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Nigeria – Governance and Political Risk Outlook

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Presentation on theme: "Nigeria – Governance and Political Risk Outlook"— Presentation transcript:

1 Nigeria – Governance and Political Risk Outlook
Address by Senator Udoma Udo Udoma at the Nigeria Development and Finance Forum (NDFF) 2014 Conference in New York 29th – 30th May 2014 THEME: “Entrenchment of Economic Growth in Nigeria

2 Nigeria is the largest economy in Africa
GDP rebasing – now 26th in the world (Top 20 by 2020?) Stable macro-economic outlook Increased economic diversity and visibility on the global economic map New economic and investment opportunities Top African destination for FDI (UNCTAD, 2013) Among Goldman Sach’s “Next 11” Top destination for equity investments in frontier markets (Rencap, 2014) Population - ~168m GDP - $510bn GDP growth rate – 6.4% (IMF, 2013) GDP per capita - $2,600 Inflation rate – 7.8% (Apr, 2014)

3 Despite strong outlook, Nigeria still experiences many challenges
Key Challenges Nigeria’s Priorities as defined in the Transformation Agenda Lack of adequate infrastructure Income inequality High unemployment Significant levels of poverty and growth disparities among regions Poor power supply Insecurity in the North East Infrastructure – power, transport, housing, ICT Real sector – agriculture, manufacturing, oil and gas, solid minerals Human capital development – education, healthcare, labor and productivity, women and youth development. BUT – Governance challenges in executing the transformation agenda

4 What is good governance and why does it matter?
What is it? “The manner in which authority is exercised in the management of a country’s economic resources for development” – World Bank Why does it matter? Promotes long term economic growth and development Improves Government efficiency, transparency and accountability Ensures sustainable and transparent framework of rules and institutions for businesses to thrive Promotes political stability Minimizes corruption

5 Recent news reflects poorly on governance in Nigeria…
Alleged non-remittance of crude oil revenue by NNPC in January Suspension of CBN Governor in February Terrorist activity in the North-East by Boko Haram (nearly 4,000 deaths in 2014 alone) Kidnapping of 276 female students in Chibok, Borno State in April #BringBackOurGirls trending globally on social media However, International support from USA, UK, France, China, Canada, Israel, Iran and neighboring countries May signal a turning point in the fight against Boko Haram

6 …however there are many positive developments
Significant progress in building the institutions that will strengthen governance over time; and Nigeria is making progress on many other fronts

7 Nigeria: A thriving democracy with a strong, independent and critical press
Democracy is strongly linked to good governance. 27 of the world’s top 30 most prosperous countries are democracies – Legatum Prosperity index™* Since 1999, Nigeria has operated a successful democracy with strong & independent legislature (checking powers of the President) and press (mostly privately owned) Print: > 30 national and provincial newspapers, >20 general interest magazines and journals, + a variety of local newspapers Radio and TV: over 20 privately owned stations Social media: Blogs, Twitter, Facebook Though Nigeria’s three democratic presidents produced by Peoples Democratic Party (PDP) Strong opposition emerging – All Progressives Congress (APC) formed from merger of main opposition parties, controls ~40% of the states and National Assembly 2015 general elections expected to be more competitive at all levels! * Based on variety of factors including wealth, economic growth and quality of life

8 Mini Case Study: CBN - Handling the financial crisis
Increasing transparency in government operations, with independent and well respected regulatory agencies Macro-economic stability, restored investor confidence, stable and strong banking sector…. foreign investor interest in banks being currently sold e.g. Enterprise Bank. Mini Case Study: CBN - Handling the financial crisis 2008 2009 Global financial and economic crisis Nigerian economy and banking system crisis – NSE Collapsed by 70% CBN intervention Injection of N620bn of liquidity Establishment of AMCON Replacement of leadership in 8 banks Today 2012 Successful recapitalization of some banks – Union Bank as an example Freedom of Information Act in 2011 Increasing public disclosure of government activity (e.g. budgeting, revenue accounts) Ministry of Finance announces forensic audit of oil revenue accounts by PWC Public hearings and corruption probes by the National Assembly Independent and well-respected regulatory agencies operating without much political interference CBN, SEC, AMCON, PENCOM, NDIC, NCC, etc.

9 Ongoing privatization and deregulation of the Nigerian economy
Fostering growth and development of the economy Reduced reliance on inefficient government parastatals for essential services More level-playing field for businesses Privatization of key sectors/services previously operated solely by the Government Telecommunications Broadcasting services Airlines Power – “A game changer” Next challenge - Deregulation of downstream petroleum sector and privatization of NNPC – will reduce opportunities for corruption An example: Telecoms Nigeria now largest telecommunications market in Africa, with 9% contribution to GDP in 2013

10 Independent judiciary and increasing citizen participation in governance matters
Governance is improved when there is a rule of law Nigeria has a fairly independent judiciary Many successful court actions against the Government (including successful election petitions) Governance is improved when citizens participate more actively Several demonstrations to promote improvement in infrastructure and service delivery in Nigeria #BringBackOurGirls is a great example Government initiatives aimed at directly reaching end users of services e.g. Ministry of Agriculture

11 Nigeria is a proven investment case, not without risks but with strong fundamentals
World Economic Forum (May 7-9) in Abuja - Billions of dollars in investments commitments. Over 1,000 participants Growing middle class (~23% of 168 million population) Youthful (~60%) and entrepreneurial population Average GDP growth rate of 7% over last 3 years

12 Example: UACN – High Return on Investment (ROI) in just 2 years
Date NSE Quotation Dividend Paid UAC Market Capitalisation 31 Dec 2011 N29.70 N1.10 N47.5 billion 31 Dec 2012 N42.00 N1.50 N67 billion 31 Dec 2013 N (post-scrip 1 for 5=N80.44) N1.60 N129 billion 21 May 2014 N (post-scrip N67.44) N1.75 N108 billion 171% ROI between Dec and Dec 2013 Price slightly lower now due to profit taking by investors, but still a good return CBN official Naira/Dollar rate remained relatively unchanged since 2011 purchase date

13 “If we are to be present in Africa, we need to be present in Nigeria”
Francois Hollande, President of France “If we are to be present in Africa, we need to be present in Nigeria”

14 Thank you!

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