FG Looks to 2020, Targets 7% Growth Under Economic Recovery Plan

To raise oil output to 2.5mbpd, implement market-determined FX rate regime CBN pumps another $100m into FX market

The much-awaited Economic Recovery and Growth Plan (ERGP) of the federal government, which targets a gross domestic product (GDP) growth rate of 7 per cent by 2020, was finally released yesterday, paving the way for government to seek multilateral donor funding from the World Bank and African Development Bank (AfDB).

The four-year plan (2017-2020), which unveils a roadmap for Nigeria’s economic recovery, growth and sustainable development, was made public by the Ministry of Budget and National Planning.

Other highlights of the plan include the government’s target to increase oil production from 2.2 million barrels per day (mbpd) to 2.5mbpd by 2020.

The government, through the Central Bank of Nigeria, also aims to implement a market-determined exchange rate regime to build confidence

and encourage foreign exchange (FX) inflows.

Real GDP under the plan is also projected to grow by 4.62 per cent on average over the plan period of 2017-2020, from an estimated contraction of 1.54 per cent in 2016.

However, real GDP growth is projected to improve significantly to 2.19 per cent in 2017, reaching 7 per cent at the end of the plan period.

Announcing this yesterday, the ministry said the ERGP is now uploaded on both its website (www. nationalplanning.gov.ng) and that of the Budget Office of the Federation (www.budgetoffice. gov.ng).

The core vision of the plan is anchored on sustained inclusive growth.

The ministry, in a statement announcing the official release of ERGP, said there was urgent need as a nation to drive structural economic transformation with emphasis on improving both public and private sector efficiency.

“The aim is to increase national productivity and achieve sustainable diversification of production to significantly grow the economy and achieve maximum welfare for the citizens, beginning with food and energy security,” the statement issued by Mr. James Akpandem, Media Adviser to the Minister of Budget National Planning, Senator Udoma Udo Udoma, said.

The plan envisages that by 2020, Nigeria would have made significant progress towards achieving structural economic change with a more diversified and inclusive economy.

Overall, the ERGP is expected to deliver on five key broad outcomes, namely: a stable macroeconomic environment, agricultural transformation and food security, sufficiency in energy (power and petroleum products), improved transportation infrastructure, and industrialisation focusing on small and medium scale enterprises.

“Realising that the country’s economy would remain on a path of decline if nothing was immediately done to change the trajectory, the present administration, when it assumed office, embarked on strategic moves to halt the trend and redirect the course of the country’s economy and growth process.

“The process started with the development of the Strategic Implementation Plan (SIP) for the 2016 Budget of Change as a short-term intervention.

“The ERGP, a medium-term plan for 2017 – 2020, builds on the SIP and has been developed for the purpose of restoring economic growth while leveraging the ingenuity and resilience of the Nigerian people.

“The plan seeks to eliminate the bottlenecks that impede innovations and market-based solutions, recognises the need to leverage Science, Technology and Innovation (STI) to build a knowledge-based economy, and is consistent with the aspirations of the U.N.’s Sustainable Development Goals (SDGs),” the statement said.

The development of the plan went through a rigorous process, including wide consultation and robust engagements with stakeholders from a range of relevant fields, including economic experts from the public and private sectors, academia, organised private sector, civil society groups, organised labour, sub-regional governments, international development partners (including the World Bank and International Monetary Fund (IMF)/and African Development Bank).

Others are the National Economic Council (NEC) and the National Assembly. The plan has been approved by the Federal Executive Council (FEC).

The ceremonial presentation of the ERGP will take place when President Muhammadu Buhari returns from his medical vacation, the statement added.

According to the government, the ERGP differs in several ways from previous strategies and plans of previous administrations.

It is anchored on focused implementation, which is at the core of the delivery strategy over the next four years.

• It outlines bold initiatives such as ramping up oil production to 2.5mbpd by 2020, privatising select public enterprises/assets, and revamping local refineries to reduce petroleum product imports by 60 per cent by 2018;

• It builds on existing sectoral plans such as the National Industrial Revolution Plan and the Nigeria Integrated Infrastructure Master Plan;

It signals a changing relationship between the public and private sector based on close partnership.

