1. NIGERIA : IMPLEMENTING AN INVESTMENT- FRIENDLY TRANSFORMATION AGENDA DR. NGOZI OKONJO-IWEALA COORDINATING MINISTER FOR THE ECONOMY HON. MINISTER OF FINANCE 17 th NIGERIAN ECONOMIC SUMMIT NOVEMBER 11, 2011

2. BACKGROUND WEAK GLOBAL ECONOMIC ENVIRONMENT – POOR SUSTAINABILITY/DEBT OUTLOOK IN SEVERAL EUROZONE COUNTRIES SOVEREIGN DEBT CRISIS IN THE EUROZONE; PARTICULARLY GREECE & ITALY RECENT DOWNWARD REVISION IN PROJECTED EUROZONE GDP UNTIL 2016 EUROZONE GDP REVISED DOWNWARD TO 1.6% GROWTH FORECAST IN 2011 FROM 1.9%. GDP EXPECTED AT 0.8% (1.6%) & 1.6% (1.8%). MANUFACTURING OUTPUT IN FRANCE, GERMANY, ITALY AND SPAIN AT 2 YEAR LOW 2012 UNEMPLOYMENT RATE GOING UP TO 8.7% FROM 7.8% 2

3. BACKGROUND (CONTD.) WEAK GLOBAL ECONOMIC ENVIRONMENT (CONTD.) – UNCERTAINTY IN US FISCAL POLICY OUTLOOK US DEBT TO GDP RATIO EXPECTED TO GROW 94.4% BY THE END OF 2011, 99.4% BY 2012 AND 102.2% BY 2013 GDP GROWTH FORECAST FOR 2010 REVISED DOWNWARD TO 2.5% FROM 3.3% – EMERGING MARKET FORECAST REVISED DOWNWARD EMERGING MARKET GROWTH REVISED DOWNWARD TO 6.4% FROM 6.6% INDIA’S GDP GROWTH FORECAST FOR 2012 REVISED DOWNWARD TO 7.82% 3

4. DIRECT POSSIBLE IMPLICATIONS FOR NIGERIA EUROPE AND THE USA ACCOUNT FOR OVER 60% OF EXPORTS OIL ACCOUNTS FOR OVER 70% OF TOTAL BUDGET REVENUE. MORE VOLATILITY IN ECONOMIC GROWTH 4

5. KEY FOCUS OF THE REFORM AGENDA: – ENSURE MACROECONOMIC STABILITY & SUSTAINABLE GROWTH – CARRY-OUT STRUCTURAL REFORMS, PRIVATIZATION, LIBERALISATION, AND DEREGULATION. – STRENTGHEN INSTITUTIONS, SUPPORT TRANSPARENCY, FIGHT AGAINST CORRUPTION. – INVEST IN PRIORITY SECTORS CREATING JOBS 5

6. ( A) FISCAL CONSOLIDATION & OPTIMIZATION REIN-IN GOVERNMENT EXPENDITURE:  NEED TO BUDGET AT PRUDENT OIL PRICES - $70 FOR 2012  ENSURE THAT FISCAL DEFICIT IS FINANCEABLE AND KEPT BELOW 3% OF GDP  REDUCE RECURRENT EXPENDITURE FROM 74.4% OF TOTAL EXPENDITURE TO BELOW 70% BY 2015  INCREASE CAPITAL EXPENDITURE BY 1.5% PER YEAR (I.E. AT LEAST 5% BY 2015)  STEADY DOMESTIC DEBT AT 16.4% OF GDP  REFORM FERTILIZER, PETROLEUM, AND OTHER INEFFICIENT SUBSIDIES.  NEED TO FOCUS ON COMPLETING EXISTING STOCK OF ONGOING PROJECTS ENSURE MACROECONOMIC STABILITY & SUSTAINABLE GROWTH 6

7.  STEM LEAKAGES IN OIL REVENUES DIVERSIFY REVENUE SOURCES : NON-OIL REVENUES ACCOUNT FOR 25% OF FEDERAL REVENUES AND ONLY 2.2% OF GDP BUT THIS IS UNUSUAL AMONG AFRICAN OIL PRODUCERS. 7 ENSURE MACROECONOMIC STABILITY & SUSTAINABLE GROWTH

8.  INCREASE NON-OIL REVENUES TAX REVENUES – REDUCE MULTIPLICITY OF TAXES AND LEVIES AND IMPROVE COLLECTION EFFICIENCY – BETTER ENFORCEMENT OF CORPORATE TAX COLLECTION  IMPROVE CONTRIBUTION FROM REVENUE GENERATING AGENCIES – VAT AND CUSTOMS 8 ENSURE MACROECONOMIC STABILITY & SUSTAINABLE GROWTH

