Year 2009 was a very challenging one, globally and locally, as the world grappled with the economic meltdown and sought ways of ameliorating the situation and moving the world's economy back to the path of stability and growth. However, some recent developments have raised hope about a renaissance in the Nigerian economy in 2010. Group Business Editor, ROTIMI DUROJAIYE, writes on expectations of Nigerians for the new year and how to make 2010 a landmark year for the reshaping of Nigeria's economic outlook.

Industry operators, housewives and the unemployed in Nigeria probably knew that 2009 would be one of their most miserable years but never imagined the extent of the economic woes. The year, which began with consternation and extreme uncertainty globally, saw Nigeria emerge from its denial to revise sharply downwards its budget assumptions and forecasts as initial projections fell flat on their face in the light of collapsing oil price in the international market.

The level of the monthly federal allocation, the mainstay of virtually all the 36 states excluding Lagos, fell by as much as 15 per cent despite persistent drawings from the excess crude account and the cushion offered by the hefty devaluation of the naira, leaving treasury managers of most states in quandary.

Overall fiscal revenue declined by 40.7 per cent in the first half of 2009 to N2.2 trillion. The year 2009 was better marked by collapse in purchasing power, failing capital market, mounting jobless population, especially among Nigeria's youths, production disruption in the Niger Delta, collapse in oil prices, shrinking government revenues, unavailability of credit to the economy due to risk aversion by a bruised and traumatised banking system and worsening power supply situation despite unprecedented government spending on the sector. According to an economist, Bismarck Rewane, the growth rate of monetary and credit aggregates slowed sharply by 8.6 per cent and N9.8 trillion. Oil exports which account for over 90 per cent of exports declined by about 40 per cent to $58.9 billion while external reserves fell from $64 billion in 2008 to current level of $42 billion in 2009.

Analysts, across board, have all indicated that the Nigerian economy did not fare any better in 2009, and the projection, even for this year, has been anything but promising. In fact, those who are quick to jump to conclusions simply described it as "turbulent".

The country experienced some measure of laxity in managing the spill-over effect of the global economic crisis, which hit its shores in late 2008. Economic managers were, instead, enmeshed in a jamboree of endless debates on whether or not it would actually affect the banking industry, the pivot around which the economy revolves.

In practical terms, there was little or late response to the issue of falling oil prices, the dwindling public revenue and the corresponding losses in the financial sector. Expectedly, there was abysmal failure in budget implementation, with projections rubbished by deficits that were mostly unanticipated. These failures, no doubt, contributed immensely to poor infrastructure, liquidity crisis, and the continuous energy problem in the country.

Outline For The Economy

Between December 15 and 17, 2009, the Nigerian Economic Summit Group (NESG) conveyed the 15th Nigerian Economic Summit (NES 15). The theme of the summit, which was held in Abuja, was: 'Scorecard of Nigeria's Economic Progress: Bridging the Implementation Gap'.

In substantiating the essence of the theme, the Chairman of the NESG, Maxi Sam Ohuabunwa, said owing to the tendency of successive governments in Nigeria to disregard expert counsel or policy proposals, jettison old projects or discontinue existing programmes, it had become necessary to take the country's progress report.

As the global economy rebounds after the economic meltdown, experts say Nigeria faces a rough road to recovery in 2010, with the challenges posed by persistent lack of access to credit, reduced external reserves, volatile exchange rate and mass infrastructure deficits among others.

The NES, organised by the NESG, in collaboration with the National Planning Commission (NPC), represents a veritable platform for operators in the private and public sectors to interact on economic issues and come up with policy recommendations.

Director-general of the NESG, Frank Nweke Jr, said for Nigeria to attain its 20:2020 vision, the country has to record significant milestone every year that leads to the target period.

The year 2010 will then be significant to Nigeria's economic managers in many respects, one of them being that the year precedes the decade of the 20:2020 vision. Second, the year marks the golden jubilee (50 years) celebration of Nigeria's Independence, also interpreted to mean a period to reminisce the impact of self rule on the economy over the past five decades.

But as most of the speakers at NES 15 acknowledged, if Nigeria has not started before now, this is the period to make the great start.

