promoting inclusive growth under the transformation agenda

PROMOTING INCLUSIVE GROWTH UNDER THE

TRANSFORMATION AGENDA

Bright E. OkoguDirector-General

Budget Office of the Federation

1st Covenant University International Conference on African Development Issues, Nigeria

May 5, 2014

HOW DID WE GET HERE?

Dependency on oil exports

High food importation/food insecurity

Housing DeficitPoor Infrastructure

High Inflation

Falling Reserves

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Macro-indicator 1960-1969 1970-2003Real GDP Growth (%) 2.9 3.1Inflation (%) 3.3 21.4Surplus (+)/Deficit (-) (% of GDP) 10.0 -4.5Domestic credit to private sector (% of GDP)

6.5 11.6

Balance of Payments (% of GDP) N/A -3.3333*External Reserves ($'bn) 0.2 3.9

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High Recurrent ExpenditureRising

Domestic Debt

8 9 High unemployment 2

HOW DID WE GET HERE?

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WHERE WE ARE

Between 2004 and 2013, real GDP grew by an average of 7% per annum

GDP is one of the fastest growing in the worldGDP is one of the fastest growing in the world

Inflation declined from about 15% in 2004 to about 7.8% in March, 2014

Inflation rate is decliningInflation rate is declining

From N132/$ in 2004 to N156/$ in 2013

Exchange rate is relatively stableExchange rate is relatively stable

From US$7.6 billion in 2003 to about US$40 billion currently

External reserves are risingExternal reserves are rising

Nigeria’s GDP, about US$510 billion, now largest in Africa Implications: on our status as a concessionary borrower from the world bank; on critical ratios such as BOP and fiscal deficit

with GDP Rebasing with GDP Rebasing

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WHERE WE ARE (2)

Recurrent expenditure dropped from 74.4% in 2011 to 71.5% in 2012, & 67.5% in 2013. But 73.7% in 2014 – Revenue shock, rising wage bill, pensions

Cost of governance is reducingCost of governance is reducing

Annual Borrowing has fallen from over N1 trn in 2010 to N852 Billion in 2011, and further to N571 Billion in 2014 (as proposed)

Government borrowing is decliningGovernment borrowing is declining

Strong economic performance has received international validation by rating agencies like Fitch, S&P, and Moodys {BB-}

Nigeria’s credit rating has improvedNigeria’s credit rating has improved

Nigeria has become the highest investment destination in AfricaDomestic bonds included in JP Morgan and Barclays emerging market Index

Nigeria’s market – An Investment destinationNigeria’s market – An Investment destination

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INEQUALITY: NIGERIA AND THE REST OF THE WORLD CIA, WORLDBANK, and NBS DATA

South Africa: 0.63Brazil: 0.54China: 0.42India: 0.33

Indonesia: 0.38Turkey: 0.40Malaysia: 0.46Mexico 0.47

Nigeria: 0.48 (NBS)

Source: CIA, 2013

Source: WorldBank

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INEQUALITY! Maternal Mortality RateNIGERIA AND THE REST OF THE WORLD

Nigeria still ranks poorly on the list of countries with high maternal and infant mortality rates with a ratio of 545-630 per 100,000 live births on the maternal mortality index (2010) indicating that women were being shut out of the impressive economic growth. This has improved somewhat in 2013

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NIGERIA’S ECONOMIC REFORMS

Fiscal Discipline (Implications for macroeconomic stability, and growth in monetary and fiscal buffers)Oil price-based fiscal rule (backed by the FRA)Maintaining an Excess Crude AccountSovereign Wealth Fund (formalisation of the ECA)Budgetary ReformsMTSS, MTEF and FSPPublic Financial Management reformsTreasury Single Account (TSA)Integrated Personnel and Payroll Information System (IPPIS)Government Integrated Financial Management Information System (GIFMIS)Financial Sector reformsBanking consolidationAMCONSecurities market reforms (increasing capital base for stockbroking firms, Banks’ divestment from non-banking businesses, etc)

FISCAL REFORMSFISCAL REFORMS

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NIGERIA’S ECONOMIC REFORMS (2)

Civil ServiceRight-sizing the service/skill-matchingReview of civil servants pay scales Pension scheme reformmonetization of fringe benefitsPowerCompletion of privatization of PHCNPrivatization of 10 NIPP projects in processAccelerate works on gas pipeline infrastructureContinued investment in hydro-electric powerRoadsConsiderable progress and completion of some major projects like the East-West road, the dualization of the Abuja-Abaji-Lokoja and the Kano-Maiduguri roads.AviationUpgrading air navigational and security systemsComplete work on the remodelling of 11 airport terminalsAccelerate construction work on the 5 new airport terminals

