Transcript Document

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
Draft/ Confidential
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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”
Population - ~168m
GDP - $510bn
GDP growth rate – 6.4%
(IMF, 2013)
GDP per capita - $2,600
Inflation rate – 7.8% (Apr,
2014)
- Top destination for equity investments
in frontier markets (Rencap, 2014)
2
Despite strong outlook, Nigeria still experiences many challenges
Key Challenges
Nigeria’s Priorities as defined
in the Transformation Agenda
•
Lack of adequate infrastructure
•
•
Infrastructure – power, transport,
housing, ICT
Income inequality
•
•
High unemployment
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
•
Significant levels of poverty and
growth disparities among regions
•
Poor power supply
•
Insecurity in the North East
3
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
4
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
5
…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
6
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
7
Increasing transparency in government operations, with
independent and well respected regulatory agencies
•
•
•
•
•
Freedom of Information Act in 2011
Increasing public disclosure of
government activity (e.g. budgeting,
revenue accounts)
Mini Case Study: CBN - Handling the
financial crisis
2008
Global financial and economic crisis
2009
Nigerian economy and banking system
crisis – NSE Collapsed by 70%
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.
CBN intervention
2009 2011
2012
Today
•
Injection of N620bn of liquidity
•
Establishment of AMCON
•
Replacement of leadership in 8
banks
Successful recapitalization of some
banks – Union Bank as an example
Macro-economic stability, restored
investor confidence, stable and strong
banking sector…. foreign investor
interest in banks being currently sold
e.g. Enterprise Bank.
8
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
An example: Telecoms
- Broadcasting services
- Airlines
- Power – “A game changer”
•
Nigeria now largest telecommunications market in
Africa, with 9% contribution to GDP in 2013
Next challenge - Deregulation of downstream petroleum sector and privatization of
NNPC – will reduce opportunities for corruption
9
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
10
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)
Average GDP growth
rate of 7% over last 3
years
Youthful (~60%) and
entrepreneurial
population
11
Example: UACN – High Return on Investment (ROI) in just 2 years
Dividend Paid
UAC Market
Capitalisation
N29.70
N1.10
N47.5 billion
N42.00
N1.50
N67 billion
N1.60
N129 billion
N1.75
N108 billion
Date
NSE Quotation
31 Dec 2011
31 Dec 2012
31 Dec 2013
21 May 2014
N67.00
(post-scrip 1 for 5=N80.44)
N56.20
(post-scrip N67.44)
• 171% ROI between Dec. 2011 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
12
Francois Hollande,
President of France
“If we are to be present
in Africa, we need to be
present in Nigeria”
Thank you!
Draft/ Confidential
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent