For the record: “Our gov’t is recording successes” – FG takes case to World Media

Jonathan Goodluck

Highlights of Information Minister, Labaran Maku, at a world press conference on Tuesday, October 22, 2013, at the National Press Centre, Radio House, Abuja.

INTRODUCTION:

  • In continuation of the monthly World Press Conference Series, which was introduced recently by the Federal Ministry of Information, we will look at developments in some of the key sectors of the political economy in the last one month.

 

  • We will review the significance of the recent Positive Sovereign Credit Rating of Nigeria by some global rating agencies.

 

  • The recent election of Nigeria into the non-permanent seat in the United Nations Security Council will also form part of our presentation.

 

  • We will also highlight the achievements recorded in the Power Sector, especially the commissioning of two power plants in Ondo and Kogi states by President Goodluck Jonathan, as well as the successful privatisation of the successor companies of the Power Holding Company of Nigeria (PHCN).

 

  • The successes recorded recently by Nigeria in the field of sports, particularly football where the Super Eagles defeated the Antelope of Ethiopia by two goals to one in the crucial first leg of the final play offs for a ticket to the 2014 World Cup, and the 6-1victory of the Nigerian Golden Eaglets over their Mexican counterparts in the ongoing Under 17   World Cup will form part of our briefing.

 

  • We will also inform you about the steps the Federal Government is taking to bring to an end the prolonged strike of the Academic Staff Union of Universities (ASUU).

 

FINANCE

Positive Sovereign Credit Ratings matter and related issues

 

*        Over the last week, two global credit ratings agencies – Fitch and Standard and Poor’s, have both affirmed Nigeria’s sovereign credit ratings at BB minus, with a stable outlook.  A Sovereign Credit Rating is an evaluation of the creditworthiness of a sovereign state or nation, and is a key determinant of the interest rate at which such a country (and its private sector) can borrow on international financial markets. It also indicates the level of risk of investing in a country and, is therefore monitored closely by foreign investors.

 

*        So in spite of a challenging global economic environment in which several countries (including very-recently, Ghana) have seen their creditworthiness downgraded, that of Nigeria remains steady and unchanged. The ratings agencies are citing the solid macroeconomic performance – including low fiscal and external debt positions, lower inflation, ample foreign reserves, and strong non-oil GDP growth, as major contributory factors to this recent rating, while also recognizing challenges like oil theft and infrastructure shortfalls.

 

*        What this ratings affirmation implies for Nigeria, is that the private sector can continue to raise finance at cheap rates on international credit markets. More specifically, Nigerian banks can borrow money at cheaper rates abroad in order to “unlend” to local private enterprises. In addition, the ratings should uphold Nigeria’s attractiveness for foreign investment, especially since the country has been the number one investment destination in Africa over the last two years.

*        A number of Nigerian banks have gone to raise funds abroad e.g. Access Bank ($350 million Euro Bond), GTB ($350 million Euro Bond),  Fidelity Bank ($300 million Euro Bond)

*        International Investors are now more interested in Nigeria. About $7 Billion invested in Nigeria by foreign investors in 2012.

*        Domestic bonds included in JP Morgan and Barclays emerging market Index.

*        Government’s efforts at diversifying the economy and creating jobs continue to pay off. In the Agriculture sector, over 2.7 million jobs have been created across 9 crop value chains, including rice and cassava. Housing sector reforms are also at an advanced stage with the establishment of the Nigerian Mortgage Refinance Corporation (NMRC), which will help unleash the sector and provide affordable mortgages to Nigerians, starting from the first quarter of 2014. The Job creation interventions are also doing well. About 19,000 jobs have so far been created by the 1,200 beneficiaries of the first phase of the YouWin program; 120,000 jobs have also been created on the Community Services Scheme (CSS), while the Graduate Internship Scheme has so far deployed over 2,000 graduates across the nation.

 

On structural reforms, the Federal Government’s commitment to improve service delivery to every class of customers in the Nigerian electricity sector, has recorded another major milestone. As of today, the administration has successfully sold the 15 successor generation and distribution companies and has realized a total of $2.07 billion.  An initial payment of 25% was made earlier in the year and the balance of 75% completed during the third quarter of 2013.  The formal handover of share certificates and licenses to the purchasers was held on September 30, 2013, while the Physical handover of the assets is slated for December 2013 on the completion of labour payments.

 

•         Dollar exchange rate has been between ₦155 and ₦160 over the last two years.

•         Inflation dropped to 8% in September, 2013 from 12.4% in May 2011.

•         External Reserve increased from $32.08 billion in May 2011 to $48.4 billion as of May 2013

•          Excess Crude Account rose from about $4 Billion in May 2011 to about $6 billion in May 2013

•         Sovereign Wealth Fund (SWF): US$1 billion earmarked for investment in the 3 arms i.e. Stability Fund, Infrastructure Fund and Future Generation Fund; The Board of the Nigeria Sovereign Investment Authority was Inaugurated on 9th October, 2012 and now commenced core investing activities.

