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Economy of Lagos is Expanding, Outlook Bright

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While Nigeria’s economy is thought to have contracted in 2017, the commercial capital Lagos continued to expand. CNBC Africa’s Wole Famurewa spoke to Steve Ayorinde, Commissioner for Information and Strategy for Lagos State and discussed the spending plan and outlook for the state’s economy.

Recession is a word that we approach cautiously in Lagos because you also have to be sensitive to the general feelings in the country, but the way you look at the Lagos economy is that last year Lagos State actually generated more money than the year before it, when there was no recession.

Is that internally generated revenue by Lagos State?

Absolutely. And if you also look at the budget we’ve passed into law, N812 billion, which means that you can see that in about two years of Governor Akinwunmi Ambode’s Administration, the governor has almost doubled the budget size that he met in 2015, which means that the economy of the state is expanding. Lagos State is now an oil producing state, it has the largest petrochemical industry, the largest fertilizer west Africa, the largest refinery in Africa in a year or two will all be happening here. It means that something is happening and work has started and without a doubt, this is the fifth largest economy in Africa.

It has two of the most lucrative ports in Nigeria are in Lagos, so you can’t discount the fact that financially speaking, there’s actually no recession in Lagos state, but as I said we have to be sensitive to the general mood of the nation and what is going on.

But while we’re not trying to be insensitive to the broader country’s plight with the recession. I think it’s important to really highlight what is going on in Lagos. Like you mentioned, we’re looking at doubling the budget size in 2 years. So let’s get a sense of where that spending is going and the impact that you’re expecting.

Infrastructure. I say to people, one of the most iconic features of Lagos is the Lekki Ikoyi bridge. The one that Mark Zuckerberg jogged on. That image went viral all over the world. That bridge, as fantastic as it is, came at the 6th year of Fashola’s administration. In Governor Ambode’s first two years 2 similar bridges are on their way, not just to serve as iconic structures but to ease traffic in two of the most densely populated areas in Lagos. Those two fly over bridges will be ready before the 27th of May as part of the legacy and iconic projects that we thought are necessary to celebrate Lagos at 50. As we’re commissioning those two, work will be starting on another bridge to serve Agege. Work is progressing. In terms of infrastructure, roads are a major concern of this administration.

For a state that has about 9,000 roads, 6000 belong to local government and local council development areas means that there’s a lot crying for attention in these areas. This was why last year, we embarked on 114 roads, the first of its kind in Nigeria, we’re concentrating on inner and local government community roads. That’s 2 per local government and LCDA. This year we expanded the scope to 181 roads. This means that the least that any LCDA will get is two, but we realise that there are other areas that require more than two because of the nature of the road network. We don’t just want to fix roads, we want roads that will add to the economic activity; that will lead from one point till the other; that will connect to the express ways and the major roads. That’s why we said 181 roads. All will be delivered in addition to the other roads. You need to go to Epe and see the kind of road infrastructure that we’re putting on there. So, our area of focus is road infrastructure is without a doubt.

In addition to this we’re working in the hospitality and creative sectors. We’re building 6 theatres across Lagos in all the divisions of Lagos state, Epe, Badagry, Ikorodu. Areas that have otherwise been neglected, because we see that Lagos is not just about Lagos Island or Ikeja. Let every part of Lagos feel development under Ambode.

It sounds like a really great project that you’re putting out there, and the government is spending quite a bit, but then, we’ve heard a lot about what the government is doing, let’s move over to the private sector investment. It’s a difficult environment because of all the forex issues but tell us about that, the types of flows of private sector capital that we’re seeing into Lagos.

You know the beauty of what Lagos is enjoying is that practically everything that Lagos initiates involves a buy in from the private sector. Take for example the Security Trust Fund. You can’t have a mega city with 21 million people and counting without adequate provisions for security. the bulk of the money that goes into the Lagos state security trust fund actually comes from the private sector. It’s the same thing that we have applied with the Lagos State Employment Trust Fund. It’s a N25 billion, 4 year project but what we’re trying to say is that Lagos is partnering with the private sector to ensure that a sort of soft loan goes out to a number of young entrepreneurs to start up businesses and everything. The job of government is to provide an enabling environment for businesses to thrive, for salaries to be paid and for activities to flower. And that’s what Lagos state is trying to achieve with the way we’re softening all the laws that pertain to registration of businesses. We have the Lagos global office of home office affairs, serving as a one stop shop for people and businesses.

But are there any major projects coming from Lagos that we can anticipate this year?

A lot. Take for example the oil and gas sector. The Tunde Folawiyo oil and gas initiative. People say Lagos is an Oil and Gas state now, but it’s a private sector driven thing. Yes Lagos will gain statutory benefits as an oil and gas producing state, but who will derive the greatest benefit? It’s the Tunde Folawiyo company that will employ people and ensure that money is coming into the state and into the pockets of people that will be employed. It’s not coming to government directly but we’re ensuring that support is provided to the private sector. The whole idea is to partner with the private sector. If the economy is not, booming. If civil servants, are not getting their salaries, the rippling effect touches practically everybody.

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

NNPC To Resume Oil Exploration In Sokoto Basin

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The Nigerian National Petroleum Corporation on Thursday announced plans to resume active oil exploration in Sokoto Basin.

A statement issued in Abuja on Thursday by NNPC spokesperson, Kennie Obateru, said the corporation’s Group Managing Director, Mele Kyari, said exploration for crude would resume in the Sokoto Basin.

The statement read in part, “Kyari also hinted of plans for the corporation to resume active exploration activities in the Sokoto Basin.”

The NNPC boss disclosed this while receiving the Governor of Kebbi State, Atiku Bagudu, who paid Kyari a courtesy visit in his office on Thursday.

