Reviews & Outlooks | |
Reviews & Outlooks | |
1025 VIEWS | |
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Monday,
February 12, 2020 / 04:00PM / Economic Associates / Header Image Credit: Economic Associates
It is indeed very surprising how Nigeria's impressively positive economic narrative from 1999 to 2014 has given way to an unflattering post-2014 narrative in which the economic terrain is about recession, inflation, unemployment, poverty, restiveness, and insecurity; the financial terrain is about foreign exchange rationing, devaluation, multiple exchange rates, low loan-deposit ratio, and high interest rates; while the fiscal terrain is about low revenue, low capital spending, large deficits, high debt service, rising debt, and concerns about solvency/bankruptcy.
With huge windfalls from the commodity price surge from 1999
to 2014, Nigeria enjoyed economic expansion- growth accelerated and commercial
services, led by telecommunications and information services, outgrew
agriculture and oil- that saw Nigeria's rank rise phenomenally from the 52nd
to 22nd economy in the world; financial expansion- deepening of
banks, bonds and equity markets, as well as government revenue and spending;
and stability- single digit inflation and interest rates, and a strong exchange
rate; and, a marked reduction in misery- falling unemployment and poverty
rates.
With shortfalls replacing windfalls since the crash of
commodity prices in July 2014, Nigeria's economy has endured economic
contraction- growth reversal, recession, and a sluggish recovery to now rank as
30th economy in the world; financial contraction- especially bank
deposits, equity market capitalization, and foreign exchange supply, as well as
government revenue and spending, and instability- the Naira lost about two
thirds of its value against US dollar, while inflation and interest rates
jumped into double digits; with the growing misery reflected in growing number
of unemployed, poor, and disenchanted.
We present data that reveals that the common thread between
the two eras is the quantum of external liquidity at the country's disposal.
External liquidity surge from windfalls fuelled the era of expansion and
stability, just as external liquidity shortages from shortfalls inflicted
contraction and instability. We also show that unfolding global realities now
mean that Nigeria could easily adopt policies to raise external liquidity
thresholds enough to switch from contraction to expansion. Global liquidity glut
has seen a doubling of long-term capital inflows to developing countries in the
last decade and Nigeria is very well-placed to strategically reposition itself
to get a fair share of that.
Despite negative external income shock, domestically, Nigeria
remains prodigiously asset rich. Nigeria's large population spread in scores of
urban centres and past oil booms combine to bequeath her with valuable public
assets. However, while Nigeria's economic, fiscal and financial struggles
resulting from the decline in income have been conspicuous in news headlines,
the solutions that the value of assets owned by Nigeria could unleash have been
less so. We draw attention to the hidden value in vast assets owned by Nigeria,
make a case for unlocking massive domestic and external liquidity required to
arrest the economic, fiscal and financial crisis from them, and articulate four
ways of doing so.
We show that Nigeria could adopt the following options to
raise domestic and external liquidity thresholds:
(i.) Securitize equity holdings in NLNG and other oil and gas Joint Ventures
to shore up foreign reserve threshold, while giving Nigerians at home and in
diaspora opportunities to invest in the assets and earn some of the dividends.
(ii.) Privatize to attract brownfield FDI by converting all wholly owned
corporate assets to securitizable Joint Ventures stakes in which government
owns up to 49 percent and foreign investors own up to 51 percent.
(iii.) Liberalize to attract greenfield FDI by breaking government monopoly in
all infrastructure sectors to encourage entry of foreign investors who could
operate in parallel to the Joint Ventures.
(iv.) Commercialize idle or under-utilized state-owned lands and built structures
by relocating uneconomic activities from prime locations and repurposing them for
leasing to open new streams of non-tax revenue.
Doing these will change Nigeria's economic, fiscal and
financial narratives by unlocking the liquidity Nigeria needs to strengthen the
Naira, rejuvenate fiscal, financial and foreign exchange streams, rebuild
infrastructure, diversify and accelerate growth, eradicate poverty and
unemployment, and lay the foundations for shared prosperity. Leading developing
countries adopt different combinations of these four options to fuel their
transformation.
Evolution of Developing Countries' and Nigeria's Shares of
Exports, FDI, and Remittances
As the Economic Associates "Nigeria Outlook Conference" moves to Lagos on February 19, 2020 from Abuja in Feburary 12, 2020 and then
Port Harcourt on February 26, 2020; discussions
of the outlook will focus on facts summarized in four sub-themes viz:
1. Unfolding Global Realities
Coming to grips with the strategic implications of the widening divergence between downside risks to global growth and upside prospects of larger inward capital flows for countries and companies.
a.
