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Non-oil Sector as a Game Changer in Nigeria

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agriculture
  • Non-oil Sector as a Game Changer in Nigeria

Nigeria’s export trade in the 1960s was fuelled by the agro-industry and constituted mainly of cocoa, groundnuts, rubber, palm oil, palm kernel, beniseed and copra. Nigeria also exported tin ore and columbite. Then agricultural exports were practically the country’s main sources of foreign exchange with the nation being a major exporter of the aforementioned produce. The agricultural sector was the bedrock of the nation’s economic growth and development at that time. There was also heavy dependence on revenue from taxes on those exports by government.

However, the 70s saw a persistent growth in oil export with a consequent decline in non-oil exports. This came to a height when a boom in the global price of oil brought tremendous fortunes for the nation. By 1986, the nation’s non-oil exports share had dropped below five per cent from about 65 per cent in the 60s, following the sector’s long period of neglect, even as revenues from oil plunged as a result of drop in global prices of the commodity. Then it became very clear to any discerning mind that Nigeria’s over-reliance on oil export as a major revenue earner was no longer sustainable.

Efforts geared towards diversifying the economy, reviving the agricultural sector and exploring the non-oil sector of the economy have been on for decades, since the fortunes of oil in the global market took a turn for the worse in the 80s. There have been schemes and programmes such as ‘Green Revolution’, ‘Operation Feed the Nation,’ and entrepreneurial drive through the creation of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) as well as a number of development plans by successive administrations. Unfortunately, these lofty programmes failed to achieve the aim for which they were established and the programmes could not reverse the economic fortunes of the country.

The present economic realities, such as the tailspin in the global price of oil, scarce forex reserves and acute inflation have, more than ever before, made the Nigerian government and its citizens realise the need to stimulate the non-oil sector of the economy. Interestingly, this effort is not limited to only the agricultural exports but also other non-traditional exports.

Experts are of the opinion that government has a critical role to play in providing the enabling environment for all the stakeholders in the non-oil sector and for every Nigerian to galvanise their productive energies to address the current economic challenges. To this effect, the Federal Government recently made a number of reviews in its policies and legal frameworks of some economic activities in the non-oil sector as well as providing incentives for stakeholders. The Finance Minister, Mrs. Kemi Adeosun, September last year announced the planned re-introduction of the Export Expansion Grant (EEG) so as to stimulate exports and ultimately boost foreign exchange earnings. The scheme, which was introduced by the Federal Government in 1999 to encourage non-oil exports and cushion the effect of cost disadvantages faced by Nigerian exporters, was rested in 2014 following reports of its abuse. Another commendable incentive is the 10-year tenor export stimulation facility provided by the Central Bank of Nigeria (CBN) at nine per cent interest rate. It is designed to fast-track access to N500 billion Export Stimulation Facility (ESF) for companies in the export segment of the nation’s economy under the new guidelines released by the CBN. It is expected to increase funding support and stimulate investment in the non-oil sector.

Also, the Finance Ministry only a few months ago took measures to encourage import substitution by hiking import duties on products, particularly consumables, which the nation has the capacity for manufacturing locally, from 20% to 60%.

Some of the products listed are consumables like rice, sugar cane and salt; alcoholic spirit, beverages and tobacco. This policy can potentially boost local patronage and enhance value addition to the nation’s agricultural and mineral sectors, which provide the raw materials base for industries. Data released recently by the Manufacturers Association of Nigeria (MAN), indicated that the food, beverage and tobacco sub-sector sourced 67.5 per cent of its raw materials locally in the first six months of 2016 as against 64.73 per cent in the corresponding period of 2015. Therefore, if MAN can recommend the backward integration model of the British American Tobacco Nigeria (BATN) and few other multinationals incorporated in Nigeria for its members perhaps the percentage of locally sourced raw materials would rise above that.