In October 2019, the President, Major General Muhammadu Buhari (retd.), had during the spud-in ceremony of Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North-East, said the government would explore for oil and gas in the frontier basins across the country.

He outlined the basins to include the Benue Trough, Chad Basin, Sokoto and Bida Basins.

Buhari had also stated that attention would be given to the Dahomey and Anambra Basins which had already witnessed oil and gas discoveries.

Kyari restated NNPC’s commitment to the partnership with Kebbi State for the production of biofuels, describing the project as viable and in tandem with the global transition to renewable energy.

He said the rice production programme in the state was a definite boost to the biofuels project.

Kyari said the linkage of the agricultural sector with the energy sector would facilitate economic growth and bring prosperity to the citizens.

He was quoted as saying, “We will go ahead and renew the Memorandum of Understanding and bring in any necessary amendment that is required to make this business run faster.”

The Kebbi State governor expressed appreciation to the NNPC for its cooperation on the biofuel project.

Bagudu said the cassava programme was well on course but the same could not be said of the sugarcane programme as the targeted milestone was yet to be attained.

Kebbi state is one of the states that the NNPC is in partnership with for the development of renewable energy.

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Nigeria To Benefit As G-20 Approves Extension Of Debt Relief Till December

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Finance ministers of G-20 countries have approved an extension of debt relief for the world’s poorest nations till December 2021.

David Malpass, World Bank president, made the announcement at the virtual spring meeting, on Wednesday.

TheCable had earlier reported that the G-20 countries will meet this week to consider an extension of the debt freeze.

The G-20, is a group of finance ministers and central bank governors from 19 of the world’s largest economies, including those of many developing nations, along with the European Union.

G-20 countries had established a debt service suspension initiative (DSSI) which took effect in May 2020.

Nigeria had benefited from the initiative which delivered about $5 billion in relief to more than 40 eligible countries.

The suspension period which was originally set to end on December 31, 2020 was extended to June 2021.

Malpass said the extension to December 2021 will boost economic recovery and promote job creation in low income countries.

He urged countries to be transparent in their approach to the debt service payment extension.

“On debt, we welcome a decision by the G20 to extend the DSSI through 2021. The World Bank is also working closely with the IMF to support the implementation of the G20 Common Framework,” he said.

“In both these debt efforts, greater transparency is an important element: I urge all G20 countries to disclose the terms of their financing contracts, including rescheduling, and to support the World Bank’s efforts to reconcile borrower’s debt data more fully with that of creditors.

“Participation by commercial creditors and fuller participation by official bilateral creditors will be vital. I urge all G20 countries to instruct and create incentives for all their public bilateral creditors to participate in debt relief efforts, including national policy banks. I also urge G20 countries to act decisively to incentivize the private creditors under their jurisdiction to participate fully in sovereign debt relief efforts for low-income countries.

“Debt relief efforts are providing some welcome fiscal space, but IDA countries need major new resources too, including grants and highly concessional resources. From April to December 2020, the first DSSI period, our net transfers to IDA and LDC countries were close to $17 billion, of which $5.8 billion were on grant terms.

“Our new commitments were almost $30 billion, making IDA19 the single largest source of concessional resources for the poorest countries and the key multilateral platform for support. To recover from COVID, much more is needed, and we welcome the G20’s support for advancing IDA20 by one year.”

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Economy

IMF / Fiscal Monitor Report April 2021 Forecast

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Unprecedented fiscal support by governments during the pandemic has prevented more severe economic contractions and larger job losses, but risks remain of long-term scarring the International Monetary Fund says in its Fiscal Monitor report released on Wednesday (April 7) in Washington, DC.

Meanwhile, such support, along with drops in revenues, has raised government deficits and debt to unprecedented levels across all country income groups, said Vitor Gaspar, Director of the Fiscal Affairs Department at the IMF.

The first lesson one year into COVID-19 is that fiscal policy can act timely and decisively. The fiscal policy response was unprecedented in speed and size looking across countries. We also learned that countries with easier access to finance or stronger buffers were able to give more fiscal support. They’re also projected to recover faster,” said Gaspar.

Average overall deficits as a share of GDP in 2020 reached 11.7 percent for advanced economies, 9.8 percent for emerging market economies, and 5.5 percent for low-income developing countries. Countries’ ability to scale up spending has diverged.

“So, what have we learned? We’ve learned that fiscal policy is powerful and that sound public finances are crucial in order to enable that power to be used to the fullest,” stressed Gaspar.

Gaspar urged policy makers to balance the risks from large and growing public and private debt with the risks from premature withdrawal of fiscal support, which could slow the recovery.

“In the spring 2021, we emphasize differentiation across countries. Moreover, COVID-19 is fast evolving, as are the consequences from COVID-19. The fiscal policy must stay agile and flexible to respond to this fast-evolving situation.” Said Gaspar.

He also warned that the targeting of measures must be improved and tailored to countries’ administrative capacity so that fiscal support can be maintained for the duration of the crisis—considering an uncertain and uneven recovery

“Moreover, countries are very different in their structures, in their institutions, in their financial capacity and much else. Therefore, policies and policy advice have to be tailored to fit.” Said Gaspar

Gaspar concluded his remarks by emphasizing that global vaccination is urgently needed, and that global inoculation would pay for itself with stronger employment and economic activity, leading to increased tax revenues and sizable savings in fiscal support.

“A fair shot, a vaccination for everybody in the world may well be the highest return global investment ever. But the Fiscal Monitor also emphasizes the importance of giving a fair shot at life success for everyone. It documents that preexisting inequalities made COVID-19 worse and that COVID-19 in turn made inequalities worse. There is here a vicious cycle that threatens trust and social cohesion. Therefore, we recommend stronger redistributive policies and universal access to basic public services like health, education, and social security,” said Gaspar.

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