Transcript - Africa Newsroom

Open for Business: Matching
Opportunities with Patient Capital
DR. OKECHUKWU ENELAMAH
H O N O U R A B L E M I N I S T E R – I N D U S T R Y,
TRADE AND INVESTMENT
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
Outline
▪ Overview of the State of the Economy
▪ MITI’s Plan to partner with private capital for
diversification and growth
▪ Why Nigeria continues to be an attractive
market for patient capital
▪ Conclusion
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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Oil price crash exposed the structural deficiencies
in Nigeria’s large and thriving economy
POPULATION (M)
NOMINAL GDP ($B)
USD/NAIRA FX RATE
Low level of FX allocation
began in 2014 due to
unavailability
Parallel
mkt. rate
CBN rate
OIL REVENUES (NGN T)
NET FDI INFLOWS ($B)
INFLATION Y-O-Y (%)
Nigeria entered a perfect economic storm starting from 2014 –
Diversification & Growth are key to recovery and ensuring a more stable future
*at YTD (9/28/2016). FX rate yearly numbers represent FX conversion rate values on the last day of that year; Oil revenue data only available till FY ‘15
Note: The nominal GDP and FDI inflows are at current prices (include the effect of inflation); FX rates taken on the last day of the year
Source: Trading Economics, globaleconomy.com, World Bank, CBN
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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… however, the fundamentals of the Nigerian
economy remain strong
Detail
Implication
▪
▪
170m+ people
▪
▪
Large domestic market
▪
Youthful population – median age 19
▪
Potential for potential inventors with
home-grown technology
▪
▪
Diversification already underway
▪
Potential to significantly improve labor
productivity with improved
infrastructure
▪
Potential to increase contribution of the
working age to the GDP of the country
▪
Source of government revenue to
develop other sectors
Size
Productivity
and
demographic
potential
Abundant
natural
resources
Strengthening
democratic
institutions
Nigeria has largest population in
Africa and 7th largest in the world
Current low productivity across key
economy sectors
▪
Nigeria has the 10th largest proven
oil reserves (37mn barrels) and
9th largest natural gas reserves
(~5Tr m3)
▪
Commercially viable minerals and
arable land
▪
▪
▪
Continuing unstopped democracy
Elections becoming more credible
Successful transfer of power to
opposition party
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
Large unskilled and semi-skilled labor
force that can be drawn at low wages
▪ Stability of political institutions
▪ More ownership of the democratic
process by citizens
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Countries in difficulty have used different strategies
to strengthen and diversify economy
GERMANY (1950)
• Post WW II industrial depression
-
Context
-
<50% of capacity pre-world war
with price control and weak currency
policies driving depression
>2M people unemployed due to lack of
jobs
• Focused policy on establishing
currency stability, freeing market
forces and setting strong legal
parameters for the economy
Actions
• Removed price control policies
allowing market pressures to
determine prices
- Goods reappeared on open
market as producers could charge
real prices
- Worker absenteeism vanished as
consumption grew
ITALY (50’-70’)
• Boom in SME industries
accelerated economic development
• Globalisation put SMEs industry
under pressure from cheaper
foreign rivals products
• Small businesses aggregated into
groups (special clusters) close to
raw materials source to drive
down costs and be more
competitive
-
Cotton/textile, marble, leather, steel
clusters etc. formed around the
country
• Close proximity of SMEs forced
focus on innovation as a
competitive advantage amongst
individual businesses
• Introduced new, higher value
currency (Deutsche mark) to replace
old currency
Results
• Experienced strong exportsbased growth and extended
surge in productivity
• Stable currency encouraged
businesses to invest in restoring
industrial capacity
CHILE (2004)
• Copper - main economic export
accounting for ~75% of total
exports and >25% of GDP
• Commodities market dip in 2011
driving copper revenues down
• Created special economic zones
(SEZs) for non copper sectors
(especially agro sectors)
-
• Invested in investment
promotion body (CNIC2) focused
on investment and innovation in
technology for non-copper sectors
• Lifted restrictive policies limiting
favourable business environment
-
• SMEs able to resist pressure on
products through superior
innovation, cost efficiency and
quality
Note: 1) SEZ: Special Economic Zone; 2) CNIC: Council on Innovation for Competitiveness
