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Tag: GDP

  • Insights from a rebased economy

    Insights from a rebased economy

    It is amazing what great transformation a little recalibration – beg your pardon, rebasing – has wrought on the profile of the Nigerian economy.

    For two full decades, we tormented ourselves with guilt that the economy was underperforming, what with a GDP that stood at a piddling $283 billion. Following the re-basing, we now know that the GDP actually stands at a roaring $510 billion, pushing South Africa to a distant second in Africa in that department and sending powerful warning signals to the world that the Nigerian juggernaut has finally arrived.

    Our consuming desire, which seemed more an exorbitant declaration intent than a remote possibility, was to enter the ranks of the world’s largest economies, the so-called G20, by the year 2020. Every indication now is that Nigeria will hit that milestone several years ahead of projection. Our planners will now have to rebase Vision 20/20:20 itself.

    Several decades ago, the per capita GDP was a paltry $1,500, which placed Nigeria in the same unproductive bracket as India and Ghana. As if that was not bad enough, some misguided Nigerians developed the pernicious habit of holding up the economies of those two countries as models of growth and stability.

    Now we know that Nigeria’s per capital GDP stands at $2,989, places it well outside their league. The acronym BRIC once designated the rising global economic bloc comprising Brazil, Russia, India and China. Then, it was enlarged to BRICS, to accommodate South Africa and, it would now seem in retrospect, to spite Nigeria.

    With the galloping profile of Nigeria’s economy as revealed by the recent rebasing, global leaders of economic thought are set to drop South Africa from that league and replace it with Nigeria, which they consider more worthy of the distinction. With that change, and in the interest of euphony, I gather from the best authorities that the league will henceforth be known as BRINC.

    Good riddance, then, to South Africa, the upstart that was always thumbing its ungrateful post-apartheid nose at the Big Benefactor up North. Living well, it has been said, is the best revenge. So out with BRICS, and in with BRINC.

    For decades, the conventional wisdom was that the manufacturing sector in Nigeria was in great distress if not positively doomed, and that some industries were relocating to Ghana where the business climate was allegedly more friendly. Everyone blamed the epileptic power supply for the poor state of manufacturing

    The rebasing shows indeed that manufacturing has suffered a decline, but not to the extent of validating the conventional wisdom that the power supply, especially electricity, is a cardinal factor in the calculus of economic growth and development. .

    In the United States where power supply is guaranteed round the clock except in the face of the direst disasters, Wall Street erupts in champagne-drenched celebration and the stock market index rises sharply if the economy manages to record a 2 percent growth.

    But in Nigeria where power is severely rationed if and when it is available, the economy has been growing at a pace more than three time faster than that of the United States. And whereas manufacturing is in precipitous decline in the United States, in Nigeria it has taken only a 50 percent tumble.

    Meanwhile, following the rebasing, it has come to light not merely that the economy has all the while been growing at a dizzying, superheated 7 percent a year.

    It follows, then, that the importance of electricity has been vastly exaggerated.The question must now be asked: Who needs a steady power supply when the economy is growing at such a furious gallop?

    Conventional wisdom has also been upended in many other areas of the economy, following the rebasing. The rate of employment used to be considered an indication of the health of the economy. Employment increased as the economy grew, they said. But the Nigerian example shows conclusively that jobless rate can actually increase sharply or stay stagnant even as economy expands.

    So, why make a fetish of job creation? Why take up all that trouble and expend so much imagination cooking numbers reflecting progress in job creation when the economy is doing just fine without it? Why the national lament that more than half a million persons subjected themselves to accidental death crippling exertions to fill 4,000 advertised positions – why bemoan this when the economy is growing at such a breath-taking pace?

    Again, they used to claim that you cannot build a strong economy without a good road network and sound transportation system. But our rebased economy has just debunked that claim by building the world’s 26th largest economy without freight trains and without anything that can be called water transportation, propelled only by express passenger trains that take a whole day to travel the roughly 240km from Lagos to Ilorin?

    Who really needs all that infrastructure? Certainly not the economy.

    Consider yet another factor that economists are always trumpeting as indispensable to growth and development: stability. As far as I know, nobody has ever accused Nigeria of pursuing, much less attaining, stability. Everywhere you turn – in the neighbourhoods, on the highways, in the professions, in the universities, in the policy establishments, in the motor parks, in police stations and army barracks and even in the precincts of the Presidential Villa, instability reigns.

    To cite practical examples from the policy establishment: One day they are banning rice imports to conserve foreign exchange and encourage local industry. The next day, they undo the ban, saying that only big-time smugglers are profiting from it.

    Again, one day they ban wheat imports and declare that cassava bread will replace wheat bread as the favourite item on the nation’s breakfast table; the next day, they launch a national wheat-production programme.

