing the VAT paid on goods and services.

    According to Ms. Lagarde, it had become imperative for the Federal Government to broaden the country’s tax base, pointing out that Nigeria’s VAT rate was not only among the lowest in the world, but below VAT rates in other countries of the Economic Community of West African States (ECOWAS).

    “The current VAT rate is among the lowest in the world and well below the rates in other ECOWAS members. So, some increase should be considered,” she had recommended.

    Her recommendation appeared to have hit the right chord in the ears of some senators, who during a debate on the general principles of the 2016 Budget of N6.08 trillion, called for heavy taxation of Nigerians to make up for the shortfalls that may arise in the projected revenues.

    The senators argued that heavy taxation could be a better option than relying heavily on borrowing to implement the budget.

    Senate Chief Whip Olusola Adeyeye (APC Osun Central), who led the debate, said that without spreading the dragnet of taxation, there would be no money to fund the budget, especially in the face of dwindling oil revenues.

    However, the President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Mr. Bassey Edem, said though he supports taxation, multiple and spurious taxation are injurious to business and should be discouraged.

    He also aligned with Mrs. Akande on the need to harmonise state and local government tax agencies.

    Frontline industrialist Mr. Duro Kuteyi, dismissed as erroneous that manufacturers unwilling to pay taxes, but that they want to be taxed fairly.

    The fear

    However, as altruistic as the experts’ calls to widen the tax net may be, it has not gone down well with many.

    A Lagos-based legal lawyer and public affairs analyst, Mr. Obiora Akabogu, said an unproductive economy like Nigeria’s cannot survive with the upward review of IGR and VAT.

    He said that raising the IGR and VAT to cushion the effects of the oil revenue shortfall will not work because not a few Nigerians have been impoverished by the economy’s unproductiveness.

    Akabogu told The Nation: “VAT is derived from a productive economy, but an economy that is near comatose makes it difficult for federal and state governments to raise money by increasing IGR and VAT, because the masses are impoverished.

    “Nigeria is operating a mono-cultural and precarious economy, which is dependent on one major revenue source, which is oil.”

    He insisted that imposing heavy taxation on already impoverished masses in whatever form amounts to overkill.

    According to him, the hash operating environment caused by the nation’s huge infrastructure gap, particularly electricity supply, has rendered the real sector, including manufacturing and agriculture unproductive and uncompetitive.

    “Diversification is the only way to go,” Akabogu said, pointing in the direction of manufacturing, agriculture and agro-allied industries.

    He said other sectors that hold promise of turning around the economy if properly exploited, include: solid minerals, ICT, entertainment and tourism among others.

    Besides economic reasons, Akabogu said alleged corruption in the nation’s tax administration system could pose serious hurdles to the proposed shift to tax revenue as to bail out the economy.

    He said: “The truth is that most Nigerians are unwilling to pay tax unless they are compelled. And they hinge their refusal on the belief that government’s officials will misappropriate any money they pay.

    “The thinking, and rightly so, is that Nigeria’s tax system allows for compromises, which tax officials have exploited to defraud the government of its revenue. This is why despite the fact that tax is the most reliable source of revenue for government all over the world, of tax evasion rate has been very high in the country.”

    Apart from alleged collusion between tax collectors and tax defaulters to defraud government of the needed revenue, many individuals and corporate organisations are unwilling to pay tax because they believe the authorities have not shown evidence of previous remittances.

    Those on government payroll who remit through the Pay As You Earn (PAYE) method also complain that the authorities do not account for deductions.

    Analysts believe that such public perception of the tax system may take more time to change, even as they agree on the importance to save the economy from total collapse.

    Mrs. Somorin said that small-scale enterprises must be assisted to stimulate production.

    “A lot of people are being encouraged to go into production. Small-scale enterprises should be encouraged to engage more hands outside the white-collar jobs. Small-scale industries are dying because there is no form of assistance from the government. They need to be assisted.”

    She added that tax revenues could be generated from the SME sector if given necessary encouragement.