Coming out of global economic meltdown, with most countries of the world pushing at great speed to recover within a very short time whatever might have been lost to the recession, analysts say Nigeria should not be the one to slump or end up among the laggards.

The Federal Government has through the 2010 budget outlined its vision for the year concerning the economy. Multilateral financial institutions and the World Bank have given their outlook on the Nigerian economy for 2010. The NESG during the NES 15 enjoined the government to, as a matter of priority, invest substantially in critical economic sector such as power, agriculture and transportation and to continue in that light over the next decade for the country to actualise the 2020 vision.

Independent analysts have also expressed their opinions on the way forward for the economy from 2010. A lot of issues have been raised about the economy from this year. But generally they reinforce the economic challenges facing the country and her people.

World Bank's Senior Economist, Finance and Private Sector Development, Africa Region, Ismail Radwan, had said Nigeria's economy has the potential for double digit growth in 2010. The World Bank had predicted robust growth for the Nigerian economy this year notwithstanding the gloomy economic atmosphere.

"The Nigerian economy is doing well and may be going at six per cent growth or even close to seven per cent this year (2009) and next year (2010) will even be higher," said Radwan.

According to the expert, the biggest impact from the financial crisis has been the fall in commodity prices, especially the fall in the price of oil, which he admitted had since rebounded to about $80 per barrel.

"The crisis may be over for Nigeria. The on-going reform in the banking sector is a step in the right direction as it would entrench best practices in the sector," he added.

Analysts at Standard Chartered Bank said 2010 looks set to be a landmark year for the reshaping of Nigeria's economic outlook. It is believed that with the budget assuming production of 2.09 million barrels per day, with a conservative price assumption, Nigeria's windfall savings will return in 2010.

According to Standard Chartered, the passage of the Petroleum Industry Bill (PIB), expected optimistically in first quarter of this year will represent Nigeria's first sweeping attempt to rewrite the terms of its engagement with international oil companies (IOCs).

Repositioning Industrial Sector In 2010

The critical issue deserving priority attention for the revival of the industrial sector is the poor energy situation, especially the power supply problems.

And just as advised by the governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, who urged Yar'Adua to reduce his Seven-point Agenda to the first on the list (energy), experts have also advised the President to focus on the energy crisis, which has virtually crippled industrial activities nationwide.

Other industrial constraints, as important as they are, would have comparatively smaller impact and could still be contended with if power supply is regular, the stakeholders emphasised.

According to the President, Manufacturers Association of Nigeria (MAN), Bashir Borodo, finding a lasting solution to the energy crisis in the country is a key factor to the revival of the comatose industrial sector. And one way of ensuring this is to sustain the progress already made in the Amnesty initiative in the Niger Delta region.

Borodo explained: "As I said before, power supply and sustenance of the amnesty are linked because the power plants depend on gas, and militancy in the Niger Delta would affect gas supply. So, government should maintain and sustain the amnesty. It is a key factor.

"Government should also build on whatever progress has been made in the energy sector presently. They should decide - once and for all - whether the oil price would be deregulated or not. And there is also the need for an official price on gas. This is because presently, the price of gas is predicated on black oil which is deregulated. This should be de-linked. Why should we link the price of gas to Low Pour Fuel Oil (black oil)? Government should decide on these issues in the first quarter so that we can keep moving."

Speaking on a similar note, the executive secretary, Nigerian Textile Manufacturers Association (NTMA), Jayeola Olanrewaju, said a solution to the energy crisis is very important. According to him, "let the government address the energy crisis. If they can put that in place, it will reduce the cost of production drastically, and then we can compete.

"Though we desire some form of protection, we are not asking for a blanket ban, but we want to be able to compete. So, if government can save us from the energy problem and, may be, also address the problem of multiple taxation, then we will surely compete."

Managing Director of Ayoola Foods Limited, Segun Olaye, spoke on a similar note. According to him, power supply is the major issue deserving government's attention. Next to it, he stressed, is security.

Olaoye stated: "The government should give the provision of regular power supply priority attention, so as to reduce the cost of operation. When that happens, this will be passed over to consumers in form of downward review of prices of products.

"Government should also focus on the security situation in the country. The way people are losing their jobs in the country today is a matter of great concern. It will simply lead to an increase in crime. For instance, I know a lot of people who have lost their jobs in the past two weeks."

