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Economy

The Urgency of Nigeria’s Economic Diversification

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Nigeria NSE

In 2012, Nigeria became the second African country to be listed on JP Morgan’s emerging market bond index, and quickly became the biggest economy in Africa after surpassing South Africa with a GDP of $509.9 billion in 2013. Establishing itself as the second fastest growing key emerging economy after China in 2014 , with crude oil at all time high of $107.64 a barrel, words get out, economists and investors across the world renewed their interests in the Nigerian economy, a nation of over 170 million people and growth rate of 7.4 percent.

However, all these were short lived as global oil prices plunges, with Nigeria generating 53 percent of her revenue from crude oil and 93 percent of her foreign revenue. The economy dip, Naira, Nigerian currency had to be devalued three times as Nigerian foreign reserve can no longer sustain fix rate of 155 naira to a US dollar, exhibiting characteristics of first phase of economic recession, it became conspicuous that the nation that was once global destination for investments needs a more sustainable economic policy with a long-term strategy.

Diversification

The ongoing discussion between the US and Iran has further proven that Nigeria can no longer exist as a mono-crude oil economy but as a multi-diversified economy. The research conducted by Bloomberg shows that global oil supply would increase in 2016, when Iran’s oil is expected to hits global market and forces oil prices below current level, in fact, analysts forecasted $20 a barrel for crude oil in 2016. If the Nigerian economy is struggling this much at $45 a barrel the state of the economy is better imagine when crude oil price hit $20 a barrel.

The data released by National Bureau of Statistics (NBS) shows that Agricultural sector employed 70 percent of the Nigerian labour market, which comprises mainly the youth. The service industry is currently the fastest growing sector with manufacturing as the frontier, if Nigeria as a nation would overcome her current economic rout there is need for urgent economic diversification across all sectors.

The research conducted by Maria Uzonwanne of the Department of Economics, Nnamdi Azikiwe University shows that “there exists a positive relationship between economic growth in Nigeria and diversification of other sectors because, when there were proper management of human resources, huge investment and concentration on agriculture, Nigerian economy was recorded to be healthy and vibrant”, which means effective diversification strategy with proper management of manpower and government investment will not merely resuscitate Nigerian economy but also enables Nigeria to feed her growing population and subsequently eradicate poverty and create jobs.

Nigeria’s unemployed graduates is expected to increase by 24.33 percent in 2020, which means there would be more unemployed graduates by 2020 if nothing is done now, British Council.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Nigeria’s Spending Structure Unsustainable, Budget Head Says

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interbank

Nigeria’s current trend of spending more money on running the government than on building new infrastructure is unsustainable, the country’s top budget oversight official said.

Low revenue collection and high recurrent costs have resulted in actual capital expenditure below two trillion naira ($4.88 billion) a year for a decade, Ben Akabueze, director-general of the Budget Office, said Tuesday in a virtual presentation.

“Hence, the investments required to bridge the infrastructure gap are way beyond the means available to the government,” Akabueze said. Recurrent spending, allocated towards salaries and running costs, has accounted for more than 75% of the public budget every year since 2011, he said.

Africa’s largest economy requires at least $3 trillion of spending over the next 30 years to close its infrastructure gap, Moody’s Investors Service said in November. The country’s tax revenue as a proportion of gross domestic product is one of the lowest globally, according to the International Monetary Fund.

“Huge recurrent expenditure has constrained the provision of good roads, steady power supply, health care services, quality education and quality shelter,” Akabueze said.

Nigeria should amend its constitution to create six regions to replace the existing 36 states, which each have their own governments, Akabueze said. The country also needs to reduce the number of cabinet ministers to a maximum of 24 from more than 40 and cut federal ministries to fewer than 20 from the current 27, he said.

“No country can develop where a large part of its earnings is spent on administrative structures rather than on capital investment,” Akabueze said.

 

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Economy

Consistent Drop in Revenue Forced FG To Review Cost of Governance

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The federal government has initiated an order to cut the cost of governance in the face of dwindling revenue occasioned by the headwinds of the COVID-19 pandemic and the attendant global economic tailspin.

Minister of Finance, Budget and National Planning, Zainab Ahmed, said yesterday in Abuja that the measures were targeted at reducing recurrent expenditure, which is projected to gulp about 41.5 per cent of the total provisions of N13.588 trillion in the 2021 budget, amounting to N5.64 trillion.

She stated that President Muhammadu Buhari had directed the salaries and wages committee to review the payroll of public servants as well as consider the merger of some agencies.

Besides, the government will also remove some unnecessary items from the budget as a move to cut the cost of governance.

