THE TRANSFORMATION AGENDA: ECONOMIC DIVERSIFICATION OF NIGERIA AND THE ROLE OF NEXIM Presented by Mr. Roberts Orya MD/ CEO, NEXIM BANK at the NIGERIA DEVELOPMENT FINANCE FORUM 2012 CONFERENCE 24TH -25th May, 2012

OUTLINE OF PRESENTATION The Outline of my presentation is as follows: The Transformation Agenda – An Overview Nigeria’s Economic Structure / Diversification External Sector Strategies Investment Opportunities in Nigeria NEXIM’s Role in Economic Diversification Concluding Remarks

THE TRANSFORMATION AGENDA – An Overview The Transformation Agenda is a medium term strategy (2011-2015), which has been designed to shape the focus and direction of the current administration in meeting Nigeria’s socio-economic challenges and long term development aspirations It is premised on, and draws inspiration from the Vision 20:2020 Economic Transformation Blueprint, which is a long term plan for stimulating Nigeria’s rapid growth and development through a diversified, sustainable and competitive economic environment.

Focus of Federal Government’s Transformation Agenda Infrastructure (power and transportation) Agriculture Manufacturing Entertainment Industry Education Investment in key sectors Government budget transparency Financial Management Fight corruption Good governance and anti corruption Macroeconomic reforms and stability Focus of FGN Transformation Agenda Fiscal Optimisation Accommodative monetary and exchange rate policy Job creation 11 Investing in priority sectors that will create jobs 13

THE TRANSFORMATION AGENDA – An Overview Over the last one year, the Nigerian economy has recorded significant progress in line with the transformation programme as follows: GDP growth of 7.36% in 2011, and projection of 7-8% up to 2015, which is significant in the light of global economic crisis. Financial sector reform, leading to improved capitalisation of Nigerian Banks and gradual recovery of the stock market Proactive Monetary Policy measures to manage inflation and exchange rates Improvements in external reserves balance, leading to increase to US$38. 72bn in 17th May, 2012 from US$32.3 in January, 2011.

THE TRANSFORMATION AGENDA – An Overview economic performance cont’d Improved budget process following the launching of medium term economic framework aimed at reducing recurrent expenditure and freeing more resources for capital projects Sovereign rating of B+/B by S&P, with target to achieve investment grade (BBB) by 2015. Implementation of Power Roadmap, leading to inauguration of the Board of Bulk Trading Company to intermediate between power producers and distributors, thus giving IPPs the confidence to invest.

ECONOMIC STRUCTURE / DIVERSIFICATION While the Nigerian economy has continued to record high growth, Crude Oil remains the dominant source of government revenue and export earnings 70% of government revenue and 95% of export earnings averagely This prevailing structure has exposed the Nigerian economy to the vagaries of the oil market. One of the key objectives of government under the transformation Agenda, therefore, is to aggressively pursue a structural transformation of the economy from a mono product to a more inclusive, diversified and industrial economy

ECONOMIC STRUCTURE / DIVERSIFICATION Economic diversification is further underscored by the following: Oil sector accounts for only about 16% of Gross Domestic products and has limited multiplier and linkage effects Agriculture currently contributes about 41% of GDP and employs over 60% of the population Over the past five years, Oil sector growth has declined, while the non-oil sector has been the main growth driver Solid minerals currently contributing less than 1% of GDP, in spite of Nigeria’s huge solid minerals deposits.

SECTORAL CONTRIBUTION TO GDP Source: CBN Annual Report

Sectoral Growth Rate of GDP (2006-2010) Source: CBN

External Sector Strategies From the foregoing Diagram & Table, it is evident that the contribution of services sector is growing at double digits along with the mining sector. However, their contribution to the external sector is quite minimal. Also, even though Agriculture is the largest contributor to the GDP, Nigeria remains largely an import dependent economy with huge food import bills. Non –oil Exports constitute less than 5% of total exports with over 70% of the exports comprising of raw and semi-processed agricultural products. The growth strategies under the vision objectives seek to transform the structure of exports from primary to processed/ manufactured goods

Composition of Non-Oil Exports Source: CBN

External Sector Strategies Under the current Transformation Agenda, the agricultural value chain has been specifically targeted for funding intervention towards value added exports of some cash crops and other agricultural products. The Nigerian Incentive Based Risk Sharing System (NIRSAL) has also been launched to de-risk the agricultural sector and promote private sector investment and credit flow to the sector

Investment Opportunities in Nigeria

Current Measures to improve investment climate in Nigeria   Measures Comments 1 Tax incentives Includes Tax concessions, Tax holidays (up to 7 years under pioneer status), Capital depreciation allowance 2 Improvement in infrastructure Increased FGN capital budget SURE (Subsidy Reinvestment Programme) to address roads and power projects, Implementation of Power Roadmap being pursued, Infrastructure Concession and Regulatory Commission established to facilitate private sector funding of infrastructure 3 Improved Port processes Reduction in number of agencies at the ports, leading to reduction in clearing time to about 2 weeks from 4 weeks Objective is for goods to be cleared within 48 hours Nigerian Customs currently facilitating the Single Window Model to facilitate trade

