Tag: economic recovery

In 2017, Nigerians in the Diaspora’s remittances was $22 billion. It jumped to $25 billion last year; that is, 6.1 per cent of the Gross Domestic Product (GDP) and 83 per cent of the Federal Government’s budget. Experts say that tapping into this enormous Diaspora remittance market could be the wedge for an economy in search of inclusive and sustainable recovery. Assistant Editor CHIKODI OKEREOCHA reports

Partner and Chief Economist at the Pricewaterhouse Coopers (PwC) Nigeria Dr. Andrew S. Nevin hit the bull’s eye when he said: “Nigeria’s biggest export is not oil; it is actually people, because of the remittances coming in.”

To Nevin and, indeed, other experts, Nigerians living abroad are its biggest export, considering their huge remittances that hold enormous opportunity and growth.

The PwC boss said last year that Nigerians in Diaspora remitted $25 billion, representing 6.1 per cent of the Gross Domestic Product (GDP).

According to him, this figure translates to 83 per cent of the federal budget and 11 times the Foreign Direct Investment (FDI) flows in the same period. It was also seven times larger than the net official development assistance (foreign aid) received the previous year, which was $3.359 billion.

Nigeria has seen an increase in migrant remittances in the last few years. For instance, Nigerians in Diaspora remitted $22 billion in 2017. It was the highest in the sub-Saharan African region, followed by Senegal and Ghana with $2.2 billion each.

Currently, Africa’s largest economy is said to be among the top five in global remittances, and her Diaspora remittance market, according to experts, is well positioned to get bigger in coming years given her favourable demographics.

For instance, Nevin, in a report titled: “Nigeria Economic Outlook: Top 10 Themes For 2019”, noted that Nigeria is projected to add no fewer than 200 million people to her population of 196 million between last year and 2050.

The report, which was co-written by PwC Nigeria Senior Industry Associate Omosomi Omomia, and made available  to The Nation, added that the country’s population is expected to surpass that of the United States,  ranked the third most populous by 2050.

Read also: Ogun pensioners to work for APC’s victory

The many benefits of Diaspora remittances

According to the World Bank, the Nigerian remittance market is worth over $10 billion, making the Diaspora community a major enabler of growth and development, if properly channelled.

To experts, remittances are private unrequited transfers (i.e. payments for which no economic asset or benefit is obtained) sent from abroad to families and communities in a worker’s country of origin (or home country).

The remittances include cash and non-cash that flow through formal channels – electronic wire, or through informal channels like money or goods carried across borders.

They constitute the second largest financial inflow to many developing countries, exceeding international aid. They also have a distributive impact on households as income and consumption patterns are affected.

Remittances are mostly used by households for daily consumption and access to basic services, such as health, education, and housing. They also may be a vital source of income for people whose livelihoods are threatened by natural disasters or other calamities.

Remittances remain important sources of donations to those beyond the immediate family circle through formal or informal philanthropic initiatives.

However, when they are not used for immediate consumption needs or passed to charities, the savings and remittances of those living in the Diaspora can be turned into investments.

They can also offer governments and firms more means to finance infrastructure and business operations, while rewarding senders (i.e. migrant workers) with a financial return.

Indeed, the desire of Nigerians in the Diaspora to assist those people who have remained in their homelands can be turned into a driver for much needed savings and investments back home.

For instance, Nigeria’s booming real estate industry is said to be one the first points of call for Nigerians in Diaspora seeking for profitable investment areas. This is so because of the opportunities that come with the surge in urban development and population growth.

Already, there are mortgage propositions, for example, that link potential homeowners with vetted property developers and agents to ensure that the journey to home ownership is stress-free.

Diaspora remittances can also have transformative effects on livelihoods and communities with well-invested funds stimulating employment and income-generating opportunities.

The rising remittances are also said to have provided a useful source of foreign exchange, helping to raise reserves as well as maintain the stability of the naira. At a point in the fight for stable foreign exchange market in Nigeria, a definite policy on the flow channel and exchange rate was made.

Research has also found that increasing remittances lead to reduced poverty, enhance human and economic development since it provides income for households, education, healthcare, housing, small businesses and farming.

Recipients of these remittances, who are encouraged by the fact that remittances contribute to economic growth and to the livelihoods of people worldwide, tend to put more money into these sectors than those who do not receive any.

