1. COUNTRY SCENARIO PRESENTATION 21 st Nigerian Economic Summit 13 th – 15 th October 2015 Kunle Elebute, Partner/Head, Advisory Services, KPMG Professional Services 21 st NES theme: Tough Choices: Achieving Competitive, Inclusive Growth and Sustainability `

2. National Planning Commission Contents Why Use Scenario Analysis Phases of Economic Cycle Scenario Analysis Methodology/Framework Model Assumptions Illustrative Output Policy Options Alignment… Expected Thrust of NES #21

3. National Planning Commission Why Use Scenario Analysis? 123 Provide options for economic and social policy Select the scenario that will enable the country to recover from the current slowdown Identify the key economic levers that will generate the maximum impact - GDP per capita, Unemployment rate, etc. Fiscal and monetary policy that will result in the appropriate macro stability required for the economy to recover and grow… Outcome

4. National Planning Commission …Four Phases of Economic Cycle Time Real GDP Growth Slow down Boom Slump Reco very Boom Recession + - 6.5% - 7% 2.4% 0%

5. National Planning Commission The Framework Tax : GDP Ratio Reform of Petroleum Subsidy Scheme Recurrent vs. Capital Expenditure Ratio Infrastructure Financing JV Cash Call Financing Options Inputs Fiscal Multipliers* Outputs Education Health Infrastructure Security Other Capital Expenditure GDP GDP Per Capita Poverty Rate Unemployment Rate Child Mortality Rate Exchange Rate Inflation Rate Foreign Direct Investment External Reserves *Fiscal multiplier: The ratio in which the change in a nation's income level is affected by government spending.

6. National Planning Commission Model Assumptions Maintain the current tax collection system Reform of the FIRS and other revenue collecting agencies Improve collection administration and expand the tax base Tax to GDP ratio Reform of Petroleum Subsidy Scheme Retain the current level of subsidy on PMS & HHK Reform of Subsidy Scheme (leakages/corruption) Total Reform of petroleum subsidy scheme Infrastructure Financing Fiscal allocation Fiscal allocation and deficit financing Fiscal allocation, deficit financing and use of PPPs JV Cash Call Funding Retain 100% of JV cash call funding in the budget Reduce JV funding by 50% & IOCs to fund balance Alternative financing Base Case Moderate Case Optimistic Case Capital : Recurrent Expenditure Ratio Ratio to remain static 20:80 Improve ratio to 40:60 Improve ratio to 60:40 Variables/Scenarios

7. National Planning Commission Input variablesBase Case Scenario 2016-2020 Moderate Scenario 2016-2020 Optimistic Scenario 2016-2020 Tax to GDP Ratio5.60% - 5.60%6.16% - 9.02%6.72% - 13.93% Petroleum SubsidyN266.0b – N266.0bN123.2b – N123.2bNil Recurrent to Capital Expenditure Ratio80% - 20%60% - 40%40% - 60% JV Cash Call FundingN1,060.4b -N1,240.5bN530.1b – N620.2bNil Model Assumptions

8. National Planning Commission OUTPUTBase Case Scenario 2016-2020 Moderate Scenario 2016-2020 Optimistic Scenario 2016-2020 Per Capita GDP$2,483 - $2,601$2,841 - $3,049$2,902 - $2,994 GDP$459.3b - $537.3b$522.4.4b - $618.8b$623.2b - $717.5b Unemployment Rate8.0%8.15%6.97% Reserves$22.01b - $25.75b$24.50b - $29.01b$28.72b - $32.96b Poverty Rate30%22%13% Child Mortality Rate46/100030/100016/1000 Literacy Rate78.6%79.5%91.5% Exchange Rate199.7197.0195.0 Inflation Rate9.0%6.0%4.14% Illustrative Output

9. National Planning Commission Policy Options - Moderate Case ■ Target between 10 - 15% of the annual budget on investment in education ■ Promote effective use of innovative teaching methods/materials in schools ■ Adopt a merit based education system that will be based on performance, skills, and competences Education ■ Increase the number of physicians from 19 per 1000 population to 100 per 1000 ■ Increase national health expenditure per person per annum to about N30,000 Health ■ Provision of credit guarantees to attract long term funding to infrastructure assets for the initial period of investment ■ Increase the paved road network from 65,000Km to 120,000km ■ Increase power generation to achieve 10,000 MW Infrastructure

10. National Planning Commission Policy Options - Optimistic Case ■ Increase budgetary allocation to education to 20% ■ Raise the quality & standards of Universities to redress the outflow of students to foreign countries ■ Increased investment in vocational education through establishment of technical colleges and vocational centers in each state of the federation Education ■ Provide tax incentives and government funded research grants to local manufacturers of pharmaceutical products ■ Convert 1,000 hospital beds in 5 teaching hospitals into world class private wings with funding, expertise and management by world class healthcare companies Health ■ Privatize/concession the railways (focus on freight), major highways, major airports, refineries/pipelines/depots. ■ Adopt alternative financing options in the areas of infrastructure investment both directly and in partnership with the private sector ■ Privatization of the power transmission network and increase power generation to achieve 20,000 MW Infrastructure

11. National Planning Commission Policy Options - Possible Outcomes Optimistic Case Moderate Case Base Case + Real GDP Growth - Q4: 2015 Q2: 2016 Q2: 2017 - 2% 3% 7.5% Q2: 2018

12. National Planning Commission APC Manifesto Create 5 million new jobs and 4 million new home owners by 2019 Establish N300bn regional growth fund for the private sector Create a social welfare program of at least N5,000 for the 25 million poorest and most vulnerable citizen Provide allowance to the unemployed youth corps for 12 months Generate, transmit and distribute electricity on a 24/7 basis Make Nigeria the world’s leading exporter of LNG Increase the number of physicians from 19 per 1000 to 50 per 1000 Increase national health expenditure per person per annum to about N50,000 from less than N10,000 currently Establish technical colleges and vocational centers in each state Establish at least six new universities of science and technology Promote one meal a day for all primary school pupils. Increase budgetary allocation to education to 20% of annual budget … the manifesto appears to be in line with the policy options under the Optimistic scenario Economy Infrastructure Healthcare Education

13. National Planning Commission Expected Thrust of NES #21 Rigorous Debate on Tough Choices … Additional Policy Options; Key Priorities; Timing/Sequencing of Reforms; Responsibilities; and Fiscal and Other Incentives. to achieve… Competitiveness and Inclusive Growth on a Sustainable basis