The report highlighted key drivers to the GDP growth, citing elevated crude oil prices, sustained high interest rates and a stable crude oil output between 1.3mbpd and 1.5mbpd. Nigeria’s gross domestic product (GDP) is projected to grow by 3.1% in real terms in 2024, higher than the 2.74% recorded in 2023.

In retrospect, the report noted that the Nigerian economy demonstrated resilience in the first half of 2024, navigating through numerous macroeconomic challenges despite facing significant headwinds such as high inflationary pressures, increased foreign exchange (FX) volatility, insecurity, dwindling reserves, and fluctuations in foreign investments.

However, real GDP printed a growth of 2.98% in Q1 2024, an increase compared to 2.31% recorded in the corresponding period of 2023, although lower in contrast to 3.45% recorded in the previous quarter.

Meanwhile, economic growth has been largely driven by the services sector combined with a rebound in the oil sector, on the back of improved crude output.

ICT and banking drives growth as industrials suffers

The Nigerian industrial sector, once considered a cornerstone of economic development, comprising mining and quarrying, manufacturing, electricity, water supply, and construction subsectors has faced significant challenges in recent years, leading to tepid growth and low GDP contribution, in contrast to the likes of services and the agricultural sector.

• According to the report, inadequate infrastructure remains a critical hurdle for the industrial sector, ranging from insufficient power supply, unreliable transportation network, dollar supply crunch, and high cost of credit.
• In recent years, the sector has also suffered from low investment, while witnessing some exits like the divestments of GlaxoSmithKline (GSK), Shell, Kimberly-Clark, and Diageo in the first half of the year.
• The services sector on the other hand has recorded impressive growth, driven by the ICT and banking sectors, both growing by 5.43% and 33.3% respectively in Q1 2024.

The report highlighted the harsh economic consequences emanating from the several reforms implemented by the government in the last year, for example, the high cost of credit, increased poverty rate, and erosion of corporate earnings especially in the manufacturing and ICT sectors.

On the flip side, some of the positives that have been recorded as a result of the reforms such as improving foreign reserves level, improved capital importation, increase in FAAC allocations to the three tiers of government amongst others.

Other projections

The report indicated an expectation of tapering inflation rate albeit at elevated levels.

“We anticipate that inflation will persist at elevated levels, driven by factors including supply chain disruptions, currency depreciation, and rising production costs. Consequently, interest rates are likely to remain high in the short-to-medium term, as the Central Bank of Nigeria (CBN) continues to employ tight monetary policy to tame rising inflation and ensure FX stability.”

“In terms of foreign exchange dynamics, we anticipate the exchange rate to oscillate within the range of N1,400 to N1,500 against the US dollar, driven in part by the CBN’s efforts to attract foreign portfolio investments (FPIs) and normalize the FX market. This anticipated narrow band is expected to provide some respite to businesses and investors, aiding in planning and decision-making processes,” the report noted.

The Group Managing Director/CEO of Norrenberger, Tony Edeh commented on the report saying, “The NEO report provides a comprehensive analysis of the Nigerian economy, highlighting both challenges and opportunities. It is our hope that this report will serve as a valuable tool for businesses, investors, and policymakers in navigating the complex economic landscape.”

About the report

The Norrenberger Economic Outlook (NEO) report for H1 2024 is a comprehensive review of the Nigerian economy in the first half of the year, highlighting various changes across different markets and offering an outlook for the rest of the year.

The report is designed to help readers gain invaluable insights into monitoring pivotal economic drivers and navigating fiscal pressures.

Additionally, the report delves into the economic landscape and potential of various states within Nigeria, identifying dominant and thriving sectors in the economy. From agriculture in the northern regions to technology hubs in the southwest, and oil production in the Niger Delta, the report highlights opportunities that transcend the immediate impacts of the current reforms.

Notably, the report not only examines the current economic conditions and the effects of recent policies but also identifies future opportunities within the Nigerian economy. It serves as an essential guide for investors and stakeholders aiming to make informed decisions in a complex and evolving economic environment.

Click this link to download the full report: https://tiny/NEObeyondthereforms

About Norrenberger 

Norrenberger is a financial services Group providing bespoke financial solutions that add value to our individual and institutional clients. With a team of experienced professionals, Norrenberger offers a comprehensive range of services, including asset management, private equity, development finance, investment banking, securities trading, pensions, insurance, fintech and digital banking.