Implications of Diverging
Global Economic and Financial Paths for EMEs
i. Economic Downsides:
Exports, GDP Growth, Demand
ii. Financial Upsides:
Strong FDI and Remittance Flows
b.
Evolving EME Realities:
Nigeria vs. Peers']
i. Exports
ii. FDI and Remittances
2. National Impact-Points
Coming to terms with tight money, credit, equity, and forex
conditions, that weaken and confine growth to a few sectors, and orchestrate
double-digit inflation, interest rates, and multiple exchange rates.
i.
Tight
Foreign Exchange Market
ii.
Volatile
Exchange Rate, Inflation, Interest Rates, and Equity Prices
iii.
Tight
Money, Credit, Bonds, and Equity Markets
iv.
Slow
GDP Growth and Concentrated Sectoral Growth
How to mitigate shortfalls, by closing budgeted and actual
revenue gaps on the fiscal side and raising forex supply/domestic financing
thresholds to levels required to underpin faster growth on the monetary side.
i. Fiscal: Closing Budgeted
vs. Actual Revenue Gaps
ii. Monetary: Meeting Higher
Domestic Liquidity Thresholds
iii. Forex: Meeting Higher
External Liquidity Thresholds
4. Managing Risk Exposures
Strategic levers that can be pulled to seize big
enough slices of increased inward capital flows to developing countries to
compensate for the risks to growth and exports.
a.
Transiting
from Windfalls to Shortfalls
i.
Income: Operating vs.
Nin-Operating
ii.
Liabilities: Debt vs.
Equity
iii.
Assets: Accumulation vs.
Decumulation
b.
Capitalizing
on Tailwinds: Global and Domestic Silver Linings
i. Fallouts of the Global Liquidity Glut- Large FDI
and Remittances Headroom
ii. EME Race for Global Liquidity
iii. Vast Stocks of Idle but Valuable Domestic Public
Wealth
Please
note that this event is by prior reservation only; and all reservations are
subject to confirmation by EA. Please visit www.econassociates.com to complete the online reservation form.
For more information, please call Maryjane on 08166871208, or e-mail
info@econassociates.com; or register online - Abuja, Lagos, Port
Harcourt; or download
a reservation
form, or download the conference
brochure.
More Insights from Dr. Ayo
Teriba HERE
Pictures from the Conference in Abuja on February 12, 2020
Some
of the Directors from the Bureau for Public Enterprises with DBN and EA Staff
at the Abuja Conference
Olorunshola
Abdulazeez of Nigeria Governor's Forum with Maryjane Chigbo and Ayo Teriba of
Economic Associate
Akin Soetan - Senior Technical Assistant to the President on Economic Matters - Office of the Vice President, The Presidency, Nigeria
1. Economic Associate's Conference on 'Nigeria's
Economic Outlook' To Hold On Feb 19, 2020
2.
Moody's Announces
Completion of a Periodic Review of Ratings of Nigeria
3.
The GTBank 2020
Economic Outlook: Macro-Economic and Banking Sector Themes
4.
FSDH Macroeconomic
Outlook 2020: Accelerating Growth in the New Decade
5.
African Economic
Outlook 2020: Developing Africa's Workforce for the Future
6.
Nigeria in the New
Decade: Priority for Accelerated Growth, Job Creation and Poverty Reduction
7.
Global Bank Rating
Outlooks Are Still Skewed to the Negative
8.
2019 Review and 2020
Outlook - Nigeria in the New Decade... Nothing Ventured, Nothing Gained
9.
NCM2020 (6) - Nigeria's
Fiscal Deficit is Projected to Widen to 4% of GDP
10. NCM2020 (4) - Africa's
Projected 4% Growth Is Insufficient To Make A Dent
11.
FBNQuest 2020 Research
Outlook: Global Headwinds Moderating, Domestic Calm
12. United Capital To Host
2020 Outlook Breakfast Session
13. NSR H1 2020 (11) -
Fixed Income - Liquidity Surfeit to Keep Yields Subdued
14. NCM2020 (2) -
Significant Downtrend Recorded in Global Growth; Major Economies Negatively
Affected
15. FY 2020 Outlook:
Treading Uncharted Waters
16. Increasing External
Risks and Weak Public Finances Keep 2020 Outlook on SSA Sovereigns Negative
17. NSR H1 2020 (10) -
Monetary Policy - CBN Caressing Both FPIs and Economic Growth
18. NOVA Economic Outlook
H1 2020 - Nigerian Economy To Grow By 2.4% YoY Over 2020
19. NSR H1 2020 (9) - GDP -
Economic Growth Should Remain Anemic, Flatlined at 2.2%
20. NSR H1 2020 (8) -
Inflation Set for a Double Whammy in 2020!
21. Year Ahead 2020 -
Re-risking The Financial System