An Attempt to Diversify the Economy

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MD, NSIA, Mr. Uche Orji

In line with its Economic Recovery and Growth Plan (ERGP), the federal government recently sealed a deal with Africa Import and Export Bank (Afreximbank), Bank of Industry (BOI) and the Nigeria Sovereign Investment Authority (NSIA) to establish economic zones that will boost manufacturing GDP by 20 per cent, and increase revenue by $30billion as well as create 1.5 million jobs all by 2025. Bamidele Famoofo examines the government’s readiness to implement the project and deliver its benefits to Nigerians in seven years.

The ambition of government to shift revenue focus from oil has recorded another milestone with the signing of agreement between the federal government, Afrex- imbank, Bank of Industry and the Nigeria Sovereign Investment Authority (NSIA), to create three special economic zones, where made in Nigeria goods will be produced and exported to earn foreign exchange for the country. The ultimate goal of government for sign- ing the deal to establish six manufacturing hubs in the six geo-political zones of the country as highlighted in its economic blueprint christened the Economic Re- covery and Growth Plan (ERGP) is to boost manufacturing thereby boosting the contribution of the sector to Gross Domestic Plan (GDP) to at least 20 per cent in the next seven years. Government through the special economic zones planned to increase the nation’s revenue by $30billion-about N9.15trillion (at the current exchange rate of N305 to a dollar)- and also generate 1.5million jobs all by 2025.

President Muhammadu Buhari, who presided over the signing of the agreement with three out of five development financial institutions (DFIs), inside Aso Rock, said the Made in Nigeria for Exports (MINE) project aims at positioning the country as the pre-eminent manufacturing hub in sub-Saharan Africa and as a major exporter of made in Nigeria goods and services regionally and globally. “This is a presidential special priority intervention aimed at using the zones to attract substantial foreign and domestic investment for the development of world- class facilities dedicated to export-oriented manufacturing in a range of industries across Nigeria,” Buhari explained. The Minister of Industry, Trade and Investment, Okechukwu Enelamah, added that the ministry was facilitating the setup of the economic zones throughout Nigeria for specific goals, including to help overcome the infrastructure disadvantages faced by local manufacturers, and promote the cluster effects gained by locating similar manufacturing businesses together. He recalled that the Economic Recovery and Growth Plan (ERGP) identified the development of Special Economic Zones (SEZs) as a major strategic tool to accelerate the implementation of the Nigeria Industrial Revolution Plan (NIRP).The projects in the pilot phase include Enyimba Economic City in the South-east zone, Funtua Cotton Cluster, North-West; and Lekki Model Industrial Park, South-west.

Execution Plan

To ascertain that the project hits the ground running, on June 2018 the Nigeria Special Economic Zone Investment Company Limited (NSEZCO) was set up as the special purpose vehicle to deliver project MINE and harness the federal government’s spending on the SEZs. “With the signing, the investment company in the special economic zones (SEZ) will become operational”, the president said. The federal government set up NSEZCO Limited as a vehicle for participating in public-private partnerships involving federal and state governments and local and foreign private investors to develop new Special Economic Zones all over the country, offering world-class infrastructure and facilities at competitive costs. Buhari also said, the federal government was implementing a comprehensive plan. The plan includes, “the invitation of experienced Special Economic Zone developers and operators to partner with us to upgrade the federal government owned Free Trade Zones in Calabar and Kano, to offer world class standards of infrastructure and facilities.’’ “Whilst we await the completion of the process of bringing in these investors, the Federal Executive Council has approved the award of contracts in excess of N19.45 billion for the needed investment in Calabar and Kano Free Trade Zones and work is currently ongoing. This is the highest amount of capital investment ever in the history of these zones”, FG hinted.

