Banking Sector Reforms in India Ppt - PDF by hya12563

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									                                                                                                      OUTLINE
                                                                          I: Introduction:
                                                                          II: Nigeria’s Lost Decades!
                                                                          III: The Journey So Far: Reforms and
    TOWARDS VISION 2020                                                         Outcomes (1999 – 2006)
                                                                          IV: Despite Progress, Stylized Facts and
            Prof. ChukwumaC. Soludo, CFR                                        Challenges
               GOVERNOR, Central Bank of Nigeria                          V: Towards 20: 2020 --- Agenda and
Being Presentation at the Retreat for Members of the Senate of the              Strategies With a Deadline
                  Federal Republic of Nigeria.
                        October 29, 2007                                  VI: Is the Vision 2020 Doable?
                   Port Harcourt, Rivers State
                                                                          VII: Conclusions                                                                   2




                                                                         I: INTRODUCTION: It is the
I: INTRODUCTION:                                                         Economy, Full Stop!
                                                                         “If a Government does not deliver on the economy, it will neither be credible
n   Thanks for Invitation                                                     nor sustainable… ”

n   Nigeria ’s Date with History: 2020                                   “Once a country has a democratic regime, its level of economic de velopment has a very
                                                                            strong effect on the probability that democracy will survive… Democracy can be
                                                                            expected to last an average of about 8.5 years in a country with per capita income
    n   Largest African/black country                                       under $1000 per annum; 16 years in one with income between $1000 and $2000; 33
                                                                            years between $2000 and $4000; and 100 years between $4000 and $6000…
    n   Recent progress                                                     Above $6000 democracies are impregnable and can be expected to l ive forever. No
                                                                            democratic system has fallen in a country where per capita income exceeds $6055”.
    n   The BRICs                                                           Prezeworski, et al (1996) “What Makes Democracy Endure?”: Journal of
                                                                            Democracy, Vol. 7, No.1, pp. 39—59.
    n   The N-11: Nigeria to be 20 th by 2025 (Goldman                   To have a chance of sustaining Democracy for another 33 years fr om
        Sachs) --- under very low assumptions; GEM                          2015, GDP must be at least $370 billion (from its current $142
                                                                            billion), if population at current growth rate will be about 184 million.
n   Question: Can it be done?                                               This means sustaining GDP growth rate of at least 12-15 per cent
                                                                            per annum for next 8 years starting from 2007. This will surpass
                                                                            China, and break the Guinness Book of Records on World Growth
                                                                            History!

                                                                         This is the NATIONAL CHALLENGE!
                                                                     3                                                                                       4
    II: Our Past: Nigeria’s Lost Decades?                                                        III: THE JOURNEY SO FAR:
n   Recall the groundnut, palm produce, cocoa economies of the 1960s. Nigeria
                                                                                           REFORMS AND OUTCOMES (1999- 2003)
    comparable to Indonesia in 1973
                                                                                       n   De-militarisation and reforms of the military
n   By 1995 Indonesia ’s GDP was more than twice Nigeria’s. Its manufactured
    exports was 40% and Nigeria’s less than 1%.                                        n   Re-building basic institutions of the state
                                                                                            n   Police force and law enforcement
n                                                                  a
    Malaysia borrowed palm seedlings from Nigeria, but now exports plm
    produce to Nigeria!                                                                     n   ICPC and fight against corruption
                                                                                            n   Procurement Reforms --- ‘Due Process’
n   Recall the Austerity Measures; Essential Commodities era; SAP er a; Guided
    liberalization, and all forms of experiments with reforms                               n   Nurturing nascent Democratic institutions--- legislature, judiciary

n   Nigeria’s Per capita income of $2,263 in 1980 declined to $547 in 1993; $463 in
                                                                                       n   Liberalisation and Privatisation programme
    1999                                                                                    n   GSM licences and telecom revolution
                                                                                            n   Liberalisation of downstream oil sector
n   GDP growth rate in decade of 1990s was 2.8%; same with population growth
    and poverty soared to estimated 70% in 1999.                                       n   Attempts at rebuilding infrastructure--- NEPA, roads
n   Frequent military interventions characterised Nigeria ’s first four decades as a   n   Re-integration of Nigeria into global community
    nation                                                                             n   Nigeria as a stabilising force in Africa, especially West Africa
n   By 1999, Nigeria was literally a pariah and Failed State--- with defining brand    n   Several Sectoral Reforms under the BPE and line Ministries
    names of Corruption, 419; drug trafficking; lawlessness, and stagnation. Most
    Nigerians sought to flee the country, and not many people gave Nigeria a
    chance!                                                                        5                                                                                  6




