Nigeria’s economy has turned the corner and is now firmly on the path of growth, Budget and National Planning Minister, Senator Udoma Udo Udoma said in Uyo, Akwa Ibom State, on Wednesday.
Pointing to the recently released 4th quarter numbers by the National Bureau of Statistics, the Minister told a gathering of media practitioners at the Nigeria Union of Journalists Press Centre, that the report shows the strongest performance since the economy emerged from recession.
“It shows that 39 out of 46 economic activities are now growing. Agriculture is growing; Manufacturing is growing, and Services has recorded its best performance in 11 Quarters. Particularly notable is the fact that the growth is driven by the non-oil sector which has recorded its strongest growth since the fourth quarter of 2015. In short, we have turned the corner and are now firmly on the path of growth, he said”
Senator Udoma said the current real GDP growth performance is most encouraging and shows a movement in a very positive direction, especially with regard to the non-oil sector performance; and assured that with the Buhari Administration’s continuing commitment to the implementation of the ERGP, the economy is expected to further strengthen in 2019, and over the medium term.
He explained that at inception the administration faced real crisis in the economy which included a sharp drop in oil revenues with consequent fiscal challenges as the Federal Government had to struggle to meet its commitments while many States were unable to pay salaries on a regular basis. Investors and businessmen complained about the difficulties they encountered in doing business in Nigeria; Foreign reserves had dropped from $37.33 billion in June 2014 to $23.81 billion in September 2016 and inflation had risen from 9.2% in June 2015 and peaked at 18.5% in December 2016 coupled with exchange rate instability as the Naira lost value in the parallel market, ultimately falling to as low as N520/US$.
These, he further explained, led to the economy dipping into recession by the second quarter of 2016 registering GDP contraction of -1.49% from where it dipped further to -2.34% by the third quarter. Government had to take immediate steps to stop the economic drift and reverse the collapse, he added.
He enumerated the steps to include the introduction of an expansionary budget in 2016 christened the Budget of Change, because once an economy begins to decline and goes into recession, the private sector is usually reluctant to invest. Government must intervene to boost the economy and restore confidence and putting in place a comprehensive Medium Term Plan – the Economic Recovery and Growth Plan (ERGP), 2017-2020 with the broad of objectives of restoring growth, investing in the people and building a globally competitive economy.
The Minister also explained measures introduced under the ERGP include:
· Establishment of Investors’ and Exporters’ FX window by the Central Bank of Nigeria to deepen the market, boost liquidity and accommodate all FX requirements;
· Setting up the Presidential Enabling Business Environment Council (PEBEC), which initiated and completed a 60-Day National Action Plan across many reform areas to improve the country’s Ease of Doing Business Ranking. This was complemented by Issuance of Executive Order EO1;
· Establishment of Nigeria Industrial Policy and Competitiveness Advisory Council as a vehicle for partnering with the private sector on the industrialization agenda;
· Partnering with the private sector on infrastructure development through various models such as Road Trust Fund Scheme, Concessions arrangements; Public, Private Partnerships (PPPs), etc.;
· Introduction of Social Investment Programme to take care of the poor and the venerable, build skills, and support small business enterprises with N500 billion allocation in annual budgets every year;
· Support for agriculture with over N120.6 billion disbursed to more than 800,000 farmers under the Anchor Borrower’s scheme, including the revitalization of 11 fertilizer blending plants, setting up of special Presidential Committee on key commodities such as Rice and Tomato;
· Improving domestic revenue mobilization by positive engagement with communities in the Niger Delta so as to reduce disruptions to oil production. Other initiatives directed at increasing revenue mobilisation include the Voluntary Assets and Income Declaration Scheme (VAIDS), Executive Order on remittances of GOEs Operating Surplus, etc.;
· Initiatives to enhance public efficiency include the establishment of an Efficiency Unit within the Ministry of Finance to cut costs and block leakages. Other initiatives include the implementation of the Treasury Single Account, Whistle Blowing Policy, Presidential Initiative on Continuous Audit, and implementation of Integrated Payroll Personnel System (IPPIS) across MDAs to enhance efficiency and eliminate unjustified payroll entries;
· Adoption of 22-point Fiscal Sustainability Plan with the States to encourage discipline in the management of State finances;
· Increased budgetary allocations to capital expenditure – from 16.1% in 2015 to 30.2% in 2016, 31.7% in 2017 and 31.5% in 2018 – with priority given to the key execution priorities of the ERGP, as well as human capital and security, which are amongst the key objectives of the ERGP; and,
· Improved capital expenditure releases, in spite of revenue constraints – N1.2 trillion from 2016 Budget, N1.58 trillion in 2017 Budget and N1.23 trillion from the 2018 Budget as at 10th January, 2019.