    Edem said the challenge of inadequate electricity supply must be

    Tackled once and for all, urging the government to invest in the energy sector by harnessing alternative sources of energy, such as wind, coal and solar, to improve electricity supply to support the manufacturing sector.

    How far the government demonstrates its political will to address these issues will determine the success of fiscal diversification to revamp the battered economy.

  • LCCI, PwC identify priority sectors for diversification

    LCCI, PwC identify priority sectors for diversification

    Experts have advised the Federal Government to give priority to four sectors – agriculture, petroleum (petrochemical and refining), retail and Information and Communications Technology (ICT) – in its  efforts at weaning the economy off its over-dependence on oil.

    At a stakeholders’ forum in Lagos on the state of the economy, experts noted that the sectors have the most dominant transmission links to the economy.

    “These sectors in the medium-to-long term are key to boosting other sectors like manufacturing,” Country and Regional Senior Partner, PwC Nigeria and West Africa, Mr. Uyi Akpata, said.

    The theme of the forum was “Nigeria: Looking beyond oil”

    At the event organised by the Lagos Chamber of Commerce and Industry (LCCI) in collaboration with PwC Nigeria, Akpata said the need to target the agric sector, for instance, was because of its forward linkages to agro-processing and other services, such as logistics as well as backward integration to input supply sectors, which could improve farm incomes, increase employment and improve domestic food security.

    He projected that, potentially, Nigeria’s global agriculture exports could take-off at a rate similar to Brazil’s, with $59 billion in export revenues by 2030.

    The senior partner of the leading consulting firm also said value added to oil and gas output needs to urgently improve by implementing diversification within the sector. According to him, this requires investments across the downstream sector to develop petrochemicals, fertilisers, methanol and refining, industries relevant in both industrial and consumer products, which Nigeria imports.

    Similarly, the retail sector, he said, holds promises. While pointing out that consumer spending is the largest driver of the economy, accounting for about 70 per cent of Gross Domestic Product (GDP), he said the firm expects that this will be the boost for the retail sector growth even as population continues to expand.

    “Thus, as incomes rise along with rapid urbanisation, we project that household consumption expenditure could reach $1.1 trillion by 2030, from $317 billion in 2014, which implies a growth of nine per cent through 2030,” he said.

    Also, with Nigeria’s teledensity at 107.87, a large population of young urban people and massive scope to improve Internet broadband penetration, the expert projected that Nigeria is likely to see accelerated growth of its digital economy. He said more importantly, the opportunity to leverage technology to generate improved social and economic outcomes across other sectors has been created.

    Mr. Akpata said Nigeria is the largest economy in Africa and 22nd globally. “We project that the economy could rise through the world rankings to top 10 in 2050 with a projected GDP of $6.4 trillion, surpassing Germany, the United Kingdom, France and Saudi Arabia,” he said.

    He, however, said to achieve this diversification of the economic from its over dependence on crude oil is required. “Nigeria’s intrinsic potential lies beyond oil; harnessing this potential has become an imperative given the expectations of lower oil prices,” he stated.

    LCCI President, Chief Nike Akande, could not agree less. Describing the stakeholders’ forum as “strategic, timely and significant”, she said “it was an opportunity to discuss and to pool our wisdom together regarding how our country can navigate the lingering economic challenges and proffer alternative paths towards sustainable economic growth and development.”

    According to her, the sustained decline in global oil prices since 2014 has put the nation in difficult position and consequently led to various fiscal and economic challenges such as the drop in foreign earnings, decline in foreign reserves, huge financial bailout for some state governments and unstable macroeconomic environment.

    Mrs. Akande said a holistic and sustainable economic diversification strategy is desirable and in fact, inevitable at this time. “We need to put an end to the high dependence on oil. Strategic decisions and policies that will put the Nigerian economy on a path of sustainable recovery have become imperative.

    “Without doubt we need to pay greater attention to manufacturing, agriculture and agro allied industries, solid minerals, ICT, entertainment, tourism and many other areas in the non-oil sector,” she added.