                                                                                           REFORMS AND OUTCOMES….
REFORMS AND OUTCOMES ….                                                                Structural/Institutional Reforms
                                                                                          n Tax Reforms
                                                                                          n Ports and Customs Reforms
n   Focus on Economy as foundation for new                                                n Banking and Financial Sector Reforms
    Nigeria --- NEEDS ….                                                                  n Exchange Rate and Forex management
                                                                                          n Micro Finance Policy--- Micro Finance Banks
                                                                                          n Trade Policy and Tariff Reforms--- adoption of CET
n   Macroeconomic Reforms                                                                 n Liberalization / deregulation (eg. petroleum pricing)

    n   Budget and public expenditure reforms                                             n Monetization Policy
                                                                                          n Public service reforms
        (transparency and procurement reforms, Due
                                                                                           n    Strengthening the National Statistical System
        Process; oil price-based fiscal rule)                                              n    Pension Reforms ---- silent revolution….
    n   Non-accommodating monetary policy; Exchange                                        n    Breaking public sector monopolies --- power, telecom,
        Rate management                                                                         infrastructure, etc (Energy Reform Act, etc)
                                                                                           n    Urban Renewal: The Abuja Example
                                                                                           n    ICPC; EFCC; Police force quadrupled; Judiciary reforms
                                                                                   7                                                                                  8
    REFORMS AND OUTCOMES ….                                                                  OUTCOMES……SO FAR?
n   Sectoral Reforms                                                        Nigeria on the way to ‘Emerging Market’ status
     n Presidential initiatives on Agriculture
                                                                                                   GDP: WHAT HAS CHANGED?
     n Solid minerals

     n Education ---- ??

     n Power and energy reforms especially local content in oil                               Indicator              1999            2005            2006*
       sector: understanding the nature of Power crisis
n   Regulatory Reforms
                                                                        GDP [Nominal Naira value] (Million)         4,799,966.00    14,894,454.44   18,222,800.00
     n NCC; NAFDAC; SON; SEC; CBN

n   Pursuit of Debt Relief and Integration of Economy into              GDP [Nominal US Dollar value]   (Million)     51,783.28       112,789.93      141,646.33
    global system
     n External Agencies of Restraint, including:                       GDP Growth Rate                                   1.19             6.51             6.0
     n PSI with IMF; submit to External Rating Agencies                 Non-oil GDP Growth Rate                           4.37             8.59            8.93
     n WAMZ, single currency and convergence criteria                   OIL GDP                                          -7.50             0.50           -4.67
     n Nigeria part of core of NEPAD and its Peer Review
       mechanism                                                        Source: National Bureau of Statistics
                                                                        Note: 2006 Figure provisional
                                                              9         US dollar GDP value at N127.5 to 1 Dollar for all periods                              10




GDP Per Capita (US$)
                                                                     REAL GDP Growth (%)
                                                                   n Non- oil    sector powers a new economy
                                                                   n Non- oil    sector growth out-performed overall growth during the reform
                                                                   years




                                                              11                                                                                               12
 Sectoral Share of Total GDP                                 Poverty Incidence & Literacy Rate
                                                                                             Poverty on the
                                                                                                decline




                                                                        Adult literacy on
                                                                          the increase


                                                    13                                                             14




Industrial Capacity Utilization & Teledensity              Movement in Inflation and Real Minimum Wage
                                                                                            Inflation abates
                                     Poor power supply                                      due to effective
                                     constrains capacity                                    monetary, exchange
                                        utilization in                                      rate, fiscal policy
                                          industry                                          and growth of agric.




 Telecom revolution
                                                                  Real minimum
 empowers economy
                                                                 wage on the rise
                                                                      again


                                                    15                                                             16
                 Federal Government Fiscal Operations                                                                                                                                                                                                                                                                                                External Debt (US$ billion)                                                                              Domestic Debt (US$ billion)
                                                                                                                                                                                                                                                                                                                                    40                                                                                                           16
                                                      Real Federal Government Expenditure                                                                                                                                                                                                                                           35                                                                                                           14
                                                                                                                                                                                                                                                                                                                                    30                                                                                                           12




                                                                                                                                                                                                                                                                                                                                                                                                                                     US$ billion
                                                                                                                                                                                                                                                                                                                          US$ billion
                                       2,000.00                                                                                                                                                                                                                                                                                     25                                                                                                           10
                                       1,800.00
                                       1,600.00                                                                                                                                                                                      Federal Government                                                                             20                                                                                                             8
                        N'million




                                       1,400.00
                                       1,200.00                                                                                                                                                                                       expenditure falls                                                                             15                                                                                                             6
                                       1,000.00                                                                                                                                                                                                                                                                                     10                                                                                                             4
                                        800.00                                                                                                                                                                                          In real terms                                                                                   5                                                                                                          2
                                        600.00
                                        400.00                                                                                                                                                                                                                                                                                          0                                                                                                          0
                                        200.00
                                           0.00                                                                                                                                                                                                                                                                                             1975 1980 1990 1991- 1999 2003 2004 2006                                                                   1975 1980 1990 1991- 1999 2003 2004 2006
                                                                  1975          1980 1990 1991- 1999 2003 2004 2006                                                                                                                                                                                                                                        1998                                                                                                       1998
                                                                                          1998