•         Reducing Cost of Governance: The Federal Government has adopted a policy  to reduce recurrent expenditure and complete unfinished capital projects; Recurrent expenditure has dropped from 74.4% of total budget in 2011 to 68.7% in 2013; Envelop system developed to enable Ministers prioritize uncompleted capital projects.

•         Waiver and Tariff Policy: Government is focusing on sectoral waivers rather than individual. e.g. agricultural, power, aircraft spare parts, solid minerals at zero duty.

•         Trade: Imports are down (textiles, plastic & rubber, paper & paper making material), and exports are up (plastic & rubber, vegetable products, prepared food stuff and beverages); Non-oil exports have increased from 9% of total exports in 2008 to 31% in 2012; Oil exports are now 69% of total exports, compared to 91% in 2008.

•         Measures taken to increase non-oil revenue:Recovery of tax arrears in the sum on ₦704.8 million;

•         Tax investigation and enforcement activities led to the  recovery of over ₦10.65 billion; Commenced implementation of the Integrated Tax  Administration System (ITAS) project;

•         Registered 227,140 new taxpayers in 2012

•         Implemented full taxpayer segmentation

•         Full restructuring of Tax offices nationwide

•          Roll-out nationwide Tax Identification Number;

•          Integration of Customs Operation (Platform) through a portal named Nigeria Integrated Customs Information Systems (NICIS) thus eliminating multiple submission of cargo and goods documentation to several stakeholders e.g. Bank, CBN, Freight Companies, etc;

•         Online real-time processing of Custom’s documents/manifest by shipping/airlines

•         Simplification and harmonization of Customs clearance procedures, in line with international best practice

•         Electronic tracking and auditing of Customs operations and transaction

•         Increased efficiency in public financing: The Integrated Payroll and Personnel Information System (IPPIS):

•         Enhances efficient personnel cost planning and budgeting as personnel cost will be based on actual verified numbers and not estimates

•         215 MDAs (153,019 staff) are on IPPIS as at Jan 2013

•         Savings on Payroll cost to date is ₦118.9 billion

•         Work ongoing to bring in other 321 MDAs not yet on IPPIS

•         About 46,821 ghost workers identified

•         Introduction of the Government Integrated Financial Management and Information System (GIFMIS) in April 2012.

•         GIFMIS is aimed at improving the acquisition, allocation, utilization and conservation of public financial resources using automated and integrated, effective, efficient and economic information systems.

•         58% of the budget now executed through GIFMIS. Will rise to 79% by end of third quarter 2013.

•         Treasury Single Account (TSA) is a unified structure of government bank accounts that gives a consolidated view of the cash position.

•         93 MDAs are currently on TSA

•         Government’s overdrawn position has dropped from ₦102 billion in 2011 to ₦19 billion in 2012

•         A New Petroleum Subsidy Payment Regime Is In Place
To Help Stem Leakages:

•         Audited ₦1 trillion in subsidy and found ₦232 billion questionable. So far, about  ₦14 billion was recovered. The payment process has now been tightened.

•         PPPRA reduced the number of oil marketers from 143 to 32.

•         SURE-P Expenditure: Of the FG’s ₦180 billion budgeted for the 2012 SURE-P, ₦86.5 billion was spent. The remaining balance of ₦93.5 billion was carried over into the 2013 SURE-P budget bringing its sum to about ₦273.5 billion in projected expenditure.

•         Classification of projects under SURE-P: SOCIAL SAFETY NETS (e.g. Maternal & Child Health, Mass Transit, Community Services, Graduate Internship Scheme); Niger-Delta Augmentation for East-West; WORKS (ROADS & BRIDGES) (e.g. Abuja-Lokoja Road, Kano-Maiduguri, Oweto Bridge);TRANSPORT (RAIL) (e.g. Lagos-Kano, Port-Harcourt – Maiduguri)

•         Cleaning up of the Banking Sector: All 22 banks are now fully stable and capitalized; Non-Performing Loans have fallen to about 5%; But not enough lending is going on at affordable interest rates so the government is:Restructuring existing DFIs to get in private sector capital and Creating a new wholesale DFI for 10-15 year money at affordable rates

•          Capital Market: The Capital Market has now rebounded; Stock market index has risen by 71% since May 2012; Stock market capitalization (value of listed companies) has increase by 66.2% since May 2012 to ₦11.8 trillion.

•         State of the Nigerian Economy: Robust average GDP growth of 7.01% was recorded in    2011 and 2012;

•         –  Despite the continued slow down in the global economy

•         Market capitalization rose to 8.98 trillion in 2012 from N6.55 trillion in 2011 (37.3% increase).

•         –  Stood at N12.07 trillion as at end May 2013.

•         –  Bond market expanded significantly  by 55.61 percent to N5.82 trillion in 2012 from N3.74 trillion in 2011.

•         –  All-Share Index rose by 35% from 20,773.98 in 2011 to 28,078.81 in 2012. Over 37,794 as at end May 20

•         GDP growth rate stood at 6.56 percent at the end of the Q1 2013;

•         Eight out of the fourteen broad sectors surpassed their growth targets in the Transformation Agenda.

