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How the FG plans to revive the economy in 2017

Over the past few weeks, minute details of the government's National Economic Recovery and Growth Plan have emerged.

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After years of fattening on oil revenue and growing into one of the world’s 20 emerging markets, Nigeria officially fell into recession in the second quarter of 2016.

The effects of that slump, coupled with the initial stumblings of the present administration as well as dogmatic fiscal policy meant that by the end of 2016, commodity prices were up between 50–250%. The naira lost value by over 40% in 18 months, fluctuating between N520 - N550 by the end of the year.

A chart of that exchange rate would look a lot like the road to recovery; a steep path that the government has made worse by being reactive in dealing with the falling price of oil and more recently, in managing the forex crisis.

Yet, two separate events in recent weeks have raised hopes within and outside the business community. First, the FG issued a $1bn Eurobond which was over subscribed by 680%; and in three days, the naira has strengthened from N540/$1 to N405/$1.

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This year, the federal government has expressed its intention to implement its National Economic Recovery and Growth Plan; and recently, ministers have begun to outline few parts of what looks like our long awaited, previously missing economic plan.

Yes. There’s a plan.

Speaking at BusinessDay’s Nigeria Economic Outlook 2017, the Minister for Budget and Planning, Udoma Udo Udoma gave a detailed expose of the proposed 2017 budget. The FG projects total expenditure of 7.298 trillion naira; 31% of that amount or 2.36 trillion will be allocated for capital expenditure.

The goal, according to him, is to fill an infrastructural gap that experts have estimated at over 300 billion dollars. The FG intends to invest in a myriad of projects: a new social housing program worth one trillion naira, the 3050MW Mambilla hydro-power project and the completion of all interstate roads, among others.

The prospective effects of this slump can not be fully expressed. To begin with, better infrastructure will make life easier for the average Nigerian. Think of a Lagos where instead of waking up in the dead of the night to avoid morning traffic, you can get to work by rail.

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One of the hallmarks of the recession in 2015 was how foreign companies quickly left the country, thanks to increasing costs of production. A stable power system and efficient transport networks will prevent capital flight, lure these companies back and attract new investors interested in doing business with Africa's largest market.

There is a general consensus that our over-dependence on oil was a major reason why the economy shrank after oil prices fell mid-2015, and the obvious way out is diversify the economy. To achieve this, the FG intends to improve local capacity. A good example is local food production where it has introduced initiatives such as subsidized fertilizer, grants and a proposed 20 billion naira fund to support farmers.

This week, the Minister for Agriculture, Audu Ogbeh announced China has shown interest in importing yams. Similar initiatives have been introduced in manufacturing and small scale enterprise.

Still, there's the small issue of the naira. Even before the economic slump, our currency was never particularly strong. It's why we make fond reference to the days when the exchange rate was 200 naira to the dollar.

The FG's plan is to strengthen the currency by reducing demand for the dollar. It aims to do this by reducing our dependence on foreign products, improving local capacity to meet demand for products, driving down the import of foreign goods and supporting exports.

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Fiscal policy also plays a major role in this. This week, the Central Bank released a $180 million intervention fund into the forex market. The naira's sharp rise in the last four days is a direct result of this policy.

It would be a relief if these initiatives could instantly fix the economy; unfortunately, they can not. At least, not in isolation.

Public institutions are responsible for executing the government's directives; yet years of rot and corruption have reduced them to stumbling blocks instead of facilitators. The effect is that the average process takes much longer than it should; and no-one feels the effect of this more than businesses.

Naturally, this poses a problem for investors. Who wants to bring their money into a place that makes it absurdly difficult to spend said money?

A major indicator for investors looking to do business in any country is the Ease of Doing Business Report.  The report is an index created by the World Bank that uses rankings to show the strength of a country's institutions, regulations for businesses and the protection of property rights.

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Nigeria stands at No. 169 out of 190 countries in the newest edition of the rankings.

According to the Minister for Trade, Industry and Investment, Professor Okey Enelamah,, there is a direct relationship between prosperity and the ease of doing business report.

The government aims to boost Nigeria's standings and strengthen its institutions with the ultimate goal of attracting foreign investment. One of the initiatives it plans to cut visa processing time to 48 hours and scale visa on arrival to make it easy for foreigners to enter the country.

In the area of technology, the FG has created funds and tax incentives for ICT firms to attract investment and consequently boost employment and participation in the emerging sector.

Professor Enelamah has stated that the government, through his office, has created a Presidential Ease of Business Committee to examine the key factors that the report considers and make recommendations to improve Nigeria's situation. In simple terms, the committee will look at all the many reasons (pronounce; institutions, practices, processes, levies) why Nigeria is at 169, and will propose ways to improve, or where necessary, completely get rid of them.

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Per federal institutions, the FG plans to reduce bottlenecks and cut redundancy by holding them to higher standards and creating checks and balances.

The road to recovery is a long one; the elements of the government's proposed plan that have been made available may have the potential to inspire a rebirth of the economy but emphasis must be made of the context in which that will be achieved.

The plan to drive down imports will mean that a lot of familiar foreign goods will either gradually become either unavailable or severely expensive; alternatives will also be limited, at least until we can improve local capacity to produce goods of that standard.

As the FG moves to direct capital expenditure for infrastructural development, recurrent expenditure will take a back seat, meaning that in the short term, the populace will have to make sacrifices for the greater goal.

What remains to be seen is whether these plans and initiatives will make the transition from mere words and Google docs to actual reality.

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