Nigeria’s ambition of sustaining economic growth, needs a refocus on key fundamental inhibitors such as the deregulation of the oil and gas sector, according to Ike Chioke, group managing director, Afrinvest.
Chioke on Thursday explained that for the country to grow, a deregulation of such a critical sector will attract massive investment into the downstream sector, more investment in the upstream and enhance opportunities to create employment for the teeming masses.
Speaking on Channels TV business morning programme monitored Thursday by business a.m., the GMD said: “If you look at what we have done with the oil sector today, which remains the big elephant in the room blocking out progress, we have continued to maintain the subsidy in the petroleum products and that’s an estimation of N1.4 trillion that this government has spent, since it came into office. Although there is no line item in the budget that says “subsidy”, it’s being packaged under different arrangement,” Chioke said.
He frowned at the practice particularly given the country’s need in sourcing money to fund education and health care which are critical human developmental factors.
Describing the world as a place where quality and capacity of the human capital is critical, Chioke said when you have a lot of people, who are not educated and are not healthy, they are not human capital. They are just people taken up space, and then it leads to a plethora of other issues that you can see being exhibited today, from the Boko Haram, the Niger Delta activists, restive youths and unemployment across the country, to name a few.”
Chioke explained that with a review of the budget being passed, economic activities show that revenues are not catching up with the estimates.
“This year, as we go into the new budget cycle, we fear that the actual revenue receipts particularly from oil revenue and non-oil revenue will drag,” he said.
Noting that what has been funding the government is other financing sources, such as returns from Paris club, the spread between the official exchange rate at N305/$1 and market exchanger’s N360/$1, and probably money coming back home from looting, Chioke asked where the fundamental growth was expected to come from?
Speaking to Afrinvest newly released half year report titled, “Where is the growth?” Chioke said that the report is a review on market performance for the first half of the year and a projection into the next half, which happens to be within the same period the 2018 national budget is being passed.
“We can see the signals as activities begin to pile up for the 2019 elections, and we look at a country like Nigeria, what we lack is a robust growth to propel us to the momentum that we need.
“From the monetary side, the CBN has been maintaining rates for the last 7 periods, but when we look at what is happening in developed market, growth is now around 3.8 projected to 3.9 percent, at the developing markets, China still maintains the momentum of about 7 percent. When you break it down to sub-Saharan Africa, you see an average growth position of 2.8 percent, and that’s actually been dragged down by Nigeria, where we managed to grow 0.8 percent after climbing out of the 2016 elections and Q1 2018 where we’ve managing to touched 2 percent. When you look at the underlining fundamentals of Nigeria, what we are really lacking is growth,” Chioke argued.
Noting that there are indications that the central bank’s monetary policy committee, will do a politically induced hair cut of rates, Chioke said that Afrinvest is assuming that the CBN will keep MPR at 14 percent, but because people will continue to suggest that with MPR at 14 percent, it’s not beneficial for the private investment community to borrow, it may become a campaign issue, and the MPC could be convinced to bring it down.
He was however quick to note that he expects the CBN MPC to keep MPR where it is, because air is still being sucked out of the Nigerian economy by the faster growth pace in the developed markets.
“The normalisation of monetary policies in those markets such as the systemic central banks, federal treasury, European Central Bank, Bank of Japan, and others, are raising rates and as that’s happening, money is leaving developing economies and moving back to the developed world, so to attract more money, we have to do something much more fundamental,” he said.