•           Solid minerals

•           Financial Institution & Insurance

•           Building & Construction

•           Transport

•           Education

•            Roads, Estate

•            Public Administration

•           Other Services

•         Growth driven largely by the non-oil sector of the economy

•              Agriculture  –  27.64%

•              Wholesale and retail trade – 28.4%

•               Telecommunications – 24.38%

•         FDI averaged US$7.97 billion par annual in 2011 and 2012 from US$6.10 billion in 2010. Still the highest in Africa;

•         Home remittances increased from US$19.20 billion in 2009 to US$20.61 billion in 2011 and US$21.89 billion in 2012;

•         Gross external reserves improved from US$32.34 billion in 2010, to US$48.8 billion as at April 26, 2013.

•         The Youth Enterprise with Innovation in Nigeria (YouWin) programme has created over 12,000 new entrepreneurs and over 50,000 jobs.

•          A successful Graduate Internship Scheme (GIS).

 

•         The scheme has so far placed over 2,000 unemployed graduates in private sector organisations where they can receive mentoring and acquire work experience. The plan is to place 50,000 graduates in establishments every year till 2015.

Privatisation Update and Successes

  • The privatization of the Nigerian power sector has been internationally recognized as one of the most ambitious and transparent reform program ever embarked by any nation
  • On August 21, 2013, 5 Generation companies and 10 Distribution companies successfully completed payments for the purchase of the assets.
  • The 10 NIPP power plants are going through the bidding process.
  • We have put in place all other support institutions to ensure the efficient functioning of the electricity market. These include, amongst others, Nigerian Electricity Regulatory Commission (NERC), Transmission Company of Nigeria (TCN), Electricity Management Services (EMS) and Nigeria Bulk Electricity Trading Company (NBET).
  • The payment of severance package to PHCN staff is to be concluded by the end of October and physical handover to the new owners thereafter.
  • The Ministry has repositioned itself towards providing effective overall leadership for the sector and facilitating investments with special attention to the National Grid, greenfield IPPs, renewables and rural access
  • The Condition Precedents that are essential to the declaration of the Transition Electricity Market (TEM) are therefore substantially in place and are currently being subjected to a quality and assurance testing by NERC, prior to the declaration of TEM
  • Fifty-five (55) IPPs have applied to Nigeria Bulk Electricity Trading Company (NBET) for PPAs. Including three (3) renewable energy IPPs, one coal generating IPP, and the rest gas based IPPs
  • Several reputable international companies have indicated interest in investing in the sector through our various investment forums – we have signed MOUs with Power China (20,000MW) generation + transmission infrastructure, General Electric (10,000MW), Siemens, Electrobras etc.

 

Update on Transmission

 

  • The Management contract with Manitoba Hydro of Canada is in place to bring best practices. The Schedule of Delegated Authority (SODA) duly signed by the Honourable Minister of Power has also been issued to Manitoba Hydro.

 

  • Inauguration of TCN Board, Management & Advisory Team

§  The enlarged technical board of TCN has also been inaugurated by the Honourable Minister of Power to add more experience and fresh impetus into the supervision of TCN

§  The shadow team (Directors) is to aid the transfer of best practices while bring the local knowledge to bear

§  The Management team is therefore charged to work as a unit in the delivery of a robust and stable transmission grid.

 

  • Transmission Expansion Plan

§  With the full payment for the GenCos and DisCos comes the urgent need to reposition TCN to meet its obligation in the post privatization era.

§  TCN Network Expansion Blueprint was presented to the PACP on Monday 26 August 2013

§  The blue print commits TCN to a transmission capacity of 16,000MW by 2017

§  The FGN is committed to the funding of this blueprint through a variety of sources which include:

  • AfDB                    $150m
  • World Bank                  $290m
  • Eurobond Issue $150m
  • China Exim Bank         $500m
  • Proceeds for the sale of NIPP gen. assets  – $1.6b
  • Appropriation
  • Agence FDB       $170m

 

NIPP Update

§  A total capacity addition of 4775MW expected when all the NIPP generation units are commissioned.

 

§  So far 1,350MW capacity has been commissioned and taken over.

 

§  Recently commissioned Geregu Power Plant has a total capacity of 434MW.

 

§  The Omotosho Power Plant which was commissioned on Saturday 19th October, 2013 has a total capacity of 450MW

 

§  Other NIPP  Power Plants include:

o   Calabar  562.5MW

o   Egbema 337.5MW

o   Gbarain  225MW

o   Omoku    225MW

o   Alaoji      450MW

o   Sapele    450MW

o   Ihovbor  450MW

o   Olorunsogun  450MW

 

Niger Delta Power Holding Company has promised to commission others in quick succession between now and end of the year.

 

  • 790MW will also be added to the National grid through the African Finance Corporation (AFC) N226 billion to finance critical electricity infrastructure.

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