44 — Vanguard, WEDNESDAY, APRIL 11, 2018 ECONOMY ECONOMY IN REBOUND: Figures maintain uptrend but analysts remain cautious By Emeka Anaeto, Business Editor AHEAD this year’s edi tion of Vanguard National Economic Summit, macroeconomic highlights are still pointing towards real recovery, amidst some informed commentaries about fragility of many of indices. However, current data from national institutions such as the National Bureau of Statistics, NBS, and the Central Bank of Nigeria, CBN, appear contradictory, apparently, drawing bases for some brainstorming sessions this Friday at the summit which brings Nigeria’s leading private sector and public sector executives to a round table discussion of the issues under the theme: “Economy in Rebound: Pitfalls, Trajectories and Resettings”. The latest reports on macroeconomic indicators available to Vanguardshows that the prospect of economic growth improved following an expansion in the Purchasing Managers’ Index (PMI) in March 2018 after recording two consecutive months of slowdown. But analysts at FSDH Merchant Bank Limited said yesterday that there are still infrastructure problems and security challenges that require urgent attention in order to ensure sustainable growth in the PMI, meaning that the March performance may be a flash in the pan. Vanguard economic watch also indicated that the rising foreign capital inflows into Nigeria; favourable crude oil price; and increased oil production have led to significant accretion to the external reserves. Indeed, the CBN Governor, Godwin Emefiele, indicated two days ago that the reserves is set to hit USD50 billion soon, up from about USD23 billion recorded in the bad days of economic recession in 2016. The current external reserves position continues to provide short-term stability for the value of the Naira. The highest monthly foreign exchange inflows to Nigeria through the Investors’ and Exporters foreign exchange window was recorded in January 2018 at US$6.04billion while the inflows in March 2018 at US$5.15billion was higher than the highest amount recorded in 2017 at US$4.53billion. Inflation rate has been on the downward trend in the past 14 months. FSDH Research says it expects the inflation rate to decline further to 13.49% in March, 2018 mainly on account of base effect of previous year. The analysts at FSDH, however, noted that the declining inflation rate may lead to a further drop in the yields on fixed income securities, particularly at the short-end of the yield curve. This would put pressures on the earnings of finan- cial institutions. Though there is current concern over mounting public debt, analysts at FSDH Research notes that the current strategies of the Debt Management Office (DMO) to reduce the interest expense on the debt of the Federal Government of Nigeria (FGN) is working. However, The Federal Government has announced that it may raise less debt in the second quarter of 2018 than initially indicated. This development, according to analysts, may reduce further the yields on the FGN securities, bringing additional pressures on the banks’ earning lines. Although FSDH Research believes the yields on the Nigerian Treasury Bills, NTBs, may drop further, they are of the view that the yields on the FGN Bond may move up gradually from the current level, cussioning the overall effect of declining yield of fixed income securities on banks. Besides the above flashpoints on the economy, many analysts that spoke to Vanguard Economic Discourse team indicated that some of the uncertainties in the economy are: delay in the passage of the 2018 Budget; Possibility of capital flight as a result of monetary policy normalisation in the advanced countries and the possible increase in food prices as a result of the rising unrest in the food producing states in Nigeria. Yet not a few expressed discomfort that the economic and fiscal issues would soon take back seat as the electoral season draws near. But on the fears over normalization in the international economic front it is noted that the Federal Open Market Committee (FOMC) of the U.S Federal Reserve System raised its anchor interest rate, the Federal Funds Rate (Fed Rate), to between 1.50% - 1.75% from 1.25% - 1.50%. FSDH Research expects that the FOMC will increase the Fed Rate to between 2.25% - 2.50% by year end. Consequently, FSDH Research notes that subsequent external borrowing may attract higher interest rates as yields in the global market move up. The GDP rebound In the broader perspective, we rely on the last Gross Domestic Product (GDP) figures released by the National Bureau of Statistics’ (NBS) which showed that the fourth quarter of 2017 (Q4’17) was yet another good quarter for the Nigerian economy. The results revealed that the economy expanded further in the quarter by 1.92% year-onyear, YoY, (vs. 1.40% YoY in Q3’17) while full year real GDP was recorded at 0.83%, a recovery from the contraction of 1.58% in 2016. The oil sector continued its positive trend, while the nonoil sector rebounded markedly in contrast to previous quarters where it had either been significantly subdued or in decline. In Q4’17, the non-oil sector was a major driver of growth recording 1.45% YoY (vs. - 0.76% in Q3’17, -0.33% in Q4’16). To this analysts at Cardinalstone Finance Limited, a Lagos based investment house, stated: “In our opinion, this signals that the country may have started reaping diversification benefits.” Non-oil sector, hope for a New Dawn? At 1.45% YoY, the non-oil sector expanded at a much faster pace in Q4’17 