According to Buhari: “We have allocated substantial funds to upgrade the capabili- ties of our people and the systems in the Nigeria Export Processing Zones Authority to strengthen it as a regulator of our Special Economic Zones; and we are allocating substantial resources to the provision of “outside the fence” infrastructure to ensure that our Special Economic Zones are con- nected to global, regional and domestic markets. We are reviewing our incentive framework to ensure competitiveness relative to the other countries with whom we are in the race to attract export-oriented global manufacturing investment.” He added that the federal government will extend the early successes achieved in ease of doing business to the areas critical to globally competitive export-oriented manufacturing operations. “On governance, oversight of the project rests with the Honourable Minister of Industry, Trade & Investment, supported by the Honourable Minister of State and the Permanent Secretary, who comprise the leadership of MITI. “The leadership of MITI is supported by a Project Steering Committee (SteerCo), with membership drawn from a cross section of stakeholders, set up to support project oversight, governance and implementation. “It meets on a regular basis to review progress of project implementation, proffer advice and assist in problem solving.

Funding

Besides government equity commitment to drive the project, five DFIs have shown interest in making the dream come true. Already, both Afreximbank and Export and Import Bank of China have committed $1billion (about N305billion) to the project. Enelamah, who made the revelation also said there is plan in the budget to fund the execution of the project. “NSEZCO intends to raise at least $500 million in equity over the first five years in order to execute its ambitious strategy of becoming a leading investor in special economic zones in the country. The other investment partners are the African Devel- opment Bank (AfDB) and Africa Finance Corporation (AFC),” Enelamah added. Apart from securing direct funding for the SEZs projects, there are indications that government is making effort to boost infrastructure development in the country that will have a direct impact on the actualisation of the project.

For instance, Buhari approved the es- tablishment of a Presidential Infrastructure Development Fund (PIDF), which is to be managed by the Nigeria Sovereign Investment Authority (NSIA) for specific investment in critical road and power projects across the country.

In line with the agenda, the National Economic Council (NEC) on May 17, 2018, authorised the initial transfer of $650 million (about N198.25billion) to the NSIA from the Nigeria Liquefied Natural Gas (NLNG) Dividend Account, as seed funding for PIDF. “This initiative aims to eliminate the risks of project funding, cost variation and completion that have plagued the develop- ment of the nation’s critical infrastructure assets — such as the 2nd Niger Bridge, Lagos to Ibadan Expressway, East—West Road, Abuja to Kano Road, Mambilla Hydroelectric Power — over the last few decades. This commitment by the President and NEC, allows all state governments to own an economic interest in the project companies that will be professionally developed and managed by the NSIA. The investments will yield returns, which will diversify revenues to states, improve the fiscal sustainability profile of the federation and ensure Nigerians benefit from modernised Infrastructure for decades to come. The PIDF will secure counterpart funds required for projects being co-developed with China Exim and China Develop,” FG disclosed.

ERGP Reviewed

ERGP was launched in 2016. It was aimed at stimulating the economy, activating growth of non-oil sector and delivering a robustly diversified and sustainable economic growth and development. Also, it was designed to among others, sustain private sector growth, help businesses grow capacity, and remove bottleneck to business growth. The implementation of the ERGP plan started yielding results when in 2017, less than one year after its launch, Nigeria jumped 24 places on the World Bank Doing Business index, and was listed among the 10 most reforming economies globally, feats that attracted accolades and commendation for the federal government’s economic policies. The ERGP articulates government’s vision for the country and lays the foundation for long-term growth. The underlying philosophy is to optimise local content and to empower local businesses. The three strategic objectives of the plan are to: restore and sustain growth; invest in the people; and build a globally competitive economy.

Speaking about government’s commitment to make the ERGP work and deliver on its promises, Vice President Yemi Osinbajo, during one of the strategic sessions to articulate the plans, said: “The ERGP is unlike others introduced by governments in the past. At its core is a focused approach to its implementation, supported in particular, by the highest level of political will, from the President himself through to our civil servants on the ground. It is no longer business as usual for us in government.” He said, following the six weeks of lab work, which included the participation of around 300 individuals from the government, working to resolve issues and problems presented by captains of industry, “we as a government are clearer today as to what we can do today to remove the regulatory and bureaucratic bottlenecks within the ambits of the law.” “The reality is that if we say that we are committed to improving the business environment and serious about making our economy more market-driven, we cannot but take the outcomes of the Labs very seriously.”