The Kwara State Government is set to create innovation hubs that will generate at least 2,000 jobs in the manufacturing sector.
According to the State Governor, Alhaji Abdulrahman Abdulrasaq, innovation hubs will be established in the area of high-end movie production and textile manufacturing.
While receiving the delegation of Kwara Youth Centre (KYC); an umbrella body of young people who offer solutions to challenges in various communities, Abdulrasaq said the state is seeking to benefit from the N200 billion intervention fund of the Central Bank of Nigeria (CBN) that had been set aside to promote entrepreneurship.
The governor disclosed that the proposal has been sent and talks had reached an advanced stage for the state to be considered for the funds.
“We are talking with the CBN on the innovation hub and I’m glad to inform you that our proposal to access the fund is receiving favorable ratings. When these hubs are created, they would generate at least 2000 jobs in the area of movie production and textile designs,” He said.
Why this matters: The hubs would attract European and Chinese firms and lead to technology transfer to the indigenous workers, as stated by AbdulRazaq. It will also be a huge factor in driving growth in the grassroot by giving room for the greater potential of a wider product range especially in textile manufacturing.
The governor stated that he envisions a state where government would create the right environment for individuals to create wealth and employment rather than anyone relying exclusively on the government to give them job.
According to him, this is why he is committed to agricultural value chains, especially in the area of cashew and sugarcane.
Here are macro trends that will shape Nigeria in 2021 – KPMG
Analysts in KPMG Nigeria have stated that there are 10 macro trends that will determine the fate of the nation’s economy next year.
Nigeria may be out of recession by the first quarter of 2021, as projected by the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, but analysts in KPMG Nigeria have stated that there are 10 macro trends that will determine the fate of the nation’s economy next year.
The macros are Global dynamics, fiscal sustainability, uncertain forex environment, stringent policy posture, constrained productivity and accelerated credit penetration.
Others are cautious private sector investment activities, emerging digital economy, socio-political threats, and consumer pressure points.
This was disclosed by Olusegun Zacchaeus, Associate Director, Strategy and Economics, KPMG, during the American Business Council webinar recently.
Zacchaeus explained that the modest recovery expected in 2021 is threatened by the second wave of COVID-19 pandemic. According to him, everyone should expect more pressure that will emanate from the global economy. For instance, the change of baton of the Democratic government in the United States is expected to impact several economies, including Nigeria. He said,
“The emergence of a new democrat president will have implications on the global economy. The bigger fiscal stimulus package totaling US$2.5 trillion from 2021 to 2024 is expected to drive recovery.
“On oil price dynamics, bilateralism with possible easing of trade tensions between the US and China. Possible catalyst for distortion in oil prices given strong advocacy for shift away from fossil fuel.”
KPMG added that OPEC is considering deepening oil production cuts amidst rising Covid-19 cases, and fresh economic lockdown in Europe Outflows from SSA between February and March totaled $5 billion.
According to the firm, 47% of investors think emerging market economic activity will slow over the next 12 months, compared with 37% who think it will accelerate and borrowing costs are still high and financial conditions remain difficult.
“WTO expects a significant downturn in global trade in 2020 between 13% and 32%, and some recovery in 2021 at 8%. Risks to the outlook include a second wave of COVID-19 with the results being very sensitive to the length of time that the Covid-19 threat remains in place or trade restrictions,” he added.
It stated that the proposed 2021 budget provides indications of tight spending and worsening debt. KPMG projected that the Budget implementation will likely underperform in line with historical trends.
According to the firm, Nigeria’s fiscal flexibility is constrained by a high interest bill as a percentage of general government revenue and by inefficient non-oil tax collection.
Noting that the impact of new tax policies could be watered down by overall low economic outputs, KPMG advised that the Integrated Revenue Monitoring System (IRMS) needed to ease revenue recognition.
Uncertain FX environment
It stated, “The foreign exchange environment will remain under pressure exacerbated by lower FX earnings.
“Fair value estimation at N422/$1, reflecting a 9% overvaluation of real effective exchange rate. Fair value may improve but rates will still be misaligned in 2021.
“Liquidity is low due to the pressure on foreign reserves and sharp fall in capital importation by -78% in Q2 2020 (QoQ). Liquidity will remain challenged given oil price outlook and capital flows,” it added.