STRUCTURAL REFORMSSTRUCTURAL REFORMS

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NIGERIA’S ECONOMIC REFORMS (3)

BUT GROWTH HAS NOT BEEN INCLUSIVE ENOUGH!Strong economic performance across various sectors is creating jobs across the nation. A total of 1.6 million jobs were created in the past yearLarge number of new entrants into the labour force (about 1.8 million p.a.)GDP shows that the country is not so poor. But we recognize that income distribution needs to be fairer.This is a challenge of public policy that the Transformation Agenda is addressing.

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WHAT ARE WE DOING TO MAKE GROWTH MORE INCLUSIVE?

Target of the Transformation Agendacreating decent jobs in sufficient quantities to address the protracted problem of unemploymentlaying the foundation for a robust and inclusive growth of the Nigerian economyimproving, on a sustainable basis, the well-being of all classes of Nigerians

Inclusive Growth and the Transformation AgendaInclusive Growth and the Transformation Agenda

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Fiscal consolidation

and Optimization

Job Creation

Strong, Inclusive,

non-inflationary

growth

Pillars of the Transformation Agenda

Strong macro-fiscal foundation has been laid; Progress with structural reforms and job creations, but needs deepening

WHAT ARE WE DOING TO MAKE GROWTH MORE INCLUSIVE? (2)

Key Elements of the Transformation Agenda


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HUMAN CAPITAL DEVELOPMENT

•Education•Health

•Labour and Productivity•Women and

Youth Development

GOVERNANCE•Security•Public Service Reform•Anti-Corruption•Foreign Policy and Economic Diplomacy

REAL SECTOR•Agriculture

•Manufacturing•Oil & Gas

•Solid Minerals

INFRASTRUCTURE•Power•Transport (Roads, Rail, Inland Waterways & Seaports)•Housing•Water for Irrigation and Industries

Job creationPoverty Reduction

National Food Security

National Social securityStrong

NoninflationaryEconomic Growth

WHAT ARE WE DOING? (2)

AgricultureEnded Corruption in Fertilizer and Seed Sector

Growth Enhancement Support (GES) Scheme with E-WALLET Rice and Cassava RevolutionPrivate Sector Investments in AgricultureManufacturingpolicy is to encourage import substitution, where we have a comparative advantage, and exports, where we can be competitive internationally Development of National Industrial Revolution Plan (NIRP) with focus on the entire value chain of sub-sectors like agro-processing, consumer goods manufacturing, cement, textiles, and petrochemicalsTransformation of the Onne Oil and Gas Free zone with $6 billion invested leading to the attraction of 150 companies into the zone with over 30,000 jobs created to date


Sectoral ReformsSectoral Reforms

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Housing Nigeria Mortgage Refinance Company (NMRC) has been launched, and will increase liquidity in the housing sector and provide secondary market for mortgageCreate over 200,000 mortgages over the next 5 years (opening opportunities for architects, masons, carpenters, painters, transporters, etc.)ICTIncreasing the Ease of Doing Business for Telecom Services Providers:

Streamlined Application for building infrastructure. Applications now processed within 30 days; right of way reduced from ₦5 million to ₦145,000.Reduced multiple taxation on operators. Strong government support to and licensing of mobile companies



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EducationPolicy is to get 10.6 million “OUT-OF-SCHOOL” children “IN-SCHOOL”, and improve Quality of Education and Access at all levels. Promoting Access to Affordable Education & Improving Quality

Construction of special girls school in 13 states of the Federation has began to improve girls education program.Construction of 124 Almajiri Schools to reduce the number of out-of-school children in the North1-year Early Child Education institutionalized as part of the education system to enhance access and quality of learning outcome

Attention is turning to Vocational Training for Plumbers, Carpenters, Technicians and ArtisansCreative IndustryProject Advancing Creativity and Technology (ACT) Nollywood Policies to protect intellectual property



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OverviewSURE-P has unambiguous objective which is to use ‘savings’ from subsidy reduction to improve critical infrastructure and provide social safety nets.The social safety nets are provided for the very poor and vulnerable people in the society.Total amount that accrued to FGN SURE-P Account as at 31st December 2013 is N345 billion at an inflow of N15 billion per month.

