A KEYNOTE ADDRESS BY AMB HABIB HABU OON CONSUL GENERAL OF NIGERIA NEW YORK 1 OUTLINE Introduction Country Profile Overview of the Nigerian Economy Governments Transformation Agenda Nigerian Economy in Africa ID: 830280
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TAKING A STAKE IN AFRICA’S BIGGEST ECONOMYA KEYNOTE ADDRESS BYAMB. HABIB HABU, OONCONSUL GENERAL OF NIGERIA, NEW YORK
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Slide2OUTLINEIntroductionCountry ProfileOverview of the Nigerian EconomyGovernment’s Transformation AgendaNigerian Economy in AfricaRebasing of GDPOpportunities & Incentives offered by the Nigerian Economy
International Oil Pricing & the Nigerian Economy: What ProspectsConclusion
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Slide3IntroductionI’m honored & excited to give the keynote addressMy focus is on the Nigerian Economy; policies that have influenced rapid economic transformation; Key sectors that account for recent growth; opportunities/incentives for investment; and future prospects.But first, Brief
Country ProfilePopulation – 170mGDP - $510bnGDP Growth – 6.4%
GDP per capita - $2,600; Inflation Rate - 7.8%
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Slide4Overview of the Nigerian EconomyNigeria is the largest economy in AfricaStable macro-economic fundamentalsIncreased economic diversity and visibility on the global economic mapNew economic and investment opportunitiesTop African destination for FDI (UNCTAD, 2013)
Among Goldman Sach “Next 11”
Top destination for equity in frontier markets (Rencap
. 2014)
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Slide5Overview of the Nigerian Economy cont’dKey challengesLack of adequate infrastructureIncome inequalityHigh unemploymentSignificant levels of poverty & growth disparities among regions
Poor power supplyInsecurity in the North East region
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Slide6Government’s Transformation AgendaPriorities as defined in Govt’s Transformation AgendaInfrastructure – power, transport, housing, ICTReal sector – agriculture, manufacturing, oil and gas, solid minerals
Human capital development – education, healthcare, labour and productivity, women and youth development
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Slide7Nigerian Economy in AfricaNigeria rebased its GDP from 1990 to 2010, resulting in an 89% increase in the estimated size of the economy. As a result, the country has become the largest economy in Africa with an estimated nominal GDP of USD 510 billion, surpassing South Africa’s USD 352
billion and Egypt’s USD 271.9 billion (2013). The exercise has revealed
a more diversified economy than previously thought. The services sector is more dominant. Sectors like entertainment (Nollywood) contribute significantly to GDP, more than previously thought.
Nigeria
has maintained its impressive growth over the past decade with a record estimated 7.4% growth of real gross domestic product (GDP) in
2013
, up from 6.7% in 2012.
Due to falling crude price, GDP growth as at 3
rd
quarter of 2014 was 6.23%
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Slide8Nigerian Economy in Africa cont’dNigeria is also Africa’s Largest Market, with 170 million in population (7th largest in the World), and a growing middle class, currently 23 percent of the population (AFDB 2010)By 2050, Nigeria will have one of the youngest populations in the World – number 5 on the “List of the Top Ten
Countries. Nigeria’s median age is projected at 21.4 years in 2050, from 17.8 years in 2013
.Driven by the Non-Oil Sector, Nigeria’s real GDP growth outperformed that of Sub-Sahara African region in 2014.
2011
2012 2013 2014
Q3 2014
Real GDP Growth % (Old Series)
7.43
6.58 6.89 N/A
N/A
Real GDP Growth % (New Series)
5.31
4.21 5.49
6.23
6.75
*
Non-Oil Growth % (New Series)
5.85
5.81 8.42 8.21
7.0
**
Sub-Sahara Africa – Real GDP growth % 5.5 4.9 4.9 N/A 5.4*** Based on NBS Projections. ** Based on IMF Projections
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Slide9Nigerian Economy in Africa cont’dGoing forward, there are prospects of strong economic growth. Such prospects are predicated on continued recovery of the global economy, favourable agricultural harvests and a possible boost in energy supply arising from the power-sector reform, as well as on expected positive outcomes from the Agricultural Transformation Agenda.
Comprehensive economic and structural reforms are also expected to improve economic growth.
Nevertheless, the country’s ongoing GDP rebasing may influence the growth figures, possibly making them lower going forward since the expected result is a larger economy.
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Slide10Nigerian Economy in Africa cont’dOther Positive IndicatorsSovereign Debt Position Remains Strong and Sustainable but concerns continue to exist over the build-up of domestic debt
Non-Oil Revenues are Low….but Government is working to enhance them
Inflation is trending downwards: Inflation is now 8.3% as at the end of July 2014
, down from 12.3%
in December 2012
Exchange Rate is fairly
stable: The
Naira/USD exchange rate has remained within the prescribed
band (plus/minus
3% band around N155)
Foreign Reserves
at
US$ 38.9
Billion (
2014
),
of
which:
Excess
Crude Account is US$ 4.05 Billion (July 24, 2014)
Sovereign
Wealth Fund is fully operational. Funds under management now stands at $1.55 billion
.
Yields on Eurobonds are low & Domestic Bond yields are also relatively low10
Slide11Nigerian Economy in Africa cont’dOther Positive IndicatorsExternal Accounts have slightly weakened in recent times but remain in a strong positionNigeria remains in the top 3 FDI destinations in Africa with South
Africa and Mozambique being the other twoGovernment has been reforming the financial sector
Clean up of banking system complete – all 24 banks are now fully stable and capitalized. Non-Performing Loans (NPLs) are now less than 5 percent.Government policies (e.g. forbearance) have supported a strong
capital markets
performance – one of the best in Africa
.