Ahmed spoke at a policy dialogue on ‘corruption and cost of governance in Nigeria,’ organised by the Independent Corrupt Practice and other Related Offences Commission (ICPC).

Also at the occasion, the Director-General, Budget Office, Mr. Ben Akabueze, proposed a constitutional amendment to pave the way for the restructuring of the country into six regions instead of the present 36 states structure. This, he said, would help to reduce the rising cost of governance.

Ahmed stated that the proposed cost-saving measures was aimed at streamlining government expenditure with revenue.

She said: “We still see government expenditure increase to a terrain twice higher than our revenue.”

She urged all government agencies to come together to trim the cost amid the country’s dwindling revenue.

According to her, the nation’s budgets are filled every year with projects that are recycled and that are also not necessary.

“Mr. President has directed that the salaries committee that I chair, work together with the head of service and other members of the committee to review the government pay rolls in terms of stepping down on cost,” she added.

The minister said the federal government would also review the number of government agencies in terms of their mandates, adding that the government will consider merging two agencies with the same mandate.

She said: “We need to work together; all agencies of the government to cut down our cost. We need to cut down unnecessary expenditures–expenditures that we can do without.

“Our budgets are filled year-in-year out with projects that we see over and over again and also projects that are not necessary.”

Akabueze, in a paper titled: ‘Reducing the Cost of Governance in Nigeria,’ described the country’s current system of democratic governance as very expansive and expensive.

He said the constitutional provision that mandated the president to appoint a minister from at least each of the 36 states, should be amended to reduce the number of federal cabinet members.

He cited the large federal structure to be one of the drivers of the high cost of governance and engendering public outcry that government spending is largely on recurrent activities at the expense of capital projects.

While describing the subsisting fiscal policy as unsustainable, Akabueze said the persistent call for the reduction of governance cost had continued to gain momentum in view of its impact on government fiscal situation.

He stated that the cost of governance is considerably cheaper in the United States from where Nigeria copied the presidential system of government.

According to him, the general cost of administration in the United States is less than 10 per cent of the total annual budgets while the United States, with a higher population than Nigeria, has only 15 secretaries and executive departments as against Nigeria, which has 27 ministers, 16 ministers of state and 27 ministries.

He lamented that the federal government is maintaining 943 Ministries Departments and Agencies (MDAs) with many of them having duplicated functions.

“There are 541 federal government-owned public corporations and enterprises. We need to cut these in order to install efficiency in governance. Also, we have a bloated civil service. The current civil service structure and size is clearly unsustainable for Nigeria’s economy,” he said.

He warned against the tendency where the civil service is accorded political, ethnic and religious patronage.

“A comprehensive staff auditing and job available is imperative to determine the right size of the federal civil service without having any adverse effect on the service. And to avoid duplication in the civil service, the staff rationalisation programme should be gradual,” he added.

Akabueze said the federal government’s recurrent spending accounted for more than 75 per cent of the actual MDAs expenditure between 2011 and 2020, in addition to personnel cost which accounted for government significant spending.

He accused the MDAs of incurring excessive personnel costs and wilfully indulging in wide range of underhand practices that are driving governance cost out of the ordinary.

According to him, in 2016, personnel cost was N1.87 trillion while at the moment the same cost has spiralled to over N3 trillion.

The effect of the rising cost of running government, Akabueze added, is the reason why only 30 percent of the budget is available for capital project and the cause behind many abandoned capital projects nationwide.

He said: “Personnel cost accounted for 31 per cent and 63 per cent of the total spending and retained revenue in 2020. In the USA, the general administration cost is less than 10 per cent of total budget.’’

He challenged Nigerians to task themselves on governance, saying that the success story of the Asian Tiger was a product of sound leadership and determination.

ICPC Chairman, Prof. Bolaji Owasanoye, described the cost of governance as the driver of corruption in Nigeria.

He said the government was committed to improving the country’s revenue by focusing on new and existing sources and by streamlining payroll.

He added that the federal government would also ensure removal of subsidies and reduction in the cost of contracts and procurement are for the benefits of the vulnerable.

He listed critical area of concern to include payroll padding and the phenomenon of ghost workers.

The federal government’s intended cost-cutting approach is coming amid a report by a public finance transparency advocacy firm, BudgIT that the 2021 federal budget contains over 316 duplicated capital projects worth N39.5 billion.

BudgIT, a public finance transparency advocacy firm, said in a report that the duplication of projects was just one among other loopholes for corruption in the budget.