AchievementsImproved Access to Primary Health Under the “Save One Million Lives” initiative, over 433,650 lives were saved in 2011 and 2012 by scaling up 6 cost-effective interventionsPlanned scale-up to 30,000 beneficiaries for the CCT program.Ongoing rehabilitation of 74 health facilities.


The SURE-P ModelThe SURE-P Model

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WHAT ARE WE DOING?(6)

AchievementsImproved Access to Primary Health Maternal and Child Health (SURE-P):

9,028 Healthcare Workers (Midwives, CHEWs and VHWs) were recruited, oriented and deployed

Supply of drugs and Health Commodities (drugs, mama nursing kits, midwifery kits and equipments) to the 500 SURE-P selected facilities (Primary Health Centres)

223,786 beneficiaries received antenatal care28,435 deliveries by skilled birth attendants

Community Services, Women & Youth EmpowermentCSS: 119,000 beneficiaries engaged (3,000 per State, plus FCT)CSS: States CIC InauguratedCSS: Partnership with NRC, NOA, FMY for SURE-P exit and sustainability



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Achievements Vocational Education Training

8 Training Centres evaluated85% of rehabilitation completed on selected Federal Government Training CentresOver 62,000 applications from prospective trainees receivedPublic Works / Job creationRoad maintenance pilot scheme on 40 priority 1 Federal Roads over 4,500kmDeployment and training of 3,919 workers900 beneficiaries deployed in 3 States working on 700km District Roads Programme Major works on-going in Roads and Rails Projects



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Inclusive Growth and the Transformation AgendaInclusive Growth and the Transformation AgendaOther Special Initiatives to promote Jobs and GrowthOther Special Initiatives to promote Jobs and Growth

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PURSUING INCLUSIVE GROWTH IN A GLOBALIZED WORLD

A comment on Maskin’s Alternative TheoryGlobalisation = enhanced international productionRecognizes 4 skill levelsAssumes two countries (Rich and Emerging)Structure with multiplicity of tasks in a production process but assumes that higher skill levels (A and B) are obtained in Rich countryEmerging countries are endowed with lower level skills (C and D) Higher skill levels earn more than lower skills levelRaising the skill levels of (lower skill workers) can reduce inequality

Some complications…Beyond improving skills, globalization has its own inherent challengesLimited market access in global context (other barriers)Requisite technology not always available & expensive to acquire 20

PURSUING INCLUSIVE GROWTH IN A GLOBALIZED WORLD (2)

Markets are not perfect!Market imperfections exist when buyers are uninformed, public goods exist, the number of firms is small, property rights are weak

Subsidy in OECD countries limiting benefits of globalization & inclusive growth in emerging countriesNo free lunch!

Free trade is not really free for developing countriesThe weight of Non-tariff barriers

Education: a necessary but not sufficient condition for inclusive growthYes! But raising the skill level of low-skill workforce is a necessary but not sufficient condition. Other important drivers of inclusive growth such as structural transformation and improvements in macroeconomic fundamentals

An efficient tax policy and administration system in emerging countries could be used to improve income distribution, and help foster inclusiveness

Globalisation is yet to deliver its promise of decreasing inequality. Why? Globalisation is yet to deliver its promise of decreasing inequality. Why?

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CONCLUDING THOUGHTS

Nigeria has come a long way in its economic growth path!Economic prosperity is ongoing but is yet to be all-inclusive.This is attributable to weak infrastructures, demographic peculiarities, structural bottlenecks

Growth is on-going but not yet all-inclusiveGrowth is on-going but not yet all-inclusive

Maskin’s suggestion of raising the skill level in emerging economies (through education) is necessary for globalisation to deliver its “reducing inequality” promise!Beyond raising the skill level, structural transformation, improved macroeconomic fundamentals and an efficient tax administration in emerging economies must be set right. Significant achievements have been made through our fiscal consolidation and structural reform efforts

Structural Transformation, Macroeconomic fundamentals , and Better Tax AdministrationStructural Transformation, Macroeconomic fundamentals , and Better Tax Administration

We are mindful of and are optimistic that we are driving in the right direction

Policies, Programmes and Outcomes are in coursePolicies, Programmes and Outcomes are in course

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promoting inclusive growth under the transformation agenda

Documents

nigerias economic reforms

impressive economic

pursuing inclusive growth

sectoral reforms

structural reforms

real gdp growth

surep model

strong economic performance