Source: World Bank, Brookings Institute
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
Leveraged improved policies (open
trade, increased use of FTAs and
aggressive SEZ infrastructure
development)
Reduced business registration wait
time to <1 day
Granted expedited 1 year visas to
foreign entrepreneurs
• Total exports increased >18%
in 2 years
-
Copper exports as a share of total
declined to 47%
• 732 new foreign businesses and
1,523 entrepreneurs setup in Yr. 1
Effectively used SEZ strategy
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Key issues and how we plan to address them
Key Issues
Status
quo
1
Action
Goals
1
Poor macroeconomic
performance
2
Oil export dependent economy
• Crude oil & related products
account for 90% of exports**
• High unemployment
• Low GDP growth
• Most consumption &
production inputs imported
• Inflation
Make the economy more
inclusive across Nigeria
3
2
Diversify to insulate from
external shocks
KPIs
• GDP / GDP per capita
• Unemployment rate
- Target 3M jobs added by 2019
• Regional inequality
• Sustained wealth creation
across the country
• Trade deficit
• Weight of oil vs. non oil
industries (manufacturing, etc.)
• Grow export revenues
Low FDI inflows
• ~1% of GDP**
• Foreign companies exiting
Nigeria en masse
3
Increase investor
trust in Nigeria
• Net FDI inflows
• EoDB* - Climb 69 places (from
169 to 100/189 countries by
2018)
• # of foreign companies
entering/operating in Nigeria
Note: * EoDB – Ease of Doing Business
Source: **World Bank
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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MITI’s Plan has 5 execution principles
Guiding Principles
1
Favourable
economic
framework
• MITI to create an
economic framework
for inclusive &
diversified growth
of a modern economy
• MITI framework will
unleash private
sector initiative by
removing barriers to
start and operate
businesses
• MITI framework will
focus particularly on
the growth of
Nigerian exporters
2
3
4
5
MSME support
Sector prioritization
Partnerships and
JVs
• MITI to drive
specific initiatives
that benefit MSMEs
• MITI to specifically
assist smaller
entrepreneurs with
affordable credit
and simplified
bureaucratic
requirements
• Examples include
the MSME
microcredit
scheme instituted
in 2016 or Equity
Funding
• MITI to intervene in
high potential
sectors, e.g.
manufacturing,
value add
agriculture, digital
economy, mining
etc.
• Investments in
these sectors will
have a multiplier
effect by creating
jobs, improving the
trade balance and
putting growth
enablers in place
• MITI will pursue JVs
and partnerships/
PPP where
beneficial, e.g. in
infrastructure and in
value added
manufacturing
• Negotiate
investment/free
trade agreements
with trade bodies
• Partnerships with
other foreign trade
bodies are critical
to executing MITI’s
mission
Immediate
implementation
• MITI will drive
implementation
using structured
approach
- Drive results
using set goals,
KPIs and
timelines
- Set up the right
teams to design,
implement and
track policies
- Help build a
cohesive
communications
strategy to
inspire
commitment and
build confidence
MITI will provide immediate execution support in critical industries in 2016 and help transition
to more structural reforms in 2017/2018
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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The plan has a strong focus on Results Delivery
Nigeria
Diversification &
Growth Plan
Core Pillars
Foundational
Enablers
2
Implement the
Nigerian Industrial
Revolution Plan
(NIRP)
3
Support Micro,
Small & Medium
Enterprises
(MSMEs)
Support
digitalization
of the Nigerian
economy
4
Establish an Enabling Business Environment (EBE)
5
Establish 21st century trade/free trade agreements
6
Attract domestic and foreign investments
7
Institutionalize the Structural Reform Agenda (SRA)
8
Results Delivery
1
Results Delivery
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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Multiple interdependencies exist in the execution
and will be actively managed
Public ministries &
bodies, e.g. ministry
of Agriculture,
Foreign Affairs
EMT (Economic
Management Team)
• Interdisciplinary team
set up by President Buhari
to lead Nigeria’s economy
- Chaired by Vice President
Yemi Osibanjo
- Preparing a separate
“Recovery Package” that
incorporates aspects of MITI
plan
• Coordination with other
ministries is required for:
Cooperation
is required
between various
Training institutions
and universities
• Cooperation with training
institutions is required in
order to help
institutionalize the
changes in investment,
trade, and industry
bodies for success
• Cross ministry
efforts, e.g.