    But the really exciting thing is that, far from acting as a brake on economic growth, instability has actually been a spur.

    There is no other way to explain the robust expansion the rebased economy has witnessed in two decades of acute instability. It will come as no surprises if it turned out on further rebasing that the North-east and the Plateau-Bauchi axis constitute the fastest-growing and most productive regions in Nigeria.

    In light of these profound insights that rebasing the economy has yielded and many others that I cannot do justice to in this piece, economists will have to rework – beg your pardon one more time — rebase, recalibrate, readjust or re-whatever their old theories and revise the standard texts.

     

    From Himself the Igodomigodo

    “My Own Big Brother,

    “I called your line yesterday to show my cornucopious appreciation to you for your munificent words and the very nice things you said of me in your hebdomadal pantagruelian and yet dialectical didactic (pardon my alliteration) column (“To Patrick Obahagbon, from a kindred soul,” April 7, 2014).

    “The panegyrics coming from a literary avatar and a sui generis lollapalloza that I have admired his inimitable, intrepid and polyvalent style for a period of aeon was an anodyne for me.

    “I thank you for everything and may your utilitarian pen never suffer any hiatus or atrophy.

    “Thanks my Senior Brother. I will keep in touch.”

    Say it for the Hon Patrick Obahiagbon. He never disappoints.

  • Global trade unbundled, says report

    Global trade patterns have changed dramatically in the last two decades. Emerging markets now account for 42 per cent of world exports, up from 19 per cent in 1990, or 52 per cent excluding intra-EU trade. Asia has firmly established itself as the centre of the “made in the world” vertical global supply chain, with China emerging as a mega-trader.

    Trade is increasingly “unbundled” with countries no longer trading in goods so much as in “tasks”, such as design or assembly. Services trade is expanding faster than goods trade driven by improving communications; it cannot easily be measured at the border and some estimates put services at 40 per cent of total trade now.

    Historically trade growth has averaged about 1.4 times GDP growth. But since the 2008 peak, world exports have risen only five per cent, while nominal GDP has grown more by than10 per cent. Some fear that this slowdown is structural. We, however, believe trade growth will pick up and this ratio can be restored.

     

     

    Growth in developed countries is accelerating while manufacturing, still the driver of goods trade, is coming out of the doldrums. Constraints such as lower trade finance availability and rising protectionism are fading. New multilateral trade pacts are in the works.

     

    The next leg up in trade is likely to be fuelled by a further unbundling of the supply chain, by continuing growth and opening in emerging countries and by increasing horizontal trade in both intermediate and finished goods.

     

    The report’s main findings include:

     

    Emerging markets now account for around half of global trade; most countries have seen a big rise in the share of their trade with EM. From 1990-2012 the share of US trade with EM rose to 46% from 25%, Brazil’s to 57% from 25% and Korea’s to 60% from 16%.

     

    Goods are increasingly “made in the world”, with global supply chains; the import content of exports has risen from 20% of total exports in the 1990s to 40% of total exports currently and is expected to rise to 60% by 2030.

     

    Services trade is growing fast and is more important than it looks; trade in services has grown at an average 9.0% since 1990, higher than the 8.0% for goods trade.

    The slowdown in trade growth since 2008 is mostly temporary; the ratio was highest in the 1990s – a golden decade for trade fuelled by the creation of the WTO and liberalisation in China and India.

     

    Trade is set to accelerate but patterns will change; China is now a mega-trader – a position last held by colonial Britain, with trade significant not only as a share of world trade (11.5%) but also of its own GDP (47%).

     

    Madhur Jha, Senior Global Economist at Standard Chartered, commented: “Trade is unlikely to grow as rapidly as it did in the 1990s or 2000s but we think that concerns about the lack of trade finance and a sudden end to supply chain expansion are overdone; we believe the trade-GDP ratio can regain the 1.3 to 1.5 range longer term.

     

    “South-South trade and services trade are likely to gain importance over the coming years; in the WTO’s “high” scenario, South-South trade balloons to around 43% of total world trade, more than doubling from current levels. China would augment its position as the mega-trader of this century, raising its share from a tenth to about a quarter of total trade.

     

    “Asia remains the centre of inter-regional trade and we expect it to maintain its importance in world trade over the coming years, with the fastest growing trade routes likely to remain centred on Asia.”

  • The politics of size

    The politics of size

    In terms of population, land mass and mineral endowments, Nigeria is massive relative to most countries in Africa. Our population of over 150 million people – if they were truly economically empowered – would make this nation a powerhouse. So the controversial recent rebasing of our gross domestic product (GDP) is only stating the obvious in book form.

    Unfortunately, our high numbers are made up largely of very poor people who cannot afford much. Instead of squabbling about whether the rebasing is right or wrong, we should rather be scandalised that given our huge population we are only generating so much.

    Over the last 53 years, a succession of leaders have failed to harness the natural advantages our size offers either on the economic front locally, or diplomatically on the continental and global stage. That is why today millions of Nigerians have become economic refugees fleeing to unlikely places like South Africa, Libya or Cyprus – anywhere would do!

    It is the same failure of leadership that has seen smaller African countries run rings around us as we have contested for things on the international stage. They have little or no respect for our size – pre or post rebasing. Their reaction is a function of how we’ve squandered our potentials.

    It isn’t that size doesn’t count. There are obvious advantages that being identified as the biggest economy in a region or continent confer on a country. Were it not so, many would not have paid any attention to last weekend’s landmark.

    Size does count for something. For many years the South Africans basked in the honour of being described as Africa’s biggest economy. They were certainly not too thrilled at seeing the title slip out of their grasp – no matter how untidy the process of Nigeria’s emergence on top may have been.

    The official reaction from Pretoria was very proper and welcomed the fact that African countries were rising on the global scene. However, unofficial tweets that circulated in the country in reaction to the new GDP figures were more revealing. Most were keen to emphasise that while Nigeria may have a larger population, the rebasing didn’t change the fact that South Africa had the more prosperous and advanced economy.

    One commentator, Dr. Martyn Davies, CEO of Frontier Advisory, argued that the new label didn’t amount to more than underlining the fact that Nigeria had a larger population. “No country became rich through buying consumer goods. They become rich through saving, investing, innovating, embracing technology, driving productivity… Not GDP.”

    “Three things create wealth in successful economies – obviously considering clean, effective government as a given… its innovation, its productivity and its technology… And I don’t see really any of the three coming out of Nigeria at all. It’s purely a numbers game. Fast moving consumer goods facing numbers game. That is it,” he said.

    One advantage of being branded the biggest is that it is now a reality investors looking for opportunities on the continent must deal with. The challenges and cost of doing business here notwithstanding, they would think hard about sidestepping the immense opportunities offered by our huge market.

    On the home front, the largely negative reaction to Nigeria’s overnight emergence in the ranks of the world’s 30 largest economies can be understood from two perspectives. Firstly, it represents one of the few bits of good news on the economy for President Goodluck Jonathan’s administration in a very long while.

    He and his team would naturally want to take credit for the new labelling because it has happened under his watch. It doesn’t matter whether his policies or those of his predecessors are what triggered the quantum leap.

    But what really riles people is that no attempt is being made by the government to put the rebasing in perspective. The suggestion somehow seems to be that the new GDP figures mean life for the average Nigerian has become better under Jonathan because his statisticians tapped their calculators – releasing a batch of impressive new numbers.

    Worse for the government, the results have been unveiled against the backdrop of the tragic Nigeria Immigration Service (NIS) recruitment exercise a few weeks back which left 19 dead across the country. As of today millions of able-bodied, educated citizens are pining away in the ranks of the unemployed. Indeed, one of the defining images of the Jonathan years would be the cavernous Abuja National Stadium overflowing with desperate jobseekers.

    It is hard to be impressed with the rebasing when it is happening at a time Nigerians are feeling the pinch of the absence of the most basic public infrastructure. The bulk of our people live in the dark – without hope of power any time soon. The same frustrated ones who have to pay through the nose to provide their own electricity are supposed to crack open bottles of champagne to celebrate some new statistic that has no bearing on their lives.

    Here is one statistic that shows why many are so cynical. South Africa which we have just ‘overtaken’ generates over 45,000 megawatts of electricity; Nigeria with her grand GDP figures can only manage a little over 3,000 megawatts.

    Still, we should be grateful for little mercies. The ongoing numbers storm has focused attention on what is important: the state of the economy and the ability to turn it around – rather than mundane matters like religion and ethnicity. It should now be the key test as we edge towards electing a new set of leaders in 2015.

    Former United States President Bill Clinton rode into office in 1992 hammering on the parlous state of the economy. Jonathan’s leadership over this critical area of national life should come under scrutiny. So also should the credentials of his potential rivals who think they can do a better job.