Our component companies are licensed, authorised and regulated by either the Securities & Exchange Commission (SEC), Central Bank of Nigeria (CBN), Nigerian Exchange Limited (NGX), National Pension Commission (PenCom) or National Insurance Commission (NAICOM).

Website: www.norrenberger.com

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The U.S. dollar, often regarded as the world’s primary reserve currency, serves as a benchmark for global trade and financial transactions. Nigeria, like many other nations, relies on the dollar as a key medium for international commerce. Most international trade deals, including Nigeria’s crucial oil exports, are conducted in dollars, making the value of the dollar inherently linked to the health of the Nigerian economy. 

Currency Fluctuations and Exchange Rates  

Currency fluctuations play a significant role in shaping Nigeria’s economic landscape. The local currency, the Nigerian naira, often faces challenges as it fluctuates against the dollar. Exchange rate movements impact various sectors, including imports, exports, and inflation. A weaker naira relative to the dollar can continue to increase the cost of imported goods, contributing to inflationary pressures, while a stronger naira may improve purchasing power but potentially harm export competitiveness. 

Trade Dynamics and Dollar Dependency  

Nigeria’s economy is intricately connected to global markets, and the dollar’s dominance in international trade significantly influences the country’s economic activities. The oil sector, a crucial component of Nigeria’s economy, is particularly susceptible to fluctuations in the dollar. Since oil is priced and traded globally in dollars, changes in the dollar’s value directly impact Nigeria’s revenue from oil exports, affecting the government’s budget and the overall economic stability of the nation. 

Remittances and Foreign Direct Investment  

The Nigerian diaspora, a substantial and influential community, sends billions of dollars in remittances back home annually. The value of the dollar directly impacts the purchasing power of these remittances in Nigeria. Additionally, foreign direct investment (FDI) into Nigeria often involves transactions in dollars. A strong dollar may attract more FDI, while a weaker dollar may make investments in Nigeria more appealing for foreign businesses. 

External Factors and Economic Stability  

External factors, such as global economic trends, geopolitical events, and monetary policies in major economies, can influence the value of the dollar and, consequently, Nigeria’s economic stability. Fluctuations in the dollar’s strength may impact Nigeria’s ability to manage its external debt, as loans are often denominated in foreign currencies, exposing the country to exchange rate risks. 

Challenges and Opportunities for Nigeria  

While the dollar’s impact on Nigeria’s local economy presents challenges, it also opens doors to opportunities. Diversifying trade partnerships, promoting local industries, and implementing sound monetary policies are key strategies for mitigating the negative effects of currency fluctuations. Moreover, Nigeria can leverage its abundant resources and youthful population to attract foreign investment and stimulate economic growth independently of the dollar’s influence. 

In conclusion, the impact of the U.S. dollar on Nigeria’s local economy is multifaceted, influencing trade, inflation, and overall economic stability. As Nigeria navigates the global economic landscape, policymakers and stakeholders must remain vigilant, adapting strategies to harness the opportunities and address the challenges posed by the ever-evolving dynamics of the dollar. 

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Wealth preservation involves a strategic approach to safeguarding and growing one’s assets over time, protecting them from the negative forces of market volatility and unforeseen events.

Economic uncertainty refers to a situation in which the future economic environment is difficult to predict and there is a high degree of risk or unknowns involved. This can be caused by a variety of factors, including political instability, changes in government policies, micro- and macro-economic factors, and market fluctuations.
Economic uncertainty can lead to a decrease in economic activity as people and businesses become more risk-averse. The identified sources of economic policy uncertainty in Nigeria are frequent changes in the apex bank’s (Central Bank of Nigeria) policy, unexpected changes in government policy, political interference, an unexpected fall in the global oil price, and a recession.
In preserving wealth during economic uncertainty, one must consistently sustain the purchasing power of their wealth over the long term and ensure it is available for transitioning to future generations.
The major strategies used to preserve wealth in uncertain times are:

1. Financial Planning and
2. Portfolio Diversification

Financial Planning

Financial planning is a tool used to accumulate and preserve wealth. It involves an assessment of your current financial situation and creating a plan, specifically around the management of finances and preparation for the potential costs and issues that may arise.
Creating a financial plan is important because it allows you to make the most of your assets and gives you confidence that difficulties along the way will be surmounted.
Financial planning during uncertainty, particularly inflation, can be quite challenging; all it takes is discipline and consistency.