Indeed, to most Nigerians, the consensus is "regular power supply alone is sufficient to reposition Nigeria as an industrial giant, because of its multiplier effects on the economy".

It is generally believed that, with uninterrupted power supply, most of the identified challenges to the country's industrial, nay economic, development, namely the endemic corruption in the country, policy constraints, multiple taxation, the impact of globalisation and a host of others, would pale to insignificance.

Statistics by MAN revealed that members of the association alone spend a whopping N49 billion yearly at ensuring regular power supply for their operations.

Chairman, Infrastructure Committee of the association, Reginald Odia, at a forum last year, said average weekly fuel consumption by members of the association for running their generators was approximately 8.68 million litres of diesel, while the average monthly cost of maintaining these generators was approximately N955 million.

The fuel costs add up to N3.124 billion monthly and N37.488 billion yearly, using the prevailing diesel price of N90 per litre, while the generator maintenance cost amounted to N11.650 billion yearly, both of which give a total figure of N49.038 billion.

Odia regretted that "the consequence of this is that the much-needed capital to maintain and increase production at factories and production lines are locked up in purchasing generators, which are totally unproductive assets".

According to Odia, the prevailing epileptic power supply in the country increases overhead cost due to the additional manpower required to run generators, just as it increases operating cost due to the high prices of fuel for running the generators.

He, therefore, canvassed what he described as a 'sound power policy' that would directly affect the lives of all Nigerians in all sectors.

Odia stressed: "Drastic policy actions need to be put in place now in order to make Nigeria generate adequate electricity. The challenges are overwhelming, but the consequences of not rising up to the challenges are just too overwhelming and catastrophic."

To address the problem, several suggestions had been proffered. Perhaps the leading one is that government should simply do to the power sector what it did to the telecommunication sector: allow private investors who will pay some fees to the government and charge consumers for power consumption with necessary regulation put in place. But as it were, the government seemed not pleased with this.

Yet government's pledge to generate 6,000 megawatts by December 31 last year did not come to pass, even as the President failed to declare a state of emergency in the power sector as promised.

With the latest news that some ministers and government officials may be sanctioned over the failed target, perhaps 2010 would witness significant progress in the power sector.

The Banking Sector

Nigeria witnessed a lot of events that sent shocks to people in the banking sector in 2009.

The sanitisation of which took place under the new CBN governor, Sanusi, saw to the removal of eight managing directors of banks.

High cost of funds, spiralling inflation, naira depreciation and parlous infrastructure, among others, accounted for few loans to the industrial sector which in turn had serious effect on the economy.

Chief executive officer of Chase Mutual Investment Limited, Lagos, Ayo Olatunde, observed that the financial markets were still with crucial challenges with the cost of fund at very high range of 18 per cent to 30 per cent.

"This cost of fund is unattractive to investors on medium or long term projects and could only further entrench the short-term orientation of investors," he said.

Considering the expectations of the New Year in the banking sector, Olatunde stated that the CBN governor needed to consider the high cost funding in his banking reform agenda.

According to him, the stock market was yet to recover and many investors were still reeling under the pains of the huge losses suffered in capital market transactions.

Olatunde recalled that when the idea of universal banking came up, the thought then was that merchant banks would be eliminated and that it could be possible for commercial banks to undertake investment banking just as merchant banks could also undertake commercial banking activities.

With the current trend in the banking sector, he said, banks engaged in all sorts of businesses, many of which were alien to the real core banking in the name of universal banking.

His words: "Banks now compete with their customers in real estate, importation and marketing of petroleum products, sales of consumer goods, buying and selling of telephone recharge cards, revenue collection, sales outlets for various ventures on commission and several other businesses.

"Banks now set up all manner of subsidiaries for these purpose. CBN should also consider this issue with the ongoing reforms of the banking system. Banks need to focus on their core mandate of banking and leave business to their business customers," he said.

Also, an Abuja-based public policy analyst, Jide Ojo, stated that the banking reform that was taking place was part of the 2010 reform.

