2012 witnessed remarked changes in various sectors of the economy,
especially the banking industry. While government tried to map out new
strategies to reposition the economy for greater growth, experts are of
the opinion that government needs a pragmatic approach to actualise the
transformation of the economy.Sunday Business takes a look at the
activities in the various sectors during the outgoing year.
The energy sector
The electricity generating capacity stands at between 4,200 and 5,000 mega watts (MW), even as government stressed that with the effort of the Nigeria Independent Power Projects (NIPP), commissioned in phases across the country, power generation will hit7,000 MW by the first quarter of 2013. Government emphasised that with gas production in excess of 500 standards cubic feet, more modules from the NIPP plants will be able to provide electricity to the national grid, such that many communities can enjoy uninterrupted power supply of 16 hours per day and more.
Economic experts are of the opinion that Nigeria needs electricity generation capacity of about 35,000 MW by the year 2020 for domestic and industrial consumption. A lecturer in Economics Department, Lagos State University (LASU), who spoke with Sunday Business under anonymity, explained, “ Nigeria has a population of over N160million people. So we need about 35,000MW of electricity generation to achieve Vision 20:2020. For instance, South Africa has about 40,000MW electricity generation with a population of only 50 million and Brazil has 100,000MW with a population of just 192 million. It means we have a long way to go in tackling the power crisis. There must be significant investment in rural electrification programmes to fast track expansion of transmission and distribution lines to rural areas in the country.”
Also, Sunday Business learnt that government has concluded plans to disburse N170 billion to workers of the Power Holding Company of Nigeria (PHCN) to cover their gratuities as well as pension as agreed by government and representatives of labour unions in the PHCN, for the transfer of ownership of the parastatal to successor companies.
The downstream sector/Petroleum Industry Bill
The oil and gas sector of the economy has been in the news throughout 2012. For instance, the year began with a sudden increase in the pump price of fuel from N65 per litre to N150 and subsequently N97 after a nationwide strike and protests by Nigeria Labour Congress (NLC), which compelled government to reconsider its position. The new fuel price regime paved the way for a probe into the activities of oil marketers in the country, which yielded subsidy scam, which is still lingering.
Also, the Petroleum Industrial Bill (PIB) designed to streamline operations in the sector to ensure a level playing ground for International Oil Companies as well as local firms has been in the National Assembly since 2008 without any positive outcome. The bill has not been passed into law notwithstanding the fact that the petroleum minister, Mrs. Diezani Allison-Madueke, said that the revised version of the bill was sent the National Assembly for consideration.
The banking industry
The banking sector experienced some reforms ranging from merger of some banks to the removal of N100 charge on the use of Automated Teller Machines (ATM). Some of the reforms in the sector include, cashless policy, which limits the level of withdrawal by individuals to N500.000 and corporate body to N3million, attempt by the Central Bank of Nigeria to introduce N5000 bank note, and currency restructuring. For instance, in first quarter of 2012, Access Bank Plc and Intercontinental fused into one entity, Ecobank acquired Oceanic Bank,
Spring Bank became Enterprise Bank Limited, First City Monument Bank acquired FinBank, Bank PHB became Keystone Bank Limited, Afribank became Mainstreet Bank Limited, Sterling Bank acquired Equitorial Trust Bank while Union Bank of Nigeria is now owned by African Capital Alliance Consortium.
Manufacturing sector
Economic experts say the manufacturing sector contributes only 5 per cent to the Gross Domestic Product (GDP). The Nigerian Association of Chambers of Commerce, Industry Mines and Agriculture (NACCIMA) recently said no fewer than 800 companies in Nigeria closed shop between 2009 and 2011 mainly due to harsh operating business environment.
According to the president of NACCIMA, Dr. Herbert Ajayi. “More than half of the surviving firms had been classified as ailing, which poses a serious threat to the survival of the manufacturing industry in the country. Capacity utilisation in industries hovered around 30 per cent and 45 per cent on the average, with 100 per cent overhead costs. Political and economic factors contribute greatly to the decline in the manufacturing sectors. For instance, poor infrastructure and epileptic power supply are also key impediments to the industry. The industry as a whole operates on more than 70 per cent of energy it generates, using generators and operating these generators greatly increases the cost of manufacturing goods in Nigeria . Other factors include increase in the prices of petroleum products used by industries, multiple taxation, unabated smuggling and inadequate access to finance, both local and abroad”.
Data obtained from the office of the Director General, West African Institute of Financial and Economic Management, stated, “In developed countries where the real sectors are thriving, manufacturing contribute as much as between 35 and 40 per cent to the GDP. For instance, in Malaysia, the manufacturing sector contributess about 45 per cent to the GDP. Our manufacturing sector must function optimally to generate more jobs if we are to realise the Vision 2020 target.
