Nigeria’s growth prospects impeded by power sector – World Bank Vice President

Following his appointment in June, Hafez Ghanem, the new World Bank Vice President for Africa visited Nigeria a few days ago and held talks with government authorities, private sector operators as well as civil society groups on how the  Bretton Woods Institution can further assist the country in dire need of development. In this interview, Ghanem tells Onyinye Nwachukwu, BusinessDay’s Abuja Bureau Chief that Nigeria’s growth prospects, largely impeded by the Power sector is slowing down Africa’s rising project as he discusses the outcomes of his three days visit….Excerpts 

Can you give us insight into your visit to Nigeria?

I started my new position as the vice president for the Africa region of the World Bank about a month ago and of course I wanted to come as early as possible to Nigeria because Nigeria is a big and important country in Africa. At the World Bank, our mission is to fight poverty, to support economic growth and development, that is what we are trying to achieve in Africa. And obviously given the size and importance of Nigeria, if you want to fight poverty in Africa, drive economic growth in the continent, you need growth and development in Nigeria. And so I wanted to come here to listen to our Nigerian counterparts about their views about how the World Bank can serve them best, how the bank can contribute to the growth and development and poverty reduction in Nigeria.

Who did you meet and what conversations did you have with them? 

Well, I met with a large number of people, I met with the Vice President, minister of finance, minister of power, minister of health, I met with the representatives of civil society, representatives of the private sector, the think-tanks, the minister of budget and national planning. I met with several governors and the conversations were all about the types of projects and programmes that the World Bank can do to support Nigeria’s development. We focused on some specific questions that were raised. The first question was how we can support human capital development in Nigeria. You know in today’s world, the best investment for development is human beings. So for example we talked with the minister of health and the Vice President about how we can improve nutrition, to eliminate stunting in the country. We talked also about the projects for fighting malaria, for ending polio, so those are the projects and programmes that we are working on, we have nutrition project and malaria project and we are very involved in polio vaccination. We also discussed education, essentially in today’s world how to develop the digital economy in Nigeria, how can the World Bank do to support development of the digital economy in Nigeria. Nigeria is a very young society with a lot of promise, a lot of energy, a lot of imaginations, a lot of capacities among the youths and how can we channel all of this energy and capacity towards development through more use of modern technology. So those were the kinds of issues we were discussing. Today, for example with the governor from the North East, we were also discussing what can a development Organization like the World Bank contribute to this instability in the North East.

You also met with the finance minister, what did you discuss with her?

The meeting went very well, with the finance minister, she is very much focused on how to accelerate growth, she is very much focused on not just fast growth but stable and sustained growth, meaning that we can look into the future and see lasting impact. So we had this discussion about how the World Bank can contribute to sustained growth, one of the big bottlenecks for growth in Nigeria is the power sector and we had a discussion on that and how the World Bank can support that sector. We already have two projects that were approved last June, one for rural electrification and one for transmission and we discussed more on how we can attract more private sector investment in the power sector and so that was the discussion we had with the minister of finance and I’m looking forward to continuing this dialogue and discussion, so it is a very positive outcome.

The World Bank has given so much assistance in Nigeria’s power sector, particularly the power sector recovery programme, just wondering whether the Bank is planning additional support to help the struggling sector.

Right now, there are two projects that we are going to start implementing soon, the first one is on rural electrification, and that is linked by the way to the digital economy that we are talking about, leapfrogging into new technologies using power all over the country to help the economy. It’s a $350million to finance electrification in rural areas. The other project is for the transmission lines. We are happy to do more work in the power sector because it is so important, and especially now, all over the world, we see more and more private investments in the power sector, so we have been discussing and we had our colleagues from the International Finance Corporation which is the private sector arm of the World Bank who were with us in all of the meetings and we are trying to see how we can, using a whole World Bank group, that is, the World Bank itself and also the other arms, the international finance corporation and the  Multilateral International Guarantee Agency to attract more investments in the sector. It is very important and we believe that we are on the right track, and we will be happy to do more.

The World Bank seems to be encouraged by Nigeria’s economic growth rebound after a difficult recession. What is the bank’s growth projection for Nigeria in 2018 and what do you see as major risks to your projection?  

Our growth projections in general for Africa have remained typically the same around 3 percent. I think growth in Nigeria has been around 2 percent. What we have seen in the past both before and after recession is that growth in Nigeria has been very much linked with oil prices and that is really what everybody, the government and all its partners is trying to diversify the economy to the point where it will not be so affected by oil prices. As we look in the short run for Nigeria, we see is slow improvement in the growth rate but of course those projections will change if oil prices change. So that is really what is going on right now. We see a rebound as you just said, you were in recession, but now you have growth, it is still 2% which is very low, our hope is to reach more than 5% over the next two – three years.

Are you saying that our over dependence on what happens in the oil market is a major risk? 

