08, 2019 / 09:20AM / By Atedo N. A. Peterside*, CON/ Header Image Credit: Legacy
Being Keynote Address At The 25th Nigerian Economic Summit Dinner, Abuja
I consider it a great honour and privilege to have been invited as the Keynote Speaker on the occasion of the Dinner to celebrate the 25th Nigerian Economic Summit here today in Abuja. The organisers told me they wanted a speaker who was an active participant at the first Summit held a little over 25 years ago and who is still active today.
When I went back to read the Report of the 1st Nigerian Economic Summit which kicked off on 18 February 1993, my first reaction was one of humility and thanksgiving to God that I am still here 25 years later; I never realised that so many out of that very first batch of Summiteers had since passed on. May their gentle souls rest in perfect peace.
My second reaction however was one of disappointment that some of the exact same economic issues and problems that plagued Nigeria then are still being debated here 25 years later. I am not claiming that we have not achieved phenomenal progress in certain areas such as telecommunications, commercial and investment banking, Pension reform and other service sector pursuits such as Information Technology, Music, Film, Art and Fashion.
The harsh reality is that whatever gains Nigeria achieved in income per capita over the course of the last two decades are slowly being wiped out, as falling annual per capita incomes have become the norm in every single year since 2015. Macroeconomists measure broad aggregates and the numbers do not lie. The investment and GDP statistics used here were obtained with the assistance of Dr Yemi Kale, who heads the National Bureau of Statistics.
In a nutshell, falling living standards appear to have come to stay in Nigeria and so hoardes of Nigerians continue to join the ranks of the extremely poor year after year, at a time when several African countries are successfully lifting more and more of their own people out of poverty. World Bank data confirms that the African countries who have been most successful (Top ten) at reducing extreme poverty over the course of a 15-year period spanning Year 2000 to 2015 are Tanzania, Chad, Republic of Congo, Burkina Faso, Congo DRC, Ethiopia, Namibia, Mozambique, Rwanda & Uganda (See slide 1 below).
When the earlier Summits were being held in the 1990s, some of the most popular comparisons by presenters were those between Nigeria and Malaysia, Indonesia and various other Asian tigers. Today, we can clearly benefit from case studies on poverty reduction emanating from Africa's top ten. The same can be said for education, healthcare and infrastructure where Nigeria does not feature in Africa's top ten in terms of rapid positive change.
Indeed, Nigeria now leads the world in two appalling statistics: 1) the largest number of school age children out of primary school (10.5m); and 2) total number of persons living in extreme poverty (90m approx.). It was not so in 1993.
There is a frightening and ominous link between these two sets of statistics because children who are ill-equipped in terms of basic primary education are likely to be the most difficult to integrate into a 21st Century economy. Many of them were born into poverty and will remain in poverty unless we do something urgently to rescue them. Even more worrying are the regional disparities that show up when socioeconomic data is disaggregated. For instance, the WAEC May/June 2019 WASSCE results show that 9 out of the top 10 States with the best results are from the South East and South-South zones - Lagos State is the only top 10 entrant from outside these two zones. Conversely, of the bottom 8 States on this same Exam results chart, 5 are from the North West, whilst 3 are from the North East zone (See slide 2 below).
As GDP growth rates fizzled out in 2015 and 2016, the Central Bank of Nigeria (CBN) compounded the situation by embarking on forex policies which caused investors to both take fright and take flight at the same time. The inevitable outcome was an economic recession. It was only after CBN succumbed to pressure in early 2017 to allow a Nafex exchange rate, where all business units and individuals could buy and sell forex freely at a market determined exchange rate of N360/$1 approx., that supply bottlenecks slowly disappeared, and the economy limped out of a recession. The Nigerian economy is however still largely stagnant and so anaemic GDP growth rates which fall below the approximate 3% population growth rate are not cause for celebration. With high inflation rates in the 11% range, which CBN appears to have accepted as being the norm, investors now fear stagflation. Compare and contrast this with Ivory Coast and Senegal which held inflation below 2% and grew GDP in excess of 7% in 2018.
Before going into prescriptions, it is important to update this audience about
the current structure of the
Nigerian economy, which is significantly different from what prevailed in 1993
in 5 important areas:
1) Over 50% of our GDP now comes from the Service Sector. CBN appeared to have forgotten this in 2016 when directing banks to allocate 60% of forex to the manufacturing sector that accounted for less than 10% of GDP. CBN also held out the false hope that denial of forex to specific sectors of the economy would somehow incentivise investors in other sectors. The reality is that draconian actions directed at one group of investors simply make other investors think "so who is next and/or what is next"? A corollary of this proposition is to point out that actions and pronouncements that increase overall Uncertainty and Risk are likely to be counter-productive, if the goal is to boost investment activity generally;
2) Inward diaspora remittances now eclipse the oil and gas sector as the number one source of forex for Nigeria. Again, CBN overlooked this while trying to force these inflows to come in at a stipulated official rate of N200/$1 at a time when the parallel market had galloped beyond N400/$1 in 2016;
3) Our ICT sector's GDP contribution has since outgrown the oil and gas sector share of GDP and so it should be heralded and nurtured instead of being attacked by rogue regulators as has become fashionable;
4) The split of aggregate demand between the Private Sector and the Government Sector (all 3 tiers) is now 91.5%/8.5%. Some Nigerians still dream about FG stimulating national aggregate demand through its own expenditure activity alone. Meanwhile, FG's total 2020 budget expenditures will translate into a paltry sum of $130 or less per Nigerian. How can that possibly transform Nigeria's economy in a meaningful way?
One of the first areas of consensus in that first economic summit in 1993 was that FG expenditures alone could never transform the Nigerian economy and so by far the most impactful activity that FG could engage in was to create an enabling environment and a level playing field that would stimulate phenomenal private sector investment activity. 25 years later some of our policy makers still sound as if they missed this most basic lesson.
5) In 2018, Nigeria' Foreign Direct Investment inflows slipped behind Ghana's for the first time. In terms of FDI flows into Africa, Nigeria slipped into the second tier in 2018. The first tier is now comprised of Egypt, South Africa, Congo, Morocco, Ethiopia, Ghana and Mozambique (see slide 4 below). Indeed, Mozambique may head this chart in a few years' time. They have provided the type of clarity which Nigeria has refused to provide to the Oil and Gas sector from the moment the Oil Minister in the previous administration produced a first draft of a myopic Petroleum Industry Bill.
I thank you for your attention.
About The Author
Atedo N. A. Peterside* CON, is the Founder of Stanbic IBTC Bank Plc and the Chairman of Anap Business Jets Limited, ART X Collective Limited, Cadbury Nigeria Plc and Endeavor High Impact Entrepreneurship Ltd/Gte.