On the multiplicity of rates, KPMG stated that multiple exchange subsist, considering the spread of N80 between BDC, government intervention rate, and official rate. CBN may not likely close the multiple exchange rate window.
KPMG stated that Volatile, Uncertain, Complex and Ambiguous (VUCA) policy environment has negative impact on the overall growth in the economy.
Following this, social wheel pressure is spinning and this has resulted in a growing flux of skilled talent to other climes like Canada, U.K, Australia, and the United States.
“The nature, speed, volume, and magnitude of change is not predictable e.g. rising Inflation and low aggregate demand. Lack of clarity resulting in multiple and conflicting interpretations.
“Lack of predictability in issues and events make it difficult to see future outcomes or make decisions. Focus will be more on social vs economic growth,” it added.
Accelerating credit penetration
The tax firm stated that Nigeria has been credit starved despite increased supply to the private sector. On what is expected in 2021, it added that deepened credit penetration is expected to continue in 2021. Albeit, there may be increased concentration
While concluding on this, it noted that LDR stipulated at 60%, now increased to 65% and that the OMO restrictions increasing overall liquidity in the banking sector.
“Increase in CRR from 22.5% to 27.5% to tame excess liquidity and inflation. The Reduction in MPR by 100bps from 12:5% to 11.5%. Development Finance Initiative as a policy tool will enhance credit penetration,” it recalled.
Cautious private sector investment activities
According to KPMG, the Private sector confidence remains low as FDI is expected to dim in 2021. The firm noted that the largest component of capital importation, contributing 58.8% of total capital importation.
It attributed this to the government aggressive policies toward enhancing other strategic investments e.g. technology development in the economy.
It also attributed the Portfolio investment, which declined by 91% (YoY) at $385.32million in Q2 2020 from $4,292.893million in Q2 2019, to the impact of Covid-19 on global activities, which dampened investors’ sentiments.
Emerging digital economy
The emerging digital economy is expected to witness growth in 2021, as Nigeria boasts of an industry driven by increased investment resulting in capital to drive growth.
On the influx of start ups in the segment, KPMG stated that the total funding in Nigerian startups in 2018 up to $178 Million. Entry of new players, 15 startups raised more than $1million in the fintech segment.
“Tech start-ups have begun to attract funding from venture capital firms, however, foreign investors provide over 80% of this funding,” it added.
The social wheel of pressure is spinning, as an additional 5million Nigerians are expected to be pushed into poverty in 2021 due to crisis. This will be driven largely by contraction of remittances and growth in population (2.6% annually) above the GDP growth rate.
Consumer pressure points
Even in 2021, the tax firm is optimistic that there are several macro forces pitched against the consumer. One of them is employment, which remains a major challenge in Nigeria, as inflationary pressures on the rise are expected to be sustained in 2021, driven by rising costs.
Despite the challenging environment, consumers’ confidence is expected to be positive, as consumer spending will remain under pressure.
In conclusion, unemployment and erosion of purchasing power, due to inflation, will form additional pressure points.
What you should know
Speaking at the same forum in 2019, as reported by Nairametrics, Zaccheaus explained that the the global developments in 2020 portends significant risks for the Sub-Saharan countries. Other factors are investment for growth, productivity, technology and digital disruption, socio-economic pressure and consumer pressure points.
While providing an update on the Nigerian economy, it was stated that it currently stands on a slippery slope of recovery. According to KPMG, the Nigerian economy which recorded a growth rate of 6.21% in the first quarter of 2014, has continued to witness very slippery growth recovery since the 2016 recession.
PIB and Electoral Amendment Bill pass second reading in House of Reps
The Petroleum Industry Bill (PIB) and the Electoral Act Amendment Bill has passed second reading in the House of Representatives.
This was disclosed by Channels TV on Tuesday after both bills were addressed by Lawmakers for the second time during plenary.
On the Petroleum Industry Bill
Rep leader, Alhassan Doguwa, said the PIB has been in the pipeline since the firth assembly and hopes the 9th Assembly would be able to pass the bill.