According to him, a bill had been drafted and sent to the National Assembly for the establishment of Asset Management Company. The company is to facilitate an improvement in banking sector liquidity, protection of the earnings of banks from further erosion and a reduction of the debt overhang on the capital market and its participants.

"This, CBN says, should provide a much-needed fillip for the revival of the Nigerian Capital Market," he said.

Ojo also recalled that the apex bank promised intervention in the banking capacity within the regulatory regime, fast-tracking the implementation of risk-based consolidated and cross border supervision framework, easing the flow of credit, particularly to the real sector of the economy, improving governance structures and practices in the financial services sector and improving confidence in the economy in general.

"It is hoped that the CBN governor will sustain the tempo of the reform," said the public analyst.

Concerning the economic and budget expectations in 2010, all contributors agreed that implementation of the budget was a major challenge in 2010.

Some of them saw budget 2010 of N4.079 trillion and tagged 'Budget of Fiscal Stimulus' as a misnomer.

Analysing this year's budget, Ojo stated that Nigeria was doomed with the current political leadership.

Over the years, he said, budget in trillions of naira had been passed without much to show in terms of human capital or infrastructural development.

His words: "In a country with more than 70 per cent of the populace living below poverty line, we have a government that has voted N7.066 billion to build an earthly paradise for her Vice President.

"The amount involved in this building project is mind-boggling and tantamount to sheer waste or misapplication of the nation's resources.

"Why did the Yar'Adua administration wait till the third year of his administration, the eve of another general election as well as when there is global economic recession and fall in oil revenue to build house for the Vice President?

"I am of the opinion that even at today's inflationary rate, if there will be any urgent need to build an official residence for the Vice President, N1 billion will be too much, let alone seven.

"In whatever way this project is viewed, it is out of tune with current economic realities," he said.

Other heart-rending revelations from the 2010 budget mentioned by Ojo included the proposition spend $210 million (about N31.5 billion) to purchase four new presidential aircraft.

"Two of the aircraft are to be delivered in 2010, while the remaining two are expected in 2011 and 2012. It was reported also that N250 million has been earmarked to fight termites in state house, N542.4 million budgeted to purchase and fuel power generating plants as well as the N450 million set aside for maintenance of vehicles by the Presidency in 2010, despite the monetisation policy of the government.

"At the National Assembly, the legislature will spend a total of N127.782 billion. The breakdown shows that the legislature will have N118.782 billion as recurrent expenditure and N9 billion for capital projects. Of the amount, N30.9 billion is voted for senators and House of Representatives members sitting allowances while furnishing and renovation of residences of the Senate president and the deputy Senate president will need N250 million.

"The Senate is said to be planning to buy guest houses for its principal officers at the cost of N750 million. For fuelling and lubricants of vehicles and generators, the House budgeted N460 million, while the Senate sets aside N286 million. Also in 2010, the Senate proposed to spend N600 million for budget activities; N3.7 billion for office materials, books, periodicals, printing and uniforms; N1 billion for public hearings; N9 billion for 'programmed activities'; N957 million for maintenance of vehicles and other equipment; N355 million for office equipment and N80 million for utilities. Some N1.4 billion has been earmarked for maintenance of vehicles, generators and other equipment, N500 million for partitioning of offices and N385 million for three new generators. Can we in good conscience say these are national priorities considering that a whopping N1.09 trillion of the budget is expected deficit?

"If the Presidency and the NASS could vote these huge figures for their personal aggrandisement in this austere time while millions of graduates of our tertiary institutions roam the streets aimlessly in search of non-existing white and blue collar jobs, does this not portray our political leaders as self-serving? Any wonder there is high rate of armed robbery and kidnappings in the country?

"To drive home the pitiable situation of Nigerian masses, on December 22, 2009, Kapital FM, Abuja, hosted widows to a Christmas fete. The estimation of the organisers was that about 1,000 widows will turn up. They were wrong; over 10,000 widows showed up putting the planners in a quandary on what to do. In the footage of the sad story showed on Nigerian Television Authority (NTA) on December 24, many of these widows were seen scrambling for grains. It is in the midst of this nationwide misery that a handful of people in corridors of power decided to enjoy on our behalf. If this status quo is maintained, neither the Seven-point Agenda nor Vision 20:2020 will be achieved."