Transcript promoting inclusive growth under the transformation agenda

PROMOTING INCLUSIVE
GROWTH UNDER THE
TRANSFORMATION AGENDA
Bright E. Okogu
Director-General
Budget Office of the Federation
1st Covenant University International Conference on African Development Issues, Nigeria
May 5, 2014
HOW DID WE GET HERE?
1
Dependency on oil exports
2
High food importation/food insecurity
3
Housing Deficit
4
Poor Infrastructure
Macro-indicator
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1960-1969
1970-2003
Real GDP Growth (%)
2.9
3.1
Inflation (%)
3.3
21.4
Surplus (+)/Deficit (-) (% of GDP)
10.0
-4.5
Domestic 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
High Inflation
8
6
Falling Reserves
Rising Domestic
Debt
9
7
High Recurrent
Expenditure
High unemployment
2
HOW DID WE GET HERE?
3
WHERE WE ARE
GDP is one of the fastest growing in the world
 Between 2004 and 2013, real GDP grew by an average of 7% per annum
with GDP Rebasing
 Nigeria’s GDP, about US$510 billion, now largest in Africa
 Implications: on our status as a concessionary borrower from the world
bank; on critical ratios such as BOP and fiscal deficit
Inflation rate is declining
 Inflation declined from about 15% in 2004 to about 7.8% in March, 2014
Exchange rate is relatively stable
 From N132/$ in 2004 to N156/$ in 2013
External reserves are rising
 From US$7.6 billion in 2003 to about US$40 billion currently
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WHERE WE ARE (2)
Cost of governance is reducing
 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
Government borrowing is declining
 Annual Borrowing has fallen from over N1 trn in 2010 to N852 Billion in
2011, and further to N571 Billion in 2014 (as proposed)
Nigeria’s credit rating has improved
 Strong economic performance has received international validation by
rating agencies like Fitch, S&P, and Moodys {BB-}
Nigeria’s market – An Investment destination
Nigeria has become the highest investment destination in Africa
Domestic bonds included in JP Morgan and Barclays emerging market Index
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INEQUALITY: NIGERIA AND THE REST OF
THE WORLD CIA, WORLDBANK, and NBS DATA
Nigeria: 0.48 (NBS)
South Africa: 0.63
Brazil: 0.54
China: 0.42
India: 0.33
Indonesia: 0.38
Turkey: 0.40
Malaysia: 0.46
Mexico 0.47
Source: WorldBank
Source: CIA, 2013
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INEQUALITY! Maternal Mortality Rate
NIGERIA 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 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 Account
Sovereign Wealth Fund (formalisation of the ECA)
Budgetary Reforms
MTSS, MTEF and FSP
Public Financial Management reforms
Treasury Single Account (TSA)
Integrated Personnel and Payroll Information System (IPPIS)
Government Integrated Financial Management Information System
(GIFMIS)
Financial Sector reforms
Banking consolidation
AMCON
Securities market reforms (increasing capital base for stockbroking
firms, Banks’ divestment from non-banking businesses, etc)
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NIGERIA’S ECONOMIC REFORMS (2)
STRUCTURAL REFORMS
Civil Service
Right-sizing the service/skill-matching
Review of civil servants pay scales
Pension scheme reform
monetization of fringe benefits
Power
Completion of privatization of PHCN
Privatization of 10 NIPP projects in process
Accelerate works on gas pipeline infrastructure
Continued investment in hydro-electric power
Roads
Considerable progress and completion of some major projects like the EastWest road, the dualization of the Abuja-Abaji-Lokoja and the Kano-Maiduguri
roads.
Aviation
Upgrading air navigational and security systems
Complete work on the remodelling of 11 airport terminals
Accelerate construction work on the 5 new airport terminals
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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
year
Large 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?