Steps to Financial Planning

1. Find a certified financial advisor. Consult with a financial advisor who can provide personalised guidance based on your specific financial situation and goals.
2. Review/Assess your current financial situation. This is required to evaluate your current financial standing. It includes the calculation of your net worth, and tracking your income, expenses, debts, and investments. Revisit your budget and look for expenses that can be reduced or eliminated.
3. Identify your goals – Your goals must be SMART 
   Specific: Clearly state your goal e.g. I will save N1m in 6 months which is 20% of my salary.
   Measurable: Ensure you can measure success. For instance: save N167,000 monthly.
   Achievable: Set goals you know you can achieve e.g. It is 20% of my salary and it is achievable.
   Releant: Set goals relevant to your life e.g. This helps with the payment of my house rent.
   Time-Bound: Set a deadline for completion e.g. 6 months.
4. Design a plan – Set up a structure. Do I invest in a mutual fund, or do I buy stocks? Do I set up a monthly direct debit?
5. Execute the plan – Set up an emergency fund by investing in the mutual fund. Set up a life and health insurance plan.
6. Review and refine – It is advisable to have a quarterly review of your investments and plan.

Portfolio Diversification

Portfolio Diversification is important in considering investments that have the potential to outperform inflation. Some of these investments include stocks, real estate, and commodities, and have been proven over time to protect the purchasing power of your assets.
Review your portfolio regularly and adjust your asset allocation when needed to stay on track toward achieving your financial goals.

Looking to speak to a financial advisor to help you preserve your wealth? Call us on 0700-NORREN, 234 (0) 908 781 2026 OR send an email to customerservice@norrenberger.com.

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Despite the backdrop of political uncertainty, foreign exchange challenges, and global economic uncertainties, Nigeria’s stock market has shown remarkable resilience. In 2022, investors reaped impressive gains, with the market delivering a significant boost of about N5.6 trillion or 19%. This figure is notably higher than the modest 5.7% growth recorded in the previous year, underlining the market’s growing allure. 

Undoubtedly, the Nigerian stock market’s recent vigor owes much to the influx of start-up companies. These innovative ventures contributed N1.2 billion to the economy in 2022 alone. The potential is vast; should government policies support start-ups and enable their listing, a ripple effect of increased investor interest and market capitalization could transform the landscape. 

Key Insights to Navigate the Boom  

• Monitor Trends and Identify Opportunities: The ability to monitor market trends and identify emerging opportunities is important during this period of stock market expansion. Staying informed through reliable sources and leveraging analytics tools can empower investors to make informed decisions. 
• Diversification: The Golden Rule: Just as “time is money,” diversification is the bedrock of wise investment. Your portfolio should reflect your risk appetite, investment objectives, and age. Allocate your assets strategically across various sectors and industries to minimize risk and maximize potential returns. 
• Strategic Wealth Creation: The stock market is a dynamic arena where strategic thinking reigns supreme. Rather than chasing quick gains, adopt a long-term perspective. Patience and persistence often yield more substantial rewards. 

Norrenberger’s Role in the Stock Market Boom 

Norrenberger Financial Group and Norrenberger Securities Limited stand as your partner in simplifying wealth creation while harnessing technology’s potential. Our NorrenTrade platform provides a direct gateway to trade stocks on the Nigerian Stock Exchange (NGX), enabling you to take advantage of the ongoing stock market boom. Our commitment to transparency, expertise, and personalized guidance ensures that you’re equipped to navigate the market with confidence. 

As Nigeria’s stock market continues to flourish, remember that opportunity favors the prepared. It’s a journey of calculated steps, strategic decisions, and the right partners by your side.  

Contact us at customerservice@norrenberger.com to embark on your journey towards seizing this opportunity that the Nigerian stock market boom has to offer and ultimately securing your financial future.  