He was delighted that the implementation of the ERGP is yielding positive results. “We have improved oil production to take advantage of the slight recovery in oil prices. The economy is now on a positive growth path after exiting recession in Q2 2017, and other macroeconomic indicators have also witnessed significant improvements.”
The improvements he listed include:
· Real GDP growth has improved from -2.34% in Q3 2016 to 1.17% in Q3 2017 and to 1.81% in Q3 2018. The recent report by the National Bureau of Statistics (NBS) on GDP shows that Real GDP grew further by 2.38% in Q4 2018 – stronger than 2.35% growth inherited by the administration in Q2 2015. For the full year 2018, real GDP stood at 1.93% higher than 0.82% in 2017.
· The performance of Real GDP has continued to be driven by the non-oil sector which grew by 2.70% in Q4 2018 up from 2.32% in Q3 2018, 2.05% in Q2 2018 and 0.76 in Q1 2018. This also compares favourably with -0.33% in Q4 2016 and 1.45% in the corresponding quarter in 2017. The growth of the non-oil sector in Q4 2018 represents the strongest growth in the sector since Q4 2015.
· Key sectors like Manufacturing, Agriculture, Quarrying and other minerals and Services are witnessing steady growth. While the Manufacturing sector grew by 2.35% in Q4 2018 compared to 1.92% in Q3 2018, Agricultural sector rose from 1.91% in Q3 2018 to 2.46% in Q4 2018. Services recorded its best performance in 11 quarters, growing by 2.90% in Q4 2018 compared to 2.64% in the previous quarter. In addition, Quarrying and other minerals grew by 20.95% in Q4 2018 as against 17.03% in Q3 2018.
· Inflation Rate has been trending downwards from 18.55% as at December 2016 to 15.37% in December 2017 and further to 11.44% in December 2018. This is below the ERGP target of 12.42% for 2018.
· Stability has been restored in the Exchange Rate Market bringing near convergence between the interbank rate (NIFEX) and the autonomous rate (NAFEX) over the past 12 months.
· There is sustained accretion to External Reserves from $23.81 billion in September, 2016 to $43.042 billion as at 4th February, 2019.
· Capital inflows have improved by 56.7% from $1.82 billion in Q3 2016 to $2.86 billion in Q3 2018.
· The economy has witnessed sustained positive trade balance since Q4 2016, as the value of Nigeria’s export continue to exceed imports. As at Q3 2018, Nigeria’s trade balance stood at N681.27 million as against a deficit of N135.96 million in the corresponding quarter of 2016.
· Manufacturing Purchasing Managers’ Index (PMI) in the month of January 2019 stood at 58.5 index points indicating expansion in the manufacturing sector for the 22nd consecutive month.
· Nigeria’s rank in the World Bank’s Ease of Doing Business Index improved from 170th in 2015 to 146th in 2018. This shows a movement by 24 places reflecting the impact of the reforms in the business environment.
Also, the Minister said Government is making significant progress on the implementation of the various components of the National Social Intervention Programme (N-SIP), stating that as at December 2018 the following had been achieved:
· 1,646,395 loans have been successfully disbursed under the Government Enterprise & Empowerment Programme (GEEP), with 1,302,793 of the loans given under the TraderMoni scheme;
· Over 9.3 million school children are currently being fed each day in 49,837 schools across 24 states under the Home-Grown School Feeding Programme. This programme has also provided direct jobs to 96,972 catering staff engaged under the scheme;
· 297,973 poor Nigerians in 217 Local Government Areas (LGAs) across 20 States, have benefited from the N5,000 Conditional Cash Transfer Scheme and 2,530 community facilitators have been trained;
· 500,000 graduates are benefiting from the N-Power programme while 20,000 non-graduates in the N-Build category are either currently in training or serving as interns
He also pointed out that one of the key initiatives to facilitate the implementation of the ERGP, particularly to unlock private investments and create jobs, was the conduct of Focus Labs in key selected areas of the economy, which has led to a number of quick wins for the country including the establishment of Nigeria’s first Gold Refinery in Ogun State.
Government, he stressed, is committed to an increase in the Minimum Wage as part of efforts toward improving the standard of living of Nigerian workers, noting that some provision has been made for this in the 2019 Budget while a high-powered Technical Committee has been set up to advise on ways to ensure that the attendant wage adjustments can be funded without increasing the level of borrowing, as well as on how to implement these consequential adjustments in such a manner as to minimize their inflationary impact.
The Minister also noted that even with the improved budgetary allocations to infrastructure, government spending is not sufficient to address the large infrastructure deficit which is why government is encouraging Public Private Partnerships pointing particularly to the Tax incentives on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme which seeks to leverage private sector capital for the development and refurbishment of road networks in industrial clusters and key economic areas in the country.
This, he said, entitles private investors to full recovery of the cost incurred on road projects in the form of a Road Infrastructure Tax Credit which can be utilized against participants’ future Company Income Tax (CIT) payable to the Federal Government.