    Vice President Yemi Osinbajo, said the topic of the forum was in line with President Muhammadu  Buhari administration’s determination to boost economic growth through effective policies.

    He said the administration was already making important strides to actualise the administration’s commitment in delivering the change agenda.

    “Indeed, we are repositioning the economy for exclusive growth and successful development by getting the fundamentals right be it fiscal, monetary, trade and investment policy reform,” the Vice President said.

    Osinbajo, who was represented by a Senior Special Assistant, Dr. Jumoke Oduwole, added that the administration remained committed to diversifying the economy away from over-dependence on oil and creating an enabling environment that will aid private sectors set goals and development.

    “We are investing in critical infrastructure, embracing and encouraging the private sector and advocating for greater inclusion particularly through job creation. To attain this, our administration is prioritising key areas such as industrialisation, agriculture and agro-allied processing and solid minerals. We are determined to diversify this economy through export promotion, our support in promoting local raw materials and pressing needs for made in Nigeria goods,” the Vice President said.

  • Diversification: Any role for Nigeria’s $2.7b beer market?

    Diversification: Any role for Nigeria’s $2.7b beer market?

    Although the economy has witnessed bad times of late, the beer market, estimated at $2.7 billion, remains relatively resilient. Experts say that if properly harnessed, the sub-sector can drive industrialisation, writes Assistant Editor CHIKODI OKEREOCHA.

    THE outlook for Nigeria’s brewery industry is bright. Despite a slowdown in revenue growth in recent years and in the face economic uncertainties, the industry, as a large segment of the food and beverages sub-sector, has been waxing stronger.

    However, the alcoholic beverage segment of the industry appears to be driving the upsurge. Beer is the most populous alcoholic beverage in the country, making up about 96 per cent of alcohol sales.

    Analysts at GTI, a leading investment banking group, say beer consumption experienced an average growth of 10 per cent in the last 10 years. They have predicted a Compound Annual Growth Rate (CAGR) of 13 per cent in the next 10 years.

    In a May, last year report, GTI Research Lead Analyst, Mr. Chuks Anyanwu, gave a breakdown market share of beer consumption as Lager (58 per cent) of the market share; Stout (27 per cent), leaving 15 per cent to Malt. In terms of the consumption channels, 40 per cent of beer consumers drink in beer parlours, 28 per cent through provisional store purchases, 13 per cent via informal convenience spots, while the rest go through kiosks, restaurants and hotels and others.

    The analyst said the growth potentials in the brewery industry cannot be over emphasised.

    He identified the country’s expanding population and market as some of the growth drivers.

    His words: “One of the most important and under-appreciated changes in Nigeria is the growing size and strength of its consuming class.

    “The success of companies in the brewery industry hinge largely on the existence of large markets, nonetheless, Nigeria’s rapidly expanding population provides a perfect platform for companies in this industry to flourish.”

    Anyanwu noted that despite the industry’s strong long-term outlook, it is going through a tough time due to rising cost of living, pressure from foreign exchange rates, decreasing disposable income as well as distribution pressures stemming from security concerns.

    The Nation learnt that heightened security concerns in some parts of the country, particularly in the Northeast, have been a pain in the neck of beer manufacturers. The situation is said to have added pressure on their distribution and cost of commodities, thereby restricting beer consumption to safe locations.

    The GTI research was however quick to note that with the continuous expansion of the Nigerian middle-class, “we estimate a current installed capacity deficit of 53 million hectolitres to service the potential market”.

    As GTI pointed out, Nigeria’s emerging middle-class paints a picture of an increasingly normal society, driven by consumers who are living lives similar to those of Western Europeans, accounting for 23 per cent of the population.

    The investment banking group specifically observed that there has been a significant expansion in middle-income earners, most dramatically in those whose income have reached $6,000-$7000. Citing a report by Standard Bank South Africa, it also said it has been estimated that middle income households would reach 12 million in 2030 with sufficient income to meet all basic necessities as well as health and education services.