The post Capitalizing on the Current Nigerian Stock Market Boom   appeared first on Norrenberger Asset Management Limited.

The market is largely information-driven, which suggests that positive or pro-market information will most likely cause a positive reaction by investors and vice versa. However, the current bullish momentum being experienced in the market can be attributed to some pro-market pronouncements that were made by the current President upon assumption of office such as the petrol subsidy removal, floating of the exchange rate, and the decreasing interest rate regime in the money market.

The pronouncement on the unification of the exchange rates resulting from the floating of the Naira is particularly critical to attracting Foreign Portfolio Investors (FPIs) to our market, as they constitute a significant part of liquidity injection to the market, which drives demand and consequently stock prices.

Considering the ongoing economic reforms, how should investors take a position in the market?
Several stocks in different sectors of the market in the last year and in the months leading up to the general elections in February this year had been trading below their fair values. Despite the recent rally in the market, some stocks are still undervalued and potentially have a decent upward potential. Therefore, investors should look to taking a position now on especially fundamentally sound stocks with attractive dividend yields and upward potentials for capital appreciation.

Other factors to consider in position-taking are investing in companies within critical sectors of the economy that would benefit from government policies such as banking, petroleum (especially downstream subsector), agricultural, technological, and construction sectors.

How can investors benefit from investing in the equities market?
Investors coming to the market must be very clear about their investment objectives and goals. They need to form a strategy for attaining these goals and be dynamic when the fundamentals of these strategies change. A very important point to consider is that the stock market is a long-term market. As such, investors should match long-term funds with long-term instruments. Investing short-term funds in the long-term market could lead to undue pressure, which in turn could cause such investors to exit their positions regardless of whether their position is profitable or not.

Investors can benefit from the equities market in different ways such as earning dividends, capital appreciation, bonus issues, and a combination of all of the above. To benefit from the aforementioned, invest in stocks with good financials, history of dividend payment, and timing of investing i.e. buying fundamentally sound stocks when others are staying off it (bucking the trend), setting target prices or benchmark returns, and exiting positions when such targets are met. Finally, avoid greed by all means.

How has the unified exchange rate impacted the equities market so far?
This policy pronouncement has had a positive impact on the equities market as it reassures Foreign Portfolio Investors that should they inflow their funds to Nigeria at a certain rate. They can also repatriate the funds back to their home country at a market-determined rate as against the managed exchange rate of the past. This is a confidence booster for these FPIs who hitherto had stayed off our market but could trickle back in and therefore provide liquidity for our market.

Foreign investors’ appetite is growing, and their confidence is building. How can the government sustain this?
The policy on floating the currency needs to be sustained, better transparency in that sector is also needed. The government also has to boost its foreign reserves with productive ventures as well as blockage of leakages in the oil sector, which accounts for a major part of the country’s foreign exchange earnings. Diversification of the economy to other sectors than petroleum would also help the country earn more foreign exchange and consequently boost our reserves.

Why should potential investors sign up with Norrenberger Securities Limited?
At Norrenberger Securities Limited, we pride ourselves as simplifiers of wealth creation, a philosophy that is shared across the Norrenberger Financial Group. Our human capital is our most priced asset as we are deliberate in attracting the best talents in the market to help build an institution that is poised to add value to our clients and the investing public. We leverage technology and sound research in engaging with our clients.

Trading of stocks eases challenges investors have. How can this be made seamless?
With rising inflation numbers, most investors seek investment classes that could give returns that minimise or eliminate the impact of inflation on their funds. Trading in stocks can help achieve this goal. At Norrenberger Securities Limited, clients can trade in the market directly on their own with the help of our Norren Trade platform. We continually seek innovative ways to ensure that very complex financial products and services are simplified to the level of the not-too-savvy investor.

How would you access the economy today, bearing in mind the unification of exchange rate, fuel subsidy removal, and decreasing interest rate at the money market?
The state of the economy in the past two months has been a mixed bag of pains and gains in different quarters. The markets have seen investors make significant gains as some stocks appreciated for as much as 60% in their share prices. The stock market has seen investors hedge against inflation, as returns on their investments have exceeded the current inflation rate.