Generally, remittances are used for housing, consumption and education financing, with increased flows observed during “back to school and pre Christmas periods”.

However, beyond their well-known role as senders of remittances, Nigerians in the Diasporas also promote trade and foreign direct investment, create businesses and spur entrepreneurship. They also transfer new knowledge and skills.

These must be why experts have been calling on the government to remove obstacles to free flow of Diaspora remittances and create opportunities for Nigerians in the Diasporas to engage in development.

Some of the specific actions include identifying goals, mapping Diaspora location and skills, fostering a relationship of trust with the Diaspora, maintaining sophisticated means of communication with the Diaspora, and ultimately, encouraging Diaspora contributions to national development.

Innovative banking

solutions offer succour

To leverage the impact of remittances for families and the communities while curbing scepticism that may limit their prospects in making investments back home, the banking industry is providing solutions to the Diaspora that facilitate secure and profitable investments effortlessly.

Such technological interventions by the banking industry have made remittance transactions faster, cheaper and more convenient, making it possible to reach even the “last mile” of many remote areas in Nigeria.

Some banks that have thrown their hats into the remittance market include United Bank for Africa (UBA), First City Monument Bank (FCMB).

Others are Guaranty Trust Bank (GTBank), Union Bank, Ecobank, and First Bank. Their involvement was in response to the demand for financial service providers that combine strong a foothold across the continent with money transfer products that have extensive reach across Africa.

For instance, the Ecobank Rapid Transfer solution is a proprietary-send-and-receive money transfer product in Ecobank locations across Africa. The unique product facilitates easy transfer and access to funds across Nigeria and in all the countries across the continent where the foremost pan-African bank currently operates.

According to the bank’s Executive Director, Consumer Banking, Mrs. Carol Oyedeji, the product was conceived out of the need to provide convenient, accessible, and reliable money transfer service for its retail and wholesale customers and non-customers alike.

“This is a more convenient way we believe bank customers in Nigeria can be served better. The uniqueness of this product is its swiftness in delivery and accessibility as transactions are consummated instantly at the receiving end. No matter the bank you have your account in Africa, you can receive money through Rapid Transfer,” she said.

The Ecobank Rapid Transfer could be made through cash-to-cash, cash- to-account, account-to-cash, account-to-account and cash-pull transaction formats. The service offering also allows remittances to be received directly into the receiver’s personal bank accounts anywhere in the country and same accessed any day or time just like any other deposits.

With near or real-time connections, the receiver has access to the funds whenever he/she wants. Funds are available to receivers 24/7, 365 days in the year and they can easily retrieve money transfers from their accounts at night, during public holidays and on weekends, using any of the e-transfer channels – ATM, POS, Internet banking, Ecobank mobile App, sub-agency and physical withdrawal from the branches.

Speed, convenience and ease of mind are in-built features of this innovation. Fund is guaranteed to be securely deposited directly into receiver’s account with the risk of fraud and other malpractices hitherto associated with fund transfer receivership in the country eliminated.

First Bank, WorldRemit also

To boost the level of Diaspora remittance, First Bank Nigeria Limited and international remittance company WorldRemit sealed a deal last year to double the digital money transfer company’s number of transactions by the end of 2018.

At the launch of the partnership in Lagos, the Regional Director, Middle East and Africa, WorldRemit, Andrew Stewart, said with one million transactions to Nigeria already in the last 12 months, the partnership with First Bank was expected to double the figure over the next 12 months.

These, experts say, are indications that Nigeria is strategically positioned to take advantage of the emerging global cashless money transfer market, especially in the Diaspora remittance landscape, where the size of her remittance inflows has been increasing?

The Economic Recovery and Growth Plan targets to grow the economy by seven per cent and reduce unemployment to 11.23 per cent by 2020, among other ambitious targets. But, despite being in the second half of its implementation period, key deliverables of the four-year plan (2017-2020) are yet to manifest. Inadequate infrastructure, particularly electricity supply, lull in economic activities ahead of next month’s elections, among other risks, are said to be threatening to scuttle its realisation. Assistant Editor CHIKODI OKEREOCHA reports.

It was long awaited, but when President Muhammadu Buhari finally unveiled the Economic Recovery and Growth Plan (ERGP) in April 2017, the much-anticipated economic recovery roadmap held promises of changing the economy’s growth trajectory.