9. (B) COORDINATION OF MONETARY AND FISCAL POLICIES  EXCHANGE RATES STABILITY AND COMPETITIVENESS  LOWER INTEREST RATES  SINGLE DIGIT INFLATION RATE (C)IMPROVE SOVEREIGN CREDIT RATING – FITCH RESTORED NIGERIA'S RATING TO BB – (STABLE) (D) IMPLEMENT THE SOVEREIGN WEALTH FUND (SWF):  BUILT FROM EXCESS CRUDE ACCOUNT. IT IS DESIGNED TO:  REGULATE PRO-CYCLICALITY IN THE BUDGET  SUPPORT INFRASTRUCTURAL DEVELOPMENT  INVEST IN FUTURE GENERATIONS 9 ENSURE MACROECONOMIC STABILITY & SUSTAINABLE GROWTH

10. 10 WHY THE SWF? A. “GOOD PRACTICE” IN ECONOMIC MANAGEMENT. - CUSHION THE IMPACT OF OIL PRICE VOLATILITY ON NIGERIA’S ECONOMIC GROWTH B. STORE NATIONAL WEALTH FOR FUTURE GENERATIONS AND RESTRUCTURE/DIVERSIFY THE ECONOMY. - PROVEN OIL RESERVES ARE DEPLETING, LESS THAN 40 YEARS LEFT. C. OPTIMAL INVESTMENT VEHICLES FOR STATE FUNDS D. SOURCE OF FUNDING TO ADDRESS NIGERIA’S ENORMOUS INFRASTRUCTURAL CHALLENGES. E. PROMOTE FOREIGN INVESTMENT - AVAILABILITY OF A “BUFFER” PORTRAYS GOOD RISK MANAGEMENT.  IMPLEMENTATION IS COMMENCING SEE RECENT NEWS MAGAZINE ADVERTS FOR EXECUTIVE POSITIONS.

11. CARRY-OUT STRUCTURAL REFORMS Source: World Bank Enterprise Survey 2011 POWER SECTOR: LACK OF ELECTRICITY IS THE BIGGEST OBSTACLE TO PRIVATE SECTOR DEVELOPMENT IN NIGERIA 11

12.  IMPLEMENT POWER SECTOR ROADMAP GENERATE, TRANSMIT, AND DISTRIBUTE STABLE AND RELIABLE ELECTRICITY. COMPLETE PRIVATISATION PROCESS FOR GENERATION AND DISTRIBUTION. COMPLETE KEY TRANSMISSION PROJECTS ACROSS THE COUNTRY IMPLEMENT COST EFFECTIVE TARIFFS  FOCUS ON CUSTOMS AND PORTS REFORM  SET ACTION PLAN TO ENSURE 48 HOURS CARGO CLEARANCE. ACTIONS ALREADY TAKEN INCLUDE:  STREAMLINING THE NUMBER OF AGENCIES FROM 14 TO 7 NAMELY, NCS, PORT HEALTH, IMMIGRATION, NIGERIAN POLICE, NPA, NIMASA, AND NDLEA ;  MANDATING 24-HOUR OPERATIONS (IN SHIFTS) FOR CUSTOMS AND OTHER AGENCIES  DISBANDING NCS TASK FORCE THAT HARRASS CARGO ON THE HIGHWAY.  STREAMLINING PAPERWORKAND BUREAUCRATIC REQUIREMENTS FOR PORTS AND CUSTOMS CLEARANCE.  INVESTING IN PORTS INFRASTRUCTURE  DEVELOPING CONTAINER MANAGEMENT STRATEGY.  FINANCIAL SECTOR REFORMS – ALREADY COMPLETED  IMPROVE DOING BUSINESS RANKING (REGISTERING PROPERTY, STARTING A BUSINESS) 12

13.  IMPROVE TI RANKING – NIGERIA CURRENTLY RANKED 134 OUT OF 178 COUNTRIES  FEDERAL, STATE, AND LOCAL GOVERNMENT BUDGET TRANSPARENCY  PUBLISH ALL LEVELS OF GOVT BUDGET REVENUES AND EXPENDITURES  EITI  PENALIZE IMPUNITY AND PROSECUTE  STOLEN ASSETS RECOVERY  EFCC AND ICPC  IMPROVE PROCUREMENT AND FINANCIAL MANAGEMENT  PUBLICATION AND POSSIBLE DEBARRMENT OF OFFENDING FIRMS  IMPROVE FEDERAL AND STATE LEVEL PROCUREMENT STRENGTHEN INSTITUTIONS AND SUPPORT GOOD GOVERNANCE 13

14. INVESTMENT IN PRIORITY SECTORS CREATING JOBS  SECURITY  INFRASTRUCTURE – POWER, ROADS, RAIL, AVIATION  AGRICULTURE  MANUFACTURING  HOUSING AND CONSTRUCTION  OIL AND GAS  SOLID MINERALS  CREATIVE INDUSTRIES  EDUCATION AND SKILLS  INFORMATION AND COMMUNICATION TECHNOLOGY (ICT)  HEALTH 14