However, the flip side to this is the high cost of living that the removal of petrol subsidy has led to. The impact of this on businesses is that to maintain your labour force, a pay raise would be appropriate at this time, which in turn would lead to an increase in overheads. Businesses in turn would pass some of these increased operating costs to the final consumer, thereby reducing their purchasing power and increasing the misery index of the average Nigerian.

Nigerians are groaning under the subsidy removal while businesses are lamenting overheads, among other effects. How do you think government can quickly turn this around?
There is no quick fix to the current economic challenges facing the nation today as there have been a lot of legacy issues that needed to be addressed. The government would have to lead from the front so it makes sense to the citizenry when the government says we should tighten our belts.

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• Growth projections by the IMF and World Bank put Nigeria’s Q2 GDP at 3.2 %, can you share your thoughts on this?

Nigeria is currently rated ‘B-’ by Fitch on the back of a favourable public debt/GDP ratio, size of the economy, growth rate, domestic debt market liquidity and large oil & gas reserves. Nonetheless, the positive outlook is also constrained by weak governance, security challenges, high inflation at 22.41%, very low non-oil revenue, high hydrocarbon dependence and weakness in the exchange rate framework. There is cautious optimism on the GDP outlook for Nigeria because of the reforms under the new administration resulting to the elimination of oil subsidies, exchange rate unification and a more flexible exchange rate regime, although there is still sizeable uncertainty around the policy agenda of the new administration.

Oil production picked up from last year’s lows and I think the domestic debt market has sufficient capacity to compensate for severely constrained access to Eurobond financing. However, higher debt servicing costs and inflationary constraints to continuing deficit monetisation present risks to public finances. Bearing these factors and how the metric has played out in the past, I think the Q2 GDP will most likely hover around 2.8%.

• The May inflation rate released by NBS showed 22.41% from 22.22% in April 2023, how do investors explore a market with this rate hike?

The current inflationary trend is not peculiar to Nigeria, record high inflation rates have been witnessed across major economies of the world largely due to disruption of supply dynamics because of the Ukraine-Russia conflict which started in Q1 2022.

For context, the inflation rate in the United States of America touched an unprecedented level of 9.1% in June 2022 before slowing down to 4.05% in May 2023 while United Kingdom’s inflation rate got to as high as 11.1% in October 2022 before gradually easing to 8.7% in April 2023.

It is pertinent that investors prepare for inflationary periods because it defines price stability and avoids panic. By having a structure to protect funds from inflation, more capacity is built to weather the market volatilities, especially for long-term investments.

Despite these inflationary trends, investors continue to adopt a portfolio approach to investing, to weather the storm and reduce investment value erosion. In terms of investment objectives and risk profile, Nigerian investors are getting smarter. A handful is allocating a percentage of their portfolio to stocks that have the twin advantage of good fundamentals and attractive (double-digit) dividend yields in the equities market. Others are taking advantage of high yields in the money market space to minimise negative real returns on investment; an estimated over N507 billion worth of commercial papers have been issued in Q1 2023 most of which offered decent interest rates.

Finally, there is now increasing exposure to alternative assets such as real estate, foreign-denominated investments, private equity, commodities etc.; some of these alternative assets are not common in Nigeria. However, they offer decent returns on investment as well as diversification benefits due to their lower correlation to traditional assets like public equities and fixed-income instruments.

• Nigerian economy lost its bite with high cost of funds at 18.5%, almost crowding out the private sector, how do we resuscitate real sector funding for wealth creation?

The real sector is a prime driver of economic progress. My belief is that beyond direct funding, the real sector must be supported with the right policies. The new government should take steps to reassess the existing framework within which the real sector operates. If this is achieved, the economy will flourish. If the framework is frail or incomplete, then the real sector will struggle.

For our industries to thrive, there is a growing need for inputs to serve the growing population, many of which are agriculture based. The last administration invested heavily in agriculture, providing loans, and expanding the country’s total area of cultivated land for crops, livestock, and fisheries. The new administration must take steps to promote vibrant commodity exchanges that will guarantee minimal pricing for produce.

Building on this foundation, the leadership must accelerate faithful implementation of the ‘infrastructure master plan’ by adopting proven financing structures till it delivers an acceptable stock of hard infrastructure through seaports and airports; road, rail and water transportation linkages that can support private sector growth.

