As the curtain draws on 2013, financial, economic and the real sector players have postulated measures the federal government should take to revamp the Nigerian economy in 2014. They particularly called on President Goodluck Jonathan to rejig his economic management team, reduce lending rate to a single digit and conclude the privatisation of the power sector.
In separate interactions with LEADERSHIP Sunday, the experts, who noted that the economy recorded modest improvements during the outgoing year, said the effects of single digit inflation attained in 2013 were yet to be felt by Nigerians.
They also want the government to pay attention to increasing activities in the real sector and expressed concern over government's multiple moves to check importation, which they fear could reduce public revenue.
To the director-general of the West African Institute for Financial and Economic Management, Prof. Akpan Ekpo, the economy did not fare well in 2013 because the country had continued to experience high lending rates which left the real sector in comatose and increased the level of unemployment.
He however admitted that the economy recorded marginal improvement during the year based on a declining inflation rate as well as the unbundling of the Power Holding Company of Nigeria (PHCN). Prof. Ekpo asserted that the effect of the single digit inflation was yet to be seen on the economy and urged the government to focus on other factors that stimulate economic growth.
"A country can have high inflation rate and still grow its economy; what the government should focus on is the threshold. It should work on bringing down lending rates. In 2013, the real sector was in comatose and Nigeria cannot do well with high lending rates. The manufacturing sector contributed five per cent to the Gross Domestic Product (GDP) and that to me is unacceptable. We need the real sector to create jobs and bringing down lending rates is central to achieving this," he stated.
He said with the unbundling of the power sector taking full effect next year, "the economy could bounce back, but the government still needs to bring down lending rates to a single digit. Because I don't know who would borrow at 24 per cent to start up a factory; you have to make more than that in profit to be able to pay back."
Ekpo also stressed the need for the government to start planning beyond the oil sector by diversifying the economy, adding that the quality of the leadership structure also needs to change in 2014. While lauding President Jonathan's transformation agenda, he urged him to look at those helping him to ascertain how committed they are to growing the economy.
On the outlook of the economy in 2014, the deputy governor, Financial System Stability, Central Bank of Nigeria (CBN), Dr Kingsley Chiedu Moghalu said: "Following the economic performance in 2013, the Nigerian economy is expected to grow strongly in 2014 which will be driven by high oil prices and robust domestic demand. In addition, the several reforms initiated and pursued by government and her agencies in 2013 are expected to impact the economy positively in 2014."
Moghalu pointed out that financial sector reform through financial inclusion, would enhance economic growth and job creation through access to financial products and services by a large segment of the informal sector of the economy.
He added that the IMF has projected for real sector output growth of 7.4 per cent and the forecast for inflation shows that the rate will remain within the single digit band throughout 2014, despite the pre-election spending that might threaten price stability.
Moghalu said that the full effects of federal government and CBN interventions in the real sector such as Power and Airlines Intervention Fund, the Nigeria Incentive based Risk Sharing System for Agricultural Lending (NIRSAL), the Entrepreneurship Development Centres (EDCs) and other complementary projects of the government will improve the growth prospects in 2014.
"The conclusion of the privatisation of the power sector is expected to have positive impact on output growth and employment generation as activities in the formal and informal sector are expected to pick up", he added.
To Standard Chartered head of Africa Research and commentator on African markets Razia Khan, revenue shortfalls due to oil theft would likely persist in 2014 thereby creating a potential squeeze on Federal Accounts Allocation Committee (FAAC) allocations (the statutory sharing of oil earnings) and on state budgets. "With domestic politics dominating in 2014, Nigeria is unlikely to make much progress on tackling oil theft. The passage of the long-awaited Petroleum Industry Bill (PIB), an ambitious plan to reform the upstream and downstream oil sectors, is also uncertain," she said.
She agreed that the power sector reforms would be a key influence on the economic (and possibly the political) outlook of Nigeria, saying the GDP in the first half of 2013 was negatively affected by supply disruptions from the West African Gas Pipeline, driving power generation to new lows. Power supply may improve meaningfully only in the medium term. Agric-sector reforms and the focus on the agriculture value chain should have a positive near-term effect: higher frequency CPI data indicates falling food-price inflation; rising agricultural output should eventually be reflected in GDP growth. Nigeria's GDP statistics are still due to be rebased, and a c.30-40% increase in the estimated size of the economy is likely. While this will make some metrics, such as debt-to-GDP, look more favourable, it is likely to reveal an even weaker ratio of non-oil revenue collection to GDP," she stated in an email.
Khan said since the 2014 budget was not presented in November 2013, the typical timeframe because of disagreement on the benchmark oil price, the contentious political backdrop raises the risk that no budget would be passed by end March 2014.
She further said that the still-ambitious oil output assumption (2.39mmbd versus 2.53mmbd in 2013) is likely to require further augmentation of budget revenue using Excess Crude Account (ECA) proceeds. With ECA savings thought to have declined to close to $3.3billion, "this raises upside risks to borrowing projections. Given revenue constraints, the capital expenditure budget will be cut according to the Medium Term Expenditure Framework, with the share of recurrent expenditure set to increase to 74 per cent. While the framework foresees a reduction in spending to N4.5 trillion in 2014 from N5trillion in 2013, the rise of a stronger political opposition is likely to result in pressure for increased spending," she asserted.
The acting director-general of the Manufacturers Association of Nigeria (MAN), Mr. Rasheed Adegbenro, said in 2013 the real sector showed evidence of remarkable performance despite the harsh business environment. He noted that production output improved by N353 billion and attributed it to stability in the macro-economic indices and incentives by the government.
He predicted a better performance of the sector in 2014 arising from the power sector privatisation and urged the government to accelerate efforts to deliver its target of 10,000 megawatts of electricity by the end of the first half of 2014.
The MAN chief drew the government's attention to the ECOWAS Common Tariffs which takes off in January 2014 so that the country would not be overflown with foreign products. He also urged the government to broaden the non-oil export expansion scheme.
According to the executive secretary and chief executive officer of Nigeria Sippers' Council (NSC), Hassan Bello, one of the major trade policies that will determine the direction of port activities in 2014 is the new National Automotive Policy, which the federal government introduced to discourage importation of cars and buses and encourage local production of vehicles.
"The raising of import duties and levies on imported cars, as part of government's plan to encourage growth of the local automobile industry is expected to discourage importation of fully built units. This means that on the short run, that is, in the first and second quarter, or even through the whole year, very few cars and buses will be imported. This will mean that government would lose income in tariffs compared to this year," he said.
Samson Echenim, Bukola Idowu, Olushola Bello, Chika Izuora