Nigeria: Central Bank plans for the next 5 years

Well folks, here it is. Africa’s biggest economy’s plan for the next 5 years! Nigeria should be dominating the continent and setting the direction for the African renaissance, but corruption and internal governing deficiencies are weighing this giant down. Can Nigeria get out of its own way? Here are the highlights from the Nigeria Central Bank Governor Godwin Emefiele’s speech. (Full transcript speech available here)

• Single-digit inflation
• $12 billion non-oil exports by 2023
• 95 percent financial inclusion rate by 2024.

“Banking” the Unbankeable

Governor Godwin Emefiele disclosed that the CBN is working to ensure that at least 95 percent of all eligible adults have access to financial services in five years’ time. Fortunately, the honorable Governor is not talking about only formal banking. This would be a tall order in a country where currently only approximately 40% of the approx 99.6 million adults people are banked. In order to achieve this, a whopping 31.6 million people will need to be “convinced”, within the next five years, of the merits of keeping their money in the bank. [efn_note] This is obviously if we assume that the ENTIRE adult population is “bankable”, which in reality is not the case: no stats currently available as what percentage of the adult population is infirm.[/efn_note]. Additionally, all that in a country where, culturally, “cash is king”.

I laud the idea, but as with most plans, its achievability lies in the solidness of the “how” not so much the “what”. The numbers represent an increase of 31%[efn_note]see footnote 1[/efn_note] over the next 5 years (roughly 6.3% per year), whereas the banked population only increased by 1.4% between 2016 and 2018. The numbers are definitely against hope, but perhaps the Governor has a different strategy in mind.

What it means in $ terms

If this can be achieved, it will bolster the country’s economy and will spell a huge bump in the taxable pool: The average income per capita is around 5338 USD, so do the math… [efn_note]USD165,478,000,000, if you’re too lazy 😁[/efn_note] The obvious “how will it be used?” question must be asked, but that is not the CBN’s job to worry about I guess.

Over the past few years, Nigeria – recognizing that 63.3% of their population is based in rural areas – has granted permission to non-banks to provide limited financial services – the extent of which will be covered in a subsequent article. Swift transactions are key for business and the CBN will have to bolster this initiative to achieve its objective. [efn_note] This is obviously if we assume that the ENTIRE adult population is “bankable”, which in reality is not the case: no stats currently available as to what percentage of the adult population is infirm.[/efn_note]. This represents a HUGE opportunity for reliable entrepreneurs that conveniently situated outside the major urban centres.

Non-Oil Exports

Another steep challenge. 12 billion per annum in non-Oil exports by in 2023 (so in 4 years time), will require a concerted effort. This equates to an astounding 73% increase from the current status quo. [efn_note] $ 3.165 Billion in 2018[/efn_note]. In 2018, Nigeria exported the following products:

• Mineral fuels including oil: US$49.8 billion (94.1% of total exports)
• Ships, boats: $1.3 billion (2.4%)
• Cocoa: $317.5 million (0.6%)
• Oil seeds: $274.6 million (0.5%)
• Fruits, nuts: $189.3 million (0.4%)
• Fertilizers: $169.2 million (0.3%)
• Tobacco, manufactured substitutes: $97.2 million (0.2%)
• Raw hides, skins not furskins, leather: $93.4 million (0.2%)
• Aluminum: $74.2 million (0.1%)
• Plastics, plastic articles: $71.4 million (0.1%)
• rice, sorghum, millet, cassava (manioc, tapioca), yams, rubber; cattle, sheep, goats, pigs; timber, coal, tin, columbite; rubber products, wood, textiles, cement and other construction materials, footwear, chemicals, printing, ceramics, steel account for the other: $579.7 million (1.1%)

Doable or not?

In order to achieve the USD +12 billion objective in non-oil exports, the country has its work cut out. Completely unachievable it is not, but this will depend on the infrastructural support that the Government aims to put in place. If any country CAN do it, Nigeria can. Business is “second-nature”: Less than 8% of the adult population is in formal sector employment, while 51.3% of the adult population are afropreneurs. As I argue here [efn_note]And this would be a brilliant test case, as nowhere on the African continent are there more entrepreneurs in one place – except maybe the Democratic Republic of Congo?[/efn_note], the government just needs to “do their job” and get out of the private sector’s way. Without incentivizing beneficiation, for e.g. giving entrepreneurs who invest in production and/or manufacturing tax-holidays, the country will not obtain sufficient value from the other commodities it exports.

All the best, Mr. Governor we shall be watching this space closely, as the upward trend of the continent as a whole relies on the success of this major economy as well as the Democratic Republic of Congo (the “dormant” power-house) and South Africa getting their acts together. Bonne Chance!