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OUTLINE
Nigeria is at a critical point in its 60-year history
The Issue
Where do we go from here? Here are the numbers
Key priorities for stability, growth and sustainability: The theory of change
The Outlook
The Key Priorities
The Nigerian economy contracted in 2020
Nigeria slipped into second recession in five years on the back of COVID-19 pandemic
• Implementation of lockdowns andfall in crude oil price led theeconomy into a recession in2020Q3.
• Real per capita incomes in Nigeriaare expected to fall to levels likethose seen in the 1980s - WB
Nigeria’s Real GDP Growth (2015Q4 – 2020Q3)
2.1%
-2.3%
1.5%
1.9%
-6.1%
-3.6%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2015Q4 2016Q3 2017Q2 2018Q2 2019Q2 2020Q1 2020Q2 2020Q3
Data Source: National Bureau of Statistics; Chart: NESG Research
Sectoral performance: Only 5 sectors grew in 2020 (Q1-Q3)
Both Nigeria’s oil and non-oil sectors were majorlyaffected by the pandemic.
Growth Rate of Oil, Non-Oil and Sectoral Categorisation of
Real GDP (2020Q1-Q3 in percentage)
1.72.4
2.0 2.3
1.42.0
4.1
2.4 2.2 2.1
-2.3
-5.2
1.7
-5.3
-3.6
Non-Oil GDP Oil GDP Agriculture Industries Services
2018 2019 2020
Data Source: National Bureau of Statistics; Chart: NESG Research
-29.8%
-21.9%
-14.7%
-13.4%
-10.5%
-9.1%
-8.7%
-7.2%
-5.1%
-4.0%
-3.3%
-3.0%
-1.8%
-1.0%
1.7%
1.9%
4.2%
13.7%
14.2%
Transportation & Storage
Accommodation & Food Services
Education
Real Estate
Trade
Construction
Profession, Sci. & Technical…
Other Services
Mining & Quarrying
Arts, Entertainment & Recreation
Manufacturing
Electricity, Gas, Steam, & AC…
Administrative & Support…
Public Administration
Agriculture
Human Health & Social Services
Water Supply, Sewage, Waste…
Information & Communication
Finance & Insurance
Nigeria’s sectoral output performance (2020 Q1-Q3)
Data Source: Central Bank of Nigeria; National Bureau of Statistics; Chart: NESG Research
11.0%12.3%
15.8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
Jan
Ma
r
Ma
y
Jul
Se
p
No
v
Jan
Ma
r
Ma
y
Jul
Se
p
No
v
Jan
Ma
r
Ma
y
Jul
Se
p
No
v
2018 2019 2020
COVID-19 Impact
590
1,389
(579) (421)
(1,803)(2,388)
2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3
Closure of land borders COVID-19 Impact
6.35.5
2.92.1
8.5
6.15.6
3.8
5.9
1.3 1.5
Q1
'20
18
Q2
'20
18
Q3
'20
18
Q4
'20
18
Q1
'20
19
Q2
'20
19
Q3
'20
19
Q4
'20
19
Q1
'20
20
Q2
'20
20
Q3
'20
20
COVID-19 Impact
Closure of land borders
Trend of Inflation Rate in Nigeria (Percent)
Trade Balance (N’Billion)
Several Indicators point to the fact that many of the problems existed pre-COVID-19
External Reserves (US$ Billion)
Foreign Investment Inflows (US$ Billion)
05
101520253035404550
COVID-19 constrained the already challenging fiscalposition
Fiscal Policy Environment
7.6
10.011.2
12.6
17.4
21.7
24.4
27.4
32.2
2012 2013 2014 2015 2016 2017 2018 2019 9M'2020
As at Q3’2020, the country’s total public debt stock stoodat N32.2 trillion (added a net of N4.8 trillion).
10.6 10.8
9.4
13.6
8.4
5.4
3.3
8.0
2.53.0
2.2
3.1
2.2
5.46.1
5.6
2020 Initial 2020 Revised 2020 Actual 2021 Approved
Expenditure Revenue Debt Servicing Deficit
Federal Government Budget Expenditure, Revenue and Deficit (N’Trillion) Nigeria’s Public Debt Stock (N'Trillion)
Data Source: Budget Office of the Federation, Debt Management Office; Chart: NESG Research
Nigeria in 2020
Large current
account deficits
financed by short-
term borrowing.
