Muda Yusuf, LCCI Boss.
W’Bank raises nation’s 2017 growth forecast
Though the Federal Government’s diversification agenda seeks to mitigate the challenges caused by unstable oil prices, its dependence on oil revenue may linger as expectations from the non-oil sector as a major economic driver may not be realised soon.
The recent review of the average oil price from $42.5/b to $44.5/b in the 2017 budget reaffirms the pessimism of government in making the non-oil sector the major revenue driver of the economy.
As expectations from the non-oil sector may take longer to realise, the country will still be depending on revenue from oil which is dwindling and making it difficult for the government to effectively plan and execute its projects and programmes to better the lot of the people.
Members of the Organised Private Sector (OPS) reaffirmed the pessimism, noting that the non-oil sector is currently heavily burdened with various taxes and levies amidst a challenging operating environment to be able to contribute profitably to government’s expenditure plan.
According to them, while the new adjustment is a good threshold, government’s agenda to make the non-oil sector the major revenue earner will have to take the back burner till businesses are able to operate profitably in the country.
The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, noted that there is not so much revenue to generate from the non-oil sector, adding that the revenue performance of the agencies is very poor, with the bulk coming from the services sector due to low earnings from agriculture.
“Given the performance of the oil markets, the benchmark of $44.5 per barrel is a good estimate. The reality is that there is no much revenue to be generated from the non-oil sector given the weakness of the economy itself, the private sector and the environment in which they are operating. If you want to generate money from the non-oil sources, it has to be from the private sector.
“For example, look at solid minerals, manufacturing among others, it is not easy doing business. Apart from pockets of multinational firms in the country, the small and medium enterprises (SMEs) cannot really give much, especially in the real sector. If you check the revenue performance of the states and federal revenue agencies, you will discover that revenue from agriculture is very low despite the hypes and self-sufficiency agenda. Yet, agriculture is accounting for over 20 per cent of the GDP. It will take some time for the government to gain the kind of revenue it seeks from the non-oil sector. Services companies like the Telcos, banks and, maybe, ports are the ones generating the revenue from the non-oil sector,” he added.
Although, the manufacturing Purchasing Managers’ Index (PMI) in Nigeria increased marginally to 51.1% in April 2017, compared with 47.7% in March, implying an expansion in the manufacturing sector activities after several months of contraction, operators believe it will take a longer time before the gains will be recorded.
Of the 16 manufacturing sub-sectors, 14 recorded growth in the review month, as operators noted that the increase in the PMI is sustainable in the short-to-medium-term provided policies that increase access to credit and create an enabling business environment are pursued.
The Chairman, Export Group, Lagos Chamber of Commerce and Industry (LCCI), Dr. Obiora Madu, decried alleged government’s inconsistency and lack of seriousness about the non-oil sector.
“Government has not been too serious about non-oil export. Whenever they talk about the non-oil sector, they are not referring to non-oil export. The only time there was frenzy about the non-oil export was when the oil sector experienced a decline in revenue. It looks like we are back to the norm since the Niger/Delta issue was resolved and the oil prices rebounded. There is no consistency in government’s agenda and policy to promote the non-oil sector.
“Revenue from the non-oil is not as easy as oil. This is unlike agriculture where you have to soil your hands. There are no incentives to encourage interested stakeholders in the sector. The way out is to pray that the oil prices drop again so that we can go back to agriculture. We hope that the frenzy around agricultural activities will encourage people to participate and enhance growth. There is the need to address logistic challenges and provide incentives”, he added.
The immediate past National President, NACCIMA, Bassey Edem, reiterated the need for government to align monetary and fiscal policies in a manner that would stimulate a lower interest rate for an improved economic activity and sustainable development. He urged the government to enlighten private sector operators on the guidelines in the administration of the Export Expansion Grant (EEG) to foster participation.
The Minister of Industry, Trade and Investment, Dr. Okechuckwu Enelamah expressed the need to walk the talk by every stakeholder in the value-chain.“We have a $30 billion export initiative by the Nigerian Export Promotion Council (NEPC), but it is not enough and unless we create the environment for export to make us more competitive at the global market, we will not be able to achieve this. This is why I said the Economic Recovery Growth Plan (ERGP), the buy-Nigeria initiative among others, will help the nation’s non-oil sector of the economy”, he added.
But the World Bank at the weekend reviewed upward the wobbling global economic growth to 2.7 per cent, with Nigeria moving to 1.2 per cent, against its earlier projection at one per cent.
According to the global bank, Nigeria will also accelerate to 2.4 per cent in 2018, with a marginal increase to 2.5 per cent in 2019, helped by a rebound in oil production, as security in oil producing regions improves, and by an increase in fiscal spending.
However, the multilateral institution reiterated its warnings to Nigeria and other resource-endowed countries in the sub-region to implement significant fiscal adjustment policies to enthrone macroeconomic stability and nurture economic recovery.
Meanwhile, growth in non-resource intensive countries is anticipated to remain solid, supported by infrastructure investment, resilient services sectors, and the recovery of agricultural production.
Although Nigeria has a positive forecast, the growth in these countries stemming from consistency and commitment to thrive without endowment, far eclipses the projections for Nigeria from this year to 2019.
Ethiopia is forecast to expand by 8.3 per cent in 2017, Tanzania by 7.2 per cent, Côte d’Ivoire by 6.8 per cent, and Senegal by 6.7 per cent, all helped by public investment. However, some countries need to contain debt accumulation and rebuild policy buffers.Growth is forecast to jump to 6.1 per cent in Ghana in 2017 and 7.8 per cent in 2018 as increased oil and gas production boosts exports and domestic electricity production.
But frontline economist, Bismarck Rewane, noted that it is easier to record a huge growth number with a smaller population than otherwise, adding that what is important is the actual wellbeing of the populace.
“You cannot compare the size of Nigeria with these countries, so at first look, you cannot criticize the country. Per capita income is impacted by numbers, but that does not mean we should relax. In fact we can grow more than these countries without oil.
For the Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, the rising growth trend of non-resource countries in Africa has been ongoing and persistent, while the so-called big economies are faltering.
Apart from their small size, these countries have configured their macro-economy, with consistency, such that they do not think about natural resources and that is the edge over Nigeria and others.They have also taken full advantage of the resource crisis - crashed oil prices, which reduced their cost of oil to build up their reserves and economy.
“Nigeria, apart from adopting agriculture, should pursue the development of raw materials from the sector, as well as other value chains. It should not be a case of crude oil production and petrol importation,” he said.
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