April 22, 2009 1
Investing in Nigeria: World Bank Investing in Nigeria: World Bank Support Support
Steven DimitriyevSteven DimitriyevSenior Finance and Private Sector Development
SpecialistNigeria Country Office
Email: [email protected]
April 22, 2009PIDG, November 9th, 20062
World Bank Portfolio - NigeriaWorld Bank Portfolio - Nigeria
Largest Portfolio in Sub-Sahara Africa (2007) 23 IDA projects and 2 GEF projects with about US$2.6
billion in commitments; about 12% of the Africa Region’s total commitments of about US$21.1 billion.
(2009) Portfolio over 30 projects, now up to $3.7 billion (2010-2012) Additional $3.3 billion forthcoming
Country Partnership Strategy (CPS I) focus on basic social infrastructure and human development, public sector reforms, enabling environment for private sector development
CPS II Aligned to Government’s Priorities - Human development, governance and non-oil growth;
Over 50% of CPS II Fund to Support Removing Obstacles to Non-Oil Growth: Est. $1 billion in support to Power, Transport, Agriculture
sectors; Est. $1.1 billion in cross-cutting PSD support (economic stimulus package, industrial clusters/value chains, PPP framework and finance…)
Accent on Subnational Economies
April 22, 2009PIDG, November 9th, 20063
Riskiness of World Bank Portfolio
Nigeria Portfolio Riskiness in FY
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1 2 3 4 5
FY03 - FY07
Co
mm
itm
ent
at R
isk
(%)
Nigeria
AFR Region
Bank-wide
Risks of investing in Nigeria mirror risks of World Bank portfolio
April 22, 2009PIDG, November 9th, 20064
Why is Riskiness Improving?Why is Riskiness Improving?Nigeria is maturing, consolidating, and Nigeria is maturing, consolidating, and taking leadtaking lead
Macroeconomic and political order;
Public fiscal management, and creditworthiness
Widening Income Gaps and Wealth Distribution, aggravated by:
Dependence on Oil Exports,
which finance Overdependence on Imports
Governance; Rule of Law; Legal and regulatory frameworks
High cost of Infrastructure = retards competitiveness of business, promotes poverty
Commitment to Reforms; Pro-Private sector, investor-friendly policies
Capacity to Deliver
Completion of sector regulatory agenda (several bills to be passed)
Rapid scaling-up of Capacity, esp in PPP management
Prowess of local financial institutions and development of markets
Increase long-term funding for infrastructure investments
Achievements Challenges
April 22, 2009PIDG, November 9th, 20065
Sectoral Distribution of World Bank Portfolio - Sectoral Distribution of World Bank Portfolio - 20072007
Sectoral Distribution of Portfolio
18%
8%
25%23%
1%
14%
6% 4% 1%
Public Admin, Law Education
Health & Social Services Water/Sanitation/Flood Protection
Industry and Trade Energy & Mining
Transportation Agriculture
Finance
From 2009 on, this pie chart will show radical shifts:• Private Sector-led Infrastructure investment programmes will lead
April 22, 2009PIDG, November 9th, 20066
Public Financial Management (i.e., tax planning, tax collection and administration, revenue and expenditure management, information systems, asset management, debt management systems, etc.)
Infrastructure Regulatory Framework (i.e., tariff setting, tariff collection, subsidies policies, sector regulators, private sector role, investment planning, etc.)
Corporate Governance (i.e., procurement process, safeguards, monitoring and reporting systems, audited financial statements, credit ratings, etc.)
Financial Regulatory Framework (i.e., debt regulation for sub-national borrowing -- fiscal responsibility legislation, monitoring and reporting to central government, capital market regulation, bankruptcy and legal claims against sub-national entities, etc.)
Capacity Building (i.e., training, staffing, incentives, etc.)