F I S C A L C ON S T R AINT
D E E P E NING P O V E RT Y
R I S IN G U NE M P L O Y M E N T
R AT E
R I S IN G D E B T S
W E A KE NE D C U R R E N C Y
S TAG NA NT / D E C L ININ G G D P
Drivers: COVID-19 | Policy & Regulatory Challenges| Reliance on crude oil, etc.
The Outlook “A man who does not plan
long ahead will find trouble
at his door.” ― Confucius
01 0302
This scenario mirrors the path of complete economic and
policy recklessness/negligence.
This scenario marks a complete departure from the BAU-approach
to the higher path of vision, commitment and tough policy
choices on investment.
This scenario assumes we continue with the current path.
2021-2025: The likely paths ahead of us
THE OUTLOOK
Best Case:Worst Case: Business As Usual:
MACROECONOMIC PROJECTION RATIONALE
• Global economic outlook
• Oil price
• Covid-19
GLOBAL ECONOMIC OUTLOOK
DOMESTIC ECONOMIC OUTLOOK
• Oil production
• Capital expenditure
• Policy efficiency
ROLE OF PRIVATE INVESTMENT
High-end private investment
01 02 03
2.9
7.5
0.9
2.9
-2.5
1.9
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
Best Case Business as Usual Worst Case
Real GDP Growth Rate Projections for 2021-2025 (Percent)
Source: NESG Research
Source: Various sources, NESG Research
Real GDP Growth Rate Projections for 2021
Nigeria will likely exit the recession in 2021
1.9%
2.3%
-2.8%
3.0%: FGN
1.5%: IMF
1.0%: World Bank
0.9%: NESG; BC: 2.9%
0.7%: AfDB
-4.0%
-2.0%
0.0%
2.0%
4.0%
2018 2019 2020e 2021
• All growth projections for the Nigerian economy in 2021 are positive
Best Case: Real GDP Growth Rate Projections for 2021-2025 (Percent)
Source: NESG Research
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Stability
Source: National Bureau of Statistics; World Bank. Chart: NESG Research
But unemployment and poverty rates are sticky downwards…
Overtime, there has been a weak linkage between economic growth and investment vs job creation and poverty reduction. Even in periods of positive growth, unemployment and poverty rates have trended upwards
Trend of Unemployment Rate in Nigeria (Percent)
7.89.7
6.4
10.4
14.4
23.1
27.1
0
5
10
15
20
25
30
83
90
2019 2020
Number of poor people in Nigeria (million)
Figure for 2020 is an estimate from the World Bank
Source: NBS, WDI, NESG Research
To fix this challenge, Nigeria needs investment-led growth
Real Investment as a share of GDP (Percent)
2.3
1.4
1.0 1.0 1.3
0.9 0.8
2014 2015 2016 2017 2018 2019 2020*
US$1.5 billion
*Data for 2020 covers Q1- Q3
0
5
10
15
20
25
30
35
40
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
Egypt Mexico Nigeria Turkey South Africa
Foreign Direct Investment Inflows into Nigeria (US$ Billion)
Two Points are crucial:
• Size of Investment
• The direction of investment i.e. the nature of the sector acquiring the investment.
Nigeria’s investment environment has not been “friendly”
Nigeria has huge potential:
Arable land, large population &
market, mineral resources,
strategic locations…
…but
• Structural factors remain evident:
infrastructure, electricity..
• Insecurity
• Limited attention to implement
reforms across key sectors
• FX management
• Policy & Regulatory Inconsistency
• The “Nigerian Factor”.
Source: NIPC
Nigeria’s investment environment has not been “friendly”
Why Investment?
• In this COVID-19 era, government spending is important but will be constrained in view
of rising debts and future debt service obligations.
• Investment is needed to drive production and productivity.
• Investment will sustain growth.
• Investment in critical sectors will drive inclusion.
