DEVELOPING PLANS TO ACCELERATE NATIONAL ECONOMIC GROWTH

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Vice President Yemi Osinbajo, SAN, attends the NIPSS Graduation Ceremony in Kuru, Jos, Plateau State. 20th November, 2021. Photos: Tolani Alli

The recently approved 2021 – 2025 National Development Plan will usher a new season of accelerate growth in Nigeria because of its focus on value addition as major pivot to boost productivity in all sectors, according to Vice President Yemi Osinbajo, SAN.

Prof. Osinbajo stated this on Saturday at the graduation ceremony of participants of the Senior Executive Course 43 (2021) of the National Institute of Policy and Strategic Studies (NIPSS) In Kuru, Jos.

 “If we are to inaugurate a new age of accelerated growth then we must adopt a new strategic direction and policy orientation. This is precisely what the Federal Government seeks to do through the National Development Plan 2021-2025, which was recently approved by the Federal Executive Council,” the VP stated.

 In the speech, the VP cited the emergence of Unicorns from Nigeria, observing that “six of those companies started between 2016 in the middle of two recessions and the global health crisis.” (A Unicorn is a company that is worth over a billion dollars)

He submitted that some of the successes recorded by those Unicorns- Nigerian start-ups owned by young men and women, can be attributed to providence and good policies.

 According to him, such companies named Unicorns in Nigeria emerged between 2016 and 2021. The companies the VP listed are:

1.Opay

2. Paystack

3. Flutterwave

4. Andela

5. Piggyvest and

6. Jumia.

 He explained further: “What is responsible for some of these successes? Providence and good policies. Providence because COVID-19 was a boom period for online payment systems. Policy, because Mr. President approved the establishment of a Technology and Creativity Advisory Group that helped to formulate new banking policies to accommodate new tech-enabled payment systems, such that these tech companies could process payments without being full-scale banks.”

The Vice President then disclosed that, “in terms of strategic direction, the cornerstone of our strategy is boosting productivity by focusing on value addition as the guiding principle for all sectors, especially agriculture, manufacturing, solid minerals, digital services, tourism, hospitality and entertainment.”

 Prof. Osinbajo pointed out how the Plan aims to boost productivity in some of these key sectors such as agriculture and mining.

 “In agriculture, for example, just as we seek to increase the production of rice, we are paying equal attention to other parts of the value chain such as storage, transportation, processing and marketing.

 “Similarly, in the mining sector, we recognize that exploitation and extraction will not create jobs. Our aim is to focus on resource beneficiation, local industries, thereby creating wealth along the mineral value chain,” he explained.

 The Vice President explained that the strategic direction of the Development Plan is hinged on major indices, including (direct and indirect) job creation, relaxing trade restrictions, improving tax administration and creating a conducive environment for businesses to thrive.

 In line with the Plan’s focus on value addition and loosening restrictions on trade, the VP highlighted the Bangladesh example, noting that “Bangladesh only grows 2% of its annual cotton requirement and imported $11.8 billion worth of textiles and apparel while it exported about $31 billion worth of garments in 2019.”

 He further said that “generalised restrictions on trade are counter-productive when they impede the ability of local industries to procure critical inputs.”

 “Our focus instead will be on allowing imports of goods to which value can be added before domestic consumption or exportation. For example, importing cotton for garment making might be smarter than insisting on growing all your cotton,” he observed.

 Noting that the major fiscal policy challenge facing Nigeria was inadequate revenues, especially with lower oil revenues, Prof. Osinbajo pointed out the need to improve the country’s tax administration through “vigorous collection of all revenues due to the Federal Government from its Ministries, Departments and Agencies; bringing all high earning agencies into the Federal budget.”

 He also advocated for a reduction in customs duties and tariffs on raw materials and intermediate goods used in manufacturing to boost local productivity, “while giving reciprocal, non-tariff-based support like procurement, subsidies and tax breaks to priority sectors.”

 In creating a conducive environment for businesses to thrive, the VP emphasized that “we need to eliminate red tape, extortion and harassment of small businesses which increases their costs.”

 The Vice President’s speech focused on Nigeria’s public health response to the COVID-19 pandemic and the future; response to the economic downturn in the aftermath of the pandemic, the issue of continuous growth and the future of youth employment.

 Recalling how the country tackled the socio-economic effects of the pandemic, Prof. Osinbajo emphasized the important steps promptly taken by President Muhammadu Buhari to set up a committee chaired by the VP which designed the N2.3 trillion stimulus plan – Economic Sustainability Plan (ESP), as well as the previous inter-ministerial Committee headed by the Minister of Finance, Budget and National Planning, Zainab Ahmed.

 “We were clear that the only way of avoiding an economic disaster that could last for years was for the government to essentially put forward a major fiscal stimulus plan. Such a plan must have clear objectives of saving jobs and creating new ones, supporting businesses that may close down, and employees that may not be paid during lockdowns, and, of course, healthcare support to reduce the COVID-19 caseload,” Prof. Osinbajo said.

 The VP also recalled how the Presidential Task Force on COVID-19, as well as the lessons from the 2014 Ebola outbreak helped Nigeria tackle the pandemic.