                                                                                                                                                                                                                                                                                                                                                                                  NIGERIA’S DEBT PROFILE


                                                                  Overall Fiscal Balance (% of GDP)                                                                                                                                                                                                                                                  External Debt (% of GDP)                                                                                  Domestic Debt (% of GDP)
                                                                                                                                                                                                                                                                                                                                             53.62               54.21
                                                                                                                                                                                                                                    The nominal                                                                                   60
                                                                                                                                                                                                                                                                                                                                                                                                                                            16         15.1     14.32
                                                     0                                                                                                                                                                                                                                                                                                                    42.01                                                                                                 12.39
                                                    -1
                                                                                                                                                                                                                                    overall fiscal                                                                                50                                                   41.1                                                 14
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        15.63
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          11.8
                                                                                                                                                                                                                                                                                                                                                       34.74                                                                                                                                     9.65




                                                                                                                                                                                                                                                                                                            Percent (%)
                                                                                                                                                                                                                                   deficit narrows                                                                                                                                                                                          12
                                       N'million




                                                    -2                                                                                                                                                                                                                                                                            40




                                                                                                                                                                                                                                                                                                                                                                                                                              Percent (%)
                                                                                                                                                                                                                                                                                                                                                                                                                                            10
                                                    -3
                                                                                                                                                                                                                                    significantly                                                                                 30
                                                                                                                                                                                                                                                                                                                                                                                                                                            8
                                                    -4
                                                                                                                                                                                                                                                                                                                                  20                                                                                                        6
                                                    -5                                                                                                                                                                                                                                                                                                                                           2.5
                                                                                                                                                                                                                                                                                                                                  10                                                                                                        4
                                                    -6
                                                             1975             1980           1990 1991- 1999                             2003 2004 2006                                                                                                                                                                                                                                                                                     2
                                                                                                                                                                                                                                                                                                                                        0
                                                                                                  1998                                                                                                                                                                                                                                                                                                                                      0
                                                                                                                                                                                                                                                                                                                                            1990       1991-     1999     2003        2004      2006
                                                                                                                                                                                                                                                                                                                                                                                                                                                       1990     1991-   1999    2003      2004   2006
                                                                                                                                                                                                                                                                                                                                                       1998
                                                                                                                                                                                                                                                                                                                                                                                                                                                                1998
                                                                                                                                                                                                                                                                                  17                                                                                                                                                                                                                    18




              40.00
                                                                        External Debt (US$ billion)

                                                                                                                                                                                      16.00           15.11
                                                                                                                                                                                                                     Domestic Debt (US$ billion)
                                                                                                                                                                                                                                                                                                                                        Movement in Foreign Reserves
                                                                                                                                 35.94
                                                                                                                                                                                                                                    13.95
              35.00                                                    33.18                                          32.92                                                           14.00                                                                                             13.67
                                                                                                                                                                                                                                                                                                                                                                  Nigeria's Foreign Reserves
                                                                                     29.44
              30.00                                                                                   28.07                                                                           12.00
                                                                                                                                                                                                                                                                         10.31                             45,000.00                                                                                                       42,298.00
              25.00                                                                                                                                                                                                                                         9.71
US$ billion




                                                                                                                                                                                      10.00                          9.34
                                                                                                                                                                        US$ billion




                                                                                                                                                                                                                                                                                                           40,000.00
              20.00                                                                                                                                                                                                                                  8.09
                                                                                                                                                                                       8.00                                                                                                                35,000.00

                                                                                                                                                                                                                                                                                                                                                                                                                                                                               External reserves
                                                                                                                                                                                                                                                                                                U $bli n




              15.00                                                                                                                                                                    6.00                                                                                                                30,000.00
                                                                                                                                                                                                                                                                                                 S ' ilo




                                                                                                                                                                                                                                                                                                           25,000.00
              10.00
                                                                                                                                                                                       4.00
                                                                                                                                                                                               2.68                                                                                                        20,000.00                                                                                              16,955.02
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  hit all-time
               5.00                                        3.42                                                                           3.54
                                    0.56                                                                                                                                               2.00                                                                                                                15,000.00
                                                                                                                                                                                                                                                                                                                                                        9,967.09
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   high level
               0.00
                                    1975                    90
                                                           18          1990        1991-1998          1999             2003      2004     2006                                         0.00                                                                                                                10,000.00                                                                                   7,467.78
                                                                                                                                                                                               1975    1980          1990      1991-1998             1999   2003         2004            2006                                               5,488.51               4,348.59 3,548.51 5,450.00
                                                                                             Period                                                                                                                                                                                                         5,000.00
                                                                                                                                                                                                                                            Period
                                                                                                                                                                                                                                                                                                                          0.00
                                                                                                                                                                                                                                                                                                                                             1975         1980          1990      1991-         1999     2003       2004            2006
                                                                                                                                                                                                                                                                                                                                                                                  1998
                                                                                                                                                                                                                                                                                                                                                                                        Period

                                                                                                                       NIGERIA’S DEBT PROFILE
                                                                                                                                                                                                                                                                                                                                                   Foreign Reserve: Number of months of Import cover

                                                                                External Debt (% of GDP)                                                                                                            Domestic Debt (% of GDP)                                                               30.00
                               60.00
                                                                                        54.21                                                                               18.00
                                                                                                                                                                                                                                                                                                           25.00
                                                                                                                                                                                                                                                                                                                                                                                                                              25.60                                              Significant surge
                                                   53.62