Fixing the perennial problem of energy supply must be deliberate. It is almost impossible for Nigeria’s ambitions for itself to be achieved without solving the problem of how to provide energy to homes and businesses across the country.

The action plan going forward is to improve the enabling environment, further decentralise transmission, and deliver cost-reflective tariffs to attract more private investment in the sector.

The current administration must urgently address fiscal, monetary, and trade reforms to effectively increase domestic production by accelerating inclusive growth and job creation across Nigeria. With an expansion in domestic output and growth in export, the country can gain further access to foreign exchange and make the same accessible to local importers of secondary inputs and machinery.

• Nigeria’s debt has grown almost 511 percent under Buhari, with debt to GDP ratio at 32%. how best can the new administration manage its impact on the economy?

Personally, I do not embrace the conventional wisdom that fiscal deficits by the national government are inherently bad. All governments, especially in this era of fiat currency, run secular budget deficits. This is an inherent part of modern governance. The most powerful and wealthiest governments run deficits, as do the poorest nations.

A budget deficit is not necessarily bad. Look at the Japanese example with high government borrowing and low inflation. The United States, United Kingdom, Japan, China, and India have significant amounts of national debt, with the US having the largest at over $31.46 trillion. Nigeria is facing economic challenges due to its high levels of government debt, which has led to a stunted GDP growth rate, slowing export growth rate, reduced income per capita, and increasing poverty levels. The real issue is whether deficit spending is productive or not. Unproductive deficit spending is a compound negative, especially if backed by excessive borrowing of foreign currency. This is not classroom economics, but it is the lesson of the real economic history of nations.

To salvage budget deficit and attendant borrowing implication, fiscal policy will be the main driver. Monetary policy is weaker and a less effective instrument, bad monetary policy is, of course, destructive. Even good monetary policy cannot carry the load the fiscal arm can. Thus, the government must steadily remove itself from the fiction of tying the budgets to dollar denominated oil revenues and expand the economic revenue base rather than engage in perpetual borrowings.

Given the importance of managing government debt in Nigeria, it is crucial that the current administration adopts proactive debt management strategies. Some of the measures that can be taken to manage the country’s debt levels include:

• Adopting fiscal discipline. This means fiscal policies that aim to balance government spending and revenues. This can be achieved through measures such as increasing tax revenues by expanding the tax base, reducing wasteful spending, and improving the efficiency of government programmes.
• Implementing prudent monetary policy measures that aim to control inflation and manage interest rates. This can be achieved through measures such as controlling the money supply and maintaining a stable exchange rate.
• Developing a debt management plan that aims to reduce the debt-to-GDP ratio over time. This can be achieved through measures such as reducing government spending, increasing tax revenues, and attracting foreign investment.
• Ensuring that debt is used to finance productive investments that have the potential to generate returns and improve the standard of living for Nigerians.
• Increasing transparency and accountability in government debt management and ensuring that the public is informed about the country’s debt levels and management strategies.

• Nigeria is servicing its debt with almost 100% of its revenue, how do we enable private capital to contribute more to the economy?

There is no better time that Nigeria needs to unlock growth in the economy than now when the noose is being tightened around its neck by the twin evils of high interest rate and inflation, which, respectively, have crimped income and impeded the value of whatever is available. This makes it necessary, if not imperative for the country to seek ways of promoting and catalysing investment of private capital in the economy to unlock growth, which the economy lacks because of the prevailing situation.

Over the years, the country has followed passionately a government-based expenditure model while the “defend the naira at all costs” obsession of the Central Bank of Nigeria (CBN) has only encouraged hot money investments, with little or no incentive for patient capital. This has not amounted to much in closing-up investment gaps in almost all sectors of the economy. For example, Nigeria’s fiscal deficit to GDP at a 3-year average is -5.6, a very negative growth driver outcome. However, the federal government in synchronization with the private sector, can agree on the right economic philosophy and put in regulations that perfectly align with this philosophy. This mutual motive can and will produce a combined effect greater than the sum of their separate effects.

Before now, we did not have such synergy and have suffered a less competitive capital market when compared to others in the global space in terms of attracting private capital.

