Integrating Economic Diversification for Sustainable Growth
Effective integration of economic diversification strategy and Sustainable Development Goals (SDGs) into national planning is crucial for Nigeria's sustainable development. The successor national strategic plan should address challenges such as oil dependence, declining GDP, social exclusion, and high unemployment to achieve long-term growth.
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THE SUCCESSOR NATIONAL STRATEGIC PLAN: WHAT LINK THE SUCCESSOR NATIONAL STRATEGIC PLAN: WHAT LINK WITH ECONOMIC DIVERSIFICATION AND THE SDGs? WITH ECONOMIC DIVERSIFICATION AND THE SDGs? Presented at the Joint Planning Board (JPB) Meeting Presented at the Joint Planning Board (JPB) Meeting Holding in Kano, Kano State Holding in Kano, Kano State BY TUNDE LAWAL DIRECTOR, MACROECONOMIC ANALYSIS MINISTRY OF BUDGET AND NATIONAL PLANNING Tuesday, August 23, 2016
OUTLINE OUTLINE 1.0 2.0 3.0 Introduction The Structure of the Nigerian Economy Lessons From the Implementation of Previous National Plans and MDGs The Successor National Strategic Plan: Key Elements and Principles How Do We Mainstream SDGs and Economic Diversification Strategy into the Successor National and State Plans? Key Issues and Challenges Policy Recommendations 4.0 5.0 6.0 7.0
1.0 1.0 Introduction Introduction Over the years, we have not successfully mainstreamed the Economic Diversification Strategy and SDGs into our plans and budget process Nigeria is in the process of developing the 2017-2020 MTP Effective design and implementation of the Successor National Plan would afford the stakeholders the opportunity to address today s challenges such as: - high dependent on oil, declining GDP growth & revenues, social exclusion & extreme poverty, high unemployment - The States plans should also be captured in the national plan Mainstreaming and integrating economic diversification strategy and SDGs into the Successor National Plan has become critical Successor National Strategic Plan (SNSP) Success of economic diversification strategy is critical to overcoming oil dependence and safeguarding long term sustainable growth and development Oil is finite and face huge fluctuations in prices, making economic diversification critical to decouple from volatile government revenues that are highly dependent on oil exports Rapid development of shale oil and gas production in USA and slowing down of Chinese economy are impacting global oil prices and demand Economic Diversification Strategy
1.0 1.0 Introduction /2 Introduction /2 SDGs adopted in 2018 is to be implemented at the regional, national and subnational levels Nigeria is a signatory to the agenda and participated actively in its development The Agenda include 17 goals, and 169 targets Critical to ensure effective mainstreaming of the economic diversification and SDGs as an integral part of the design, implementation, monitoring and evaluation of policies and programmes in all political, economic and societal spheres Steps include: identification of issues, engagement of stakeholders and institutions, working with sectors and states to identify the actions and design a costed action plan with a clear monitoring framework It also involves addressing actions which fall under the mandate of your agency and states SDGs Mainstreaming
2.0 2.0 Structure of the Nigerian Economy Structure of the Nigerian Economy Nigeria has not been successful in diversifying its economy - Particularly revenue, export and GDP structure The economy is highly dependent on crude oil - Specifically for exports and government revenue - Leaving the country vulnerable to oil price & production shocks Highlights of Dependence on Exports & Revenues of Oil GDP by expenditure is dominated by consumption While GDP by supply-side is dominated by primary production/trade Less than 10% and 20% of GDP come from manufacturing and gross capital formation Highlights of the Share of Consumption, Investment, Manufacturing and Primary Production/Trade in GDP 120.00 120.00 98.17 96.89 92.53 100.00 100.00 80.19 69.90 80.00 80.00 64.44 Percent 79.87 Percent 55.41 60.00 60.00 60.16 29.74 63.35 49.00 40.00 40.00 17.64 20.00 20.00 0.00 0.00 1989 2015 1981 1983 1985 1987 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Share of Manufacturing in Real GDP Share of Oil & Gas in Total Exports Share of Primary Production and Trade in Real GDP Gross Investment (as % of GDP) Share of Oil & Gas in Federally Collected Revenue Final Consumption Expenditure (as % of GDP) Biggest challenges are making the non-oil sector export-oriented and revenue generating Another challenge is increasing investment rate and contribution of manufacturing to GDP
