USA Africa Dialogue Series - Fwd: [Naijaintellects] Nigeria’s Economy; Are the Good Times Here Again?

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From: elombah daniel <elsdaniel@yahoo.com>
Date: 17 February 2011 16:10
Subject: [Naijaintellects] Nigeria's Economy; Are the Good Times Here Again?
To: NIgerianWorldForum@yahoogroups.com

Nigeria's Economy; Are the Good Times Here Again?

Latest Headlines seems to suggest this is the case. Here are few examples this week alone:

1. Nigeria: Foreign exchange demand falls, as reserves rise

Efforts by the Central Bank of Nigeria (CBN) to block all loopholes for currency speculation may be paying off as demand for foreign exchange has declined in the last few weeks. From $300 million to $350 million average demand per auction for much of last year, the claims now hover around N200 million to N250 million. As a result, the CBN is able to significantly meet genuine dollar demand. For instance, the financial regulator sold a total of $874.04 during the fortnight up to February 4, representing 93.5 per cent of the $935.15 demanded.

 

2. Nigeria Foreign Investment Hits N381bn

Securities and Exchange Commission (SEC)'said Thursday that the lasting solution to Nigeria's huge infrastructure deficit  was to continue to  grow the capital market to a world class standard, such that the needed funds could be optimally raised from it. SEC pointed this out,  as it also revealed that the  total  foreign portfolio investment  in 2010 in the country through the nation's capital market was N381.34 billion, which accounted for 48 percent of the aggregate turnover value. The figure also represented 88.33 percent increase over N202.483 billion recorded in the previous year.

 

3. Nigeria External Reserves rise by $1bn in 2 weeks

Nigeria's external reserves increased by over $1bn in about two weeks to reach $34.62 billion Friday, from $33.53 billion by mid-January, 2011. Foreign exchange dealers attributed the increase in the reserves to reduced pressure for dollars at the wholesale Dutch auction system (WDAS) as well as improvements in the performance of the Nation's external sector - arising from soaring international oil prices.

 

4. Nigerian Growth Accelerated to 8.29% in Fourth Quarter

Nigeria's economic growth accelerated to 8.29 percent in the fourth quarter, boosted by agriculture and higher oil prices. Growth picked up from 7.86 percent in the previous three months, Information Minister Labaran Maku told reporters today in the capital, Abuja. Lamido Sanusi, governor of the Central Bank of Nigeria, had presented the growth figures to the Cabinet earlier. Non-oil industries, led by agriculture, grew 8.87 percent and may continue to fuel expansion as the government encourages banks to lend more to farmers, Maku said, forecasting growth of 8 percent in the first quarter of this year. The country's 24 lenders have agreed to triple their lending to agriculture to 3 percent of loans, Phillips Oduoza, chief executive officer of United Bank for Africa Plc., said yesterday.

 

5. Nigeria's Economy to Expand 7.98%, Faster Than 2010

Nigeria's economy, the second- largest in sub-Saharan Africa, is projected to grow by 7.98 percent this year, led by non-oil industries including agriculture, said Finance Minister Olusegun Aganga. The expansion, which compares with 7.85 percent in the previous year, comes amid a "commitment to grow the non-oil sector to become the major driver of economic growth" this year, Aganga said in a speech today in Abuja, the capital.

Africa's most populous country is seeking to diversify its economy, which relies on oil for some 95 percent of its export income, Aganga said. The industry accounts for just 16 percent of gross domestic product, while agriculture accounts for 42 percent, according to the Abuja-based National Bureau of Statistics.

On Feb. 1, the country's 24 banks pledged to triple lending to agriculture to aid the industry and boost economic growth, said Phillips Oduoza, chief executive officer of United Bank for Africa Plc.

Aganga said the security situation in the restive oil-rich Niger Delta has "improved" and helped boost crude production amid high international prices. An infrastructure deficit estimated at $100 billion remains a "major" challenge to growth, he added.

 

6. FG Surpasses Revenue Target by 6.9%

The profile of Nigeria's revenue generation continued to rise in October last year when the total federally-collected revenue was estimated at N623.31 billion, an increase of 6.9 and 55.6 per cent above the proportionate monthly budget estimate and the receipts in the corresponding period of 2009, respectively. However, the Central Bank of Nigeria (CBN), which on Thursday churned out the figures in its Monthly Report for the month of October 2010, pointed out that the performance was 3.3 per cent below the receipts in the preceding month. According to the report, at N462.35 billion, gross oil receipts, which constituted 74.2 per cent of the total revenue, exceeded the proportionate monthly budget revenue estimate and the receipts in the corresponding period of 2009 by 13.2 and 79.9 per cent, respectively.

