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Nigeria’s Investment Climate and Economic Outlook DR. OKECHUKWU ENELAMAH HONOURABLE MINISTER OF INDUSTRY, TRADE AND INVESTMENT FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT Objectives Nigeria’s Economy – An Overview Economic Climate Reform o Improving the Ease of Doing Business Nigeria’s Economic Outlook for 2016 Conclusion FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 2 Economy Overview Nigeria is the largest economy in Africa, and the 26th largest in the world Demographic Potential: Most populous country in Africa; youthful population – median age of 19 Nigeria is Africa’s largest oil producer; government depends on oil and gas sales for more than seventy percent of revenues, and ninety percent of foreign exchange Global slump in oil prices has had an adverse impact on fiscal position, and on the currency Growth averaged 6 percent between 2005 and 2014; slowed to under 3 percent in 2015 FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 3 Nigeria is facing challenging times, arising from a combination of domestic and foreign circumstances Uncertainty about Policy thrust of new government o Implications of Falling Crude Oil Prices on Government Revenues o Prices down about 70% since mid-2014 o Possible adverse effect of Iranian oil Implications of lower growth in China on Emerging Economies o Change of government and uncertainty about economic thrust Implications for commodity prices and impact on the global markets Strengthening Dollar o Several emerging market currencies have depreciated against the dollar o Implication of the winding-down of quantitative-easing FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 4 … however, the fundamentals of the Nigerian economy remains strong in the mid-term Implication Size Large domestic market Large unskilled and semi-skilled labor 170mm+ people Nigeria has largest population in force that can be employed at low wages Potential for innovation and home-grown technology Africa and 7th largest in the world Productivity and demographic potential Diversification already underway Current low productivity across key Potential to significantly improve labor Abundant natural resources Nigeria has the 10th largest proven Source of additional government 17 years of democracy Elections becoming more credible Successful transfer of power to Stability of political institutions More ownership of the democratic Strengthening democratic institutions economy sectors productivity with improved infrastructure Potential to increase contribution of the working age to the GDP of the country oil reserves (37mn barrels) and 9th largest natural gas reserves (~5Tr m3) commercially viable minerals and arable land revenues and employment process by citizens opposition party FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 5 Nigeria has a burning platform to rapidly accelerate investments into the non-oil sector “Our leaders have over relied on oil money to the detriment of other sectors…Now that the price of oil has crashed, we are now facing serious economic challenges…we will engage in commercial agriculture and mining as well as resuscitate the abandoned agroallied industries…” – Buhari, 2015 speech “...The Nigerian economy needs to move away from dependency on oil…We are carefully assessing our exchange rate regime keeping in mind our willingness to attract foreign investors” – 2016 Budget Speech “Not only do oil and gas account for more than 90 per cent of Nigeria’s export revenues, which have roughly halved in the past six to eight months, the government relies on them for 70 per cent of fiscal revenues. So the 45 per cent fall in Brent crude since last June has wreaked havoc on its financial health.” “International business shying from investing in Africa…”Investor confidence about the outlook has remained weak, and financing is likely to become more difficult and more costly for everyone” – IMF, January 2016 – Financial Times, July 2015 “The oil industry, with its history of booms and busts, is in its deepest downturn since the 1990s” – New York Times, January 2016 “I see an immediate priority—a fundamental change …The new reality of low oil prices and low oil revenues means that the fiscal challenge facing government is no longer about how to divide the proceeds of Nigeria’s oil wealth, but what needs to be done so that Nigeria can deliver to its people the public services they deserve—be it in education, health or infrastructure.” – Christine Largarde – Managing Director, IMF FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 6 Building the platform for sustained economic growth The new government came into office promising to focus on three key areas: o Security, o Anti-Corruption (Governance), and o The Economy. Has demonstrated the political will o Fully implementing the Treasury Single Account (TSA) o Commenced the plugging of revenue leakages, pursue looted public funds recovery Has unveiled a budget that seeks to invest substantially more in infrastructure than in previous years FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 7 Federal Ministry of Industry, Trade and Investment’s Vision Our vision is built on FOUR Pillars: o CREATE an Enabling Environment for Industry, Trade and Investment in Nigeria o IMPLEMENT the Nigeria Industrial Revolution Plan (NIRP) o CHAMPION the cause of Nigeria’s MSMEs, as a means of creating jobs and achieving inclusive growth o ATTRACT proactively long-term local and foreign investment FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 8 As Nigeria aspires to become Africa’s leading economy, we have to become more business friendly ASPIRATIONAL EASE OF DOING BUSINESS RANKING TODAY EASE OF DOING BUSINESS RANKING IN 5 YEARS EASE OF DOING BUSINESS RANKING IN 10 YEARS Top 50 Top 100 #169 Nigeria has a vision to improve the poor Nigerian business environment and Ease of Doing Business ranking across key regulations, processes, support systems, execution capabilities and training amongst other metrics FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 9 We are developing a comprehensive approach for improving the Ease of Doing Business • Analyse the root causes for the poor Nigerian business environment • Establish near to medium term targets (6 to 18 months) to improve the business environment, including approach, responsibilities and key performance indicators • Assess EoDB ranking across key regulation, processes, support systems, execution capabilities, training Enabling Environment Secretariat • Monitor the implementation against the targets and indicators • Define appropriate support measures to ensure compliance with the targets FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT • Communicate regularly with the investment community and other stakeholders (development partners, social agencies, etc.) • Share progress of objectives and key intervention initiatives 10 Economic Outlook - 2016 Oil prices have risen marginally, now around $40 per barrel, buying some respite from a challenging fiscal situation – but diversification agenda will continue to be implemented 2016 Appropriation Bill has just been passed into law by Parliament; awaiting Presidential signing 30 percent of the budget sum has been earmarked for infrastructure projects; in naira terms; more than three times the total infrastructure spending in 2015 Budget also contains 2.5 billion dollars ‘Social Investment’ spending – CCT, Micro-credit and Job Schemes Finance Ministry plans to inject 350 billion naira into the economy over the next quarter, specifically on infrastructure projects Presidential-level ‘Ease of Doing Business’ Initiative to be launched soon Government and Private Sector partnering on multi-billion dollar Infrastructure Development Fund FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 11 Conclusion Nigeria is facing a challenging economic situation, largely on account of the drop in oil prices and non-diversification of government revenues The new government is committed to taking advantage of the opportunities presented by the fiscal crisis – to restructure the economy and diversify government revenues The work of economic reform will continue to be underpinned by a focus on security and transparency Nigeria is open and ready for business and investment FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT 12 Thank you FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT