opinion
By Bukola Idowu, Bukola Ogunsina, Chika Izuora, Chima Akwaja, Friday Atufe, Olushola Bello and Taiwo Ogunmola Omilani
Last year was very challenging for various stakeholders in the country. For those in the political class, it was a time to prepare for the 2015 general elections billed for early February while those in the business class had to contend with the impact of falling oil prices in the international market, a development which led to the implementation of fiscal and monetary policies to mitigate its adverse effect on the economy.
Socially, the country did not fare better as it continued to contend with insurgency from the Boko Haram elements in the northeast of the country, a development which came to a head with the abduction of more than 200 schoolgirls from a Federal Government College in Chibok, Borno State, among other issues that characterized the socio-politico economy in 2014.
Analysts have painted a gloomy picture of the economy this year, saying the country's inflation rate may cross the double-digit mark in the first half of 2015 as the combined austerity measures introduced by the government and tighter monetary policy of the Central Bank of Nigeria (CBN) will put additional pressure on consumer prices. They however said with spending cuts and looking inwards to find things with which to grow the economy, Nigeria can still come out of the woods.
Banking
Beginning January 1, 2015, bank customers are to enjoy a reduced commission on turnover (CoT) as the phasing out of the fee on current account reaches the third stage. The Central Bank of Nigeria in April 2013 had revised the guidelines on Bank Charges introducing the gradual phasing out of commission on turnover.
The revised guideline had introduced a gradual reduction of COT from N5 per mile (per N1000) in early 2013 to N3 per mille, N2 per mille in 2014, N1 per mile in 2015 and zero COT in 2016.
The devaluation of the Naira is also expected to begin to take its toll on the economy this year. According to Head of Research at Sterling Capital, Sewa Wusu, "Nigerian consumers have not really felt the impact of the devaluation because all the goods being sold in November and December had already been paid for at the old value. However, come 2015, the impact would be felt and price of goods and services would rise."
This supports the prediction of an increase in the consumer price index to double digit in 2015. With inflation expected to rise this year, the apex bank is more likely to continue its tight monetary stance to rein the pressures on the local currency and reduce the liquidity in the market. Benchmark lending rate currently stands at 13 per cent after the Monetary policy committee of the CBN raised it at its last meeting for 2014.
Also, there is expected to be increased lending to the agriculture sector as the economy shifts in that direction. Many banks last year had raised funds internationally to increase lending as the recent CBN polices have put a lot of restrictions on the banking industry. However, this is not guaranteed as the banks would also be conservative in their lending as they work on reducing risks.
In the outgone year, the Central Bank of Nigeria (CBN) devalued the national currency, the naira (N168 to $1). This became unavoidable because of the reduction in federal government revenue from oil production and sales. The CBN governor, Godwin Emiefele revealed that Nigeria's foreign reserves lost more than $3 billion in one and a half months to efforts to defend the naira.
"The depreciation at both the interbank and the BDC segments largely reflected recent demand pressures arising from falling oil prices and dwindling external reserves," he told newsmen.
The former economic adviser to the former president Olusegun Obasanjo Professor Ode Ojowo told LEADERSHIP Weekend that, "a production crisis is really impacting on our currency so hard because we are overly dependent on oil. Nigeria is still heavily dependent on refined products when we are supposed to manufacture and sell to West African countries and this has affected this sector too. If the Federal Government continues to emphasise on food production in 2015, that will have some cushioning effect on imported inflation because 60 per cent of household expenditure in Nigeria is on food."
Reserves are down from $40.7bn to $36.75bn. The fallen oil price also had its fair share, even extended its tentacles to the banking industry as the country's All Share Index closed at 2.8 per cent, affecting bank stocks. Some financial experts have declared that the naira should be quickly devalued to prevent a further fall the country would regret. However, this will still not assure the currency's stability in 2015 or in years to come.
"On this note, the committee wishes to reiterate that the Bank remains committed to a stable exchange rate within the limits of available resources and would continue to maintain sufficiently strong level of external reserves to meet its short term obligations and other regular balance of payments commitments," the CBN governor said.
Macro economy
If oil prices continue to stay as low or goes lower than it has this year, Nigeria will have to look inwards for survival, financial experts have said. In their separate chats with LEADERSHIP Weekend, experts in the financial sector said what the country needs to survive is within its economy.
According to former deputy governor of the Central Bank of Nigeria (CBN), Tunde Lemo, Nigerians will have to depend on import substitution and increase export drive to be able to scale through 2015.
Lemo who expressed hope that 2015 would be "a year of pleasant surprises" said, "we need to buckle up. Nigerians should be patriotic, let us depend less on importation and let us be self-sufficient. Let us embrace import substitution, if we do that, it will not matter what the exchange rate of the naira is.
"The CBN has done its best, there is nothing we can do now other than to devalue because our economic main stay is petro-dollar and if it is not coming in the quantum it was coming before, the only way like Russia did is to devalue but we as Nigerians can take advantage of that. If we embark on export drive, we will be more competitive, not only that, if we do import substitution we will depend less on importation."
Also, chief executive of Financial Market Dealers Association, Wale Abe, stressed the need for Nigeria to look inward at other sectors asides oil and gas that could generate more foreign exchange for the country.
Particularly, he emphasised that the agriculture and creative industries should receive more focus in the year to come. Noting that the dwindling oil price will be a major challenge for the economy, he said the lower capital expenditure in 2015 and a higher recurrent spending would not be helpful as there would not be any real developmental spending. Abe furthered stated that this would affect private companies whose products and services are dependent on government spending.
Real Sector
The director general of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf says the chamber expects the country's inflation rate to cross the double-digit mark in the first half of 2015 as the combined austerity measures introduced by the government and tighter monetary policy of the Central Bank of Nigeria (CBN) will put additional pressure on consumer prices.
He said with the unfolding oil price slump and the consequent exchange rate depreciation, it was plausible to predict higher inflation conditions for next year, saying that inflation rate in the country dropped to 7.9 per cent in November, from 8.1 per cent in October, according to the National Bureau of Statistics.
"There will be pressures on production and operating costs across sectors. High cost of imports will also be a major factor. As a result of the import-dependent character of the economy, the sharp declines in exchange rate will naturally push up the operating costs of enterprises in the economy. Many firms are already feeling the heat across all sectors," Yusuf said.
Speaking further, the LCCI director general said, "a natural outcome of the depreciating exchange rate in an import-dependent economy is inflation. Cost-push inflation will begin to manifest in the next few weeks of 2015. This will be driven by high cost of production and high cost of imported finished goods. The tight monetary policy may continue into the 2015 and this will keep the interest rate high in the economy."
Also, the first Deputy National President, Nigerian Association of Chambers of Commerce, Industry Mines and Agriculture (NACCIMA), Mr. Bassey Edem predicted a slow economic growth in the first quarter of 2015 as a result of falling oil price and distractions all over the states in preparation for the forthcoming general elections in February.
He observed that 2015 is going to be a bleak year for the economy as government attention has shifted to the general elections, adding that it would bring about slow rate, inflation double digit known as cost push inflation.
"With the 2015 elections approaching, NACCIMA is concerned about the risk of crowding out the economy as political activities intensify. We want to caution seriously against this tendency.
"What appears to be dominating the agenda of the political leadership now is politics rather than growing the economy. Yet, we need a strong economy to support our political process under the present democratic dispensation,"Edem stated.
He said the nation is beset with so many challenges arising from falling crude oil prices, which have precipitated the proposed austerity measures, devaluation of Naira, insecurity and many more, adding that Nigerians especially manufacturers cannot be happy with the recent happenings in the country's economy because it is further bringing improvising measures on business and cost of production.
ICT
In the Nigerian information and communications technology (ICT) industry, a myriad of issues have dogged the sector such as multiple taxation, multiple regulation, inadequate environment for telecommunication operators to grow and lack of local content input, which have been reverberating for some time now.
President, Association of Telecommunications Companies of Nigeria (ATCON), Engr. Lanre Ajayi, said in terms of telecommunications regulation in 2015, he would like to see the Nigerian Communications Commission (NCC) expedite action on the release of spectrum for broadband deployment especially on the InfraCos and 2.6GHz auctions.
Warning that a lot of small and indigenous telecommunications operators have collapsed or became inactive in 2014 because of unfavourable operating environment, he averred that "government has a responsibility of creating the right enabling environment for businesses to thrive including telecoms operators. For the telecom industry, it involves eliminating multiple taxation, removal of obstacles to Right of Ways (RoW) approvals and releasing spectrum for service deployment."
He said if the fall in the value of the naira continues, it may likely force telecom operators to increase tariff.
"Telecoms services deployment requires the use of equipment that are largely imported. Devaluation increases cost of service delivery and someone has to pay for this cost. If the devaluation is not checked operators may be forced to increase tariff to recoup cost," he added.
Ajayi speaking further on what to expect with local content in the telecom sector and Internet industry in Nigeria, urged the regulatory authorities to appropriate policies that ensure the use of local input, entrepreneurs, service and goods in the Nigerian telecommunications industry.
Agriculture
In the Agricultural sector, programmes have been set in place for its development in the country. This sector is believed by many people as capable of taking over from oil in 2015 as the mainstay of the economy.
"The sector has been doing fantastic because we have a very dynamic minister who has turned the sector around," the chief agricultural superintendent of the Rural Finance Institution Project working with the International Fund for Agriculture, Mrs A.A Bello told LEADERSHIP Weekend. According to her, the growth enhancement programme is to the advantage of farmers. She further noted that with the federal government's subsidy of farm produce, particularly fertilisers (as farmers pay only 50 per cent) to middle men, there seems to be a brighter prospect for the sector adding that it has added value to rice, oil palm, cocoa, sorghum, wheat, groundnut, sugarcane and soya beans.
"More importantly, the backward integration project is proving a success, investors like Aliko Dangote, Honeywell, etc are investing heavily in agriculture. Farmers lose a lot of crops during the rainy season. 'Off-takers' who buy farm produce directly from farmers include Dangote and this process aids the farmers in securing loans," she noted.
Energy
The dwindling oil revenue set against the backdrop of the recent budget proposal presented to the National Assembly (NASS) by the finance minister, Ngozi Okonjo-Iweala, paints a gloomy picture for the oil sector in 2015. The country is known to lean heavily on oil earnings and borrowed funds even when the oil price stood above the $79 per barrel benchmark that was used to estimate the 2013 budget. There are concerns as the current oil price dwindles and currently stands at $61 per barrel (which experts foresee may drop further). This is actually below the $65 per barrel benchmark used for the 2015 budget and oil is inevitably tied to Nigeria's finances. Would Nigerians need to live an austere life come 2015? Okonjo-Iweala announced to the world that Nigeria would be running a capital budget of N634 billion. Further reports from BudgIT, an online agency which specialises in analysing public finance showed that the federal government intends to draw N80billion from the excess crude account (ECA). Oil experts believe this to be possible only if the oil price rises above $65 per barrel oil benchmark proposed in the budget. Consequently, should oil prices remain below $65 per barrel, the country would borrow more. Nigeria has recurrent receipts which must be paid, not to mention unrelenting capital expenditure commitments to its citizens. The governor of the Central Bank of Nigeria, Godwin Emefiele, told newsmen that the new oil price benchmark of $73 per barrel was considered excessively high and warned that falling oil price is likely to become a permanent feature in the economy. Logically, by 2015, Nigerians will be left reminiscing about the oil sector. However, experts say Nigeria's economic response through fiscal policies would go a long way in mitigating the negative effects of crashing oil prices.
According to analysts, one of the mistakes made by the Organisation of Petroleum Exporting Countries (OPEC) is not cutting down production but this is also counterbalanced by sales of crude oil by rebel groups in ISIS and Libya.
A public opinion commentator and the convener of PowerUpNigeria, a Power Consumer Advocacy Group, based in Lagos, Mr. Adetayo Adegbemle said that another major factor that would continue to affect oil prices is competition from the Arab world.
"USA not buying crude from Nigeria anymore keeps forcing the Arabs to sell their oil at great discount to the Asian countries. The simple reaction therefore is to diversify our exports so much that Nigeria would no more be dependent on oil exports. Germany has advanced greatly in diversifying their reliance on the Russian gas by encouraging Renewable Energy, and are preaching same throughout Europe.
"However, low revenue generation oil exports would mean that Nigeria would have to look elsewhere for income to support our bogus government spending. This therefore means that we might be looking at total removal of fuel subsidy next year as well as tightening of tax laws," he explained.
Meanwhile, the global oil landscape has continued to change as shale oil production increased in 2014, forcing countries like Nigeria to step up marketing strategies in the Asian region. Shale oil production is said to be going up to 3.5 million barrels per day and has created a glut in the Atlantic basin, according to Alex Schindelar, Dubai bureau chief of Energy Intelligence.
He said countries that export oil to the US such as Algeria, Nigeria, Angola, Libya are finding fewer markets in the US.