Measures to improve investment climate Cont’d 4 Security of Life and Property Police reform, Amnesty programme & other poverty alleviation initiatives 5 Anti-corruption drive Establishment of EFCC & ICPC Increased oversight by legislative arm 6 Export Incentives Review and streamlining of the Export Expansion Grant Creation of Export Processing Zones 7 Incentive to Agric Sector Agric Credit Guarantee Scheme Launching of NIRSAL to de-risk and improve funding of Agriculture Agric machinery to attract zero duty Enhancing effectiveness of ECOWAS Trade Libralisation Scheme (ETLS) 8 Incentive to Solid Minerals 3-5 years Tax Holiday Deferred Royalty payment Holders of mining lease to enjoy 75% Capital Allowance in first year, and 50% subsequently Zero customs and import duties

NEXIM’s Role in Economic Diversification The Nigerian Export – Import Bank was established by Act 38 of 1991 as Nigeria’s Export Credit Agency (ECA). The Bank is equally owned by the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance Incorporated (MOFI). The Bank’s broad mandate is essentially to promote the diversification of the Nigerian economy and develop the external sector through the provision of the following services in support of the non-oil export sector: Credit Facilities in both local and foreign currencies, Risk-bearing facilities - Export Credit Guarantee & Export Credit Insurance Business Development and Financial Advisory Services Trade & Market Information

NEXIM’s Role in Economic Diversification The Bank also complements in attracting foreign investment capital towards the development and growth of targeted industries and strategic sectors of the economy through availment of concessional lines of credit, co-financing arrangements and facilitation of buyers’ / suppliers’ credit towards the adoption and acquisition of new and clean technologies, assess to patents/intellectual properties, etc.

NEXIM’s Role in Economic Diversification …cont’d Highlighted below are also some targeted financial programmes developed by the Bank in support of Government’s policy initiatives towards economic diversification; a) ECOWAS Trade Support Facility (ETSF) The ECOWAS Trade Support Facility (ETSF) was designed with the following objectives: Increase the volume of recorded trade Integrate Small Scale traders into the formal payment system Assist to achieve ECOWAS & NEPAD’s goals of regional integration Create job and investment opportunities in line with Government’s transformation agenda.

NEXIM’s Role in Economic Diversification …cont’d b) Creative Arts & Entertainment Industry Facility In view of Nigeria’s position as the most prolific film producers worldwide and the 3rd largest in revenue receipts, the Bank had developed an operating guidelines to support and enhance credit flow to the entertainment industry with a view to: Facilitating the up-scaling of Nigeria’s film production quality to benefit from the global film entertainment market valued at over US$90 billion in 2010. Facilitating the establishment of adequate digital production and distribution infrastructures, etc

NEXIM’s Role in Economic Diversification To complement its financial intervention role, NEXIM maintains collaborative relationship with other trade facilitation agencies to pursue developmental roles that would enhance economic diversification, such as the following: Regional Sealink Project In order to mitigate some of the non-tariff barriers to intra-regional trade flows, especially against the background of growth of ECOWAS trade cargo from 4.7 million tonnes to 13.2 millions in the past decade and the absence of a maritime transport, NEXIM is facilitating the establishment of a dedicated regional Sealink Project. The proposed sealink project would essentially be private sector operated and it is projected to also mitigate the issue of high transportation costs and excessive transit time, which makes intra- regional trade non-competitive and west and central African transport and logistics costs one of the highest in the world.

NEXIM’s Role in Economic Diversification Borderless Initiative To complement its role as a member of the Trade Facilitation Task Force, whose mandate is to improve Nigeria’s ranking on “Trading Across Boarders”, NEXIM also partners with the Borderless Alliance, a private sector-led partnership in collaboration with USAID / West African Trade Hub and other stakeholders. The aim of the Borderless Alliance is to promote trade and regional integration in West Africa by addressing the problem of non-tariff barriers. This is to be achieved through policy advocacy in campaigns, dialogues and information disseminations.

Concluding Remarks NEXIM welcomes partnership opportunities in identifying viable projects, co-financing opportunities (in areas like Renewable Energy Projects), facilitating buyers/suppliers credits and accessing long term funds for the purpose of investment in growth sectors of the economy, especially in Manufacturing, Agro-processing, Solid Minerals, and Services Nigeria has consistently shown over the past few years as an FDI destination with one of the highest rate of return on investment Besides a large population and a growing middle class, Nigeria can be a gateway for exports to West Africa and indeed other African countries Investment climate is fully liberalised with friendly incentives, policies and laws. Also 100% business ownership is allowed for foreign investors under a one-stop investment processing approval regime. Finally, we welcome investment interests in the Sealink Project.

THANK YOU FOR YOUR KIND ATTENTION!!!