2.0 2.0 Structure of the Nigerian Economy /2 Structure of the Nigerian Economy /2 States IGR as percentage of States total revenues ranged between 1.86% (Benue) and 53.01% (Lagos) Other States would need to emulate Lagos to diversify their sources of revenues Detail of States IGR as % of Total States Revenue in 2014 is highlighted below Source: CBN
2.0 2.0 The Structure of the Nigerian Economy /3 The Structure of the Nigerian Economy /3 This structural defect has led to long standing challenges of price instability, unstable GDP growth, rising unemployment, income inequality, and poverty that causes widespread civil unrest as highlighted below GDP Growth Inflation (Year on Change) 28.20 30.00 20.00 24.80 25.00 17.40 20.00 14.80 10.00 Percent Percent 12.90 15.00 10.00 10.40 9.55 9.30 0.00 2.79 2012 5.90 5.00 2015 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 3.00 0.00 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 -10.00 Exchange Rate (N/$) Unemployment Rate (Incl. Underemployment) 400.00 336.93 35.00 31.20 350.00 27.36 30.00 300.00 250.00 25.00 231.76 N/$ 200.00 24.30 Percent 20.00 150.00 13.10 100.00 15.00 50.00 10.00 11.90 0.00 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 5.00 0.00 DASWDASDollar IFEMDollar BDCDollar
3.0 3.0 Lessons From the Implementation of Lessons From the Implementation of Previous National Plans and MDGs Previous National Plans and MDGs Lessons from the implementation of previous national Plans and MDGs were not impressive These include: Lack of policy continuity, coherence, consistency leading to profifereration of abandoned projects Inadequate alignment of the national and state plans and budgets Poor implementation of capital budget High cost of governance and corruption Non-alignment of donors grants disbursement to government priorities Weak institutionalisation of M&E framework Low capacity in plan formulation, implementation, research, statistics and M&E Infrastructural deficit and low labour skills and technology Funding challenge Stand alone MDGs with no national and State framework designed for their implementation Late commencement of the implementation of MDGs (implementation commenced in 2005 as against 2000) Insecurity and Growing socio-economic and geographical inequalities has been a bottleneck Plans MDGs
4.0 4.0 Government s policy thrust for 2017-2020 Medium Term Successor National Strategic Plan builds on the framework of the Strategic Implementation Plan (SIP) for 2016 Budget This will be guided by the AU Agenda 2063 and SDGs It is designed to ensure macro-economic stability, improve efficiency in resources allocation, reflate the economy out of recession and foster sustainable and inclusive growth Also aimed at diversifying the productive base of the economy The various priority programmes are to be implemented along 6 major pillars namely: (i) Economic Reforms, (ii) Infrastructure, (iii) Governance & Security, (iv) Environment, (v) Social Investment , (vi) State and Regional Development The Successor National Strategic Plan: Key Elements and Principles The Successor National Strategic Plan: Key Elements and Principles Infrastructure Development Economic Reforms Social Investment Increasedaccess to energy supply and improved inter- modal transportation infrastructure Setup an Infrastructure Fund Promote Public-Private Partnership Increasing stock of basic social amenities (housing, water, health centres, vocational centres) Completion of critical ongoing capital projects Improved planning, budgeting, and Monitoring and Evaluation Framework Improve the Quality of Expenditure Oil and Gas Sector Management Improve Revenue mobilization, especially the non-oil sector Sustainable Debt Management Intensifying economic Diversification efforts of the Government and Strengthening linkages in the Economy Sustain the Zero-based Budgeting approach Provide conducive business environment for investment Stimulate Investment into the Solid Minerals sector, and plug Revenue Leakages in the Sector Implement Measures to Achieve Self-Sufficiency &Become Net Exporters of a selected agric products: rice-2018, tomato paste-2016,wheat-2019. Development of MSMEs & skills Protecting the poor and most vulnerable Providing affordable and quality education Providing qualitative and affordable health care Improving overall living standard of Nigerians Job creation and social inclusion School feeding programme and CCT - - - 9
