Economy still experiencing uneven development

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Jonathan and Okonjo-Iweala*Maritime sector loses N3.2trn annually
Mixed reactions have continued to trail the performance of the Nigerian economy at 53 years after independence, as stakeholders across the various sectors differ in their opinions. Some said the economy has fared well considering the growth in some key performance indicators while others argued that it has not done well in some sectors given the slow pace of development.
The Lagos Chamber of Commerce and Industry, LCCI, noted that the Nigerian economy has grown to become the second largest economy on the Africa with estimated Gross Domestic Product, GDP in excess of $300 billion. Currently, Nigeria offers the largest market on the continent; it has the most enterprising population and is blessed with abundant natural resources.
However, the challenge over the decades has been how to make the opportunities and the potential work for the people.
The President of LCCI, Mr. Goddie Ibru, said: “The operating environment for businesses has been difficult. The economy is inhibited by serious issues of infrastructure deficits, especially with regard to power supply, currently at less than 4000 megawatts; transportation, logistics, the quality of institutions, cost and access to funds etc. All these have combined to create a burden of competitiveness for domestic enterprises. This situation has made the diversification of the economy very difficult and poses a risk of vulnerability.”
He said further, “Indigenous enterprises have been facing an even more difficult problem of market access. The economy has been virtually taken over by imports, which limits the capacity to generate the needed multiplier effects and jobs that could impact on the citizens. Unemployment has risen to frightening levels of 23.9 percent; youth unemployment is at 50 percent; the poverty situation has been worsening, currently estimated at 67 percent and the security challenges have not really abated.
Ray of hope
Ibru however, argued that the situation is not a hopeless one, saying, “Our democracy has been generally stable and has been uninterrupted for 15 years. This is something positive that we tend to take for granted. The potential that the economy offers are tremendous especially with our natural endowment in agriculture, solid minerals, oil and gas etc.
“It is of great concern, however, that as an oil producing nation, we continue to incur bills running into billion dollars on the importation of petroleum products. This denies the economy of the much needed foreign exchange and the tremendous multiplier effects which domestic refining of petroleum products would have offered the economy. As we mark our 53rd anniversary, we should accelerate necessary reforms to fix our infrastructure, diversify the economy, strengthen our institutions and reduce corruption. There should be a correlation between wealth accumulation and value creation in order to entrench the right values in the society.
“As citizens of this great country, we need to constantly engage the leadership at all levels in order to improve governance quality. Democracy is a process, not an event. Therefore, the citizens have a critical role to play in making the democratic process work for them. In all, we have reasons to be grateful to Almighty God on this occasion of our 53rd anniversary. There are obvious shortcomings and setbacks, just as there have been some promising developments.”
Uneven growth
In his own assessment, the Director General of LCCI, Muda Yusuf, said, “The Nigerian economy still developing unevenly. We cannot begin to celebrate anything about the economy as it is still developing unevenly.”
In his review of the economy as the country marks her 53rd independent anniversary, he pointed out that while the micro economy angle has not been doing too badly, we are not doing so well in the investment climate, because there are a lot of investment issues that are yet to be resolved.
“When you look at the micro economy angle, the economy has not been doing too badly; when you look at the GDP, it is well over $300 billion; we are the second largest economy in Africa and in the not too distant future, it will be the biggest economy in Africa. Nigeria has the largest market as we speak, which itself, brings a lot of opportunities both for domestic investors and for foreign investors.
“There are three main angles of the economy – there is micro economy angle, and there is the investment angle and the welfare impact angle. Nigeria has the largest market as we speak, which itself, brings a lot of opportunities both for domestic investors and for foreign investors.
“Our micro economy environment generally, is also assessed to be stable, although there has been some pressure lately but it is still stable.
