The portraits of economic and financial news coming out of Nigeria in recent days are blurring. The House of Representatives’ probe of the country’s oil subsidy regime from 2009-2011 uncovered a cesspool of corruption and brazen thefts and long list of errors, including lack of accounting, overpayments, persistent disregard for regulations and outright incompetence in the management of the programme.
Before that, another committee of the Federal Government uncovered hair-raising N700 billion naira fraud in the pension unit of the Office of Head of Service of Federation. Add the news from the political scene, particularly the continuing security challenges, and the picture becomes gloomier.
Already one month into the second quarter, not much has been achieved by way of the government’s transformative economic policies that were expected to shape the economic outlook of the country in 2012, such as the complete deregulation of the downstream sector of the oil and gas industry, and the privatization of the power sector. The deal has not been sealed yet to sell off the four thermal, two hydro-power plants and 11 electricity distribution companies earmarked for divestiture this year.
Despite these hitches, the three tiers of government in the country continue to smile to the banks as savings from the Excess Crude Oil Account, now renamed Sovereign Wealth Funds (SWF), continue to mount due to increasing oil revenue earnings. For instance, the three tiers shared N187 billion from the SWF account in February. SWF represents revenue generated as differential between budget and actual receipts into the crude oil account. The cumulative amount shared by the three tiers that month alone, according to a report by the Economic Confidential was N921 billion from different revenue sources. In addition to the amount from the SWF savings, N727 billion came from statutory and VAT allocations and N7.6 billion from a batch of refunds from NNPC.
Yet infrastructure development across the country remains unimpressive. Power generation hovers around 3000 megawatts and below. The expectation is to raise it to 4000 megawatts by the end of this year, which even if achieved will remain only 10 per cent of what Nigeria needs to leap out of its present economic capacity-underutilisation.
Despite this gloomy picture, there is hope however in the overall financial sector of the economy. The Central Bank of Nigeria (CBN) has continued to implement its policies that are aimed at providing the enabling environment for our economic progress and development. The cashless policy of the Apex Bank has taken off successfully in Lagos (the pilot state). The recapitalisation of the banks is now complete. And with the banks’ toxic assets taken off their balance sheets by Asset Management Corporation of Nigeria (AMCON), the banks are now in good position to resume serious lending.
But Nigeria’s over-reliance on one major export commodity—crude oil, which accounts for 92% of country foreign earnings, is not healthy for its economic development. The solution to this monoculture economy lies in developing the non-oil sector through import and export financing, which the Nigeria Export Import Bank (NEXIM Bank) was established in 1991 to facilitate.
The significance of promoting the non-oil sector became evident to Nigeria’s economy watchers recently when the country’s exports fell to $49.6bn in 2009 from $63.4 billion in 2008 due largely to the fall in crude oil prices and global economic meltdown. However, the non-oil export continued its rise in value receipts from $3.2billion in 2007 to $7.7billon in 2009.
Perhaps taking a cue from the CBN’s banking reforms (CBN is part owner of NEXIM Bank), the current team at the bank’s headquarters headed by Mr Roberts Ungwaga Orya has been pursuing transformative agenda (helped shaped by KPMG corporate management consultants) since 2009 that has turned the bank’s years of lacklustre performance into profitability. The bank made a profit of N189 million in 2010 for the first time in many years and one year after Mr Orya became its Managing Director and CEO.
In furtherance of its mandate, the Bank supports activities that facilitate stimulation and development of non-traditional value-added exports as part of measures to enhance job creation and shore up the country’s foreign exchange earnings. Two of its flagship initiatives—Sea-Link project and Creative Art & Entertainment loan facility—are already receiving positive responses across the country and beyond.
The private-sector driven Sea-Link project, which it initiated with the aim of boosting trade among the coastal states of West and Central Africa, has since received the nod of regional funding organisations such as Guarantee Fund for Private Investments in West Africa (GARI Fund). GARI Fund recently reviewed its country funding limit for Nigeria from $15million to $20million to accommodate more investments such as the NEXIM’s Sea-Link project. Other regional funding bodies that showed interest in the Sea-Link project are West African Development Bank (BOAD) and the ECOWAS Bank for Investment and Development (EBID).