The oil market continues to be a major risk for Nigeria and it is not Nigeria, many countries in Africa. We are very dependent on commodity exports where there is oil, coffee, cocoa or copper, so that is really the challenge for all of us, for all of our continent and Nigeria obviously. The challenge is how can we reduce the dependence on commodities and how can we leapfrog into the fourth industrial revolution today, how can we leapfrog into the digital economy, where our youths deploy the use technology to create revenue, to create opportunities, to create income.  To do this we need to invest in three things, the first area is obviously the infrastructure that is needed for technology, you need power, you need telecommunications, you need good quality at reasonable prices, you need to have competition in that area. Second, you need people, that is the need to invest in people who are able to use the technology, the human capital quality, whether it is health or education, it is really critical to getting growth. And the third area is to get a regulatory framework that encourages entrepreneurship, that encourages young people to move into this area. We need to move away from growth model that is too dependent on commodities to a model that more dependent on people and on the use of technology. I think that this is the only way that we can insulate

our growth rate from changes and fluctuations in the commodity market.

Is the bank concerned that Nigeria’s growth is still fragile and what does this concern means for the region? 

One of the main areas for the region, like I said, if you want to maintain faster growth in the short to medium term, you will need to raise investments. The region needs a very huge amount of investments especially infrastructure. We are facing those concerns and the governments are not been able to finance all the infrastructure needs. So one of the areas that we are working on with all the countries in the region is what we call mobilising finance for development, how can we attract more private sector investments into those infrastructure sector. We have seen a lot of successes in attracting investments in energy for example, in transport, in telecommunications obviously, so what we see for the future is trying to get more and more private investment into the region in infrastructure especially and other sectors. We also focus a lot of our public resources on human capital development, on health, education and also on social protection. One of the projects that we discussed with the Vice President is the project of cash transfers, to support social protection programmes and sections of the society. So this is really the challenge today, to invest on human capital, in social protection and to put in place a system that attracts private investments in the infrastructure and technology sectors.

Also, when you talk about growth, it is not just any growth but inclusive growth, growth that affects everybody. Inclusive growth means expanding the middle class, getting people out of the low classes into the middle class, for this to happen,  you need to empower women, to have gender equality and I tell you why. If you look around the world, most middle class families in the Asia, in Latin America, in Europe have two edged sword – a man and a woman, so unless we empower our women, and give them opportunities to go and work and develop themselves whether in the labour market, in commerce, in business, we will never be able to have really inclusive growth unless our men are twice as efficient than the other men around the world which is not the case. So this an important challenge, and I ask myself, is it possible to empower women who are always having children. Today the fertility rate in northern Nigeria is 7 percent and the rate in southern Nigeria is 4 and half percent, which means that women are having babies every year. How can women who are having birth every year be fully empowered to participate in the economy, this a real problem, so we need to focus on how to achieve growth rate and get women to seize more opportunities in the labour market and that will require investments in the female reproductive health and child nutrition. We are having a fertility rate problem, we also have stunting of Children, 40% of our children are stunted, they are malnourished, how can we work to provide these female reproductive service and also work to provide nutrition for children, these are the areas that we need to focus our energy on if we want to achieve rapid growth in Africa.

Can you speak to the progress made by Nigeria in the ease of doing business and what more the government can to create a business friendly environment? 

Generally we see that Nigeria has made a lot of improvement in the ease of doing business, a lot of reforms and we have seen Nigeria‘s rank improving. But we still see sort of bottlenecks, if you have to get more businesses and investments into Nigeria, one of bottlenecks is the power sector, access to finance also is an issue and I have to say also that given the size of Nigeria, and given the dynamism in  Nigeria, it should be able to attract a lot more investments. It’s a country that is very attractive for investment, so in general, we have seen a lot of improvement over the last couple of years, I think that you still need to do more, especially in the area of access to electricity and the cost of finance.

The World Bank has expressed concerns on rising debt levels in majority of low income and developing economies. How do you access Nigeria’s debt levels and do you foresee any vulnerabilities? 

There are two aspects to that. As I was saying before about maximizing finance for development, we believe that we should do our best to try to finance these investments without incurring debt. And it is by getting the private people to finance investments. Most governments around the world today are facing very tight budget constraints, but at the same time, we have financial markets that are quite liquid. So, let us attract private sector to finance those investments without governments having to borrow. So instead of me borrowing to build an airport, I can get an investor to build the airport and run it, I get the service without running into debt. So this is the one way that we are looking at effectively funding development. The other aspect that when we look at the whole financial sustainability and the capacity of countries is domestic resource mobilsation, how can you mobilize more resources domestically through your tax system rather than increasing debt. So those are the two areas that we have been working on with the countries in the region, attracting investments so that governments do not have to spend and also helping governments put in place systems so that they can raise more resources domestically without incurring debts.