MONDAYBUSINESS Recovery plan: All eyes on implementation
Since the Buhari-led administration took over the mantle of leadership in 2015, Nigerians have remained unwavering in demanding for a blueprint that would streamline the government’s economic agenda. The recent launch of the Economic Recovery and Growth Plan (ERGP) is therefore respite to many. Our reporter examines the document and what experts say about it.
The demand for economic reforms for the present administration became more pertinent in the face of the economic recession which saw a reversal in the country’s growth trajectory owing to the sharp and continuous decline in crude oil prices since mid-2014, along with a failure to diversify the sources of revenue and foreign exchange in the economy,
Most macro variables worsened significantly: inflation (from 9% to 19%); exchange rate (from 197/215 to 305/465); unemployment (from 7.5% to 14%); GDP growth (from 2% to -1.56%); market capitalisation of NSE (from N11.658trn to N8.658trn with daily trading down from around N11 billion to N1 billion or less (about $2 million); poverty escalating; and youth agitations increasing. Business confidence remains very low at (-29) while competitiveness index remains a low 3.39 points with the country ranked 124th in the world.
Foreign reserves remain depleted and the current account balance remains negative. Savings-investment rates are very low and Sovereign credit ratings worsened.
Nigeria’s growth has continued to be driven by consumption and high oil prices. Previous economic policies left the country ill-prepared for the recent collapse of crude oil prices and production.
The structure of the economy remains highly import dependent, consumption driven and undiversified. Oil accounts for more than 95 per cent of exports and foreign exchange earnings while the manufacturing sector accounts for less than one per cent of total exports.
Since inception in May 2015, Buhari’s government has made several efforts aimed at tackling the current economic challenges, and changing the national economic trajectory in a fundamental way. The earliest action was the prioritisation of three policy goals: tackling corruption, improving security and re-building the economy.
Consequently, the Strategic Implementation Plan (SIP) for the 2016 Budget of Change was developed as a short-term intervention for this purpose. However, it is recognised that more needs to be done to propel the country towards sustainable accelerated development.
The Economic Recovery and Growth Plan (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 nation’s most priceless assets.
It is also articulated with the understanding that the role of government in the 21st century must evolve from that of being an omnibus provider of citizens’ needs into a force for eliminating the bottlenecks that impede innovation and market based solutions.
The plan outlines bold new initiatives such as ramping up oil production to 2.5mbpd by 2020, privatising selected public enterprises/assets, and revamping local refineries to reduce petroleum product imports by 60 per cent by 2018. Other initiatives include environmental restoration projects in the Niger Delta.
The plan also places importance on emerging sectors such as the entertainment and creative industries. It builds on existing sectoral strategies and plans such as the National Industrial Revolution Plan, and the Nigeria Integrated Infrastructure Master Plan. Rather than re-inventing the wheel, the ERGP is said to strengthen the successful components of these previous strategies and plans while addressing challenges observed in their implementation.
The ERGP aims to achieve 10GW of operational capacity by 2020 and to improve the energy mix, including through greater use of renewable energy. The country is projected to become a net exporter of refined petroleum products by 2020.
A World Bank consultant and president of the Nigeria Economic Society, Olu Ajakaiye, anatomised the ERGP and remarked that it was a great plan if well carried out and properly financed to meet its target.
According to the development economics specialist, the ERGP has outlined 21 lucent agendas with 60 strategies and 365 important activities which have been delegated to top agencies in both the public and private sectors.
He disclosed that N75.03 trillion will be required to successfully carry out the programme which has a three-year span - 2017 to 2020.
Already, however, there are arguments that as good as the plans are, there are no clear details. For example, there is a projection of 2.5 million barrels per day within the implementation timeframe. How this would be realised is yet to be made clear.
The Managing Director and Chief Executive Officer of Cowry Asset Management Limited, Johnson Chukwu, lauded government for the bold step to launch a roadmap in the first place. He however, warned that the plan was too ambitious, given our capability at present; with the figures being mostly unrealistic. “One of which is the Gross Domestic Product’s growth numbers. These projections need to be broken down further,” he said.
The ERGP also aims to increase export earnings and government income by N800bn more yearly for a period of three years. It would improve tax collection to raise N350bn yearly, partly by implementing and raising tax on luxury goods to 15% from its current five per cent starting from 2018.
Agriculture would get an upscale to realise self-sufficiency in rice by 2018; wheat by 2019; and Nigeria becoming a net exporter of rice, cashew, groundnut, cassava and vegetable oil by 2020.
“What would happen to the state of infrastructure, which would drive these plans beginning in 2018, was not explicitly” stated, Chukwu quizzed.
Some experts are of the opinion that the government must avoid getting this economic policy enmeshed in ambiguity. “It must communicate fast and clear, because the policy is not all about government, but also investors local and foreign - who would take up the plans.”
“Urgency is needed in implementing a coherent and credible package of monetary, fiscal and structural policies as the window for bold reforms is closing as the 2019 elections are fast approaching,” Gerry Rice, IMF spokesman, said recently
The good news is that inflation is sliding and the Purchasing Managers’ Index (PMI), a measure of manufacturers’ confidence spiked by 6% to 58.9. More importantly, oil production is reported to be 2mbpd, a 32-month high.
These indicators confirm the notion that the long-anticipated economic recovery may have started ahead of analysts’ expectations. This recovery however is vulnerable to exogenous and domestic political shocks.
On its part, a think tank, the Nigeria Economic Summit Group (NESG) has urged the government to religiously implement the plan (ERGP) for it to have the desired impact on the economy.
The chairman of the group, Mr Kyari Bukar, said the summit has been quite involved right from the early stage of the development of the ERGP. It has made considerable input into it. “The plan has been launched so what we are calling for is a precision in implementation.”