  • The politics of GDP, energy and justice

    Nigeria rebased its GDP recently and the government gleefully announced that its new size makes Nigeria’s economy the biggest in Africa, having displaced S Africa which occupied that enviable position prior to the rebasing. On the worsening crisis in Ukraine the US accused Russia of using its supplies of gas to Ukraine to control that beleaguered nation just as the US is tightening sanctions on Russia for recent invasion of Crimea in Ukraine. On the internet this week was a story that a 14 year old Nigerian girl who was forced to marry a 35 year old husband in Kano had killed the husband with rat poison and is to be charged to court as a juvenile. It is my considered opinion that each of the news items I have identified for analysis today can stand on its own in terms of the politics behind its nature, occurrence, socio economic and even diplomatic implications. My goal today therefore is to show that in each case serious issues arise which have to be appreciated and tackled in a realistic and just manner if equity and justice in these matters are to be achieved in the local and international environment we are dealing with. We start with the $510 bn Nigerian GDP which has raised so much hullabaloo. The opposition APC has said that the government has ridiculed itself by the exercise. In response the government spokesman called the Opposition a ‘global irritant’ which I think is an unfortunate though good piece of malapropism – a ludicrous misuse of language, as the APC is just doing its legitimate duty of check mating the government in power, as expected of any opposition worth its salt in Nigeria, and I do not think that can be described as a global nuisance by any stretch of the human imagination. Aside from outpacing S Africa in economic size I do not see the real value of the rebasing of the Nigerian GDP. It immediately reminded me of what former British Labor PM Harold Wilson said when the British pound was devalued during his tenure of office. Wilson told the British people that though the pound has been devalued it does not mean that the pound in their pocket will buy less in Britain. In a cynical way one can say the same of this Nigerian GDP rebasing. It has added no value to the value of the naira on the streets of Nigeria and we all know that in terms of purchasing power of Nigerians, the naira is buying less and less, in terms of consumption of essential goods and services by the day, with the teeming masses of impoverished Nigerians. While one grants the government the right or is it the duty to update statistics on the GDP, it is an indulgence, and a provocative one at that too, to talk of so much wealth in a nation with so much mass poverty in the midst of such plenty. And such huge disparities between the rich and the poor, in a nation where youths die on employment lines while potential employers make money out of selling jobs application forms. Indeed there is something inherently mischievous and suspicious about the timing of the rebasing. It again reminded me of some wayward revaluation of assets in banks which can be either legitimate or fraudulent. Some so- called ‘smart’ bank managers can quickly revalue security assets so that more loans can be given out, even when they know the security value can never cover loans disbursed in the event of a break down in repayment arrangements and schedules. Banks have been known to revalue assets close to Annual General Meetings so that the Shareholders think their balance sheets are solid when all they are doing is to convert foreign currency holdings to their naira value. Which is so mischievously similar to this highly trumpeted rebasing of Nigeria’s GDP. With regard to the US accusation of Russia of using its supplies of gas to control Ukraine, the US should know that those who live in glass houses should not throw stones. The US is using economic sanctions to deal with Russia over Crimea and in the process has opened the eyes of the Russian bear to what it could use in retaliation. Russia has threatened to turn off its gas supplies to Ukraine because that nation is owing Russia a huge gas debt of $2.2bn. On the surface this is a normal business transaction between a buyer and a seller but it runs deeper than that. The aim of the Russian threat is to ward off future EU sanctions because Ukraine is a conduit for gas supplies to many EU nations. Gazprom the Russian oil giant has threatened that it will seek advance payment if Ukraine does not pay its present gas debts and that it would turn off the gas if immediate payment is not forthcoming. So if the US is calling the shots and muzzling the foreign accounts of Russian President Vlladmir Putin’s close aides, Russia is absorbing the pressure but turning the heat on Ukraine an ally of the US over the supplies of gas and gas debts owed Russia by the Kiev government inUkraine. So, both the US and Russia are on tenterhooks over Ukraine and we are watching to see who will blink first in the undeclared war of sanctions and gas debts that the invasion of Crimea by Russia is slowly but gradually ballooning into, in the global diplomatic theatre. In the case of the under aged Nigerian girl who killed her husband with rat poison, the interplay of culture, religion and justice come to the fore. I say categorically that it is wrong of anyone, whether adult or juvenile, to take human life except perhaps, in self- defence. It is very arguable that the culprit can claim self -defence successfully in a court of law in Nigeria. But given the huge discrepancy in age between her and her husband and the fact that she had no choice in the matter of her choice of husband, the rat option may have looked as a liberation option to her young mind, out of her incarceration in a relationship she knew she could not live with for the rest of her life. The morality or rationale of her now executed escape route from forced marriage is definitely criminal, but did she really have any option other than to commit murder so as to exact the capital punishment to give her an escape route out of her culturally approbated, infant predicament, matrimonial subjugation and slavery? I doubt, and I watch the trial of this murderous juvenile wife with great interest as it unfolds in our hallowed temples of justice here in Nigeria.

  • How Nigeria’s economy grew by 89 per cent overnight

    How Nigeria’s economy grew by 89 per cent overnight

    ON Saturday, April 5th, South Africa was Africa’s largest economy. The IMF put its GDP at $354 billion last year, well ahead of its closest rival for the crown, Nigeria. By Sunday afternoon that had changed. Nigeria’s statistician-general announced that his country’s GDP for 2013 had been revised from 42.4 trillion naira to 80.2 trillion naira ($509 billion). The estimated income of the average Nigerian went from less than $1,500 a year to $2,688 in a trice. How can an economy grow by almost 90% overnight?