4.0 4.0 /2 The Successor National Strategic Plan: Key Elements and Principles The Successor National Strategic Plan: Key Elements and Principles /2 State & Regional Development Improving intergovernmental relationship Harmonization of taxes Encouraging economic cooperation and common investment among States within geo- political zones Environment Improving Governance including Security Promote environmental sustainability - Clean up of oil spillage in the Niger Delta region Combat Climate Change and its Impact Promote Sustainable use of Natural Resources Strengthen regulatory framework for environmental management and enforce compliance with environmental standards Reduction in the use of wood fuel and bush burning, Great Green Wall, land degradation Develop efficient accountable, transparent and participatory governance - Improve efficiency and effectiveness in pubic service - Ensuring adequate security - Ensure Rule of Law and quick dispensation and administration of justice Enforce full implementation of TSA & IPPIS Zero tolerance for corruption 10 10
4.1 4.1 Broad Macroeconomic Objectives Broad Macroeconomic Objectives The macroeconomic policy objectives for the MTP are: - Ensuring a stable macroeconomic environment for real sector development and investment inflow into the country - Investment in critical infrastructure and institutions to enhance productivity and lower cost of doing business - Creating jobs to reduce unemployment - Protecting the poor and vulnerable through social investment - Pursuing economic diversification to reduce vulnerability due to oil price and production shocks 11
4.2 4.2 Key Underlying Assumptions Key Underlying Assumptions Demand and supply factors are expected to keep crude oil prices low in the medium term compared to the period prior to mid 2014 We are considering a conservative oil price benchmark of $42.5pb for 2017, $45pb in 2018 and $50pb in 2019/2020 The assumption also guided the MTEF and MTSS 2017-2019 preparation process The Table on key assumptions on oil price and production, and exchange rate for the Medium Term Development Plan is depicted below: 2015 Base Year 2016 2017 2018 2019 2020 Oil Production (mbpd) 2.12 2.2 2.2 2.3 2.4 2.5 Oil Price Benchmark (US$/b) 52.07 38 42.5 45 50 50 Exchange Rate (N/$1) 195.5 197 290 290 290 290 96,667.43 100,959.52 109,989.5 118,886.9 130,099.86 Nominal Oil GDP (N Billions) 79,427.13 12 Source: Ministry of Budget and National Planning, NBS
Growth Projections, 2016 Growth Projections, 2016- -2020 GDP growth is projected to gradually recover after the slowdown - A very marginal positive growth of 0.35% is envisaged for 2016 and is projected to increase to 4.04% in 2019, thus averaging 3.77% during the MTSS period 4.3 4.3 2020 GDP growth is expected to be largely driven by the non-oil sector with Agriculture, including agro-business, solid minerals, and building & housing playing a lead role Export-led growth is to be pursued Government will continue to step up efforts in diversifying the productive base of the economy, as well as implementing relevant reforms Description 2015 2016 2017 2018 2019 2020 Real GDP Growth (%) 2.79 0.35 3.02 4.26 4.04 4.86 Nominal GDP (N Billion) 94,144.96 98,543.96 108,734.53 118,979,37 129,772.72 141,976.5 Inflation rate (%) 9.55 15.12 12.92 11.88 12.57 9.54 Population Growth (%) 3.2 3.2 3.2 3.2 3.2 3.2 Final Private Consumption Expenditure (N billion) 74,196.10 75,320.19 80,048.31 84,458.36 91,955.47 98,364.29 Merchandise Imports (fob) (N billion) 10,312.01 9,857.20 9,904.25 9,348.13 8,798.94 8,314.27 Growth in Manufacturing GDP (%) - 1.46 -0.13 4.43 16.85 18.72 23.66 Growth in Non-Oil Exports (%) 12.3 15.0 20.0 17.0 12.49 25.0 FG s Share of Capital in Total Expenditure (%) 8.06 30.21 29.65 31.59 32.17 32.31 13 Source: Ministry of Budget and National Planning, NBS
5.0 5.0 How Do We Mainstream SDGs and Economic How Do We Mainstream SDGs and Economic Diversification Strategy into the Successor Diversification Strategy into the Successor National and States Plans? National and States Plans? Building Awareness Mainstreaming Process/Approach SDGs & Diversification Strategy Multi-stakeholder Approaches Tailor SDGs & Diversification Strategy to Local Context Local States and FCT Plan National Plans: MTDP National & Sub-National Policy Coherence Governments Plan Sectoral Policy Coherence MTSS/Plans at LG Level MTSS/Plans at Federal Level MTSS/Plans at State Level Budgeting for the Future Monitoring, Reporting and Accountability Federal Annual Budget States Annual Budget LGs Budget Assessing Risks and Fostering Adaptability Implementation, Monitoring, Evaluation and Reporting
