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Ncube - Insecurity in North-East Won't Have Major Impact On Nigeria's Economic Outlook

June 9, 2014

At the recently-concluded 49th Annual Meetings of the African Development Bank in Kigali, Rwanda, the bank's Chief Economist and Vice President, Prof. Mthuli Ncube, told Kunle Aderinokun that the prospect of Nigeria's economy is bright, notwithstanding the current security challenge. He also spoke on the objectives and targets of Africa50, the new infrastructure financing initiative, amongst others Would you say the objectives of the 2014 AfDB Annual Meetings have been achieved?

Absolutely! The objectives of the annual meetings have been achieved. First of all, we wanted to make sure the delegates discuss issues that are important for Africa going forward. As you know the theme of this year's meeting is: The Next 50 Years: The Africa We Want. So they discussed those issues. The vision for Africa is as follows: We want an Africa that is peaceful, that is integrated, that is prosperous, that is people-oriented, and that also has a bigger voice in the world in global governance issues. All these were discussed here. We discussed conflict and fragility issues, regional integration and movement of people and goods; we discussed inclusive growth issues, Africa's growth prospect; we also discussed issues of Africa's disposition to global economy. We discussed the issue of job creation, gender issues; A lot of things that we really go into realising the dream of Africa that we share. We are waiting to achieve our mission. On participation, heads of state participated, former heads of state also participated and you have the list. It's been really fantastic.

What is the African economy that we want in the next 50 years? The African economy would be bigger; GDP per capital would rise from the current $2,000 per person to more like $15,000 to $17,000 per person. We expect to have one more billion people, half of whom would be young people. We expect to see increase in regional trade. We expect poverty to be more than halved in terms of head-count. The disease incidence to drop dramatically. So we've got a positive view of Africa, even if the Africa's contribution to the world's GDP would be quite up there. It's already approaching 10 per cent as we speak because of rebasing issues and other things, which we are already fixing. But the question is: Can we stay the course in terms of implementing the right policies, the determination of our leaders in Africa to do that? Certainly as a bank, we are doing that in our intervention in building infrastructure, in supporting governance, in supporting the private, in supporting regional integration. We are doing a lot. We are also building skills in Africa. So we are doing our part- dealing with fragility, focusing on agriculture and productivity and dealing with issues of gender equality and opportunities for all. The Africa Economic Outlook for 2014 projected that the economic growth for the West Africa sub-region would be 7.2 per cent in 2014 and 7.1 per cent in 2015. What is the specific growth target for Nigeria? What would you advise Nigerian government to do to make the country's economic growth inclusive?

We, the African Development Bank, never in public tell a specific country what it should do on anything. Our approach as a bank is to give policy advice confidentially and we are doing a lot of that. Inclusive growth challenge is there in every country including Nigeria. The way you make growth inclusive is by targeting job creation, entrepreneurship creation, and vocational education. I'm aware that Nigeria is beginning to make strides in these areas. Of course the impact of all these things takes time to see and realise, but I know how Nigeria is doing it and certainly in the right direction. And also, the investment that we have seen in agriculture sector in Nigeria is a positive one. I know how Nigeria is doing it and it's certainly in the right direction. But also, the investment you have seen in agriculture is a positive one so that the economy can diversify from oil and gas and move higher in the global value chain. So the contribution from agriculture is fantastic. And also the services sector has grown and with the GDP rebasing, that sector is properly accounted for; mobile telephony, the movie business, the banking sector are going the right way. In terms of inclusive growth, job creation, we think Nigeria has the right level of consciousness about the issue, which is very important by the way - at least to know that there is a problem and its beginning to do something about it through structural transformation, diversification, targeting the youth, skilling them - all to me is going in the right direction.

Finally, infrastructure investment. Infrastructure investment is also a solution for spatial inclusion challenges where poorer regions and richer regions are not connected but they use roads and rails to connect them. I launched the Nigeria's 20-year vision on infrastructure last year, where I say Nigeria needs $2billion a year to cover its deficit. The issue now is how to implement the vision in terms of energy reforms, investing in the energy sector, in roads, in rails and fortunately, there is movement by the government in that direction. Do you think the security challenge in North-eastern region of Nigeria, occasioned by activities of the Boko Haram sect, would affect the economic gains that have been recorded?

We wish Nigeria well in its desire to resolve the security challenge in the Northern part of the country, absolutely. In terms of economic activities, we do not think it's going to have a major impact on the economic outlook of the country. Why? Because the engines of growth in Nigeria are sitting elsewhere other than that region, which is affected. In fact, this is true for most of the growth in Africa by the way; the growth in Nigerian economy would be driven by the dynamic huge urban areas like Lagos, Abuja plus the states in the oil-rich region that are not affected as of now. We are truly confident that Nigeria's growth return this year and next year would remain robust. But of course, we wish Nigeria well in dealing with this issue.

Considering AfDB involvement in Nigeria, how much has been committed by the bank to development to date? I don't know the exact figures in terms of the portfolio split and so on but I can tell you that we are committed to Nigeria. First of all, to show our commitment, we have upgraded our office in Nigeria. The person heading the Nigerian office now is a full director; Nigeria is the only country that has got a director heading. So that shows you the importance we put in Nigeria as a bank. Secondly, we are in all sectors of the country. We've impacted on infrastructure, roads, and also power sector and then we have done a lot of lines of credit to the banking sector, particularly targeting small and medium scale enterprises. We've given a line of credit to Bank of Industry, Zenith Bank, Access Bank; all the major commercial banks have drawn lines of credit from the AfDB Group. We believe the financial sector is critical in providing credit for development in Nigeria. But I can tell you that we've impacted broad and wide within Nigeria and we would like to do more. Africa50 has just been launched at this year's meetings. What are the objectives and specific targets of the initiative in the short to medium term?

Africa50 is a fund that the AfDB has put together to target investment in infrastructure. It is a unique fund and it has got some innovations from different angles. The first innovation is that it contains a project preparation element. The problem with financing infrastructure in Africa is that the projects are not bankable - not ready for investors. So there is a project preparation, the risk-bearing element within the fund.

Second innovation is to encourage Africans to be investors in this fund be they as individuals, African pension funds, African central banks through their foreign reserves and sovereign wealth funds, also in partnership with foreign investors. Besides, the bank itself has also pledged to put in up $500 million into the fund. So there is also innovation in partners around the fund. Why was it created in the first place? It was to invest in infrastructure; to make contribution towards closing this gap of $50 billion, which is of course unfunded in terms of infrastructure investment in Africa. But of course, the overall infrastructure demand in Africa is about $100 billion in a year. Half of that, which is $50 billion is being funded, the other half is not and we are trying to close that gap through this innovative project. And of course we need more of this because that $50 billion is not enough, it's only a start.

The target for the fund is $10 billion but we are putting our own money as a bank with other investors putting their own money. Countries, African central banks, foreign investors and all that will build up into the $10 billion. But part of that will be used for project preparation and not just final investment.

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Source: AllAfrica

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