Investment Incentives Regime (taxation policies, profit repatriation, accounting allowances…)
Removing the obstacles to Removing the obstacles to competitiveness;competitiveness;ongoing agenda to improve business ongoing agenda to improve business enabling environmentenabling environment
April 22, 2009PIDG, November 9th, 20067
Investment Climate – Current Imperatives
PSD REFORM SYNERGIES PACKET: Strengthening of Bank regulation, Sub-national credit
market development, non-banking financial sector
Simplification of Business Regulations to reduce “red tape” and strengthen investor/creditor position
Strengthening of National and Subnational PPP capacity – “best practice” transactions skills, complete regulatory framework, and remaining sectoral regulatory agenda
Selective investment projects, accompanied by Risk Mitigation support for maximizing financial leverage
IFC to diversify to Real Sector investments and PPP
April 22, 2009PIDG, November 9th, 20068
Top performers on Doing Business (2008)
TOP 10 DOING BUSINESS
COUNTRIES
TOP 10 AFRICAN COUNTRIES
TOP 10 REFORMERS
1. Singapore 27. Mauritius 1. Egypt
2. New Zealand 35. South Africa 2. Croatia
3. United States 43. Namibia 3. Ghana
4. Hong Kong, China
51. Botswana 4. Macedonia, FYR
5. Demark 72. Kenya 5. Georgia
6. United Kingdom
87. Ghana 6. Colombia
7. Canada 95. Swaziland 7. Saudi Arabia
8. Ireland 102. Ethiopia 8. Kenya
9. Australia 108. Nigeria 9. China
10. Iceland 116. Zambia 10. Bulgaria
April 22, 2009PIDG, November 9th, 20069
Potential for improvement in ranking
After wider adoptation of already existing best practices
“Nigeriana” – to 51
Nigeria - from 108
Ethiopia – 102
Bangladesh – 107
Nepal – 111
Taiwan – 50
Botswana – 51
Italy – 53
April 22, 2009PIDG, November 9th, 200610
Nigeria - low labor productivity and high unit labor costs
0
5000
10000
15000
20000
25000
S. Africa Brazil Kenya India Indonesia Nigeria
0
0.1
0.2
0.3
0.4
0.5
0.6
Labor Productivity
Unit Labor Costs
$
April 22, 2009PIDG, November 9th, 200611
Share of firm’s reporting each constraint as serious
0 10 20 30 40 50 60 70 80
Labor Regulations
Customs and Trade Regulations
Telecommunications
Inadequately educated workforce
Business licensing
Political environment
Tax administration
Practices of informal sector
Tax rates
Crime, theft and disorder
Corruption
Access to land
Transportation
Macroeconomic environment
Cost of finance
Access to finance
Electricity
April 22, 2009PIDG, November 9th, 200612
Impact of Constraints on Indirect Costs on Firms: Int’l Comparison
% of sales
0
4
8
12
16
Nigeria2006
Kenya2007
Indonesia2003
India 2005 Brazil2003
China2003
S. Africa2003
Electricity Bribes Transport losses Crime
April 22, 2009PIDG, November 9th, 200613
NEW “Flagship” Investment Promotion
Programmes (cross-cutting and sectoral)
Benchmarking/diagnostics of all 36 state economies (DOING BUSINESS and INVESTMENT CLIMATE SURVEYS)
Implementing reforms in Lagos, Kano, Kaduna and Cross River in tax administration, land management, investor information; other states to follow in 2009-11
DFID GBP 6.5 million grant
IFC $1.8 million grant
GEMS (Growth Employment and Markets in States)
Scaling up of ICP in above states Investment in high-growth clusters/value chains of:
Construction, ICT, Meat & Leather, Wholesale/ Retail markets, Entertaintment (“Nollywood”), Offshoring (in above 4 states + to be added)
ICP (Subnational Investment Climate Programme)
IDA $ 180 millionDFID GBP 70 million grant
April 22, 2009PIDG, November 9th, 200614
NEW “Flagship” Investment Promotion
Programmes (cross-cutting and sectoral)
IDA $300 million
IDA $500 million
IDA $500 million
PPP Infrastructure and Finance
$ 100 million for Capacity Strengthening$200 million for Financing: Liquidity fund, PRGs
POWER SECTOR
Gas-powered IPP; Gas supply PRG, PPA
TRANSPORT and AGRIBUSINESS
Roads, Railways, Ports and Downstream Processing
April 22, 2009PIDG, November 9th, 200615
SUMMARY
Investment regimes are improving across the Subnational landscape
A stable, competent National institutional framework is nearly complete
Tremendous needs (and opportunities) for private investment
Tremendous profits being made, yet still virtually untapped and growing potential
Now is the time to get in