                               50.00
                                                                                                                                                                            16.00
                                                                                                                                                                                              15.10
                                                                                                                                                                                                          14.32
                                                                                                                                                                                                                            15.63

                                                                                                                                                                                                                                                                                                           20.00
                                                                                                                                                                                                                                                                                                                                                                                                                                                                               In external reserves
                                                                                                                                                                                                                                                                                                 u br




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                translates to more
                                                                                                                                                                                                                                                                                                Nme




                                                                                                              42.01           41.10                                         14.00
                                                                                                                                                                                                                                                 12.39
                               40.00                                                                                                                                                                                                                           11.80
                                                                      34.74                                                                                                 12.00                                                                                                                          15.00                                                                                                  13.62
                 Percent (%)




                                                                                                                                                          Percent (%)




                               30.00
                                                                                                                                                                            10.00
                                                                                                                                                                                                                                                                                 9.65                                                   11.18
                                                                                                                                                                                                                                                                                                                                                                  10.55                                                                                                         than 25 months of
                                                                                                                                                                                                                                                                                                           10.00                                       8.11                                   7.60
                               20.00
                                                                                                                                                                                8.00
                                                                                                                                                                                                                                                                                                                                                                               5.22                    5.55                                                                       Imports cover
                                                                                                                                                                                6.00                                                                                                                        5.00

                                                                                                                                                                                4.00
                               10.00
                                                                                                                                                                                                                                                                                                            0.00
                                                                                                                                           2.50                                 2.00                                                                                                                                                    1975           1980       1990         1991-          1999     2003       2004        2006
                                0.00                                                                                                                                                                                                                                                                                                                                           1998
                                                    1990            1991-1998            1999                 2003             2004        2006                                 0.00
                                                                                                                                                                                              1990      1991-1998           1999                 2003              20
                                                                                                                                                                                                                                                                    04           2006
                                                                                                                                                                                                                                                                                                                                                                                      Period
                                                                                                Period
                                                                                                                                                                                                                                      Period

                                                                                                                                                                                                                                                                                  19                                                                                                                                                                                                                    20
                                                                                                                                                                                                                        Parallell Market Premia (percent)


                            Overall BOP Position                                                                                                                                              0


                                                                                                                                                                                            -10
                                                                                                                                                                                                                                                                         -0.77
                                                                                                            EXTERNAL SECTOR                                                                                                       -7.07        -8.52   -4.9
                                                                                                                                                                                                                                                                -5.52


                                                                        Overall BOP position                   INDICATORS                                                                   -20      -16.36




                                                                                                                                                                                   Pre t
                                                                                                                                                                                    ec n
                                                                        swings to a surplus                                                                                                 -30


                                                                                                                                                                                            -40

                                     Overall Balance of Payments (% of GDP)
                                                                                                                                                                                            -50
                                                                                                                                                                                                                               -55.18
             15                                                                                                                                                                             -60
                                                                                                                                                                                                      1990         1991-1998     1999          2003    2004    2006     1st Qtr.
                                                                                                                                                                                                                                                                        2007
                                                                                    9.67     9.78
             10

                              4.72                                                                                                                    Exchange Rate: Appreciation/Depreciation
              5
P r e t( )
 ec n %




                                                                                                                           20.00

                    0.73                                                                                                   10.00
                                                                                                                                                         9.04
                                                                                                                                           2.28                                                                                                 2.65
              0                                                                                                            0.00

                                                                                                                       -10.00          1975              1980          1990      1991-1998                1999         2003        2004         2006
                    1975      1980       1990    1991-1998      1999      2003      2004     2006
                                                                                                                                                                                                                      -6.48            -3.10
              -5                                                          -1.61                                        -20.00
                                                                                                                                                                       -8.04




                                                                                                             Rt ( )
                                                                                                                                                                                           -10.30




                                                                                                              ae%
                                                                                                                       -30.00
                                         -4.88
                                                  -2.90                                                                -40.00


             -10                                                                                                       -50.00


                                                               -10.20                                                  -60.00

                                                                                                                       -70.00

             -15                                                                                                       -80.00                                                                             -76.39

                                                           Period                                                      -90.00

                                                                                                    21                                                                                            Period                                                                      22




                                                                                                                                                                 Monetary Aggregates
       Nigeria Has Finally Achieved Convergence In                                                                                                    3-Months Deposit and Prime Lending Rates


              Exchange Rates After 20 Years                                                                           3



                                                                                                                      2
                                                                                                                       0



                                                                                                                       5
                                                                                                                                                                26
                                                                                                                                                                         22.7875
                                                                                                                                                                                             21.3
                                                                                                                      20                                         19.6
                                                                                                                                                                                                          19.6       18.91
                                                                                                                                                                                                                                17.33
                                                                                                                                                                                                                                                              Spread between
                                                                                                           Rt ( )
                                                                                                            ae %