"This is resulting in a massive shift in the flow of North African and West African crude, which used to go to North America and is now being redirected to other places. They are finding markets in Europe and some in Asia," he said.
"As that oil flows into Asia, it is displacing other barrels coming from the Middle East, especially from the Gulf. Saudi Arabia, Kuwait, the UAE, Iraq and Iran. These countries are finding more competition for their crude in Asia where they didn't see that before," Schindelar added.
Gulf News reported that a drop in oil prices is partially due to change in trade flows and also because growth in demand has not been as expected.
Also the president of the Lagos Chamber of Commerce and Industry, Remi Bello noted that there was an evident deterioration of public power supply in 2014 as electricity supply dropped by an average of 30 per cent in most industrial parts and households in the last six months of 2014.
He noted the progress made so far on power sector reforms, particularly on the privatisation of the sector but however said that the power situation continued to pose severe challenges to business operators.
There were complaints across all sectors about high energy costs especially high expenditure on diesel during the year. This he said continued to take its toll on the bottom line of investors in the economy and might be a challenge to business in 2015.
He further suggested the need for the National Electricity Regulatory Commission (NERC) to urgently address the growing concerns over the outrageous bills to consumers, much of which are not consistent with the earlier advertised billing template in 2014 as most firms especially the SMEs expressed concern over increases in their electricity bills.
"Most SMEs spend as much as 10 per cent of their monthly turnover on payment for public power supply alone. Often, these firms never get the power supply they are compelled to pay for and the plan to raise tariff in the New Year will pose further production challenge. Again, we reiterate our position that the policy of fixed charge by electricity firms should be reviewed as it is unfair to power consumers," he added.
In his contribution, Mohammed Badaru, President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture pointed out that in view of the critical role that power plays in the development of the national economy, government should continue to work very closely with the generation and distribution companies (GENCOS/DISCOS) to achieve the desired energy requirement of the country.
According to him, all stakeholders in the power sector should collaborate to improve on the current output, which hovers between 3,200MW and 3,500MW.
"We also want to counsel that the federal government should demonstrate the political will needed to drive the alternative sources of power so as to significantly improve on the power supply in the country," he emphasized.
Health
The passage of the National Health Bill into law, according to experts in the health sector, would be of great benefit to Nigerians in 2015, when the law comes into force. The Kogi State commissioner for health, Dr Omede Idris, who noted that the year 2014, saw a steady gain in the health sector in the areas of preventive, promotive and curative research however lamented that strikes had continued to cripple some of the sector's gains. Talking about the National Health Bill, he said, "it will be recalled that the Bill will address major issues of human resource for health, service delivery, research and funding through provision of one per cent consolidated fund to health in addition to other current funding options in the country such as through health insurance."
Idris believes that in 2015, there would be a setup of an implementation strategy committee by government partners and key stakeholders for operationalisation of the bill, adding that, "despite the foreseen oil glut, we expect some leap in the health sector through the National Health Act." On his part, the president, Nigerian Medical Association (NMA), Dr Kayode Obembe stated that projections in the health sector for 2015 would depend on three factors; percentage allocated to health in the budget, implementation of the national Health Act and the white paper on the Yayale Ahmed committee report.
Managing partner of Solina Health, Dr Muyi Aina corroborates the positivity of the Bill come 2015 when he told LEADERSHIP Weekend that, "the bill will make critical funds available especially for the primary health care system and the national insurance programme to finance basic maternal and child care that will no doubt help to reduce the high burden of maternal and child deaths in Nigeria." The federal government aims at preventing 173,000 childhood deaths by 2015.
Aina added that, "one can also expect to see increased participation of the private sector broadly in health. This includes the private health sector (providers, pharmacy chains, HMOs) and the private sector more broadly applying their specific non-health capabilities to solve health problems. For example, the private sector health alliance is piloting collaboration with regional cell phone companies to share power supply from their masts to power cold chain equipment for vaccines. This model of collaboration will likely become more prevalent in 2015."
Education
Will Nigeria succeed to achieve its goal of "Education for All by 2015?" Currently, research has it that Nigeria has 64 million uneducated adults. Thus, the national coordinator, Education Rights Campaign, Hassan Taiwo Soweto called for a state of emergency to be declared in the education sector adding that this year's poor WAEC results were clear pointers to the challenges in the sector. The chairman, House of Representatives committee on education, Aminu Suleiman said, "there should be an attitudinal change."