Where we are
Short and Medium Term Economic
Goals
What we need to achieve the goals
To achieve investment we
need
The Four Priorities and Economic Transformation of Nigeria: ATheory of Change
• Weak economy
Real GDP – 2.9%
Inflation – 14.5%
Unemployment rate – 26%
End of 2021
Real GDP – 7.5%
Inflation – 11.8%
Unemployment rate – 19.3%
End of 2025
PRIVATE INVESTMENTS
Macroeonomic
Stability
Sectoral Reform
Boost Aggregate
Demand
Improve Aggregate
Output
• High inflation
• High unemployment and underemployment
• Weakened currency
Priorities 3 & 4 will have low to moderate impacts on aggregate demand and output in the short-term
Priority 1
Human Capital Development
Priority 4Priority 3
Policy & Regulatory
Consistency
Priority 2
Priority 1: Macroeconomic Stability
Assessing Nigeria using the 'Maastricht Indicators' confirmed that the country has a volatile macroeconomicenvironment.
-30
-20
-10
0
10
20
30
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2014 2015 2016 2017 2018 2019 2020
RHS - Oil Sector growth (%) Real GDP Growth (%)
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
4
6
8
10
12
14
16
18
20
Jan
Jun
No
v
Ap
r
Sep
Feb
Jul
Dec
May Oct
Mar
Au
g
Jan
Jun
No
v
Ap
r
Sep
Feb
Jul
Dec
May Oct
Mar
Au
g
Jan
Jun
No
v
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Inflation rate RHS - M-o-M Inflation rate RHS - Change in Inflation
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
-10
-5
0
5
10
15
20
25
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
Current Account (% of GDP) RHS - Volatility of CA
0
5
10
15
20
25
Jan
Jun
No
v
Ap
r
Sep
t
Feb
Jul
Dec
May Oct
Mar
Au
g
Jan
Jun
No
v
Ap
r
Sep
t
Feb
Jul
Dec
May Oct
Mar
Au
g
Jan
Jun
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Prime Lending Rate MPR(%)
250
300
350
400
450
500
9-A
pr-
19
9-M
ay-1
9
9-J
un
-19
9-J
ul-
19
9-A
ug-
19
9-S
ep-1
9
9-O
ct-1
9
9-N
ov-
19
9-D
ec-1
9
9-J
an-2
0
9-F
eb-2
0
9-M
ar-2
0
9-A
pr-
20
9-M
ay-2
0
9-J
un
-20
9-J
ul-
20
9-A
ug-
20
9-S
ep-2
0
9-O
ct-2
0
9-N
ov-
20
9-D
ec-2
0
Parallel Market Rate I & E Window (Closing) Official Rate
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Fiscal Deficit (% of Total) RHS - Fiscal Deficit (% of GDP)
Data Source: CBN, National Bureau of Statistics, FMDQ Chart: NESG Research
Macroeconomic instability became even more evident in 2020
Reserves have barely improved in a space of 8 years
Data Source: CBN, Bank Indonesia, NESG Research
$35.4$38.6
$43.1$38.8
$25.8$29.1
$34.5
$43.6
2020*2019201820172016201520142013
Nigeria's External Reserves (US$ Billion, Year-end)
$111.9$105.9
$116.4
$130.2$120.7
$129.2 $133.6*
2014 2015 2016 2017 2018 2019 2020*
Indonesia's Foreign Reserves (US$ Billion)
*2020 figure is Foreign Reserves as at November 2020.
The three-pronged policy stratification to achievemacroeconomic stability
MONETARY STABILITY EFFECTIVE FISCAL MANAGEMENT GOOD GOVERNANCE AND EFFECTIVE CITIZENRY ENGAGEMENT
1
2
3
Independence of Central Bank
Stabilisation of domestic
currency
Inflation targeting
1
2
3
4
Expanding the non-oil revenue and
transparency in tax collection
Consider debt relief programs to
achieve debt sustainability
Concentrate alternative financing
and non-debt instruments for budget
deficit financing
1
2
3
Promote open markets and fair
competition through legislation
Engage the private sector on
advocacy for policies and
regulatory reform.