                            Naira Exchange Rates (N/US$1.00): Jan. 2006 - Mar. 2007                                   15                                                       14.86375                      14.79
                                                                                                                                                                                                                                                                deposit and
                                                                                                                                                                                                  12.68                 12.8
                                                                                                                      10                     8.166666667                                                                               10.25                       lending
                   150                                                                                                5
                                                                                                                                   6
                                                                                                                                                    5.75
                                                                                                                                                                                                                                                               rates narrows
                   145                                                                                                0
                                                                                                                                       3


                                                                                                                               1975               1980       1990       1991-1998           1999          2003       2004       2006
                   140                                                                                                                                                         Period


                   135                                                                                                                               Prime Lending Rate (percent)             3 Months Savings Rate (%)


Rate               130                                                                                                                                   Deviation between Actual and M2 Targets
                                                                                                                                                                   (Percentage Points)
                   125
                                                                                                                      10.00

                   120                                                                                                 5.00                                                                                  3.70

                   115                                                                                                 0.00
                                                                                                                                                                                                                                                           Deviation from
                                                                                                                                   1991-1998                    1999               2003                      2004              2006
                                                                                                         D vai n




                                                                                                                                                                                                                                                           target narrows -
                                                                                                          e i to




                                                                                                                      -5.00
                                                                                                                                                                                                                               -3.90
                                                     -06
                                 6




                                                                                                7
                                                                  06
                                          06




                                                                             6
                      -06




                                                                                     -07
                             ar-0




                                                                                            ar-0




                                                                                                                                                                                                                                                         an indication of the
                                                                          v-0
                                        ay-




                                                                                                                      -10.00
                                                               pt-
                                                  Jul
                   Jan




                                                                                  Jan




                                                                                                                                                                                   -10.00
                                                                        No
                            M




                                                                                           M
                                       M




                                                             Se




                                                                                                                      -15.00               -12.93
                                                                                                                                                                                                                                                          effectiveness of
                                                                                                                      -20.00                                                                                                                               monetary policy
                               WDAS                   BDC                  Inter-Bank                                 -25.00                                 -23.12
                                                                                                                                                                                   Period
                                                                                                    23                                                                                                                                                                        24
                           OUTCOMES…SO FAR?                                                                       Emerging new Financial System…
              n Services   sector growing faster than
                                                                                                              n   New banking system powering new economy
                industry; no change yet in agric                                                                  n   About 6-7 banks expected with over US$1 billion in tier 1
                share; ICT growth consistent with                                                                     (pure equity) capital by end of 2007
                                                                                                                  n   Now 12 banks with market capitalisation ranging between
                new economy                                                                                           $1 bn and $5 billion. These could range between
                                                                                                                      US$2billion and US$6 billion by end 2007
              n Institutions are getting better: culture                                                          n   16 Nigerian banks now in top 1000 in the world. There was
                                                                                                                      none in 2003; and 5 out of top 10 in Africa; Nigerian Bank
                of impunity lessening; EFCC; ICPC;                                                                    ranked 355th in the world---- The Banker
                                                                                                                      Banks are the soundest and safest they have ever been
                CBN; FIRS; NAFDAC; SON; Due                                                                       n

                                                                                                                  n   Big ticket assets being created
                Process                                                                                           n   AFC and An International Financial Centre
                                                                                                                  n   Vision 2020 as new Vision for the Next Economy


                                                                                                         25                                                                   26




                       TOTAL ASSETS OF BANKS                               TOTAL CAPITAL OF TIER 1 BANKS

              7,000
                                          6,738.0                     1000
                                                                       900
                                                                                                                  Emerging new Financial System…
              6,000
                                                                      800
                                                                                                 993.0
              5,000                                                   700                                     n   Capital Market Explosion
                                                          N'billion
N'billion




                                                                      600
              4,000
                                                                      500
              3,000                                                   400                                         n   About 20 companies with market cap of US$1 billion
                                                                      300
              2,000

              1,000
                           1,184.0                                    200
                                                                                    86.0
                                                                                                                      and above (India has about 100): About 21 in West
                                                                      100
                   0                                                       0
                                                                                 Dec 99         Dec 06
                                                                                                                      Africa, out of which Nigeria has 20. None in 1999.
                          Dec 99         Dec 06
                                                                                                                  n   Stable prices (exchange rate, inflation) and stronger
                                                 BANKING SECTOR                                                       banking system powering NSE
                                                  KEY INDICATORS
                                                                                                                  n    Thousands of Nigerians are making money out of
                                                                                                                      the capital market
                   Ratio of Banks Non-Performing                               No of Unsound Banks
                               Loans
                                                                      14
                                                                                   13                             n   NSE capitalization expected to hit US$100 billion in
                           28.3
              30                                                      12                           No                 2008, ahead of Egypt and second only to JSE: now
                                                                                                 unsound
              25                                                      10
                                                                                                 Bank in              about N9 trillion (over $70 billion)
                                                          Number




              20                                                      8
  Ratio (%)




                                                                                                  2007
              15                                                      6                                           n   Pension assets (now over N600 billion) and long-
                                                                      4
              10