creating an
Enabling Business
Environment (EBE)
• Execution of high
priority actions in
critical sectors
Public private
partnerships
MITI Working groups
• Interaction with private
organizations critical to
driving investment in
certain areas, e.g.
research, infrastructure
• MITI to setup a High Level “Diversification and Growth Working Group” that establishes a partnership between government,
captains of the Nigerian private sector and Nigerian science and research institutes
- The Working Group will create innovation, application and implementation for increased productivity, wealth creation and competitiveness
- The Working Group will monitor and assess Plan implementation.
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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MITI will also continue to provide input into the
progress of other areas critical to economic growth
• Energy (Power)
- Uninterrupted power supply is a necessity for the Nigerian economy to operate at its full
potential
- Current expensive gas supply multiplies the burden on the manufacturing sector
- MITI is incorporating Nigeria’s power sector investment needs into its trade and investment
agreements
- MITI will follow up with specific inputs into the Energy Master Plan in coordination with the
Ministry of Power, Works, and Housing
• Foreign Exchange
- MITI will assist in clarification of Nigeria’s Forex policy, to further attract foreign investments into
Nigeria
- MITI will work to ensure that tariffs are applied to imported goods at a rate that is in line with
international obligations
• Agriculture
- The revival of agriculture, once Nigeria’s primary export, is critical to the diversification of the economy
- MITI will channel inputs into the Agricultural Sector plan through the Federal Ministry of Agriculture
• Manufacturing:
- Transportation: MITI will be actively involved with negotiations with potential foreign entrants into this
space (e.g. companies looking to source provide buses to Nigeria)
- Infrastructure: MITI is currently assisting in the review of various plans and methods to develop Nigeria’s
road and railway infrastructure
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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“Why Nigeria continues to be an attractive market
for private capital”
3 MAIN ATTRIBUTES SUPPORT NIGERIA AS AN ATTRACTIVE INVESTMENT
DESTINATION
• Robust fundamentals with positive outlook on economic fundamentals for the medium
and long-term
Positive
Fundament • Resilient private sector with skilled, low cost labour
als and
• Large market with potential to be the hub/entry for the larger West Africa market
macro
• Relatively Diversified economy across sectors and regions
outlook
• Fast growing financial services sector and free flow of investment capital
• Tax Incentives: Amended Company tax laws, 5 year pioneer tax status in 71 industries
and specific sector tax incentives in force
Investment
incentives
• Export Incentives and duty drawbacks: Manufacturing sector duty refund on final
exportation
• Other special incentives:
- “Special investment incentives” and negotiated incentive packages with NIPC and government
- Double taxation, profit repatriation agreements
- Guarantees against expropriation
• Relatively stable political climate
Favourable
business • Improving economic policy congruence and consistency
• Existing investment in supporting infrastructure (transport, power etc.) development
climate
Source: Nigeria Investment Promotion Commission
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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Conclusion
▪ The current environment is a case of - A crisis is too
great an opportunity to waste
▪ The government is implementing a plan that would
transform the Economy and we are focused on
delivery
▪ Perspective matters – the short term headwinds
should not becloud the fundamental attractiveness of
the market
▪ The government seeks to partner with private
capital to diversify and grow the economy
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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Thank you
FEDERAL MINISTRY OF INDUSTRY, TRADE & INVESTMENT
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