“At present, about 30million youths are unemployed in Nigeria . The economy is growing at almost 8 per cent, but we still have rising level of poverty of about 70 per cent. The rate of unemployment stands at about 24 per cent, which is about 35 percent among the youths. Though increasing unemployment rate is a global phenomenon, we must tackle it in Nigeria . The inflation rate is 12.8 per cent. So what we are experiencing as economic growth rate is only marginal increase. Every year, government prepares the entire budget depending on income from crude oil. So, the economy is still heavily dependent on oil, while the manufacturing sector, which has the potentials to create jobs and generate more revenue, is not given the required attention. The rate of unemployment is growing faster than the growth of the economy. Increase in rural unemployment is also disturbing”.
Aviation sector
The sector under the supervision of Nigerian Civil Aviation Authority (NCAA) witnessed tremendous improvements until the Dana plane crash of June, which claimed over 153 lives. Some experts said the sector is suffering from policies inconsistency and lack of proper plan to enhance rapid development.
However, the sector may soon experience greater efficiency, as one of the leading airlines in the world, British Airways, has indicated interest to assist Nigeria in developing the industry. The company will partner with the Nigerian government to reposition the sector .
Agriculture/ Small and Medium Enterprises (SMEs)
The agric sector witnessed some improvement during the year. For instance, the sector, according to the National Bureau of Statistics (NBS), contributed N2.9 billion to GDP in the second quarter of 2012. The revenue accounted for about 41 percent of the oil-rich nation’s total GDP for the quarter. Aside from that, under the Agricultural Transformation Agenda (ATA), government is implementing a new fertilizer programme whereby government will withdraw from fertilizer distribution to the development of the private sector to take on these functions to enhance development.
In the same vein, Small and Medium Scale Enterprises, according to experts, contribute nearly half of the GDP and accounts for over 25 percent of employment in the country. Also, the recent release from the Enterprise Baseline Survey 2012 stated that there are 17 million Small and Medium Scale Enterprises in Nigeria , employing 32.41 million persons and making a contribution of about 46.54 per cent to the GDP.
Also, the CBN has been in the forefront of building a synergy between the financial and real sector of the economy in order to enhance accessibility to capital for operators of SMEs in the country. The initiative is to ensure that the operators of SMEs have access to low cost funds to boost their operations and for start-ups to enhance expansion of smaller units of businesses across the country. This will bring about long-term benefit of boosting domestic production capacity for local manufacturers, such that they are able to carry out operations with reduced cost. In April 2009, the CBN created N200 billion Commercial Agriculture Credit Scheme to stimulate growth in the SMEs sub-sector, with subsequent approval of N500 billion intervention fund in 2010 for the manufacturing industry.
The energy sector
The electricity generating capacity stands at between 4,200 and 5,000 mega watts (MW), even as government stressed that with the effort of the Nigeria Independent Power Projects (NIPP), commissioned in phases across the country, power generation will hit7,000 MW by the first quarter of 2013. Government emphasised that with gas production in excess of 500 standards cubic feet, more modules from the NIPP plants will be able to provide electricity to the national grid, such that many communities can enjoy uninterrupted power supply of 16 hours per day and more.
Economic experts are of the opinion that Nigeria needs electricity generation capacity of about 35,000 MW by the year 2020 for domestic and industrial consumption. A lecturer in Economics Department, Lagos State University (LASU), who spoke with Sunday Business under anonymity, explained, “ Nigeria has a population of over N160million people. So we need about 35,000MW of electricity generation to achieve Vision 20:2020. For instance, South Africa has about 40,000MW electricity generation with a population of only 50 million and Brazil has 100,000MW with a population of just 192 million. It means we have a long way to go in tackling the power crisis. There must be significant investment in rural electrification programmes to fast track expansion of transmission and distribution lines to rural areas in the country.”
Also, Sunday Business learnt that government has concluded plans to disburse N170 billion to workers of the Power Holding Company of Nigeria (PHCN) to cover their gratuities as well as pension as agreed by government and representatives of labour unions in the PHCN, for the transfer of ownership of the parastatal to successor companies.
The downstream sector/Petroleum Industry Bill
The oil and gas sector of the economy has been in the news throughout 2012. For instance, the year began with a sudden increase in the pump price of fuel from N65 per litre to N150 and subsequently N97 after a nationwide strike and protests by Nigeria Labour Congress (NLC), which compelled government to reconsider its position. The new fuel price regime paved the way for a probe into the activities of oil marketers in the country, which yielded subsidy scam, which is still lingering.
Also, the Petroleum Industrial Bill (PIB) designed to streamline operations in the sector to ensure a level playing ground for International Oil Companies as well as local firms has been in the National Assembly since 2008 without any positive outcome. The bill has not been passed into law notwithstanding the fact that the petroleum minister, Mrs. Diezani Allison-Madueke, said that the revised version of the bill was sent the National Assembly for consideration.
The banking industry
The banking sector experienced some reforms ranging from merger of some banks to the removal of N100 charge on the use of Automated Teller Machines (ATM). Some of the reforms in the sector include, cashless policy, which limits the level of withdrawal by individuals to N500.000 and corporate body to N3million, attempt by the Central Bank of Nigeria to introduce N5000 bank note, and currency restructuring. For instance, in first quarter of 2012, Access Bank Plc and Intercontinental fused into one entity, Ecobank acquired Oceanic Bank,
Spring Bank became Enterprise Bank Limited, First City Monument Bank acquired FinBank, Bank PHB became Keystone Bank Limited, Afribank became Mainstreet Bank Limited, Sterling Bank acquired Equitorial Trust Bank while Union Bank of Nigeria is now owned by African Capital Alliance Consortium.
Manufacturing sector
Economic experts say the manufacturing sector contributes only 5 per cent to the Gross Domestic Product (GDP). The Nigerian Association of Chambers of Commerce, Industry Mines and Agriculture (NACCIMA) recently said no fewer than 800 companies in Nigeria closed shop between 2009 and 2011 mainly due to harsh operating business environment.
According to the president of NACCIMA, Dr. Herbert Ajayi. “More than half of the surviving firms had been classified as ailing, which poses a serious threat to the survival of the manufacturing industry in the country. Capacity utilisation in industries hovered around 30 per cent and 45 per cent on the average, with 100 per cent overhead costs. Political and economic factors contribute greatly to the decline in the manufacturing sectors. For instance, poor infrastructure and epileptic power supply are also key impediments to the industry. The industry as a whole operates on more than 70 per cent of energy it generates, using generators and operating these generators greatly increases the cost of manufacturing goods in Nigeria . Other factors include increase in the prices of petroleum products used by industries, multiple taxation, unabated smuggling and inadequate access to finance, both local and abroad”.
Data obtained from the office of the Director General, West African Institute of Financial and Economic Management, stated, “In developed countries where the real sectors are thriving, manufacturing contribute as much as between 35 and 40 per cent to the GDP. For instance, in Malaysia, the manufacturing sector contributess about 45 per cent to the GDP. Our manufacturing sector must function optimally to generate more jobs if we are to realise the Vision 2020 target.
“At present, about 30million youths are unemployed in Nigeria . The economy is growing at almost 8 per cent, but we still have rising level of poverty of about 70 per cent. The rate of unemployment stands at about 24 per cent, which is about 35 percent among the youths. Though increasing unemployment rate is a global phenomenon, we must tackle it in Nigeria . The inflation rate is 12.8 per cent. So what we are experiencing as economic growth rate is only marginal increase. Every year, government prepares the entire budget depending on income from crude oil. So, the economy is still heavily dependent on oil, while the manufacturing sector, which has the potentials to create jobs and generate more revenue, is not given the required attention. The rate of unemployment is growing faster than the growth of the economy. Increase in rural unemployment is also disturbing”.
Aviation sector
The sector under the supervision of Nigerian Civil Aviation Authority (NCAA) witnessed tremendous improvements until the Dana plane crash of June, which claimed over 153 lives. Some experts said the sector is suffering from policies inconsistency and lack of proper plan to enhance rapid development.
However, the sector may soon experience greater efficiency, as one of the leading airlines in the world, British Airways, has indicated interest to assist Nigeria in developing the industry. The company will partner with the Nigerian government to reposition the sector .
Agriculture/ Small and Medium Enterprises (SMEs)
The agric sector witnessed some improvement during the year. For instance, the sector, according to the National Bureau of Statistics (NBS), contributed N2.9 billion to GDP in the second quarter of 2012. The revenue accounted for about 41 percent of the oil-rich nation’s total GDP for the quarter. Aside from that, under the Agricultural Transformation Agenda (ATA), government is implementing a new fertilizer programme whereby government will withdraw from fertilizer distribution to the development of the private sector to take on these functions to enhance development.
In the same vein, Small and Medium Scale Enterprises, according to experts, contribute nearly half of the GDP and accounts for over 25 percent of employment in the country. Also, the recent release from the Enterprise Baseline Survey 2012 stated that there are 17 million Small and Medium Scale Enterprises in Nigeria , employing 32.41 million persons and making a contribution of about 46.54 per cent to the GDP.
Also, the CBN has been in the forefront of building a synergy between the financial and real sector of the economy in order to enhance accessibility to capital for operators of SMEs in the country. The initiative is to ensure that the operators of SMEs have access to low cost funds to boost their operations and for start-ups to enhance expansion of smaller units of businesses across the country. This will bring about long-term benefit of boosting domestic production capacity for local manufacturers, such that they are able to carry out operations with reduced cost. In April 2009, the CBN created N200 billion Commercial Agriculture Credit Scheme to stimulate growth in the SMEs sub-sector, with subsequent approval of N500 billion intervention fund in 2010 for the manufacturing industry.
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