    With Nigerians said to be consuming an average of 11 litres of beer per head of population, experts say that the beer market, conservatively estimated at $2.7 billion (about N537.4 billion), has plenty of room for expansion.

    Recent research by Financial Derivatives Company (FDC), a diversified financial institution, attests to the industry’s rosy outlook.

    FDC was emphatic that despite high cost of living and heightened security concerns that have caused decline in growth of operators, the beer industry remains attractive and the outlook bright.

    “From our analysis, we conclude that the industry is attractive,” the research stated, noting that there is little threat of substitutes for the products produced in the industry.

    Nigeria trails South

    Africa in sub-Saharan

    Africa’s beer market

    Both countries control 15 per cent and 32 per cent market share respectively according to Vetiva, a Pan-African investment banking and financial services company.

    Nigeria’s ranking as the most populous country in Africa, with its growing middle-class and a large number of drinking-age consumers, makes its destination of first choice for multinationals scrambling for positions in a market that has shown room for expansion in the beer industry.

    Market eyed by global bigwigs

    “All the big global brewers are in Nigeria and they don’t just bring in products made in other markets; they have set up shops here. They have invested in facilities and market infrastructure”, Corporate Relations Director and Company Secretary to the board of Guinness Nigeria Plc, Mr. Sesan Sobowale, said.

    Diageo is here represented by Guinness Nigeria;  Heineken is here through its subsidiary, Nigerian Breweries Plc, he said.

    Admitting, however, that in terms of market share, Guinness Nigeria is number two, Sobowale said because Guinness is part of Diageo, which is number one in the world “and as a result, when you come to Nigeria, we behave like number one.”

    Describing his product as a clear leader in the stout segment, he said: “Obviously, a few upstarts are trying to make inroads into that market share and you know it’s a competitive market, we wish them the best of luck. But, we know that consumers are discerning, they know the best quality when they see it. We are confident that Guinness Stout will continue to be the market leader for the foreseeable future. We are not complacent and will continue to win the consumers in that segment.”

    Nigerian Breweries remains market leader

    While Diageo has 27 per cent market share through its stake in Guinness Nigeria Plc, Dutch multinational, Heineken, remains on the driving seat of the competition in the beer market, commanding 71 per cent market share through its subsidiary, Nigerian Breweries Plc.

    The company confirmed its dominance of the thriving beer market last week, when it announced a total cash dividend of N38 billion for its shareholders for 2015 business year. It declared a dividend of N28.5 billion in addition to interim dividend of N9.5 billion it earlier paid, bringing the total cash payouts for the year ended December 31, 2015 to N38 billion.

    A further breakdown of the dividend recommended by the company’s board indicated that shareholders would receive final dividend of N3.60 per share, in addition to interim dividend per share of N1.20, bringing the total dividend per share to N4.80 for last year. This would be the highest dividend ever paid by the company in its 70- year history, if approved by shareholders at the company’s upcoming Annual General Meeting (AGM).

    The company’s secretary and legal adviser, Mr Uaboi Agbebaku, said the company was able to achieve strong results and deliver good return on investment to shareholders due to its twin agenda of cost leadership and market leadership supported by innovation.

    Noting that this year will see a continuation of the tough operating environment of the previous year, Agbebaku said the company, whose lager brands include Star, Gulder, Gulder Max and Heineken, remains confident that with its strong portfolio and cost leadership agenda, it would take advantage of any upswing in the market.

    SABMiller, Castel throw their hats in the ring

    Apart from Nigerian Breweries and Guinness, the two dominant players, SABMiller and Castel make up the four global players that shape Africa’s competitive brewery market. The four brewers have a market share of 80 per cent.

    SABMiller, a South African brewery giant, recently joined the fray with its acquisition of two regional brewing companies, Pabod Breweries in 2008 and International Breweries in 2012. The firm has since shown strong growth, growing from a regional player into the world’s second largest brewer by volumes in the space of 15 years.