Inclusive Growth and the Transformation Agenda
Target of the Transformation Agenda
creating decent jobs in sufficient quantities to address the protracted
problem of unemployment
laying the foundation for a robust and inclusive growth of the Nigerian
economy
improving, on a sustainable basis, the well-being of all classes of
Nigerians
Pillars of the Transformation Agenda
Fiscal
consolidation
and
Optimization
Job Creation
Strong,
Inclusive, noninflationary
growth
Strong macro-fiscal foundation has been laid;
Progress with structural reforms and job creations, but needs deepening
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WHAT ARE WE DOING TO MAKE GROWTH
MORE INCLUSIVE? (2)
Inclusive Growth and the Transformation Agenda
Key Elements of the Transformation Agenda
GOVERNANCE
•Security
•Public Service Reform
•Anti-Corruption
•Foreign Policy and
Economic Diplomacy
HUMAN CAPITAL DEVELOPMENT
•Education
•Health
•Labour and Productivity
Job creation
•Women and
Poverty Reduction
Youth Development
National Food Security
National Social security
INFRASTRUCTURE
Strong Noninflationary
REAL SECTOR
•Power
Economic Growth
•Agriculture
•Transport (Roads, Rail,
•Manufacturing
Inland Waterways & Seaports)
•Oil & Gas
•Housing
•Solid Minerals
•Water for Irrigation and Industries
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WHAT ARE WE DOING? (2)
Inclusive Growth and the Transformation Agenda
Sectoral Reforms
Agriculture
Ended Corruption in Fertilizer and Seed Sector
Growth Enhancement Support (GES) Scheme with E-WALLET
Rice and Cassava Revolution
Private Sector Investments in Agriculture
Manufacturing
policy 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 petrochemicals
Transformation 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
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WHAT ARE WE DOING? (3)
Inclusive Growth and the Transformation Agenda
Sectoral Reforms
Housing
Nigeria Mortgage Refinance Company (NMRC) has been launched, and
will increase liquidity in the housing sector and provide secondary market
for mortgage
Create over 200,000 mortgages over the next 5 years (opening
opportunities for architects, masons, carpenters, painters,
transporters, etc.)
ICT
Increasing 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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WHAT ARE WE DOING? (4)
Inclusive Growth and the Transformation Agenda
Sectoral Reforms
Education
Policy 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 North
1-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 Artisans
Creative Industry
Project Advancing Creativity and Technology (ACT) Nollywood
Policies to protect intellectual property
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WHAT ARE WE DOING? (5)
Inclusive Growth and the Transformation Agenda
The SURE-P Model
Overview
SURE-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.
Achievements
 Improved 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 interventions
Planned scale-up to 30,000 beneficiaries for the CCT program.
Ongoing rehabilitation of 74 health facilities.
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WHAT ARE WE DOING?(6)
Inclusive Growth and the Transformation Agenda
The SURE-P Model
Achievements
 Improved 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 care
28,435 deliveries by skilled birth attendants
 Community Services, Women & Youth Empowerment
CSS: 119,000 beneficiaries engaged (3,000 per State, plus FCT)
CSS: States CIC Inaugurated
CSS: Partnership with NRC, NOA, FMY for SURE-P exit and sustainability
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WHAT ARE WE DOING? (7)
Inclusive Growth and the Transformation Agenda
The SURE-P Model
Achievements
 Vocational Education Training
8 Training Centres evaluated
85% of rehabilitation completed on selected Federal Government
Training Centres
Over 62,000 applications from prospective trainees received
 Public Works / Job creation
Road maintenance pilot scheme on 40 priority 1 Federal Roads over
4,500km
Deployment and training of 3,919 workers
900 beneficiaries deployed in 3 States working on 700km District Roads
Programme
 Major works on-going in Roads and Rails Projects
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WHAT ARE WE DOING? (8)
Inclusive Growth and the Transformation Agenda
Other Special Initiatives to promote Jobs and Growth
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PURSUING INCLUSIVE GROWTH IN A
GLOBALIZED WORLD
A comment on Maskin’s Alternative Theory
Globalisation = enhanced international production
Recognizes 4 skill levels
Assumes 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 country
Emerging countries are endowed with lower level skills (C and D)
Higher skill levels earn more than lower skills level
Raising the skill levels of (lower skill workers) can reduce inequality
Some complications…
Beyond improving skills, globalization has its own inherent challenges
Limited market access in global context (other barriers)
Requisite technology not always available & expensive to acquire
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PURSUING INCLUSIVE GROWTH IN A
GLOBALIZED WORLD (2)
Globalisation is yet to deliver its promise of decreasing inequality.
Why?
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 countries
No free lunch!
Free trade is not really free for developing countries
The weight of Non-tariff barriers
Education: a necessary but not sufficient condition for inclusive growth
Yes! 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
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CONCLUDING THOUGHTS
1
Growth is on-going but not yet all-inclusive
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
Structural Transformation, Macroeconomic fundamentals , and Better Tax
Administration
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
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3
Policies, Programmes and Outcomes are in course
We are mindful of
direction
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and are optimistic that we are driving in the right
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