There are already strong calls for the standardization of education. Many people were shocked when the Edo State governor, Adams Oshiomhole asked a teacher to read but she could not. Aside the Teachers Standardization Test, incentives are suggested to encourage teachers who are said to be the least-paid in the country. In reference to mass failure in the 2014 November/December WASSCE, it was reported that only 29.37 per cent of students obtained credits in five subjects including Maths and English. There is hope for 2015 now that efforts are being made to improve the quality of teachers. Also, a new law is in the making for employers who employ unqualified teachers; if caught, such would be imprisoned for two years.
Security
General T.Y Danjuma (rtd) recently lamented that the fight against Boko Haram is taking long. Only recently, bomb blasts rocked Gombe, Bauchi and Yobe states. It should be noted that, "the insurgency currently destabilizing some parts of Nigeria cannot only be fought with military force butthrough attacking the ideology of the terrorists," the head of Mission to the Syrian Embassy, Dr Shafik Daiyob told LEADERSHIP Weekend in a recent interview.
Syria is also encountering the same plight due to terrorist activities in the country.
"First of all, terrorism is an ideology. We need to fight this ideology first and at the same time, we have to track down and bring to an end the source of funding and arming of terrorists," he said. According to cyber security expert and Chief Consultant, iSecure Consulting, Ayo Rotibi, "the Boko Haram terrorist group invaded our cyberspace in 2014, they used the web as a noisy channel in which to promote themselves and intimidate people. Many cyber security experts concluded that 2014 is likely to be the year when the security implications of equipping all manner of 'things'- from domestic refrigerators to key components of critical national infrastructure- with sensors and internet connections begin to hit home. It was also predicted that 'cyber defence evasion', (including attack on organizations', cloud-based data) and the use of crime ware toolkits will be on the increase."
"Again, security should be tightened in highly populated places, while motor parks' managements have been advised to secure the parks by providing perimeter fences as safety measures and screen individuals going in and out of the park. As the police raise more alarm over security attacks, Nigerians have to maintain an internal vigilance come 2015. It is advisable that in the New Year, citizens should become more observant and avoid crowded places, pass information of suspicious activities to security agencies. It would be inconvenient but it is a small price to pay for safety and protection of lives. The Army is not fully trained and equipped for this sort of unconventional war and that needs to change. Post security measures should also be put in place for the 2015 elections." The BringBackOurGirls group coordinator, Oby Ezekwesili told our reporter that, "one of the areas in which the government has performed poorly is in its lack of engagement on problem-solving by providing credible information and so, each time that our government has spoken, it has spoken and acted in ways that are contradictory. So, that has created a lot of distrust among the citizens and the public at large. And so, it has a lot of work to do in rebuilding social capital and the kind of trust that would be very necessary in situations like this." Hopefully this will be the case in 2015.
Entertainment
Local artistes in Nigeria are collaborating with foreign artistes to create albums and it has taken the entertainment sector to a higher level, particularly in the area of music. Music quality has improved and Nigerian artistes are in high demand all over the globe. Nigerian Artistes have won the BET Award for Best International Act (Africa) since 2010. This year, Davido, the Nigerian music icon grabbed the prized award and also received the Best Male Artiste of the Year at the MTV Africa Music Awards (MAMA). Examples of some important team works among others include Dbanj with Jay-Z, an American artiste; P-Square and May D with Akon, an American artiste, -Square and T-I. Closer home, Davido featured in Diamond's music from Tanzania and Wizkid with R2bee of Ghana. With more partnerships like these, the Nigerian entertainment industry is set to flourish in 2015 and beyond. And soon, the word from non-Nigerians like "I love watching Nigerian music and films. In fact, my family and I are addicted to them," will become music to the ears of Nigerians and perhaps, help launder the image of the country before the international community.
Politics
Some lawmakers in the Lagos State House of Assembly have said that Nigerians should be ready for change as the 2015 election approaches. They said that what the country needs now is change of government so that we could move forward as a nation and that the All Progressives Congress (APC) would give the country the kind of leadership it deserves.
In his view, the chairman, House Committee on Information, Strategy, Publicity and Security, Hon. Segun Olulade stated that Nigerians look forward to a change of guard in 2015.
According to him, 2015 is an important year for Nigeria and that it is a year of change.
He postulated that the fall in the price of crude oil and the devaluation of naira is a product of bad leadership.
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