    With two brands, Hero and Trophy lager beer, SABMiller is gradually winning the hearts of loyalists of the established brands. Hero lager beer is brewed in Onitsha, the commercial heart of Anambra State. Trophy, which was originally launched by International Breweries Plc, Ilesha, Osun State in 1978, was taken over in 2011 by the management of SABMiller.

    These two brands have remained remarkable choices of lager with strong and notable presence in the Southeast and Southwest.

    Castel also launched its foray into the market through the acquisition of a majority stake in International Breweries Plc. This means that the Nigeria beer industry has evolved from a duopoly to an oligopoly.

    “These interests re-affirm the growth opportunities embedded in the sector and we expect it to generate a positive development for the sector in terms of volume growth and deeper market penetration,” Vetiva said.

    Vetiva added that at five per cent-plus real Gross Domestic Product (GDP) growth expectation over the next decade, medium to long-term economic outlook for the industry is healthy. The firm hinged its projection on what it described as “Nigeria’s supportive demographics

    characterised by growing youthful population with avid thirst for fun and social culture that encourages festivities.”

    Vetiva added that Nigerian brewers are moderately shielded against the macroeconomic risks, as sales recover quite swiftly from unfavourable economic cycles. “….we think domestic beer consumption rate will increasingly set the Nigerian market apart on the heels of expanding economy,” it added.

    How beer can contribute

    to economy

    The beer industry is a large segment of the food and beverages sub-sector. It constitutes the non-oil sector where Nigeria is leveraging on to drive her economic diversification programme.

    Having evolved from purely bottling activities to a diversified industry involved in the production of canned drinks and the use of tetra pack, the sector accounted for 35.9 per cent of the growth in the industrial sector, which grew in 2014 by 6.41 per cent as against 0.87 per cent in 2013.

    Nigerian Breweries has the largest capacity and coverage, with about eight breweries located across the country. It has an estimated annual capacity of 13.5 million hectoliters (mn hl).

    Guinness operates four breweries with a total annual capacity of 7.5mn hl by 2014. SABM has built up its capacity (by acquisition) to approximately 1.8mn hl, which includes Pabod Breweries in Port Harcourt, International Breweries in Ilesa and Onitsha.

    Experts say that the beer sector is very well positioned to galvanise the economy through industrialisation. Brewery companies, whose principal activities include the production, packaging and sales of alcoholic and malt beverages, employ close to one million people.

    They also have about 50, 000 distribution outlets in the country made up of wholesalers, hotels and clubs. For instance, Nigerian Breweries’ operations alone support indirectly 586,000 jobs, which represent 0.64 per cent of the total work force, of which 54, 000 are within its Sorghum Value Chain.

    The company’s operations also have a value added impact of N243b on Nigeria’s economy, which represents 0.65 per cent of the nation’s GDP.

    The beer industry is also a significant driver of tax revenues. In 2011 alone, N87 billion was paid directly and indirectly as taxes by Nigerian Breweries. This represented 4.02 per cent of Nigeria’s non-oil revenue.

  • Diversification only way out of poverty, says Buhari

    Diversification only way out of poverty, says Buhari

    •President launches N40b loan for rice farmers

    President Muhammadu Buhari has emphasised that the only way out of poverty is through diversification of the economy.

    He listed agriculture and solid minerals’ mining as alternatives sources of revenues.

    He spoke in Kebbi State while launching N40 billion “Anchor Borrowers’ Programme (ABP)” organised by the Central Bank of Nigeria (CBN) for rice farmers.

    The event was also used to launch the 2015/2016 dry farming season.

    The ABP programme aims to create an Ecosystem to link out-growers (small holder farmers) to local processors.

    The CBN set aside the N40 billion from the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) for farmers at a single-digit interest rate of 9.0 per cent to tackle challenges of poor funding.

    The CBN Governor, Mr. Godwin Emefiele, put the amount spent yearly on importation of foods that can be produced in Nigeria at over N1trillion.

    He said the programme being launched has been designed to create economic linkages between farmers and processors and also ensure increased agricultural output of rice paddy.

    He said that it will also close the gap between production and consumption of rice.