For instance, the ERGP, which is a medium term plan, covering a period of four years (2017 to 2020), specifically set an ambitious target to grow the economy by 2.19 per cent in 2017 and subsequently, seven per cent in 2020.

The 140-page document also seeks to reduce unemployment from 13.9 per cent as at Q3 2016, to 11.23 per cent by 2020. This translates to the creation of over 15 million jobs or an average of 3.7 million jobs per annum.

The ERGP, which is a medium-term structural reform to diversify the economy, including expanding the nation’s power sector infrastructure, also envisaged that electricity supply will continue to grow, hitting 10, 000 megawatts (MW) by 2020.

It was also hoped that the ERGP will return the economy to sustainable, inclusive and diversified growth, and transform Nigeria from an import-dependent to a producing economy; a country that grows what it eats and consumes what it produces.

On the strength of ERGP’s implementation, Nigeria ought to have reduced petroleum product imports by 60 per cent in 2018. And by 2020, Africa’s largest economy is expected to become a well-diversified economy having multiple streams of revenue.

The economic recovery plan broadly targeted the restoration of growth, human capital development and a globally competitive economy. This was in an effort to combat recession and reposition the economy on the path of sustained growth.

It aimed to achieve these by focusing on five execution priorities namely, stabilising the macroeconomic environment, achieving agriculture and food security, and ensuring energy efficiency (especially in power and petroleum products).

Other execution priorities include improving transportation infrastructure and driving industrialisation, primarily through the Small and Medium Enterprises (SMEs).

But, with Nigeria already in the second half of ERGP implementation period, most of its key deliverables are yet to manifest. Rather, a number of formidable risks may have been tossed on its path, fuelling fears that the plan’s strategic targets may not be realised.

Some of the risks includethe persistent crisis in the Electricity Supply Industry (ESI); inflation rate, which might slightly increase due to electioneering spending resulting from heightened political activities and lack of proper policy coordination.There is also the fear over late passage of the 2019 budget.

The ERGP, which exited both the government and members of the Organised Private Sector (OPS), projected that inflation rate will trend downwards to a single digit by 2020. But with government spending expected to go up this election year, this could fuel inflation rather than spur growth.

For instance, the Manufacturers Association of  Nigeria (MAN), expressed fear that with next month’s general elections, distractions from political activities may slow down infrastructure spending, which will adversely affect the performance of the real sector whose operations rely heavily on supportive infrastructure.

MAN also expressed worries that technically, from the observed trends in the Nigerian budget cycle, the 2019 budget proposal might undergo late passage and the resultant negative effect on the overall economic ambience of the country might be colossal for an economy whose current growth rate is still fragile.

The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) is also worried. Its National President, Chief Alaba Lawson, said the Chamber looks forward to the prompt passage and implementation of the programmes and capital projects outlined in the 2019 budget.

Lawson, who lauded the increased allocation to capital projects, also applauded the Federal Government and the National Assembly for ensuring that the budget cycle returns to the January to December period.

She, however, expressed concerns about the implementation of the budget, noting that late implementation of the budget will have negative effects on the execution of capital projects.

ERGP threatened by rising unemployment

Barely a year to the end of ERGP’s delivery timeline, Nigeria is nowhere close to achieving its target of reducing the high unemployment rate. While the document targets to reduce the unemployment scourge to 11.23 per cent next year, latest figures from the Nigerian Bureau of Statistics (NBS) paint a disturbing picture of the scourge.

While the ERGP targets to create over 15 million jobs or an average of 3.7 million jobs per annum, the NBS “Labour Force Statistics Report for Q3, 2018” showed that 20.9 million Nigerians are unemployed; around 7.7 million have been unemployed for a period ranging from one to three years, with a rate of 90 per cent still looking for a first job.

Specifically, the report showed an unemployment rate of 23.1 per cent for Q3, 2018, compared to unemployment rate of 18.8 per cent at the same time last year. How the managers of the economy hope to reduce the unemployment rate from 23.1 per cent to 11.23 per cent between now and next year remains to be seen.

But as Lawson pointed out, “The rise in unemployment from 18.8 per cent in 2017 to 23.1 per cent in 2018 underscored the need for intensified innovative policy actions to combat unemployment.”