Build public confidence by
stabilizing domestic currency
and policy direction
MACROECONOMIC STABILITY THE GOAL
THE TARGET
THE INSTRUMENTS OR POLICY ACTIONS
4Strengthening the country’s
banking system
Reflect national interests in budget
and Sub-national spending
Source: NESG Research
● Policy Reversals
● Lack of proper consultation with stakeholders
● Crucial decisions that affect businesses are made without consideration of evidence
and research
● Poor adherence to a central vision, ideology and goals;
● Lack of coherence (States vs Federal) has consistently resulted in economic and
social losses
● Frequent discontinuity of policies and programmes, especially when change of
government happens.
Priority 2: Policy & Regulatory Consistency
Clear visions and goals that are
consistent with improving the
business environment
Industry regulators should act as
“Enablers” not “Disablers” in the
business environment
Targeted Reforms
Policymaking should be driven by the
need to create public value
-15.5
-6.9
-3.1
-2.9
-0.6
6.1
6.6
17.3
37.2
37.7
Real Estate
Trade
Oil Refining
Public Adm
Other Manu
Food, Bev & Tob
Road Transport
Oil & Gas
Crop Production
Telecoms
Sectoral Contribution (%) to Growth 2016 - 2019 Top 5 and Bottom 5
Three of the 46 activity sectors of the economy accounted for 92.2 percentof economic growth from 2015 to 2019 – Telecoms, Crop Production and Oil& Gas.
Priority 3: Sector Reforms for Investment
The government will also need to implement reforms
that will attract significant investments into sectors
that meet the criteria:
Sectors that can account for a sizeable share of
employed individuals.
Sectors that have potential to grow and expand
their outputs
Sectors with strong backward and forward
linkages.
Sectors with link to inclusive growth.
Data Source: National Bureau of Statistics, Chart: NESG Research
Priority 3: Sector Reforms for Investment
Trade: AfCFTA: What is our winning strategy?
Digital Economy: Support for Innovation & Digital Integration.
Social Sector: Health/Education: Data-Driven Innovation,
Value Creation & Access
Industrial/Manufacturing: A revisit to the National Industrial Policy.
Petroleum Industry Bill: What hope for PIB in 2021?
Targeted Reforms
• Manufacturing• Construction• Trade• Professional Services• Education and • Health
Six Sectors met the above criteria:
ICT and Renewable energy are enablers
• The outbreak and rapid spread of thecoronavirus pandemic has not onlyoverstretched the country’s healthcaresystem but has also tested the resilience ofthe education sector.
• The pandemic has further highlighted theneed for both health and education tocontinuously adapt to a changingenvironment characterised by limitedphysical interactions.
• Human capital development is not onlyimportant but necessary for the survival ofthe nation.
COVID-19 Impacts
Nigeria's human development performance remains poor over time. The Human Development Index (HDI) stayed
flat at 0.5 from 2014 to 2019, with the country ranking 161st out of 189 countries surveyed in 2019.
Priority 4: Human Capital Development
Data Source: National Bureau of Statistics, Chart: NESG Research
72%
65%
43%
42%
21%
12%
40%
North East
North West
North Central
South East
South South
South West
Nigeria
Poverty Rate in Nigeria by Region (2019)
Key Priorities for Human Capital Development in Nigeria
• Social welfare must be a priority
• Massive digitization programme in
Education and Health sectors
• Nation-wide skills development
programme
• Curriculum review and delivery
• Opportunity for health care reforms
Reforms50.4
34.1
19.6
11.9
34.9
21.424.5
13.2
No formal
education
Primary education Secondary
education
Post-secondary
education
Poverty rate (%) Unemployment rate (%)
Poverty and unemployment are pervasive among segment
of the population with no formal education.
Poverty rate (2019) and Unemployment rate (2020Q2) by Educational Qualification
Data Source: National Bureau of Statistics, Chart: NESG Research
Source: NESG Research
Conclusion
• The goal must be to build a resilient and high growth economy that delivers a reduction in poverty and unemployment.
• Investment will play a major role in achieving sustained recovery.
• Policymakers must understand that the business-as-usual scenario will only lead Nigeria down the drain of economic hardship, wider income inequality and increasing poverty.
• The Nigerian government at both federal and state levels in 2021 must be deliberate and proactive to counter the effects of the pandemic. Urgency and intensity of reforms must be the new priority.
Thank you.