    Minister of Agriculture Chief Audu Ogbe said despite the achievements recorded under his predecessor, Akinwunmi Adesina, Nigeria is still far away from its agricultural destination.

    He said: “People supplied sharp sands as fertiliser while fake seeds were sold to farmers. There were companies with no trceable address.”

    Kebbi State Governor Abubakar Atiku Bagudu  said that Kebbi State can boast of producing 700 million metric tonnes of rice per annum.

  • The imperative of economic diversification by DMO

    The imperative of economic diversification by DMO

    IN spite of the deluge of challenges besetting our economy, Director-General of the Debt Management Office, Dr. Abraham Nwankwo recently assured Nigerians that our economy is very resilient because the federal government is in control and Nigeria’s economy will continue to remain sustainable.

    Nwankwo’s verdict which shortly after the opening of a one-day enlightenment workshop for Nigerian students in Kaduna also stressed that the economy is not only resilient and diversifiable but has started a robust journey upward under the present administration.

    He said: “Nigeria should be very proud that it has a CBN, it has an economic system that in spite of the oil shock we had our economy still remains strong. Other countries that have been in similar position, countries like Venezuela, Russia, have had their currencies devalued very rapidly in the 30 days of the oil shock. But you can observe that it was until about three months or four months later that in Nigeria’s case that the CBN has to do some little adjustments in the exchange rate.”

    He further stated, “This shows that over these years, we have attempted to improve, to diversify the economy to centre on agriculture and that is a source of inspiration for all of us. The inspiration is that given the current administration of President Muhammadu Buhari, there is a certain change and Nigerians should use this opportunity to do better than we did in the past by making sure that agriculture continues getting modernized so that we have food security, so that we also produce enough for processing and manufacturing, which will ultimately bring about the desired job creation which is at the center of President Buhari’s Administration.”

    Predictably, Nwankwo’s advocacy has struck a familiar chord with the present administration and among major players within the economy. Buhari only recently assured the nation that his administration would enact new policies in the 2016 national budget, which will see to the diversification of Nigeria’s economy from oil to other sectors such as mining, manufacturing and agriculture. Addressing a delegation of French investors in Abuja recently, President Buhari said, “We are doing our utmost best to encourage diversification into non-oil sectors which can employ a lot of people, which will ultimately help to improve security because unemployment and insecurity are inseparable.”

    The president’s clearest indication of the economic policy direction of his administration yet was further reinforced by the President, Lagos Chamber of Commerce and Industry, Alhaji Remi Bello who said that the fall in the price of crude oil, currently the mainstay of the country’s economy made diversification of the economy not only imperative but very urgent. In his welcome address at the opening ceremony of the 2014 Lagos International Trade fair in Lagos, Bello who spoke on the theme, “Promoting Nigerian Economy as a Preferred Investment Destination,” stressed that the theme of the Trade Fair underscored the importance of building an economy that is diversified.

    “The non-oil economy is generally more inclusive and integrated. It is characterized by high economic linkages, more stable and above all more sustainable,” he said. He called on government to fix the major impediments to productivity and competitiveness which he listed to include the parlous state of infrastructure especially public power supply, the challenge of substandard and fake products, poor state of roads, the high cost and limited access to funds, inconsistent policies and growing insecurity.

    The pledge by President Buhari amid calls by the DMO, major stakeholders within the economy had become more strident in the face the parlous state of financial affairs in the states. Thirty-six states of the federation had approached President Muhammadu Buhari in June to ask for a bailout following their inability to meet their basic financial obligations including the payment of the salaries of their employees and other pressing financial obligations. The President had acceded to their request by approving the disbursement of $1.6 billion paid into the Federation Account by the Nigerian Liquefied Natural Gas (NLNG) company to the three tiers of government. Buhari also approved a Central Bank of Nigeria (CBN) N250 billion to N300 billion special intervention fund solely for the payment of the backlog of staff salaries and the restructuring of their commercial loans with the Commercial Banks into long tenured loans of 20 years.