She said this will entail various measures including support for vocational training; industrial attachments and more efforts in job-creating infrastructure and development.

Lawson said these measures have become necessary because “high unemployment among the youth increases the incentives for them to join criminal gangs and network, including radical and extremists groups and also acts as a push factor for illegal migration to foreign countries.”

Electricity crisis is spanner in the works

Of all the issues hurting the ERGP’s implementation and making the realisation of its set objectives almost impossible, the persistent crisis in the nation’s ESI is perhaps, the most formidable.

Although, the ERGP recognised the fundamental role of power to the development of all sectors of the economy, Nigeria has not made much progress in boosting electricity supply to homes and businesses.

Her plan to expand the power sector infrastructure and achieve 10, 000MW by 2020 has come under threat. For instance, the nation’s installed power generation capacity is put at 12,000MW, but actual output stood at about 5,207.57MW as at December 26, 2018.

This is barely enough to power an economy as big as Nigeria’s particularly one that recently exited a debilitating recession, requiring an adequate, steady and reliable electricity supply to boost the real sector’s productivity and competitiveness.

Although, the crisis in the ESI partly prompted the need to ride on the back of the ERGP to put the economy back on the path of sustainable growth, chances of significantly increasing the current output between now and next year appear slim.

The Director-General of Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the power situation continues to pose severe challenges to private sector operators, impacting adversely on productivity.

“Throughout last year, we received complaints across sectors about high energy costs especially high expenditure on diesel, higher cost of and scarcity of gas, and payment demand by electricity distribution companies (DisCos) for power not supplied,” he said.

Yusuf further stated that the situation continued to take its toll on the bottom line of investors and SMEs, adding that some real sector companies reported that they spend as much as 20-25 per cent of their total operating cost on provision of alternative power supply and payment to DisCos.

The LCCI chief, who emphasised that the provision of power remained at the heart of the ease of doing business in Nigeria, however, noted the government’s efforts in addressing the perennial power supply shortage and the deeper commitment to alternative sources of power including off-grid initiatives.

Lawson noted that a lot of work was required to improve infrastructure, particularly power supply. She, therefore, said the Federal Government must redouble efforts in improving infrastructure, such as power, roads and rails, as well as its efforts at improving the ease of doing business.

The NACCIMA boss commended the ERGP Focus Labs, SME Clinics and the various Executive Orders aimed at making the business environment friendly for operators and investors.

She pledged NACCIMA’s continued support of the government and all stakeholders working to create and sustain an enabling business environment for the real sector against the background of the ERGP.

Tracking ERGP’s achievements

But it is not entirely a tale of woes for the ERGP’s implementation. While there are doubts over the realisation of its objectives within its stipulated timeline, some milestones have been recorded.

One of them was the launch of the ERGP Focus Labs to fast-track the plan’s implementation.The ERGP Focus Labs is a targeted six-week intervention that brings together all stakeholders to identify bureaucratic bottlenecks impacting medium-scale and large-scale investments in Nigeria and then generate ideas and resources to resolve them.

The first phase of such labs was held in Abuja, from March 12 to April 22, 2018. At the sessions led by Vice President, Professor Yemi Osinbajo, investors were said to have left the focus labs convinced that they were the better for it. Investors received all the assistance they require to overcome the teething problems that are usually associated with business startups.

For instance, one of the outcomes of the focus labs was investors’ realisation that the transformation of the agro-allied sector for the objective of achieving self-sufficiency in food production and export was possible.

Investors in this sector were said to have formed strategic partnerships that would boost their businesses in terms of identification of funding opportunities, increase in capacity utilization and marketing.

Similarly, investors in manufacturing, especially Micro, Small and Medium Enterprises (MSMEs) were exposed to opportunities that exist for them to unlock their potential, grow their businesses and contribute to building an economy that would compete with the industrialised economies of the world.

The focus labs identified projects that can boost commercial and industrial development, employment generation with positive impact on families, local sufficiency and export for the much needed foreign exchange, and also contribute to Gross Domestic Product (GDP) growth.

Osinbajo summed up the success of the exercise when he announced that it had identified private-sector projects worth about $22.5 billion – and with a potential for 500,000 jobs (in agriculture, transportation, manufacturing and processing, power and gas) – for unlocking by 2020.