By Emeka Ejere
Given the challenges being faced by the Nigerian economy, it is quite clear that the incoming year 2021 would not be a walk in the park for players within the space.
The country is in yet another bout of economic recession, remains infrastructurally challenged and continues to be caught up in a most enervating security crisis across many flanks. Added to these are the challenges of expanding poverty levels, youth unemployment, a near-comatose educational system and widespread disaffection with the central government authorities from different regions of the country whose peoples complain of being alienated and marginalized in the scheme of things.
However, this is only a top-level reading as underlying the negative prognosis and difficult operating circumstances lie several other potential winning points that could be explored by the more far-sighted and industrious to bring water out of the rock. We review some of these.
1. Numbers do not lie
Nigeria is a large economy. With a population of about 206million inhabitants, if we use the latest estimates from the National Population Commission, the country ranks as the most populous nation in the continent and this translates to giving it a basic nominal market advantage.
In addition, the country also has a positive youth bulge where about 130million of its population fits into that buoyant demographic spread, and this comes with the potential benefits of a large labour force, high numbers of people in the school system, all factors that, well tapped, could lead to high productivity and profitability numbers.
Another positive feature here is that about half of the population is considered to be literate.
As has since come to be demonstrated by several success stories, investors who address mass market items as food and water have skimmed considerable volumes of wealth from this population. There is still room for more even as the numbers continue to rise.
2. A resource-rich country
For a long time now, Nigeria has been known to be Africa’s largest crude oil producer and exporter. And there have been considerable opportunities for those involved in the business of extracting and marketing crude oil in the country, particularly through Joint-Venture arrangements that have been entered into between the Nigerian National Petroleum Company, NNPC and individual prospecting firms and marketing agents. One quite notable development in this field in recent time has been the Nigeria Content initiative through which more and more local players have been assisted in taking stronger and bigger roles in the burgeoning oil sector.
But crude oil is not all that the nation boasts of in terms of its resource endowment, with natural gas and gold being some of the more recent resources that have begun to rake in considerable profits for investors.
3. Tapping the Agricultural value chain.
In recent years, there has been an intensified focus on the agricultural sector. The Central Bank of Nigeria has in the past five years accelerated this through its Anchor Borrowers Programme. Many farmers have benefitted from the process and given that the current administration places a lot of premium on agriculture, it is only to be expected that this flow of support would continue. At the moment, while overall output has risen, there however continue to be gaps in food processing, preservation, logistics and preparation of produce for secondary and export purposes. These are areas that promise a return on investment if the variables are right.
4. Addressing the power sector gaps.
With total national output still hovering around the 4,000mw mark, and with continuing challenges being recorded in respect of distribution and transmission, it is clear that Nigeria still has a quite underserved power market.
Two programmes that have recently been introduced have some prospects of helping to mitigate the challenge. These are the support and upgrade deal with Messers Siemens AG and the Metering Programme of the Federal Government. Of these, the most promising is the Siemens intervention but that also requires a degree of fidelity from government to ensure that it runs on schedule and efficiently too.
Above all however, the Siemens deal may still be one of the best things that has been introduced into the country’s power structure for now but there is a need to ensure that the agreement is not strained. But to get the best out of the deal, Nigeria must commit to meet its counterpart funding component and political actors should be continually reminded of the need to allow for an unhindered regime of global best practices.
Whatever the case however, Nigeria needs massive improvements in its power sphere and in 2021, there will be quite a number of attempts at addressing the challenge from both the governmental and non-governmental arena. Two quick-wins that have come to the fore even now are the tendency by distribution companies to focus on small cluster and embedded power supply systems even at premium costs and the determination of a number of private sector players in the generation arena to continue to focus on expanding the overall national power stock even when some of the extant challenges in the system are yet to be satisfactorily addressed. They are seeing something that other potential players across the chain also need to lift up their eyes to see!
5. The AfCFTA push
Sometimes change takes an external dimension. Indeed the initial response to the emergence of the African Continental Free Trade Area, AfCFTA from many in Nigeria was that it should not be touched even with a long pole. Organised labour cringed over the prospects of its taking away their jobs and manufacturers grumbled that they would get the shorter end of the stick because the Nigerian economy was essentially uncompetitive.
Evidently, they both have a point and the prognosis now is that compared with some of the more established high economic achievers in North, East and Southern Africa, AfCFTA will not rub on too kindly on Nigeria in 2021. But then, but this is only largely because the country has failed to properly prepare for the emergence of the scheme, which paradoxically, it has been at the forefront of making advocacy and plans for its emergence, across several decades.
Returning to the anticipated responses from Nigerian stakeholders in 2021, indeed at a point, there is every likelihood that the country would be greeted by ‘we told you so’ calls, alongside a clamour for the country to pull back on account of anticipated revenue losses.
But that will be a mistake. The thing to do is to stay right there and continue to build across the medium to long term. The Nigerian economy has been functioning in the mould of the spoilt brat. It now needs to be built as a market-efficient organization and external shock mechanisms like AfCFTA would help in this regard. To use a Nigerian-speak, ‘by force, by fire,’ we must achieve competitiveness. If we persevere on that route, we will soon come to find out that indeed AfCFTA was made for Nigeria to shine.
6. Oil sector reforms
The relative improvement in oil price in the last quarter of 2020 has helped in stabilizing the national economy in this season. And one more quite important oil sector gain is expected with the anticipated coming on stream of the Dangote refinery, which is expected to happen towards the end of the year 2021.
The projected coming on stream of the Dangote refinery will no doubt bring basic relief but there are still greys. At what price and under which arrangement would the refiner get crude? What would happen with the existing public refineries, the supply deal with Niger Republic and other incoming refiners? But no matter how these go, there will be reduced forex pressure on the country based on savings from refined products imports moving into 2022. In addition, the expected increased competition from multiple local and regional suppliers would also quite likely transfer some price benefits to consumers.
7. The return of politics
The confirmation of the Chairman of the Independent National Electoral Commission, INEC, Professor Mahmoud Yakubu and the announcement of the commission’s plan to commence Continuous Voters Registration, CVR in Q1 2021 means that ‘Nigeria’s biggest business stream, politics’ is now being empowered once again. With a voting population that could rise to 120million and counting, the voter’s registration exercise would really be a big deal.
In addition to the statutory vote for INEC to set up registration teams countrywide, there are also going to be flank budgets from political parties and related interests seeking to get a tactical advantage from the exercise.
At another level, the year would see a whole ‘new level’ intensification of the frenzy by political actors in the ruling party for critical dominance ahead of the primaries process. The same level of political frenzy and spending is equally expected from the main opposition Peoples Democratic Party, and to a limited extent by other political contenders given that from the current shape of things, the 2023 elections will be quite fierce and a lot of the battle will actually be much underway by June 2021.