Another economic activity which has huge potential for export and foreign exchange earnings is mining. In August 2016, the Federal Executive Council approved a roadmap for the mining sector which is aimed at boosting the contribution of mining to Nigeria’s GDP. At an Economic Summit last year, Minister of Solid Minerals, Dr. Kayode Fayemi, and the CBN Governor, Godwin Emefiele, observed that the potential in the solid minerals sector offers great prospect for diversification of the economy and foreign exchange earnings. Dr Fayemi assured that there was no legislation in Nigeria prohibiting state governments from engaging in mining activities, notwithstanding that it is in the exclusive list. He urged state governments to establish Special Purpose Vehicle (SPV) to apply for mining licences.

Interestingly, recent reports indicate that the reform in the mining sector has already elicited keen interest from multinationals in the industry.

There are at least 44 known minerals, mainly gold, iron ore, bitumen and others, which have been identified for commercial production. In 2015, a report by the Nigerian Extractive Industries and Transparency Initiative (NEITI) stated that there are about 40 kinds of solid minerals of various categories waiting to be exploited.

Nigeria’s homegrown film sector, Nollywood, stands as a shining example of an industry that was grown and nurtured from the scratch by individual creativity and hard work. In 2014, it was identified as one of the key industries which boosted the country’s GDP to $510 billion, accounting for about 1.4 percent of the revised GDP figures and making it Africa’s largest economy after it was rebased.

As policymakers continue to think outside the box on how to review and strengthen existing business policies and regulatory frameworks in order to stimulate the non-oil sector, boost the nation’s GDP and increase employment opportunities for the citizenry, it is important for government to first of all invest in critical infrastructure such as power, the hub around which every modern-day industry revolves. No doubt, it has become more evident now than ever that the non-oil sector holds great promise in helping Nigeria emerge from its current economic malaise and grow sustainably.

Ogunniyi is an agriculture expert based in Lagos.

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

Foreign Sponsors Drives Infrastructure Projects In Nigeria – World Bank

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World Bank

Projects with foreign sponsors have played an important role in developing sizable infrastructure projects in Nigeria, the World Bank said on Thursday.

The World Bank said this in its report titled ‘Private participation in infrastructure 2020 annual report’.

It said sizable 2020 PPI investment commitments in Nigeria were mainly due to a big-ticket natural gas pipeline project.

The report said, “Nigeria has managed to report PPI investment commitments for five consecutive years since 2015. Sizable 2020 PPI investment commitments in Nigeria were mainly due to a big-ticket natural gas pipeline project.

“The $2.6bn pipelines will transport up to 3,500 million cubic feet of gas a day from various gas gathering projects in southern Nigeria.

“Projects with foreign sponsors, especially from China, have played an important role in developing sizable infrastructure projects in Nigeria.”

According to the report, there are four natural gas projects in some countries with $6.9bn in investment commitments in 2020.

It stated that one of them was the Ajaokuta–Kaduna–Kano pipeline, which was being developed by the Nigerian National Petroleum Corporation to transport natural gas from southern Nigeria to central Nigeria.

“The $2.8bn pipeline project represents phase one of the 1,300-kilometer Trans-Nigerian Gas Pipeline project, which is being developed as part of Nigeria’s Gas Master Plan to utilise the country’s surplus gas resources for power generation as well as for consumption by domestic customers,” it stated.

It said Mexico’s $4bn natural gas pipeline, storage, and corridor project was another one.

The report said it would be the largest natural gas storage facility in North America.

“The pipelines will provide a faster, more economical means of delivering natural gas to locations around the world,” it stated.

According to the report, investment commitments in 2020 stood at $45.7bn across 252 projects, marking a 52 percent decline from 2019 levels.

Private investment commitments had not fallen to these levels since 2004 when investment totaled $31.3bn, it stated.

Nevertheless, it added that despite the ongoing COVID-19 pandemic, investments in the second half of the year increased by 15 percent from the first half of the year.

It stated that private investment commitments in 2020 fell in all regions except for Sub-Saharan Africa and the Middle East and North Africa.

According to the report, the impact of COVID-19 was most severe in East Asia and the Pacific, followed by Latin America and the Caribbean, Europe and Central Asia, and South Asia.

It stated, “Investment commitments in International Development Association countries in 2020 totaled $6.2bn across 30 projects in 16 countries.

“This compared to $8.4bn across 27 projects in 18 countries in 2019. It is notable that there were more projects in IDA countries despite the pandemic.”