    Nigeria has a deserved reputation for corruption, so a sceptic might think the doubling of its economy a result of fiddling the numbers. In fact it is the old numbers that are dodgy. An economy’s real growth rate is typically measured by reference to prices in a base year. In Nigeria the reference year for the old estimate of GDP was 1990. The IMF recommends that base years be updated at least every five years. Nigeria left it far too long; as a result, its old GDP figures were hopelessly inaccurate.

    The new figures use 2010 as the base year. Why was the upgrade so big? To come up with an estimate of GDP, statisticians need to add together estimates of output from a sample of businesses in every part of the economy, from farming to service industries. The weight they give to each sector depends on its importance to the economy in the base year. A snapshot of Nigeria’s economy in 1990 gave little or no weight to fast-growing parts of the economy such as mobile telephony or the movie industry. At the time the state-owned telephone company had a few hundred thousand customers. Today the country has 120m mobile-phone subscriptions. On the old 1990 figures, the telecoms sector was less than 1% of GDP; it is now almost 9% of GDP. Motion pictures had not shown up at all in the old figures, but the industry’s size is now put at 1.4% of GDP. Nigeria’s number-crunchers have improved the gathering of statistics in other ways. The old GDP figures were based on an estimate of output. The new figures are cross-checked against separate surveys of spending and income. The sample on which the data are based has increased from around 85,000 establishments to 850,000. Only businesses with a fixed location are included: the traders who weave precariously between the traffic are not captured. Even so, many small businesses are now part of the GDP picture.

    Of course, Nigerians are no richer than they were on Saturday night. The majority of the country’s 170m people live on less than a dollar a day. What the revised GDP figures show is that its economy is far more than just an oil enclave, exporting crude to pay for imported goods from richer countries. The oil industry’s share of GDP is now put at just 14%, compared with 33% according to the old figures. Manufacturing is much larger than previously thought. Services are booming. It is still a tough place in which to do business. But any company or investor who wants exposure to Africa’s fast-growing markets cannot afford to pass the continent’s largest economy by.

     

  • CBN, GDP rebasing and financial inclusion

    CBN, GDP rebasing and financial inclusion

    What is the implication of Sunday’s rebasing of the Gross Domestic Product (GDP) for the financial inclusion policy of the Central Bank of Nigeria (CBN)? To analysts, it is negative. COLLINS NWEZE reports that stakeholders will have to work harder to address this ‘negative impact’.

    Sunday’s rebasing of the Gross Domestic Product (GDP) may have thrown up some challenges for banks, which are grappling with the policy of the Central Bank of Nigeria (CBN) on financial inclusion. The CBN advised banks to provide access to financial services and products to reduce the number of the under banked.

    According to CBN, the financial inclusion strategy is meant to reduce the number of adult Nigerians excluded from formal financial services from 46.3 per cent in 2012 to 20 per cent in 2020, with specific targets for payments, savings, credit and insurance.

    It said sustaining Nigeria’s development would ensure that at least 80 per cent of adult Nigerians have access to financial services as well as the right environment in which to flourish. This desire prompted the CBN to issue Agent Banking Guidelines to reach the grassroots where bank branches are scarce, but services highly needed.

    Banks have also simplified account opening procedures, lowering minimum account opening deposit to as low as N1,000. Also, the Know Your Customer (KYC) policy requirements have been eased to accommodate the grassroots.

    Despite these efforts, analysts think higher GDP implies that banking penetration is lower than the previous GDP series suggested. They also said the gap between Nigeria’s and East Africa’s bank penetrations is even bigger than was thought.

    Renaissance Capital (RenCap) sub-Saharan African banks analyst Nothando Ndebele said the economy would reflect the sectoral distribution of the industry’s loan book.

    She said: “Kenya’s loans/GDP of 38 per cent is almost double that of Nigeria, at 21 per cent against 38 per cent pre-rebasing. This explains why retail banking in Nigeria is at a nascent stage. But we think this means the banking sector’s growth potential is even greater than we initially thought.”

    The CBN said financial inclusion has been defined in various ways around the world, but the essence of inclusion is tied to economic development and providing a better way of life for Nigerians.

    The regulator has over the years recognised certain barriers to achieving inclusion some of which include distance to bank branches, cumbersome account opening requirements, lack of awareness of financial products and services, among others.

    “As a regulator, we also recognise the challenges deposit money banks face in trying to reach the underserved communities which include the cost incurred by the banks in catering to lower valued accounts and the cost of expanding their branch networks to excluded communities,” it said in a statement.