“The inflation, we have managed to keep it at a single digit, which is also an indication that it is stable, the foreign reserves, although has been under pressure lately but has been fairly robust, the growth rate is about 6.7, 6.5, per cent. “So from the micro economic perspective, the economy’s performance is not so bad but from the investment climate angle, which is what businesses need, particularly indigenous businesses, which is what they need particularly to create jobs and thrive, we are not doing so well in that area because there is a lot of investment issues that are yet to be resolved.”
Yusuf listed other areas of shortcomings including, power, transportation, railways, as well as lack of access to credit, institutional challenges, policy enforcement, and ports issues and a host of others.
He argued that all these issues combined, define the quality of the business environment. “Our score in that area is not so good and that is why, in spite of the good fundamentals, the citizens are not feeling the real impact because the enterprises, particularly the indigenous ones are not able to perform at an optimal level in a way that they can impact on the lives of the citizens and that is also related to welfare.
In this regard, he said, “ The economy is about people, and to the extent that the people are not feeling so well, to the extent that we have high unemployment, high poverty level we cannot begin to celebrate anything about the economy, because humans that make up the economy are not comfortable so that is also about governance, the quality of leadership, they should channel the resources in the economy so that those who are vulnerable can also feel the impact of whatever resources that are available.”
Microfinance development
Nigerian microfinance industry has not done badly considering the fact that while other nations were part of the international microfinance movement which blossomed in the 1990’s, Nigeria was cut off due to military dictatorship.
The Managing Director, LAPO, Mr. Godwin Ehigiamusoe, said, ‘The much we have achieved is largely due to the commitment of the regulatory and the great spirit of enterprise of Nigerian microfinance operators.
“The truth about the microfinance industry is that there has been some improvement (in GDP) largely because of the intervention of the regulatory authorities, the Central Bank Nigeria, CBN, and the Nigeria Deposit Insurance Corporation, NDIC. In addition, there is also the fact that operators, the managers of microfinance banks are becoming aware, in terms of the certification programme of the Central Bank, and there is also recapitalisation process in the industry. “All these put together are bringing improvement in the sector, I foresee a bright future for the industry,” Ehigiamusoe said.
No money for SME development
Considering the volume of loans to low-income people and micro-businesses, he noted that not much has been done but that with the launch of the Micro Small, and Medium Enterprise Development Fund by the CBN, the situation will significantly improve.
Continuing, he said, “Everyone in the microfinance sector is expectant of the positive impact of the Fund on the sector. The Fund will assist operators to address the current acute challenge of illiquidity which has plagued the sector. “The coming of the Fund means more funds for micro-enterprises and institutional viability for many microfinance banks,” he said.
On future outlook, he said, “Nigeria has a large number of people who are exceptionally enterprising, more funds are coming to the sector and all stakeholders in the industry have been building capacity. These are positive factors that will lead to a vibrant microfinance sector in too distant future.”
Loans administration
The President of the Association of Micro Entrepreneurs of Nigeria, AMEN, Prince Saviour Iche, added, “Microfinance bank in Nigeria is supposed to be the hope of the common man but they are just like the task master. That is why it is hard for anybody that borrows money with them to pay because of their fraudulent activities.
“They will encourage you to borrow, when you borrow they will not allow you to rest, they will not give you breathing space because immediately you borrow, they start troubling you over the money without giving you time to raise the money you borrowed. “I am speaking the mind of the small business owner in Nigeria, that woman and man on the street. Sometimes they charge more than commercial banks.
“If you listen to news yesterday, there was a case of a man who went to borrow money from a micro-finance bank, and the man has not yet paid, before you know it, they went to his house without informing the people leaving there and throw everybody out, they saw the man’s son in the street and chased him until he was injured.”
Huge losses in maritime
National Secretary of the Nigeria Ship Owners Association (NISA), formerly the Indigenous Shipowners Association of Nigeria (ISAN), Capt. Niyi Labinjo, has said that the country losses over N3.2 trillion annually due to its trade policies as a result of lack of understanding of the importance of the sector to the economy. Labinjo, who spoke to Vanguard on the nation’s economy and the maritime industry as it relates to her 53rd independence anniversary, explained that government seems not to understand the importance of the sector and therefore has not exploited its enormous potential.