It said: “Our investigations into the 2021 budget revealed at least 316 duplicated capital projects worth N39.5 billion, with 115 of those duplicate projects occurring in the Ministry of Health. This is very disturbing, especially considering the health infrastructure deficit and the raging COVID-19 pandemic affecting Nigeria.

“BudgIT also found zero audit records of the N10.02 trillion received by the security sector between 2015 and 2021.”

It also alleged that budgetary provisions were made for agencies for projects that are beyond their execution. It added: “Even worse, agencies now receive allocations for capital projects they cannot execute. For example, the National Agriculture Seed Council has an allocation for N400m to construct solar street lights across all six geopolitical zones, while the Federal College of Forestry in Ibadan in Oyo State got N50m for the construction of street lights in Edo State.

“These are aberrations that need to be corrected.”

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Economy

FG Partners Microsoft To Upskill 5m Nigerians With Digital Skills

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Microsoft

President Buhari’s administration is partnering with Microsoft to equip 5m Nigerians with digital skills, this is geared towards achieving a digital economy and also in line with the Economic Sustainability Plan.

According to a statement by presidential spokesman, Laolu Akande, in a dual announcement by both the Federal Government and Microsoft Corporation, 5 million Nigerians would benefit from a digital upskilling programme, and locations in each of the 6 geopolitical zones in Nigeria will also enjoy active internet connection and cloud services courtesy of this digital transformation plan.

He said the partnership with Microsoft Corporation anchored on connectivity, skilling and digital transformation followed discussions between both parties led by Vice President Yemi Osinbajo, SAN, and Microsoft President Brad Smith earlier in the year.

Speaking on FG partnership with the tech giant, Prof. Osinbajo said “our government is committed to leveraging innovation and technology to bring better outcomes across a wide area of governance concerns. Indeed, it is with this in mind that we have sought constructive partnerships that bridge the knowledge, skills and technology gap that exist in most of our communities.

“This launch is indicative of our commitment to this and will involve collaboration with various Government agencies as implementing partners, including the Ministry of Communication and Digital Economy, the Ministry of Youth and Sports Development, the Economic and Financial Crimes Commission, the Nigerian Institute of Cultural Orientation, and various other local partners. We intend that these initiatives become institutions in their own rights and make a real impact in the lives of our citizens going forward.”

On the core areas of the partnership, Prof. Osinbajo said “this partnership will focus on two pillars: Connectivity & Skilling, and Digital Transformation.

“We plan to connect under-served communities in each of the six geo-political zones with access to internet and cloud services. This project is a critical component of our objective of expanding broadband connectivity, which is by itself, a major pillar of our Economic Sustainability Plan in response to the Covid-19 pandemic.

“Working with Microsoft, we intend to upskill 5 million Nigerians through this increased internet access over the next three years in various digital skills which will increase both employability and entrepreneurship.

“The multiplier effect will bring opportunities in rural and urban areas to many young people and will help us deal with unemployment problems made worse by the pandemic.”

The VP further explained, “leveraging Microsoft’s Technology tools which can be deployed to minimise governance risks and block loopholes, working with the Economic and Financial Crimes Commission (EFCC), we will seek to use cutting edge analytical and case management tools to plug holes in our public sector system as well as confront white-collar criminality efficiently.

“This pillar will also serve a vital social function. by using Microsoft’s Artificial Intelligence technology and resources to preserve and promote our major languages so we can revitalize these important aspects of our culture.

“Our focus is of course the Nigerian people. With over 80 million regular internet users, there is no question that Nigerians have fully embraced technology, the internet and their various uses.”

On his part, the President of Microsoft Corporation, Mr Brad Smith said the “we believe in the future of Nigeria and we are excited as a company to add to our investments. It is a country we have had the opportunity to get to know better over the last few years.

“In 2018 we partnered with Tek experts to create a Customer Support Centre, a centre in Lagos that employs over 1,600 people. And then we had another opportunity to broaden our investment even more by creating our African Development Centre. A centre that, by the end of this year, will employ over 200 software developers and engineers, people who are creating technology and Microsoft products to serve not only the people of Nigeria but the people of the world.

“All of these is giving us the kind of confidence to want to invest even more. And one of the things that we have recognized as a company is the need to grow with communities and countries and not just buying for ourselves.”

On the new partnership with the Federal Government, Mr Smith said “we are embarking on a series of broad-based, really multifaceted investments to better serve Nigeria in three areas of internet connectivity, digital skilling and digital transformation. We will be providing digital skills to 5 million Nigerians over the next three years, and along the way, creating 27,000 new jobs during the same period.”

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