               5                                                      2
                                                                                                                      term capital growing
                                          8.8                                                        0
               0                                                      0
                         Dec 99         Dec 06                                  Dec 99         Dec 06    27                                                                   28
                                                                                                                                                                                  International Community Voting
                          Capital Market Indicators                                                                                                                               with their Wallet….
                                                                                                                     Market Capitalzation (N' bil ion)                            The World Is Voting for the Nigerian Economy
                         All Share Value Index (1984=100)
                                                                                                                                                                                      n     Nigeria exited external debt of about US$33 billion: frees
        50000                                                                47,529.8             9000                                                                                      resources for MDG; freer economic space--- less intrusion
        45000                                                                                     8000                                                              7764.32                 by BWIs and Creditors
        40000                                                                                     7000
                                                                                                                                                                                      n      FATF de-listed Nigeria
        35000                                                     33,358.3
                                                                                                  6000
                                                                                                                                                                                      n     Fitch and S&P rated Nigeria BB- (1st Sovereign rating ever
Percent (%)




                                                                                        Naira billion




        30000                                                                                                                                              5120.9                           for the country)
                                                       23,844.5                                   5000
        25000
                                            20,128.9                                                                                                                                  n     Fitch rated Nigerian banking system ‘D’--- same group
                                                                                                  4000
        20000                                                                                                                                                                               with China; Poland; India; Russia; etc.
        15000                                                                                     3000                                                                                n     FDI and portfolio inflows more than doubling every year---
                                                                                                                                                  1925.9
        10000
                                  5,226.4
                                                                                                  2000                           1324.9                                                     - about US$7 billion in 2006
          5000                                                                                    1000
                  175.1 1,752.7                                                                                0      294.1                                                           n     Non-oil exports grew by 24% in 2006 with China and India
              0                                                                                         0                                                                                   becoming preferred partners
                  1990     1991- 1999        2003       2004       2006 May 8,                              1991-1998 1999        2003            2004     2006     April 2007        n     Diaspora remittances over $4 billion per annum
                           1998                                         2007                                                             Period



                                                                                                                                                                             29                                                                     30




                                                                                                                                                                                  Stylized Facts and Challenges:
      IV: Stylised Facts and Challenges Ahead                                                                                                                                     Poverty Levels by Zones 1980-2004
      n           Despite Progress, Still a Very Long Way to Go!
                                                                                                                                                                                  Zone           1980      1985       1992       1996       2004
      n           Per capita income barely $1,000; USA about $32,000;
                  South Africa over $5,300. At current pop growth rate,                                                                                                           South South 13.2         45.7       40.8       58.2       35.1
                  and if GDP grows at 13% p.a, it will be in 2033 that
                  Nigeria achieves today’s per capita income of SA. At                                                                                                            South East     12.9      30.4       41.0       53.5       26.7
                  current 6% growth, it will be in 2065.
      n           POVERTY: 1 out of 2 Nigerians in poverty                                                                                                                        South West     13.4      38.6       43.1       60.9       43.0
                  n      Poverty becoming Dynastic – children of the poor likely to
                         become poor due to widening gap in access to quality education                                                                                           North          32.2      50.8       46.0       64.7       67.0
                         and size of family                                                                                                                                       Central
                  n      Spatial inequality ---- See Tables
                                                                                                                                                                                  North East     35.5      54.9       54.0       70.1       72.2
      n           INEQUALITY: Nigeria one of most unequal societies
      n           UNEMPLOYMENT: Urbanization rate 5.3% as one of                                                                                                                  North West     37.7      52.1       36.5       77.2       71.2
                  fastest in world, with urban youth unemployment at
                  about 20%---- Time Bomb!
                                                                                                                                                                             31                                                                     32
Stylized Facts and Challenges:                                                    Stylized Facts and Challenges …..
What Explains Poverty Incidence?                                              n    Breaking the Natural Resource/Oil Curse--- culture of ‘cake-sharing ’.
                                                                              n    Productive Structure still dominated by Primary Commodities--- with oil
1.     Household Size: In 2004, single member                                      and gas; agriculture, solid minerals: manufacturing and services are still
       households had 12.6% poverty incidence; 2-4                                 insignificant
                                                                              n    Infrastructure Gap: power and transportation
       member households 39.3%; 5-9 member                                          n Nigerian manufacturers face about 40% competitive disadvantage due
       households, 57.9%; 10- 20 member households,                                    to poor business environment
       73%; and above 20 member households, 90.7%                             n    Security of lives and property: law and order
                                                                                    n Armed gangs and criminality a major threat everywhere
2.     Education: Households headed by those without                          n    Niger - Delta Crisis: Binding constraint on the economy!
       education had 68.7% poverty; primary                                   n                                                            ’s
                                                                                   EDUCATION crisis: Nigeria cannot compete in today world. Our R&D
                                                                                   investment lowest among comparator countries, even in Africa.
       education, 48.7%; secondary, 44.3%; post                                    Universities cannot offer more than 10% placement to those who
       secondary, 26%.                                                             demand it, but even out of this, more than 60% of graduates are
                                                                                   unemployable.
3.     Occupation: Dominant in agriculture and                                n    Desertification and Deforestation
       forestry, 67%                                                          n    Water Crisis ---- Nigeria cannot guarantee safe drinking water to more
                                                                                   than 60% of population
4.     Rural Areas contributed 65% to poverty in 2004                         n    Agriculture still rain-fed: 60% of land fallow: Reinventing NALDA?