 

The above reports are remarkable coming barely two few weeks after a Daily Sun Editorial raised alarm on the "Declining rate of Foreign Direct Investment in the Country" and the Financial Times Declared that "concerns over a huge outflow of money from Nigeria's "rainy day" oil fund, known as the excess crude account (ECA), forced the government to pay investors higher yields than would otherwise have been expected as Nigeria sold $500m bond to investors. The Financial Times had said several major funds determined they are not interested in the deal because of Nigeria's deteriorating fiscal situation and worries about how President Goodluck Jonathan's government has run the excess crude account, designed to store up windfall oil revenues. remarkably, the bod sales was oversubscribed in demonstration of foreign investors confidence in Nigeria's economy.

 

The SUN Editorial said:

Nigeria's bleak economic outlook took another hit recently following a disturbing report on dwindling Foreign Direct Investment (FDI) in the country. FDI is basically an index to measure the inflow of capital from foreign investors. According to the report by the United Nations Conference on Trade and Development Global Investment Trends Monitor, based in Geneva, Foreign Direct Investment inflows to Nigeria dropped considerably between 2009 and 2010, by $3.7bn, from $6bn in 2009 to $2.3bn, last year. This is a huge fall of 60.4 percent. Obviously, this is not a good sign for the economy. In practical terms, it implies that it is about time government began to address the problems that discourage foreign investment and other business interests, and which contribute to capital flight to other countries.

 

However, another headline should give us cause for concern:

 

$32 BILLION MISSING IN NIGERIA – NY Times

The New York Times Tuesday February 8 detailed a very disturbing scenario of how more than $32 billion has been squandered in Nigeria, without any evidence of how the money was spent.  Nigeria, despite getting billions and billions in oil revenue, is still basically a backward country.  Entitled "Riches Flow into Nigeria, But Are Lost After Arrival," the Times' West African correspondent, Adam Nossiter said: "Some of the vast pile of cash,

 perhaps $5 billion to $8 billion, has been spent on so-far unfruitful efforts to upgrade Nigeria's feeble power output, which remains no  better than that of a mid-size American city for a nation of over 150 million people, Africa's most populous.  But the rest, some $22 billion or more, remains largely unaccounted for."

In particular, foreign diplomats, analysts and rating agencies, not to mention the residents themselves, wonder what the government has done with nearly $30 billion in supplementary oil revenues. More of this money has gone to the Niger Delta than anywhere else, under a federal formula that favors the oil-producing region, but evidence of how it has been spent is elusive.

Toward the end of 2008, about $30 billion sat in Nigeria's Excess Crude Account, a government fund of extra revenue that exceeds what the government has budgeted from the projected price of oil. When oil prices are high, money flows into the account, and it becomes an irresistible, unaccounted-for jackpot, especially for the largely autonomous governors of Nigeria's 36 states, according to financial analysts and good-government groups.

From $30 billion, the fund had trickled down to about $450 million by mid-2010, according to Veronica Kalema of Fitch Ratings, which late last year downgraded Nigeria's outlook from "stable" to "negative" partly because of the vast and largely unaccounted outflow from the Excess Crude Account.

By the beginning of this year, the fund had trickled down to about $300 million, according to reports in the Nigerian media. Officials with the Finance Ministry did not respond to calls for comment this month, but about $15 billion was spent in 2010 alone, Ms. Kalema said.

Some of the vast pile of cash, perhaps $5 billion to $8 billion, has been spent on so-far unfruitful efforts to upgrade Nigeria's feeble power output, which remains no better than that of a mid-size American city for a nation of over 150 million people, Africa's most populous. But the rest, some $22 billion or more, remains largely unaccounted for.

"Where the hell did the remaining $22 billion-plus go?" asked a foreign-based adviser to the Nigerian government who asked to remain anonymous because of his continuing relationship with it. "Most of the remaining $22 billion was drawn down by the state governments without any particular projects to spend it on, just on the basis of, there's money sitting in the accounts, lets draw it down."

It is entirely possible that nobody has a clear picture of what has become of this vast sum after it was parceled out at meetings of the state governors.

"It's basically free money," said another financial consultant who has advised the Nigerian government. "Once you get it, there are no checks and balances on what happens to it."

http://elombah.com/index.php?option=com_content&view=article&id=5286:nigerias-economy-are-the-good-times-here-again&catid=52:daniel-elombah&Itemid=73

Written by Daniel Elombah

Publisher: www.elombah.com

(A Nigerian Perspective on World Affairs)

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