than seen in the past seven (7) quarters. Growth in the non-oil sector was largely propelled by the Agriculture sector, which grew by 4.23% YoY, the highest growth rate in the past four (4) quarters. The agriculture sector benefited principally from contributions from the crop production sub-sector (makes up 90.1% and 23.6% of the agriculture sector GDP and Total GDP respectively) which advanced by 4.58% YoY. This is significant as it highlights mild success in the government’s efforts to improve agricultural output through the implementation of several initiatives most notable of which is the Anchor Borrowers’ Scheme. The improved efforts by most firms to increase local sourcing of agricultural inputs for production processes also contributed to the growth of the sector. On an annual basis, however, the growth in agriculture was lower compared to that of 2016 (2017- 3.45%; 2016- 4.11%). Services sector emerges from recession Q4’17 Non-Oil real GDP growth was also supported by a rebound in the Services sector. Growth in the sector slid into positive (0.10%) after six (6) consecutive quarters of decline, largely propelled by trade. Contributing over 16.75% to total GDP in real terms, the trade sub-sector recorded growth (+2.07%) for the first time in seven (7) quarters. This is a contrast to the Information and Communication sector (-1.46%), which extended its YoY decline for a third consecutive quarter. On a quarterly basis however, the sub-sector improved markedly as it grew by 22.5% QoQ evidenced in the improvement in the number of active mobile lines which grew by 3.7% QoQ to 144.6 million in Q4’17, according to data from the Nigerian Communications Commission (NCC). This figure is, however, 6.2% lower than that of the corresponding quarter in 2016 (154.1 million active subscribers). Oil GDP growth in Q4’17 Real GDP growth for the oil sector was slower at 8.38% YoY in Q4’17 compared to the double-digit growth rate for Q3’17 (25.89% YoY). According to the NBS data, Q4 average oil production per day slipped by 5.9% quarter-on-quarter, QoQ, to 1.9 million barrels (Q3’17- 2.03 mbpd), although this was 8.5% higher than the average daily production figure for the corresponding quarter in 2016 (Q4’16- 1.76 mbpd). Overall, the annual growth rate for the oil sector improved significantly to 4.79% in 2017, compared to the 14.45% shrinkage recorded in 2016.
VANGUARD, WEDNESDAY, APRIL 11, 2018 — 45 NIGERIA NOTES (New Series) Lagos-Kano Economic and Investment Summit: Five takeaways By Ladipo Adamolekun I was one of the resource persons at the Lagos-Kano Summit held in Epe, Lagos State on February 28th and March 1st. I would like to share with readers my five takeaways from the Summit: (1) Leadership by example, (2) Challenge of weak institutions, (3) Challenge of security, (4) Internally generated revenue and the taxpayer, and (5) Possibilities of state partnerships. 1. Leadership by example The leadership by example demonstrated by Governors Ambode and Ganduje at the Summit deserves to be acknowledged and commended. They attended all the plenary sessions and each attended one of the several simultaneous parallel breakout sessions during the two-day Summit. Unsurprisingly, their deputies followed in their footsteps. If both leaders maintain this leadership style during the implementation of the Memorandum of Understanding (MOU) they signed at the end of the Summit, there would be concrete beneficial results for both states, including opportunities for eventual reappraisals during a follow-up Summit. Of course, the assumption is that the two Governors would win a second term in their respective states. 2. Challenge of weak institutions During the opening plenary session on governance, an emphasis on the centrality of strong institutions in assuring good governance was accompanied by an acknowledgment of the country’s weak governance institutions: weak public services, weak and corrupt judiciary, weak and corrupt legislatures, and weak political parties. Expectedly, a question was posed on how best to tackle the challenge of weak institutions in the country with particular reference to civil service institutions. In addition to Botswana and Singapore that were cited as examples of countries with strong, efficient and incorruptible civil service institutions, participants were told that there are also good lessons to learn from the strong, efficient and incorruptible regional civil services in Eastern, Northern and Western Nigeria during the premilitary era. 3. Challenge of security The sharp focus of the plenary session on security was on the specific problem of assuring security in mega cities (Lagos and Kano). During the discussions on the various dimensions of the problem, two good practices in Lagos were highlighted: (i) the rebranding of the Rapid Response Squad (RRS) of the Nigeria Police Force and (ii) the Security Trust Fund (STF). Regarding the RRS, Governor Strikingly, the ongoing controversy over the recent increase in land use charge (LCU) in Lagos State is a r i n g i n g affirmation of the need for governments to always pay attention to the taxpayers’ perspective in the drive for increased IGR Ambode has rebranded it through provision of adequate equipment (vehicles, gadgets and helicopters) and a resource person who doubles as an insider cited concrete examples of its interventions that were both rapid and effective. The STF is a public-private partnership. Although Lagos State Government contributes about 70 percent of the Fund (and the balance is provided by the private sector) the Board is chaired by a private sector chieftain. In addition to funding the RRS, the government draws on the STF to provide equipment, logistical support and other incentives for the Nigeria Police Force contingents deployed to the State. It is partly because of the conducive business environment that these security measures have made possible that the government feels confident to consolidate the status of Lagos State economy as the fifth largest in Africa. 