    The apex bank has, however, taken a stand to ensure that these barriers are broken and several steps taken to address these constraints have been taken. Some of these include agent banking. The guidelines for agent banking have been approved by the CBN. They are to ensure increased agency in the delivery of banking services outside traditional brick and mortar bank branches, through additional financial access points, such as existing retail stores, petrol stations, post offices or via technology such as ‘Point of Sale’ (POS) devices and mobile phones.

     

    What banks are doing

    To drive agent banking system that was recently introduced in the country, Sterling Bank Plc has deployed biometrics enabled point of sale (PoS) terminals at its agent banking outlets in the country. The bank said the move would promote financial inclusion.

    At a forum in Lagos, Group Head, e-Business, Sterling Bank, Mr. Fatai Amoo, said about 30 million Nigerians can’t read or write, adding that the device would help bring them into the banking system. With the biometric solution, all that is required from customers are their fingerprints.

    He said: “We have over 30 million adults who are unlettered and whenever they want to use their ATMs they would tell anybody around their pin. We all know that, that is risky and a lot of people have fallen victim. Our agent banking solution has brought to an end, this kind of issues. We have been able to deploy a solution that runs on biometrics. Whether you are lettered or not, literate or illiterate, God has given all of us our fingers.”

    Heritage Bank is also offering traders and artisans of Gbagada Plank Market in Lagos agent banking services. In a statement, the bank said the customers now have the opportunity to enjoy financial services without visiting any physical branch location.

    The lender, last week, launched its agent banking scheme with the opening of what it calls the ‘Corner Shop’ bank in the market.

    “The choice of the market as the first place to launch our agent banking is deliberate. We decided to launch our agent banking in this market because of the importance we attach to the business that you do”, its Executive Director, Ivory Banking, Mary Akpobome said.

     

    How it works

    The use of biometrics-enabled PoS with a well-tested application that has been successful in India that shares some similarities with Nigeria; agents that are carefully selected are then authorised to carry out certain transactions, among others for customers under the scheme such as the enrolment of new customers in line with the CBN Level KYC requirements, deposits, withdrawals, airtime top-up and bill payment and funds transfer.

     

    Hitches

    This cannot be done with the unbalanced distribution of bank branches in the country. According to the Nigerian Deposit Insurance Corporation (NDIC), out of the 869 licensed micro finance banks (MFBs) in the country, 346 or 39.8 per cent are located in the Southwest geopolitical zone, 162 or 18.64 per cent in the Southeast, 158 or 18.8 per cent in the Northcentral while only 63 or 7.2per cent and 32 or 3.6 per cent are located in the Northwest and Northeast. Lagos, Anambra and Abuja have the highest number of MFBs.

    Agent banking is part of efforts to increase the level of financial inclusion in the country, according to the Managing Director of the NDIC, Alhaji Umaru Ibrahim.

    Agent banks operate in simple ways such that they could be operated by supermarkets, gas stations, stores and the likes as they are not full-fledged banks. The Kenyan model of agent banks are usually equipped with a combination of PoS card reader, mobile phone, barcode scanner to scan bills for bill payment transactions, Personal Identification Number(PIN) pads, and sometimes personal computers (PCs) that connect with the bank’s server using a personal dial-up or other data connection.

    Clients that transact at the agent banks use a magstripe bank card or their mobile phone to access their bank account or e-wallet respectively. Identification of customers is normally done through a PIN, but could also involve biometrics. With regard to the transaction verification, authorisation, and settlement platform, banking agents are similar to any other remote bank channel.

    According to the NDIC chief, agency banking would go a long way in reaching out to the largely unbanked population by creating banking representations where banks ordinarily do not have enough resources to establish branches.

    Ibrahim said agent banking is a complementary policy that is worthy of emulation as it would provide simple banking services to a variety of people on behalf of various banks.

    Analysts say agent banking has the potentials to grow access to banking facilities in the country especially to the uneducated and those in rural areas. Another area where agents could be meaningfully deployed is in the mobile payment system as successfully done in Kenya and some other countries.

    Agent banking, however, comes with its own risks as banks and their customers would be faced with agent fraud, unauthorised fees, loss of customer assets and records, data entry errors, system failures as well as a host of others.

    These, they noted would have negative impact on the image of the banks affected as customers’ confidence in them would water down, lowering their customer and profit base.

    On how agent banking could impact the universal banking model, the NDIC chief stated that it would only complement the current banking models. He dispelled fears that banks with national banking license would become lax in branch expansion saying “the banks will now be able to decide which will be more cost effective for them in reaching out to their customers, either opening up branches or using agent banks.”

    In 2009, the CBN adopted measures to open up banking channels to non-bank agents. An amendment to the Banking Act (passed as part of the Finance Act 2009) allowed banks to start using agents to deliver financial services. Using small shops, petrol stations, pharmacies and other retail outputs as agents could have a dramatic impact on improving access to financial services, especially in rural areas.