    Following this window of opportunity, 23 states of the federation applied to the DMO for their debts to be restructured into FGN Bonds, and all 23 States have been screened by the CBN and DMO and have had their loans converted into FGN Bonds, whose maturity will be in twenty years time.

    In the aftermath of the restructuring of this short term bank loans into long term Federal Government of Nigeria, FGN Bonds, Director-General of the Debt Management Office, Dr. Abraham Nwankwo sees immediate gains accruing to the states. He indicated that this restructuring would cut the states’ monthly debt services burden by a minimum of 55 percent and maximum of 97 percent.

    Throwing more light, he further explained that the renegotiated facilities would equally result in interest rate savings of between three and nine percent per annum for the affected states and would help them regain fiscal balance. Besides the gains accruable to the participating states, he explained that banks’ balance sheets would also improve as weak sub national loan assets are replaced with high quality sovereign assets. Nwankwo explained that the FGN Bonds enjoy enhanced liquidity since they are traded in the secondary market, thereby affording the banks improved space to lend to other sectors of the economy as they are free to convert their FGN Bond holdings into cash in the secondary market.

    The commercial Loan-to-FGN Bond plan is envisioned as a short term fiscal stabilization. Beyond this palliative measure, the diversification of the economy will bring to bear lasting positive impact which will drive economic vitality and place the nation on a stronger economic pedestal.

    A review of government’s revenue profile in the last half decade shows a disturbing pattern of our over dependence on oil, with oil accounting for about 80 percent of our foreign exchange earnings and non-oil sector contributing 20.1 percent (CBN 2010).

    Given this stark reality of our dependence on oil, the Nigerian economy is vulnerable to slump in the price of oil in the international market as is presently being felt in all facets of our economy.

    Despite these given statistics, available evidence point to a marginal improvement in the contribution of non-oil sector to the growth of the Nigerian economy. The Central Bank of Nigeria (CBN) attributed the growth in our Gross Domestic Product (GDP) from 6.9 percent in the third quarter of 2012 to 7.1 percent in the fourth quarter of the same year to the increase in the contribution of the non-oil sectors, particularly the industrial sector. (NBS 2012). The apex bank in its report titled, “Economic Report Fourth-Quarter 2012” stated that non-oil receipts stood at N589.98 billion (24.4 percent of the total). The risk of over dependence on oil has already been amply demonstrated by our shrinking foreign earnings occasioned by oil glut in the international market. With over 60 percent of Nigerians living below poverty line according to World Bank group, any further slide would be catastrophic.

    The value chain to agriculture has the transformative capacity to open up the economy and generate various activities capable of creating jobs and enhancing our quest for industrialisation. This is the future path for our sustainable economic growth and should be explored. The Manufacturing sector is a major that will be pivotal to our drive towards economic diversification. It is a major employer of labour which gives numerous Nigerians the opportunity to participate in our economic development.

    In essence, a knowledge based economy has as it’s the main driver manufacturing as parts and components must be produced. We should as a nation based on functional specialization and comparative advantage take into consideration the critical factors of production to increase the number of products which we can produce locally. Tourism, our resources in the solid mineral sector, the maritime sector are areas waiting for its resources to be harnessed for national growth and development.

    The economic challenges confronting the present administration in the face of plummeting oil price in the international market are indeed formidable and requires concerted effort to diversify our economy. This will entail policies to promote expanded production in both agricultural and industrial sector. If we achieve higher level of production output, we will not only satisfy local demand for our goods with a reasonable balance for export. We must work hard to expand our exports beyond African and Asian markets. The present government should place greater impetus in our penetration of African markets to fully harness our comparative advantage.

    An immediate upgrade of basic infrastructure to functional level such as adequate power and water supplies is required for our industrialization drive to yield meaningful results. Only then, will our concerted effort and promotion of Foreign Direct Investment become more impactful to our national economy.

    It is on this note that this writer aligns with the call by the  Debt Management Office for the diversification of the nation’s economy. The time is not only ripe  but the new administration has created a conducive atmosphere for that.

     

    • Abdallah wrote in from Kaduna