Also, it added, 2020 investment commitments in IDA countries were 21 percent higher than the 2015-2019 average of $5.2bn.

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Economy

16,000 Jobs Will Be Created After National Theatre’s Renovation – Sunday Ododo

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The National Arts Theatre- investorsking

The National Theatre will have the capacity to employ about 16,000 Nigerians at the completion of its ongoing renovation. This was revealed by Prof. Sunday Ododo, the General Manager of National Theatre.

He said the 44-year-old complex will provide over 16,000 jobs during and after its ongoing renovation, according to a report by NAN. Mr.Ododo said on Thursday that most of the jobs would come from the fields of music, movies, fashion, and information technology.

“Some of the jobs will be direct. Others will be indirect. The National Theatre will definitely be a hub for lots of activities,” he said.

Recall that the Central Bank of Nigeria (CBN) and the Federal Government recently signed a Memorandum Of Understanding (MOU) for the renovation of the complex. Under the MOU, the CBN, through the Bankers Committee, will invest N21.894 billion to renovate the National Theatre, refurbish it and run it profitably.

CBN Governor Godwin Emefiele, at the signing of the MOU, said that revamping the complex would unlock a mass of creative talents of thousands of Nigerian youths in various fields. Information minister Lai Mohammed, who signed on behalf of the Federal Government, had also said that the Private-Public-Partnership arrangement would stimulate growth in various sectors of the economy.

Mr. Ododo, while assessing the progress of the project, said that work had begun with the contractors fully mobilised to the site. He said he was particularly excited at the prospects of many youths securing jobs at all stages of the renovation.

“The jobs will come directly and indirectly through the ongoing radical restoration, revamping and renovation of the edifice. When completed, the complex, which is 44 years old, will be a huge business centre. It will be the place to be. Food sellers and other petty businesses will not be left out. Those coming for events will be served.

“Administration after administrations have ensured the edifice stands. And I must salute our predecessors; I give them kudos. If not for their dedication and efforts, National Theatre would have collapsed long ago. It is capital intensive to maintain. So you can now imagine if a huge sum of 21.8 billion naira is being invested to restore the complex.

“If, for instance, we had maintenance support of a billion naira or even half a billion annually, we will not get to this point where so much is required to fix the edifice. That is why we are glad to inform Nigerians that with the new arrangement, there’s a component that says that once the work is finished, a company will be engaged to maintain the facility every day for the next five years.

“If its work is good, it will be re-engaged; if otherwise, another company will be brought on board. So, maintenance is part of the new arrangement so that we don’t go back to Egypt,” he explained.

He regretted that hospitality outfits had taken over the business of the centre. According to him, these outfits make huge profits that could have been taken by the National Theatre.

“When the National Theatre is up and running, some of these event centres will have to be more creative to be in business. Though we don’t want to send anybody out of business, our own prime target is international businesses because we have facilities that can host international events which many of these event centres don’t have.

“Also, we will be making available a media centre that can take care of multi-language interpretation and all that. We have a 5,000-capacity main bowl. That one can take any UN event, any World Bank event, and any international event. National Theatre will be the centre to beat,” he declared.

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Economy

Once Again The National Grid Collapsed

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power project

Nigeria’s electricity transmission system, also known as the National grid, has suffered another system collapse, plunging Lagos, the country’s commercial capital, Kano and other major cities into a blackout.

The collapse, which occurred about 11.00 am on Tuesday, was confirmed by two of the country’s electricity distribution companies in separate messages to their customers.

“We regret to inform you that the power outage being experienced across our franchise – Kaduna, Sokoto, Kebbi and Zamfara states – is as a result of the collapse of the national grid,” Kaduna Electric said on Twitter.

Eko Electricity Distribution Company Plc, in a text message to its customers, said: “Dear customer, there is a partial system collapse on the national grid. Our TCN partners are working to restore supply immediately. Please bear with us.”

The grid, which is being managed by the government-owned Transmission Company of Nigeria, has continued to suffer system collapse over the years amid a lack of spinning reserve that is meant to forestall such occurrences.

Spinning reserve is the generation capacity that is online but unloaded and that can respond within 10 minutes to compensate for generation or transmission outages.

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