Though foreign investors do not doubt opportunities in the Nigerian capital market, they will not take long-term chances due to Nigeria’s weak legal frameworks, unfavorable market philosophies and unprofitable government regulations on the private sector. And that, in our view, is the crux of the matter.

• Nigerian economy has had its own turn of being affected by the Russian-Ukraine invasion, what can we do differently to attract private capital in our oil and gas sector?

Attracting foreign direct investment is a major responsibility of the government as they help to create jobs, boost transfer of skills, and ensure exchange rate stability. When accompanied by sound domestic policies, foreign investment can help create jobs, trigger human capital formation, and bring new technologies and managerial practices. It can also contribute to international trade integration, foster innovation among local firms, and encourage a more competitive business environment.

Nigeria can attract private capital into the industry by creating attractive industrial hubs, improving the business environment, and stabilising the currency. Widespread corruption, lack of transparency, security issues, import restrictions and poor quality of infrastructure are limiting the country’s foreign direct investment. The government must deliberately address these. Intense bureaucracy also curbs private investment in the sector. The country’s underdeveloped power sector also forces most businesses to generate a significant portion of their own electricity.

• Most upbeat investors are seeing high hopes in Nigeria, amid concerns of policy inconsistency how does the government explore the opportunities?

For Nigeria to attract investors, it must create the right environment and appropriate fiscal incentives to out-compete currently preferred destinations of foreign capital like China, India, and Vietnam, among others. Private capital will ordinarily be attracted to a country with a stable macro-economic policy environment with low or moderate inflation, stable interest rates, stable or predictable exchange rates, easy access to foreign exchange and minimal capital controls.

Investors gear their foreign direct investments toward economies where they have the highest potential for profit and the least risk. As such, the dent of the social unrest to the image and perceived risk of long-term capital investment would mean that the country will struggle in attracting the much-desired long-term finance needed for accelerated growth and enhanced job opportunities. There is a need to reform the foreign exchange market to inspire investors’ confidence and address the challenges of insecurity and logistics. There is a need for creative support for small businesses to promote economic inclusion. We must accelerate efforts to ensure domestic refining of petroleum products.

Our fiscal reforms must prioritise infrastructural development and transparency in the budgetary process. We must take urgent steps to tame inflation and boost the purchasing power of the citizens. Identify sectors of the economy and create the appropriate policies that would open the sectors to private investments, just as we have done in the telecommunications sector.

• The Nigerian government has ushered in a new administration, what are the key suggestions you are giving to the incoming administration?

The starting point is macroeconomic and fiscal stability. Unless the economy is revived and fiscal challenges addressed boldly, resources to develop will not be there.   Nigeria currently faces huge fiscal deficits, and this has been due to huge federal and state government expenditures, lower receipts due to dwindling revenues from the export of crude oil, vandalism of pipelines and illegal bunkering of crude oil.

According to Nigeria’s Debt Management Office, Nigeria now spends 96% of its revenue servicing debt, with the debt-to-revenue ratio rising from 83.2% in 2021 to 96.3% by 2022. The world bank predicts that this number will worsen over time if not checked. Some will argue that the debt to GDP ratio at 35.3% is still low compared to other countries in Africa, which is correct; but no one pays their debt using GDP. Debt is paid using revenue, and Nigeria’s revenues have been declining. Nigeria earns revenue now to service debt—not to grow.

Support should be given to private sector refineries and modular refineries to allow for efficiency and competitiveness to drive down fuel pump prices. The newly commissioned Dangote Refinery by former President Buhari—the largest single-train petroleum refinery in the world, as well as its Petrochemical Complex—will revolutionize Nigeria’s economy.

There is an urgent need to look at the cost of governance. The cost of governance in Nigeria is way too high and should be drastically reduced to free up more resources for development. Nigeria is spending very little on development.

Today, Nigeria is ranked among countries with the lowest human development index in the world, with a rank of 167 among 174 countries globally, according to the World Bank 2022 Public Expenditure Review report.

To meet Nigeria’s massive infrastructure needs, will require $3 trillion by 2050. At the current rate, it would take Nigeria 300 years to provide its minimum level of infrastructure needed for development. All living Nigerians today, and many generations to come, will be long gone by then. We must change this, Nigeria must rely more on the private sector for infrastructure development, to reduce fiscal burdens on the government.