                                                                         33                                                                              34




                                                                                  V: TOWARDS 20: 2020 --- Agenda
Stylized Facts and Challenges...                                                  and Strategies With a Deadline
n    Domestic Debt burden---- growing! Unfunded pension arrears huge
     (over N1 trillion)                                                               A clear VISION?
                                                                                      n Vision of a prosperous country based on hard work and
n    Over 17 million housing deficit--- to cost over N3 trillion
                                                                                        productivity of the citizens and sound value system . A
n    High population growth rate--- over 3%--- one of highest in world                  vision that breaks away from a natural resource and rent -
n    Value for money in public expenditure still very low, especiallyin                 dependent society to one based on intangible wealth,
     the States …. (some 25- 40%)                                                       entrepreneurship, and competition
n    Social service delivery still poor --- SERVICOM needs revolution
n    No effective Gas Policy  ----Power and Industrial Parks Hampered                 n   Objectives of Economic Reform?---- poverty reduction;
n    Mass Urban decay    ----                                                             employment generation, wealth creation and value re-
n    Pervasive corruption                                                                 orientation?
n    Weak public service: underpaid, inefficient
                                                                                  Agenda and Strategies must be such that lead to:
n    Weak Ports and Customs procedures--- Cotonou more competitive
                                                                                      n   At least 13% annual GDP growth Rate that is broad-
n    Re-building confidence in Electoral process and Democratic                           based (Diversified production structure, poverty -reducing
     institutions                                                                         and employment generating)
n    Challenge of Constitutional Reforms --- to strengthen institutions of            n   Reduction in incidence of Poverty by at least 80%
     Economic and Democratic Governance
                                                                         35
                                                                                      n   Create at least 3-4 million new jobs per annum           36
GROWTH SECTORS AND
ENABLERS?......                                                           TOWARDS 2020 ........
n   GROWTH SECTORS?                                                       n   Remember Li Kuan Yew: “Get few things
    n   Agriculture; Oil and Gas; Manufacturing; Tourism; Solid
        Minerals; and Services                                                right, and keep doing them right ”!
    n   Mortgage/Housing Revolution
                                                                              Consolidate on few consensuses and
n GROWTH ENABLERS
Five most important concerns of producers                                     Reforms
    n   Security of lives and property, law and order                          n   Democracy, Rule of Law and good governance
    n   Infrastructure, including Power                                        n   Private sector-led, competitive market economy
    n   Macroeconomic stability --- Inflation, Exchange Rate,
        Interest rate.                                                         n   Fight against corruption and law and order
    n   Finance--- availability and cost
                                                                               n   Macroeconomic stability--- price stability
    n   Enabling laws and regulatory effectiveness and policy
        consistency: Predictability of Level playing field for all             n   Institutional reforms, including efficiency of public
        operators
                                                                                   sector
                                                                     37                                                                           38




                                                                          TOWARDS 2020.....
TOWARDS 2020.....                                                          ARTICULATE A NATIONAL PLAN; (caveat: This is Democracy!)
COMPETITIVE BUT COORDINATED FEDERALISM, with                              (Recognizing who our competitors in the global competition are):
  increased devolution to States ---- Getting the States to Work
  in coordinated manner will be a major revolution---- 36 states          n   Some Elements of the Agenda include:
  but ONE Economy !
n Fed. Govt to concentrate on what best to deliver on the                      n   Infrastructure, especially POWER and Transportation
  ‘Exclusive List’, and providing the national ‘public/common                  n    Security of Lives and Property    -- including resolution of the
  goods’ e.g. security; law and order; macro stability;                            Niger Delta crisis; Rule of Law. Is Federal Police enough?
  regulation; policy; etc.                                                     n   Financial System Strategy 2020 (FSS 2020) with 400 initiatives
n A strategy of Coordination/competition for items on the                      n                         ---
                                                                                   The New Naira Policy becoming Africa’s Reference currency!
  ‘Concurrent List’, eg. Infrastructure; Agriculture; Education;               n   Establish an International Financial Centre
  Health; Tourism; water; etc                                                  n   Consolidate on Macroeconomic Stability– Inflation, exch rate,
n Use Matching Grants Framework and foster Peer Review                             interest rate
  Mechanism: Reward Innovation and Excellence in States                        n   Revolution in Consumer Credit; Mortgage; and SME Financing
n Design Robust Measurement Framework--- State-level
  statistics to be mainstreamed (Benchmarking; eg. BECANS,
  etc)
                                                                     39                                                                           40
                                                                                             TOWARDS 2020 ......
TOWARDS 2020.....                                                                            Role of National Assembly?
     n                                       ---
         Medium- Long - Term BUDGET Framework to underpin the
         long-term PLAN
          •   New Framework for Managing a Petroleum Fund                                    q   Without Requisite Legal Infrastructure,
          •   Ports and Customs Reforms --- clear customs in 2 – 6 Hours                         2020 will not happen!
          •   Tax policy consistent with production needs
          •   National Strategy on Foreign Borrowing                                         q   Agenda setting through Appropriation and
     n   Electoral Reforms --- credibility and transparency
     n   Constitutional Amendments--- especially to create/strengthen
                                                                                                 as Pressure Group
         institutions for a stronger economy                                                 q   Oversight function/champion for public
     n   Education and ICT revolution --- break Dynasties of Poverty
     n   Aggressive Fight Against Corruption: ICPC; EFCC; etc                                    accountability
     n   Deepen Public Sector Reforms: Size, efficiency, remuneration
     n   Strategy for Environmental Sustainability  ---
     n   Agricultural revolution: conquering nature....
     n   Etc, etc.
                                                                                        41