    According to Principal Associate, MobileMoneyAfrica Emmanuel Okoegwale, there is need to define clear operational processes, guidelines and procedures for operating and managing an agency network will improve the spread of financial services along areas of strong compelling needs.

    He noted that a lesson ought o have been learnt from the micro-finance sector “where providers that were supposed to be active in the underserved and rural communities where competing with commercial banks on high street and chasing after high net worth depositors to the detriment of the rural unbanked.”

    Without doubt, agent banking will favour the banks in terms of profitability and spread, but there is still the issue of trust as much would not be achieved without enough provisions made for customers’ protection.

     

    Kenya example

    The agent banking model started in May 2010 after Kenya changed its laws to allow commercial banks to offer their services through third-party businesses which has helped raise the profits and spread of the country’s bank.

    The agents are conveniently located at commercial outlets like shopping malls, post offices, petrol stations, laundry shops, cybercafés, chemists, eateries and supermarkets, with the belief that people will deposit cash, withdraw and open accounts, services that most people seek in banks, through agents.

    However, the Kenya model seems to be having trust issues as local media in the country report that bank customers still prefer to make use of the banking halls rather than the agents who are much closer to them.

    Some customers said they preferred to make use of the banking halls due to confidentiality of the banks compared to the agents as well as the charges they have to pay when they use the agents.

    Although agent banking was introduced in the country as a measure to decongest the banking halls, the banks continue to service more customers than the bank agents.

    It is said while some tellers in the banking halls serve more than 200 customers daily, some banking agents serve less than five people per day in Kenya.

  • NLC : Good GDP without jobs is meaningless

    The Nigeria Labour Congress ( NLC) has condemned the Gross Domestic Product (GDP) which makes Nigeria’s economy the largest in African.

    The union said the GDP is meaningless since it is without sustainable and viable jobs.

    NLC Acting President, Comrade Promise Adewusi in a statement titled “Good GDP without sustainable and viable jobs: A time bomb,”
    noted that the new GDP will only make meaning to the labour family if it translates into improved living conditions for the ordinary Nigerian which is not the case at the moment.

    Adewusi pointed out that the living conditions in the past couple of years have been progressively nosediving and pathetic.

    Deriding the data, the congress said  “Nigeria being the biggest economy in Africa ought to make no news if vital national statistics such as population, natural resources etc were to form the requisite assumptions for assessment.”

    The congress maintained that economic growth without jobs and food on the table, means nothing in realty.

    NLC noted that the “unemployment figures are frightening. We have found it necessary to warn time without number that the army of the unemployed youths constitutes a veritable army of the disparate, the desperate and the angry, and that government should urgently address the problem.
    “So far nothing has illustrated this fear better than the recent Immigration recruitment exercise tragedy. We therefore do not need any Economist or Diviner to tell us that life has improved, because it has not.”
    A GDP, said Adewusi,  could not be said to have significantly improved if our industries are virtually shut and operating environment increasingly hostile. Government according to him, should worry that the performance index of industries dropped from 46.08% to 25.81% while service industry more than doubled to 50 % from 23.03%. “

  • Rebasing the GDP: The missing link

    SIR: As a well-groomed in the field of Statistics. I took my time to do my research on what led to the sudden growth of our GPD which portrays us as the Africa’s largest economy and the 26th world’s largest economy.

    According to the Statistician-General of the Federation, Dr. Kunle Kalejaiye our GDP was improved due to the upgrading of our base year from 1990 to 2010. He further backed his analysis on theground that some certain sectors of the economy like Telecommunications, ICT and others made them to upgrade the base year because of the non-existence of the sectors in 1990.

    As far as I agreed with the data but one can only deduce that the growth in the GDP is on nominal growth not real GDP. The GDP is the market value of the good and services produced in a country within a given period of time. It is an important indicator to measure the growth of the economy. While there is a difference between growth and development in an economy, it will be very important to note that we are only experiencing growth in the figures without substantial improvement in the key-sectors that reflect in the standard of living of the entire populace.

    Why are we seeing figures on papers everyday without physical reflection in our economy? If adequate steps can be taken to gear up the recent growth of GDP by providing adequate infrastructures, employment opportunities, stable power supply and security of lives and property, the common man will begin to smell the improvement in the economy. I want Nigerians to know without being misinformed that we only supercede South-Africa in terms of nominal GDP growth as

    a result of the current base year we are adopting but South-Africa is not our match when we are talking on real GDP and the level of standard of living/per capital income which the common man on the street can feel.

    Nigerians are tired of hearing figures that don’t impact positively in their lives. Rather, there is a need for the economic team to design a robust policy that will better the lives of Nigerians rather than mere figures without development.

     

    • Ismael Taiwo A.

    Ibadan.