It utilises the value of the merger of budget and planning functions into one ministry to create a better and stronger link between annual budgets and the ERGP; and

Provides for strong coordination with the states to ensure that the federal and sub-regional governments work towards the same goals.

The thinking behind the development of the plan was driven by several fundamental principles, including a focus on tackling constraints to growth; leveraging the power of the private sector and promoting national cohesion and social inclusion; and allowing markets to function.

The plan has three broad strategic objectives, which are expected to help achieve the vision of inclusive growth: restoring growth, investing in the people, and building a globally competitive economy.

The ERGP focuses on achieving macroeconomic stability and economic diversification by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade.

The delivery mechanism has been identified as a major determining factor in the successful implementation of the plan.

On the federal government’s target to attain GDP growth of 7 per cent, it said: “This growth will be driven by a fiscal stimulus helped by an expected increase in oil prices, an increase in non-oil federal receipts, an increase in oil production, and resolution of payment arrears especially joint venture cash calls.

“In addition, increased growth in the non-oil sector especially agriculture, manufacturing, services and light industries will be central in overall GDP growth.

“The slight dip in growth in 2019 is projected to result from the general election in that year with a quick recovery the following year. The strong growth during the plan period will be driven by agriculture and industry, and in the later parts of the plan period by the services sector as well.”

Under the 140-paged plan, the CBN will also be expected to attain a market-determined exchange rate regime to build confidence and encourage foreign exchange (FX) inflows.

“The Central Bank of Nigeria’s monetary policy decisions and actions have prioritised price stability. In 2015, it introduced a ban on 41 goods and services from accessing foreign exchange in the inter-bank foreign exchange rate market.

“It is instructive to point out that this is a temporary policy measure that would be reviewed with a view to removing the market restrictions over time.

“In 2016, it moved to curb inflation by raising the MPR by two percentage points to 14 per cent in the middle of the year.

“The CBN is currently supporting growth in the rest of the economy through its dedicated support to MSMEs and the agricultural sector, through initiatives such as the Anchor Borrowers Programme which allowed participants in the agricultural value chain to access credit at single digit rates of interest.

“Furthermore, the CBN is in the process of improving the implementation of its current policies, aimed at achieving a market-determined exchange rate regime to build confidence and encourage foreign exchange inflows,” the ERGP document stated.

According to the ERGP, net domestic credit was projected to expand significantly over the plan period, at an average annual growth rate of 15.8 per cent, with the projected annual growth rate rising from 10.3 per cent in 2017 to 19.9 per cent in 2020.

While government domestic credit was projected to fall from 14.2 per cent in 2017 to 10.7 per cent in 2020, that of the private sector will increase from 10.7 per cent in 2017 to 19.0 per cent by 2020.

“This is in line with the ERGP’s strategy of mainstreaming the private sector as an engine of inclusive growth by increasing access to domestic credit.

“Money supply growth is expected to average 16.2 per cent. Nigeria’s banking sector has become more vulnerable because of banks’ higher exposure to high-risk loans (including to the oil and gas and power sectors), lower liquidity buffers, and the difficulty of paying back loans denominated in foreign currencies.

“The CBN will strengthen the banking sector and increase its resilience,” it added.

Meanwhile, the CBN yesterday injected another $100 million into the interbank foreign exchange market.

Confirming the central bank’s fresh intervention, the Bank’s acting Director, Corporate Communications, Isaac Okorafor, said the new injection was aimed at funding commercial banks with enough FX to cater for the request of customers to meet personal travelling allowance (PTA), basic travelling allowance (BTA), medicals and tuition fees.

The latest injection by the CBN brought the amount pumped so far into the interbank forex market within the last two weeks to $1.138 billion for forwards and invisibles.

However, the effect on the parallel market was neutral as the naira maintained its previous day’s value of N460 to the dollar in Lagos.