Insurance Sector is also doing better, with introduction of micro- insurance etc…Number of policy holders increased from 700,000 in 2010 to about 2 million in 2014.
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Slide12Opportunities & Incentives offered by the Nigerian EconomyDrivers of the EconomyThriving democracy with strong, independent and critical pressIncreasing transparency in government operations, with independent and well respected regulatory agenciesOngoing privatization & deregulation of the Nigerian economy
Independent judiciary and increasing citizen participation in governance mattersInfrastructure re-engineering and expansion
Strong and virile Financial and Insurance sector Simplified and streamlined Business Entry
procedures – One-Stop Initiative
The Public Service reform – removal of bureaucratic huddles
Low External Debt
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Slide13Opportunities & Incentives offered by the Nigerian Economy cont’dGovernment has developed incentives for various sectors of the economy to provide an enabling environment that is conducive to the growth and development of industries, inflow of FDI, shield existing investments from unfair competition, and stimulate the expansion of domestic production capacity
Industrial sector
Taxation:Fiscal measures have been drawn to provide for deductions and allowances in the determination of taxable income of manufacturing enterprises, including:
Pioneer status, which is a concession to pioneer companies located in economically disadvantaged areas, providing a tax holiday period of five to seven years. these industries must be considered by the government, to be beneficial to the country's economy and in the interest of the public.
C
ompanies that are involved in local raw material development; local value added;
labour
intensive processing; export oriented activities; in-plant training; are also qualified for additional concessions.
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Slide14Opportunities & Incentives offered by the Nigerian Economy cont’dInvestment Guarantees/Effective ProtectionTransferability Of Funds Guarantees Against Expropriation
Access To LandAny company incorporated in
Nigeria is allowed to have access to land rights for the purpose of its activity in any state in the country. it is, however, a requirement that industrial companies comply with regulations on use of land for industrial purposes and with environmental regulations. Land lease is usually for a term of 99 years unless the company stipulates a shorter duration.
Oil & Gas Sector
T
he following fiscal incentives have been approved by the government in the gas production phase:
tax rate under petroleum profit tax (
ppt
) act to be at the same rate as company tax which is currently at 30%;
capital allowance at the rate of 20% per annum in the first 4 years, 19% in the 5th year and the remaining 1% in the books;
investment tax credit at the current rate of 5%;
royalty at the rate of 7% on shore and 5% offshore.
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Slide15Opportunities & Incentives offered by the Nigerian Economy cont’dGas Transmission and DistributionCapital Allowance As In Production Phase; Tax Rate As In Production Phase; Tax Holiday Under Pioneer Status. LNG Projects
Applicable tax rate under ppt is 45%; Capital allowance is 33% per annum
onsight-straight-line basis in the first three years with with 1% remaining in the books;
Investment tax credit of 10%;
Royalty of 7% on shore, 5% offshore tax deductible
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Slide16Opportunities & Incentives offered by the Nigerian Economy cont’dAGRICULTUREIn addition to favourable terms of agricultural loans, companies in the agro-allied business do not have their capital allowance restricted to 60% but graduated in full - 100%;
Agro-allied plant and equipment enjoy enhanced capital allowances of up to 50%.
Solid Minerals3 to 5 years tax holiday; deferred royalty payments depending on the magnitude of the investment and strategic nature of the project;
possible
capitalisation
of expenditure on exploration and surveys;
provision of 100% foreign ownership of mining companies or concerns;
in addition to roll-over relief under the capital gains tax (
cgt
), companies replacing their plants and machinery are to enjoy a once-and-for-all 95% capital allowance in the first year with 5% retention value until the asset is disposed of, etc.
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Slide17Opportunities & Incentives offered by the Nigerian Economy cont’dTourismThe tourism sector was accorded preferred sector status in 1991. this makes it qualify for such incentives as tax holidays, longer years of moratorium and import duty exemption on tourism related equipment;State governments are prepared to facilitate acquisition of land through the issuance of certificate of occupancy for the purpose of tourism development;
25% of income derived from tourists by hotels in convertible currencies are tax-exempt provided such income is put in a reserve fund to be utilized within 5 years for expansion or the construction of new hotels, conference
centres, etc that are useful for tourism development
Telecommunications
Government provides non-fiscal incentives to private investors in addition to a tariff structure that ensures that investors recover their investment over a reasonable period of time, bearing in mind the need for differential tariffs between urban and rural areas. Rebate and tax relief are provided for the local manufacture of telecommunications equipment and provision of telecommunication services.
There are numerous other tax incentives for other lines
of trade and
export incentives for non-oil sector
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Slide18International Oil Pricing & the Nigerian Economy: What ProspectsIn the face of failing oil prices and drop in Government revenue, Nigeria has introduced austerity measures focusing on spending cuts mostly applied to areas that are in the least likely to constraint growth eg cut in international travels and consolidation of some government agencies whose functions overlapThe measures are expected to help in maintaining the external shocks and also help intensify structural transformation
The measures are not just belt tightening, but an opportunity to improve fiscal management and widen tax net that will help Government to generate additional revenue and at the same time help in redistributing income. Introduction of luxury property tax
Because Nigerian GDP growth is led by non-oil sectors, the very adverse conditions are not immediately expected in Nigeria and may never become a realityThe Nigerian economy is projected to grow at over 5% in spite of the cuts in GDP growth projections as a result of falling oil prices
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Slide19CONCLUSIONThe diligent implementation of the economic component of the Federal Government’s Transformation Agenda has resulted in strong macro-economic fundamentals This, coupled with the carefully defined austerity measures, will help Nigerian economy stay the cause even in the face of falling oil pricesNigeria remains attractive to FDIGrowth in services, agriculture and manufacturing will remain on track and will help create jobs
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Slide20CONCLUSIONTHANK YOU
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