Much can be done to raise tax revenue, as the tax-to-GDP ratio is still low. This must include improving tax collection and administration, moving from tax exemption to tax redemption, ensuring that multinational companies pay appropriate royalties and taxes and that leakages in tax collection are closed.

However, simply raising taxes is not enough, as many question the value of paying taxes, hence the high level of tax avoidance. Many citizens provide their own electricity, sink boreholes to get access to water, and repair roads in their towns and neighbourhoods. These are essentially high implicit taxes. Nigerians, therefore, pay the highest ‘implicit tax rates’ in the world.

Governments need to assure effective social contracts by delivering quality public services. It is not the amount collected, it is how it is spent, and what is delivered. Nations that grow better, run effective governments that assure social contracts with their citizens.

We must rebalance the structure and performance of the economy. A very common refrain in Nigeria, with every successive government, is “We need to diversify the economy.” Nigeria is one of the most diversified in Africa, with the oil sector accounting for only 15% of the GDP, and 85% is in the other sectors. Nigeria’s challenge is not diversification. Nigeria’s challenge is revenue concentration. This is because the oil sector accounts for 75.4% of export revenue and 50% of government revenue. The solution, therefore, is to unlock the bottlenecks that are hampering 85% of the economy. These include low productivity, very poor infrastructure and logistics, epileptic power supply, and inadequate access to finance for small and medium-sized enterprises.

Nigeria must also shift away from the import substitution approach to export-focused industrialisation. Nations do not thrive through import substitution; they thrive from export-bound industrialisation.

For faster growth, Nigeria must decisively fix the issue of power, once and for all. There is no justification for Nigeria not having enough power. Nigeria’s private sector is hampered by the high cost of power. Providing electricity will make Nigerian industries more competitive when compared to other African countries like Kenya and Egypt. With the support of the African Development Bank, Kenya, under President Kenyatta, was able to expand electricity access from 32% in 2013 to 75% in 2022.

Today, 86% of Kenya’s economy is powered by renewable energy and in one project—the Last Mile Connectivity Project—the Bank’s support allowed Kenya to connect over 2.3 million poor households to electricity—that is over 12 million people provided with an affordable connection to grid power.

In 2014, Egypt had an electricity deficit of 6,000 megawatts, but by 2022 it had 20,000 megawatts of surplus power generation capacity.

Nigeria should invest massively in renewable energy, especially solar. The African Development Bank is implementing a $25 billion Desert-to-Power programme to provide electricity for 250 million people across the Sahel, including the northern parts of Nigeria.

For inclusive development, Nigeria must completely revive its rural areas. Nigeria’s rural areas are forgotten and have become zones of economic misery. To revive and transform these rural economies, we must make agriculture their main source of income, a business, and a wealth-creating sector. To be clear, agriculture is not a development sector. Agriculture is a business, the development of Special Agro-industrial Processing Zones will transform agriculture, add value to agricultural value chains and attract private sector food and agribusinesses into rural areas. Special agro-industrial processing zones will help turn rural areas into new zones of economic prosperity and create millions of jobs.

The African Development Bank, Islamic Development Bank and the International Fund for Agricultural Development are currently supporting the implementation of a $518 million Special Agro-Industrial Processing Zones programme in seven states and the Federal Capital Territory.

Nigeria’s best asset is not its natural resources but its human capital. We must invest heavily in human capital to build up the skills Nigeria needs to be globally competitive, in a rapidly digitised global economy. We must build world class educational institutions, and accelerate skills development in science, technology, engineering, mathematics, ICT and computer coding, which will shape the jobs of the future.

There is an urgent need to unleash the potential of the youth. Today, over 75% of the population in Nigeria is under the age of 35. This presents a demographic advantage. But it must be turned into an economic advantage. Nigeria must create youth-based wealth.

We must move away from the so-called “youth empowerment programmes.” Youths do not need handouts, they need investments. The current banking systems do not and will not lend to the youth. Special funds, while palliative in approach, are not systemic and are also not sustainable. What’s needed to unleash the entrepreneurship of the youth in Nigeria are brand new financial ecosystems that understands, values, promotes and provide financial instruments and platforms for nurturing business ventures of the youth at scale.

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