4. Internally generated revenue and the taxpayer Best practices in enhancing internally generated revenue (IGR) were discussed extensively with illustrations from Lagos State’s success story: it generates the highest IGR in the country annually and is the least dependent on the Federation Account among the thirty-six states. The recent improvements in Kano State that is one of the top ten states in respect of IGR were also highlighted. But my takeaway from the session was the focus on an important balance to the emphasis on achieving continuous increase in IGR through a discussion of the taxpayer’s perspective: the need for governments to always pay attention to providing concrete answers to citizens’ question about why they pay taxes. In the late 2000s, the National Union of Petroleum and Natural Gas Workers (NUPENG) posed the question succinctly as follows: “We do not see the justification for the quantum of taxes that we paid because it does not reflect on our living conditions or the development of the state. We are still providing for ourselves those amenities that the government ought to provide for the citizenry such as light, roads, hospitals, schools, and so on. So, why then are we paying taxes?” (Vanguard, March 17th 2008). In other words, it is by using the proceeds of IGR to deliver quality services to citizens that governments can justify their demands for taxes. Strikingly, the ongoing controversy over the recent increase in land use charge (LCU) in Lagos State is a ringing affirmation of the need for governments to always pay attention to the taxpayers’ perspective in the drive for increased IGR. 5. Possibilities of state partnerships Based on my membership of the Steering Committee of State Peer Review Mechanism of the Nigeria Governors’ Forum (NGF) between 2011 and 2016, I am aware that governors across the six geo-political zones showed keen interest in peer learning and in the periodic exchange of views and experiences among them. Although the NGF still exists and is convened from time to time to address ad hoc issues, efforts focused on peer learning and partnerships among states appear to have moved to bilateral and geo-political zone levels. Governor Ambode of Lagos State affirmed his strong commitment to state partnerships in his opening speech at the Summit by reminding participants of three prior partnerships in which Lagos State is involved: South West geo-political zone, especially through membership of Odua Investment Company, and bilateral partnerships with Ogun State and Kebbi State. (Lagos-Kebbi State partnership is made famous by Lagos-Kebbi rice, christened “Lake Rice”, that is sold at affordable prices in Lagos). Strikingly, Governor Atiku Bagudu of Kebbi State attended the first day of the Summit on February 28th. Strong evidence that both Lagos and Kano States attach great importance to their partnership is provided in the wide-range of development issues covered in the MOU they signed. It is important to mention the Federal Government’s acknowledgment of the importance of the Lagos- Kano partnership through the presence of Vice President Osinbajo at the Summit’s opening ceremony. In his very good speech, he highlighted both the historical and economic significance of Lagos and Kano in the evolution of Nigeria and praised the two governments for their significant contributions to the recent improvement in Nigeria’s international ranking in the Ease of Doing Business. Last word Governors engaged in results-oriented partnerships are contributing more to promoting national unity than former military rulers and some civilian political executives and legislators who vacuously affirm that Nigerian unity is “settled” and not negotiable. Professor Ladipo Adamolekun writes from Iju, Akure North, Ondo State. AGM: From left, Mr. IIiya Kasa Sakaba, (REP- PS DICON); Lt.-Col Miri Dashe (retd), Director; Mrs. Florence Sam Iroye, Company Secretary; Lt- Gen T.Y. Danjuma (retd), Chairman; Col. H. Mgbemena (retd), Acting Managing Director, and Erikitola, all of Union Dicon Salt Plc, at the 23rd Annual General Meeting of the company, in Lagos. MASTERCLASS: From left, John Boyega, British-Nigerian actor; Colette Otusheso, Managing Director, Accelerate TV, and Seyi Babatope during The Accelerate TV John Boyega Masterclass: The Journey, in Lagos. ANGELIC VOICE: From left, Mrs Iolanda Muoguilim, Young Woman Christian Association, YWCA;Mrs Chinwe Uzoigwe, Youths coordinator and Organiser, Angelic Voice competition, YWCA Church of Resolution; Lady Christy Onabu, President, YWCA Church of Resolution and winner, Miss Osarieme Aideyan, at the Angelic Voice singing competition organised by YWCA Church of Resolution, in Lagos. COMMISSIONING: Port Manager, Tin Can Island Port, Mr Emmanuel Akporherhe (3rd right); Sarah Ballah, Head of Corporate and Strategic Communication (middle) and other officials of Tin Can Island Port, during the commissioning of new operational vehicles sent in by Managing Director of Nigerian Ports Authority, NPA, Hadiza Bala Usman, and Executive Management of NPA, in Lagos.