5.0 5.0 How Do We Mainstream SDGs and Economic How Do We Mainstream SDGs and Economic Diversification Strategy into the Successor Diversification Strategy into the Successor National and States Plans? ./2 National and States Plans? ./2 The process of mainstreaming the diversification strategy and SDGs should include among others: Introductory workshop series Public awareness campaign Opportunity management Building Awareness Initial engagement Working with formal bodies/forum such as JPB/NCDP & NEC, NESG, CSOs, international development partners, etc Fostering public private partnerships Guidance on dialogue Multi-stakeholder Approaches Review existing strategies/Plans such as NV20:2020, NIIMP, 2043 sector plans at the Federal level and States plans etc. important to learn from our failures and successes Recommendations to leadership Setting national relevant targets Formulating the Successor National Plans using systems, not silo thinking Tailoring SDGs & Diversification Strategy to Local Context
5.0 5.0 How Do We Mainstream SDGs and Economic How Do We Mainstream SDGs and Economic Diversification Strategy into the Successor Diversification Strategy into the Successor National and States Plans? /2 National and States Plans? /2 Other key processes for mainstreaming the diversification strategy and SDGs includes: Integrated policy analysis (breaking the silos) Cross cutting institutions have to work together Integrated modelling to capture economic, social and environmental concerns Sectoral Policy Coherence Multi-level institutions Multi-stakeholder bodies and forums Federal and State Plans and networks National and subnational levels indicator system Integrated modelling (availability of subnational database is key) Impact assessment processes (M&E, Research institutions, Bureau of Statistics) National and Sub- national Policy Coherence Taking stock of financing mechanism, particularly the IGR & PPP Adopted outcome-based and participatory budgeting (MTP & ZBB approach) Linking the medium term plans and the budget Budgeting for the Future
5.0 5.0 How Do We Mainstream SDGs and Economic How Do We Mainstream SDGs and Economic Diversification Strategy into the Successor Diversification Strategy into the Successor National and States Plans? /3 National and States Plans? /3 Other process of mainstreaming the diversification strategy and SDGs includes: Indicator development and data collection including baseline Disaggregating data e.g. SGDP Monitoring and reporting systems Review processes and mechanisms Monitoring, Reporting and Accountability Adaptive governance Risks analysis and management Scenario planning and stress testing Assessing Risks and Fostering Adaptability Need to initiate this process now and over time in order to diversify the economy and achieve the SDGs in the next 15 years
6.0 6.0 Key Issues and Challenges Key Issues and Challenges Institutional Capacity to design, implement, monitor and Evaluate the Plan as well as mainstream & integrate SDGs and Diversification Strategy into National, Sub-National & Sector Plans and annual budgets Data issues No functional plans (National, Subnational and Sectoral Plans) Implementation of stand alone SDGs in many States Non-Alignment of the medium term Plans with the Budgets Inadequate monitoring, evaluation and reporting mechanism Ineffective implementation of performance or outcome-based budgeting Issues of Good Governance and insecurity Funding challenges
7.0 7.0 Policy Recommendations Policy Recommendations Initiative the process of multi-stakeholders consultations and collaboration Strengthening institutional capacities through learning and re-learning Integrate SDGs and economic diversification strategy into development plans, policies and legislations at national and subnational level Commence of process of developing national and state sector-wide plans for early implementation Prioritisation and focus on core development priorities such as healthcare, education, inequalities, infrastructure, social investment, regional development, productive sector particularly agro-process and oil refining, etc Focusing on key results and milestones and adoption of outcome-based budgeting Focusing on innovative approaches to service delivery
7.0 7.0 Policy Recommendations..../2 Policy Recommendations..../2 Deployment of traditional, new and innovative sources of financing Addressing governance, issues and mismanagement of resources - Sustain implementation of the TSA system Harnessing Nigeria s demographic dividends Ensuring Data availability, acceptability and coherence. Ensure that the Plan and Budget are aligned for enhanced implementation of the diversification strategy and SDG initiatives Conduct studies to ascertain ongoing and abandoned projects for effective prioritised and implementation
