april 22, 20091 investing in nigeria: world bank support steven dimitriyev senior finance and...

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


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


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


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


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


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


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


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


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

$


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


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


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


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


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

april 22, 20091 investing in nigeria: world bank support steven dimitriyev senior finance and...

Documents

mobility project ramp2140870

nigeria portfolio riskiness

private sector developmentcps

public sector reforms

nigeria lead states52708100

ida projects

gef projects

agriculture sectors