TOWARDS 2020...
Part of Legislative Agenda ....?                                                             Outstanding Legal Challenges
q General                                                                                    q Information and Communications Technology (ICT)
     qInternational Financial Centre Law - New                                                   q Cyber crime - New
   q Evidence Act -Amendment                                                                     q E-transactions and e-payments - New
                                                                                                q Privacy and data protection New
   q Consumer Protection
                                                                                                q E-documentation - New
   q Consumer Credit --- New
                                                                                                q Electronic signature - New
   q Creating commercial courts - Constitutional amendment
                                                                                                q National identity - New
q Credit                                                                                     q Investment Laws
   q Equipment Leasing and Hire Purchase Laws –Amendment/New                                    q Commodities trading (Derivatives – Options, Futures, Swaps etc) - New

   q Law for establishing registries for moveable collateral assets i n Nigeria - New           q Taxation - Amendment

q Institutions                                                                               q Insurance
     q   Banking and Other Financial Institutions Act (BOFIA) - Amendment                       q NAICOM and Insurance Acts -Amendment

     q   Company and Allied Matters Act (CAMA) -Amendment                                       q Insurance and Pension Protection Fund - New

                                                                                             q Mortgage (Real Estate)
                                                                                                q Land Use Act – Constitutional Amendment

                                                                                                q Tenancy laws -Amendment

                                                                                                q Mortgage insurance laws - New
    VI: IS VISION 2020 DOABLE?:
    OPPORTUNITIES ABOUND….                                                Opportunities Abound….
                                                                          n   Nigeria’s vast and largely youthful population has
NIGERIA HAS ENOUGH GROWTH RESERVES TO UNLEASH AND                             capacity to create huge demand through the emergence
  SUSTAIN HIGH GROWTH                                                         of a large middle class (population of 140 million)
n   Agriculture has huge untapped capacity: Over 60% of Nigeria’s         n   Improving telecommunications system and IT system for
    arable land not under cultivation                                         productivity
n   Nigeria is a bed of gas (6 highest in the world). It is the world’s
                                 th
                                                                          n   Addressing the Business Environment will unleash
    future fuel of choice
                                                                              capacity, by improving efficiency
n   The Gulf Of Guinea is now a major exploration zone and Nigeria is
    discovering huge deepwater oil reserves.                              n   Financial System the most robust ever---- attracting US$
n   Oil prices to remain buoyant in medium term                               billions in private capital. Currently, “all portfolio/equity
n   External Reserves at almost $47 billion                                   investors have packed their bags and heading to
n   Burden of External Debt (over $33 billion) lifted---- Freer Policy        Nigeria…. If you don’t have a Nigerian/African Strategy,
    Space and not beholden to the BWIs.
n   17 million Nigerians in the Diaspora: remittances and potential           you don’t have a strategy at all”. Risk is that ‘countries
    supply of skills, global networks, etc                                    that receive up to 5% of GDP as capital inflows over a
n   Awakening Nigeria’s dormant capital --- real estate/mortgage              period of time experience financial crisis. We are fine-
    revolution                                                                tuning strategy to be pro-active!
                                                                     45
                                                                          n   Economy about to Explode…..Needs orderly explosion!        46




RISKS AND PRESSURE POINTS…                                                VII: CONCLUSIONS….
n   Globalisation: capital flows and trade. Small differences
    among countries matter greatly and could make or mar                  Let us start running NOW--- the clock is ticking…
    countries ….. Billions of dollars could flow out in a
    week…(Herding Effect as witnessed in Asia and Latin
    America during Contagion)                                             n   MOBILIZE THE COUNTRY AROUND A PLAN? A
n   WAMZ: Macro and structural convergence in West Africa.                    National, not a Federal, Plan.
n   Message: Policy errors are heavily punished. Most of gains            n   National Assembly has critical role in providing the
    can be wiped out by any wrong policy measure.
n   Pressure points: Economy becoming too sophisticated for the
                                                                              legal infrastructure
    economic managers. Shortage of highly skilled economic                n   All Stakeholders Have Major Roles to play
    managers! How do you attract them?
n   Dominant voice is about ‘sharing the cake’, the issue is about
    ‘Baking the Cake’. Overcoming pressure for distributional
    rather than Productive Efficiency is a key challenge!
n   Every policy creates winners and losers: Losers will not walk
    away without a fight!

                                                                     47                                                                  48
Thank You For
  Listening


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