 “We were able to scale up on testing and case management capacity quickly, activating 120 laboratories nationwide from five just before the pandemic – most of them public laboratories.

 “One of the key lessons we learned from our response to the Ebola outbreak was the need to build systems in ‘peace time’ that can be used during outbreaks. The President also directed the setting up of the locally and internationally acclaimed Presidential Task Force on COVID-19, which swiftly issued and enforced COVID protocols for travel and general movement,” he said.

 The VP also highlighted the impressive work done by Nigerian scientists and institutions to mitigate the effects of the pandemic. He noted the efforts of Prof. Christian Happi-led team at the African Centre of Excellence for Genomics of Infectious Diseases (ACEGID), at Redeemers University, Ede, Osun State (sample analyses and ground-breaking rapid test); and Professor Y.K Ibrahim-led team at the Africa Centre of Excellence for Neglected Tropical Diseases and Forensic Biotechnology (mass testing).

 He observed that the state-of-the-art equipment and well-trained scientists at the Nigeria Centre for Disease Control (NCDC)’s National Public Health Reference Laboratory in Gaduwa, Abuja, put it among the best prepared and resourced of its kind in Africa.

 Addressing the Senior Executive Course 43 (2021) participants, the Vice President congratulated them for their “well researched and thought-provoking presentation to Mr. President on “Getting Things Done: Strategies for Policy and Programme Implementation in Nigeria.”

 While he reminded the participants that they were “graduating at probably the most consequential period in Nigeria’s history; a time of immense challenges, but even more enormous opportunities,” the VP urged them as members of Nigeria’s foremost think-tank to find more ways to inspire growth and productive leadership across all sectors.

“We expect continued growth in voice revenue in line with the recovery in economic activities, particularly in the informal sector”, analysts at Cordros capital said.

They also expect the momentum in data revenue to be sustained by its enhanced network capacity and favourable country demographics amid rising smartphone penetration.

Cordros Capital estimates that service revenue will grow to N1.62 trillion, representing a  20.4% year on year increase in 2021, supported by growth in voice (+9.8%), data (+47.2%) and value-added services (+27.4%).   

Analysts said the company’s revenue growth will sustain expansion in margins despite elevated operating expenses amidst double whamming of a high inflation rate and naira devaluation in Nigeria.

Despite the significant increase in network operating costs that jumped by 31.5% year on year, according to the MTN Nigeria financials, 22.9% growth in topline and sub-inflationary growth of 6.6% in operating expenses pushed EBITDA higher.

MTN Nigeria EBITDA surged by 27.2% year on year to N217.29 billion in Q3-2021. This pushed the EBITDA margin upward by 179 basis points to 52.4% in Q3-2021 and by 158 basis points to 52.6% on a 9-month basis.

“We expect operating expenses to remain elevated in Q4-2021 given the pass-through impact of the Naira devaluation on BTS lease cost, increased rollout of 4G sites, and advertisement related expenses”, Cordros Capital stated.

Notwithstanding, analysts are expecting revenue growth to limit the overall impact on margins. For the financial year 2021, analysts at Cordros Capital projected that the company EBITDA will grow by 24.8% to N855.72 billion, with an accompanying EBITDA margin of 52.8%, representing +186 basis points year on year jump.     

In September, MTNN paid N72 billion to renew its operating spectrum and services licences in Nigeria for another 10 years. It paid N374.6 million for the unified access service licence, which underpins its data network and telecom coverage in Africa’s biggest economy.

“These licences, which expired on 31 August 2021, have now been renewed for a further ten-year period, starting 1 September 2021,” the telecoms firm said in a statement.

The Nigerian Communications Commission (NCC) has notified the company of the renewal of the 900MHz and 1800MHz bands, subject to licence conditions, the telecoms firm said.

It plans to invest N600 billion over the next three years to expand broadband access in Africa’s most populous country and is boosting its 4G coverage to provide home broadband as part of a rural connectivity programme.

Analysts at WSTC Securities said they have a very strong outlook for MTN Nigeria, given the strong fundamentals of the industry it operates in, and company-specific factors.

The growth expectations for MTNN are high because of its status as the market leader in the telecommunications industry, analysts stated. WSTC Securities analysts without mincing words said in the equity report that despite the strong fundamentals of the company, there are risks.

Downside risks:

Over the past few years, MTN Nigeria has had its fair share of battles with the regulators. Largely, the telecom company has broken rules and regulations demand from the host economy.

In 2015, the Group was fined about N1 trillion but revised to N330 billion by the Nigerian Communications Commission (NCC) over failure to disconnect non-registered SIM cards.

Also, in 2018, the Central Bank of Nigeria asked MTN Nigeria to refund the sum of $8.13 billion that was illegally repatriated. The dispute was later resolved after the company paid $53 million.

In addition, analysts hinted that the Attorney General of the Federation initiated a case against the Company over unpaid taxes. The case was later withdrawn. More recently, in December 2020, the NCC suspended mobile network operators from selling new SIM cards due to a national database update.

The effects of churn and the regulatory restrictions led to a loss of 5 million subscribers (-7%) between December 2020 and March 2021. The ban was lifted in April 2021.  Analysts at WSTC Securities said the most gripping bottleneck is exchange rate volatility – which may have a negative impact on costs and dividend repatriation