The NISA scribe noted that Nigeria losses over N1.2 trillion annually from freight on imported goods, and additional N2 trillion on insurance for the goods because of the present trade policy, which states that all transactions be done on Free on Board (FOB) instead of Cost, Insurance and Freight (CIF).
While FOB means that all goods to be shipped into the country are with freight and insurance inclusive of the actual cost, the CIF allows the buyer of goods to determine who ships and who buys insurance for the goods.
As a result, Labinja pointed out that the country losses out in both import and export to foreigners. He said that the industry only contributes about 10 percent of the actual potentials to the economy of the country and this, he said is as a result of lack of understanding of the importance of the sector.
He said no developed economy in the world has gotten to where they are presently without fully exploiting their maritime potentials and warned that the level of the country exploitation will determine how far it will develop.
Similarly, President of the Association of Nigeria Licensed Customs Agents (ANLCA), Prince Olayiwola Shittu, said government does not seem to recognize the importance of customs brokers to the economy.
Shittu noted that the revenue collected by the Nigeria Customs Service (NCS), could not have been achieved but for the contributions of the customs brokers. He added that many nations in the world depend on their maritime potential for development.
Railway transformation
Mr, Anthony Ajah, a civil engineer said that in spite of the huge amount pumped into the railway, there is not much progress to show for it. He noted that this is because the sector had been abandoned and neglected for a long time by successive governments.
He said: “As a matter of fact the railway has never fared well since Nigerians took over from the British. And that is why 53 years after, you cannot boldly think of the railway as a better transport alternative in the country. We watch and read about the things this administration is doing but you and I know that the problem is beyond putting outdated trains back on track. If we really want to make progress in that sector, government should hands off and let the private sector take a holistic approach and make our railway an economic hub providing viable opportunities for this country to move forward.”
On his part, Mr. Ernest Eleodinmuo, an Electronics Engineer turned entrepreneur, expressed regrets that the sector has made more promises than it fulfilled. “I remember the days of late Gen. Abacha, who invested billions of naira and they celebrated it, saying it is something that will be the end of transportation problems in Nigeria, but the problems still persist. Now looking at this administration’s effort, we know they are trying but something very meaningful is still yet to come out of it. It is still a scratch on the surface. The trains have returned to the tracks, yes, but looking back 53 years after we started managing the sector, it is still nothing to write home about.
“In other economies of the world, that sector provides a lot of money and creates millions of job opportunities in other countries. But in Nigeria, we don’t know what to do with it but I believe it’s because it is still in the hands of the government, we need to privatise it.
But talking about progress in the railway, we have not gone anywhere, we are still crawling. Look at the trains they are bringing to us in the so called rehabilitation programme, you cannot compare them to the ultra modern light rail that people are using in the 21st century rail service. The trains are not appealing to people that would want to patronise them because the consumers need to fall in love with it first before they patronise it. So all these are the things the management needs to take into consideration.”
Mr. David Ndanusa, Assistant Director, Public Relations, Nigeria Railway Corporation, NRC, however argued that “In 53 years, this is the only time that the railway has really witnessed massive investment and made remarkable improvements. The sector has witnessed these improvements because the current administration has paid extra attention to the sector and that is why we have the results we are seeing at the moment. I can tell you that 90 per cent of the routes have been resuscitated by this administration. Although many people could argue that the progress has been slow but we must not forget that the sector suffered long period of neglect during the military administration. But since 1999 when civilians took over, there has been consistent investment in the sector and we are seeing the result.
All the rail lines except the eastern axis have been brought back to life. And that axis will be ready by December this year. Also, through this transformation and modernisation programme, all the train services, including the freight and passengers to different routes have been restarted. And all the regulatory authorities like the National Assembly, and the investor, SURE-P have been monitoring the investment so as to ensure proper utilisation.
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