     

  • Nigerians live worse than before, says Okonjo-Iweala

    Nigerians live worse than before, says Okonjo-Iweala

    With the new recalculation of Nigeria’s GDP, the Federal Government has warned Nigerians not to jubilate because what the rebasing figures have thrown up means Nigerians “live worse than before.”

    The Minister of Finance and Coordinating Minister for the Economy Dr Ngozi Okonjo-Iweala sounded this note of caution yesterday in Abuja at the inauguration of the Federal Inland Revenue Services (FIRS) multi-disciplinary training centre.

    According to Dr. Okonjo-Iweala, “we live worse than before. Those who want to think that we just need large GDP to live well, is not true because, by this ratio, it doesn’t look so good.”

    The ratio she was referring to was the tax revenue to GDP ratio that is contained in the rebased figures of the GDP. Nigeria’s new GDP figures saw tax revenue to GDP ratio declined to about 12 per cent and four per cent for non-oil tax to revenue as against the pre-rebasing figures of 22 per cent for tax to GDP ratio and seven per cent for the non oil tax revenue to GDP ratio.

    She stated that “Nigeria is confronted with many constraints when attempting to increase tax revenues. We have just celebrated the fact that Nigeria has now become the largest economy in Africa with N80 trillion of GDP ($509.9bn), which makes us the 26th largest economy in the world and advances us on our goal to become one of the 20 largest economies in the world. But I want to tell you that there is one piece of the news that is not so cheering. With the increase in GDP, all our revenue ratios have been recalculated.”

    To the tax collectors, she directed that “for tax revenue to GDP, we now have to redouble our efforts to get back to the 20 per cent ratio at least that we were before and I want all of us to rise up to the challenge with the continuous improvement on the capacity of tax official through training in the modern method of auditing of companies.” Dr. Okonjo-Iweala then instructed the Federal Inland Revenue Services (FIRS) to increase Nigeria’s tax revenue to GDP ratio to 20 per cent. Earlier in his address, the Acting Chairman of the FIRS, Alhaji Kabir Mashi, disclosed that the training institute, which was built at a cost of N800m, would be upgraded to a full-fledged department to be headed by a director, and the training centre would be made available for taxpayer’s education.

     

  • ‘It is a matter of figures’

    ‘It is a matter of figures’

    Chartered Institute of Bankers of Nigeria (CIBN) former President Okechkwu Unegbu said the rebasing should ordinarily make Nigerians proud, but the nature of the economy and standard of living for the common man have made it only a matter of figures.

    He said comparing Nigeria with South Africa is not feasible, adding that the later surpasses Nigeria in all ramifications. He said the standard of living in South Africa is higher than in Nigeria, while there is also a higher level of corruption in Nigeria than in South Africa.

    The former CIBN boss said Nigeria is ranked 139th out of 176 countries in Transparency International’s 2012 Corruption Perceptions Index, and tied with Azerbaijan, Kenya, Nepal, and Pakistan. This, he added, should give government serious concern rather than rebasing. “Honestly, we should be proud but it’s a matter of figures. There is higher standard of living in South Africa than in Nigeria. I don’t see how the newly rebased GDP can impact on the common man,” Unegbu said.

    He said that the other 25 countries before Nigeria have good economy with productive private sector, emphasizing that the quality of service in the telecom sector is still poor, while consumers cannot access credit for household goods, and mortgage financing is almost unavailable in Nigeria. He said government should address social and economic imbalance in the country, adding that the figures are just political gimmicks. This perhaps prompted him to ask: “What are we big figures for? It does not translate to quality of life.”

    An economist, Henry Boyo, said although the GDP is bigger, it is unlikely to bring any benefit to the common man. He said: “I am struggling to find the benefits of this government’s action on the common man. It can only help foreign investors to have a better view of the Nigerian economy.” He said the rebasing will attract Foreign Direct Investment (FDI), but government should also ensure that other disincentives to FDI like multiple taxation is corrected. “Investment in Nigerian bonds and treasury bills will rise. Foreign investors will see these instruments as more secured,” he said. While nominal GDP, which has its uses, is the sum value of all produced goods and services at current prices, real GDP is more widely used and is slightly different as it’s the sum value of all produced goods and services at constant prices and is useful for showing how the economy changes in size and – with some further manipulation – how average living standards change over time.

    Bismark Rewane, an economist and boss of Financial derivatives Company (FDC), explained that GDP is the market value of all final goods and services produced within a country, calculated using product, income and expenditure approaches. The FDC boss said real GDP is one that is adjusted for inflation while nominal GDP is the value of goods and services based on current market prices. He further explained that Gross National Product (GNP) measures the value of goods and services produced by a country’s citizens regardless of their location while Gross National Income (GNI) is GDP plus income receipts minus income payments from the rest of the world.