Chairman of the House Committee on Upstream Petroleum, Musa Adar, stated that Nigeria needs the PIB, as it does not have the luxury to be irresponsible with resources. Citing the effects of the pandemic on the economy, he added that Nigeria’s needs a mature oil industry that will maximize productivity and compete with other crude oil and gas exporting nations in the continent.
Minority Leader, Ndudi Elumelu, said the PIB is a necessity, as the world is going green and Nigeria needs to maximize its oil and gas sector, and also explore other options.
“The world is looking to go green in less than 20 years and it makes it pertinent for Nigeria to gain maximally from the oil sector and look to explore other oil products before petroleum goes obsolete as a commodity,” he said.
(READ MORE: The new PIB may scrap DPR, PPRA, others)
On the Electoral Act Amendment Bill
The purpose of the Bill is to regulate the Electoral process across Federal and Local government levels, in order to give it more transparency.
The bill was sponsored by Rep. Aishatu Dukku (APC-Gombe). She added that the bill is necessary to fix Nigeria’s flawed electoral system.
“This amendment has become necessary because of the flaws observed in our electoral system. It’s no longer news that our electoral experiences since 1999 show a strong correlation between an efficient and effective electoral legal framework and the conduct of free, fair, and credible elections.
“In fact, amendments of our electoral laws were long identified as priority legislation by the National Assembly, because of the need to consolidate on the gains of our democratic achievements and to also address the lacuna identified in the electoral legal framework.
“A typical example is the case of the Kogi Governorship election in 2016, where a leading candidate died after the commencement of polls, but before the declaration of results.
“In addition to this are concerns that the legal framework on certain issues should be well settled ahead of the 2023 elections, such as the use of technological devices like the card reader and electronic voting system.
“Also, criteria for substitution of candidates, disclosure of the source of funds contributed to political parties, replacement of lost or destroyed permanent voters card, the penalty for the possession of fake voters’ card, dates for conducting primary elections, shall not be earlier than 150 days and not later than 120 days before the date of the election, etc.
“The bill, therefore, seeks to address many loopholes in our electoral system by way of amending over 300 clauses (including new provisions) of the Electoral Act 2010,” she said.
What you should know
Nairametrics reported last week that the Minister of State for Petroleum Resources, Timipreye Sylva said the Petroleum Industry Bill (PIB) may be passed into law by the first quarter of 2021.
“There is no better way of diversifying the country’s economy than through a well-developed oil and gas industry, particularly with the huge gas resources in Nigeria. So, PIB will be the most credible attempt towards a holistic diversification of the Nigerian economy,” he added.
House of Representative Speaker, Femi Gbajabiamila, also disclosed that the House would ensure that it passes the Petroleum Industry Bill within the next six months or probably less.
#EndSARS: States affected by violence should get 1% VAT – Senate
The Nigerian Senate has urged the Federal Government to give states that were affected by lootings and destruction by hoodlums after the anti-police brutality protests, 1% of all Value Added Tax (VAT).
This motion was moved by Senators Abiodun Olujimi and Gershom Bassey on Tuesday and disclosed in a report by Channels TV.
What you should know
After the lootings and destruction by hoodlums who hijacked the #EndSARS protests, Nairametrics reported that the Speaker of the House of Representatives, Femi Gbajabiamila, said Lagos State will need about N1 trillion for the reconstruction and repair of the properties and infrastructure that was vandalized in the process.
The Senators moving the motion declared that destruction caused in Lagos by hoodlums was valued at a range of over N1 trillion by the State Governor, Babajide Sanwo-Olu.
Senator Gershom Bassey also revealed that hoodlums attacked federal properties in Calabar like the WAEC office and looted food warehouses in the state.
“Cross River State being a predominantly Civil Service State may not overcome the effects of the invasion since the destroyed state infrastructure were built from lean state resources over the years,” Bassey disclosed.
Senator Sani Musa said the lootings which started in Lagos spread to other states, leading to the destruction of properties and urged for the FG’s assistance.
“#EndSARS came as a peaceful protest, but turned violent. It started in Lagos and later spread to other states which led to the destruction of homes, businesses, and government offices. It is very unfortunate. The government needs to rebuild what was destroyed and pay compensation as well. It is their responsibility,” Musa said.