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National
Economic Empowerment and Development Strategy (NEEDS) (VIII)
Contd. from last week
Targets and strategies
NEEDS has established the following targets:
Facilitate technological input into the production process.
Foster development of a Nigerian version of Hollywood for film
production.
Encourage the local manufacture of film production inputs, and
support services clusters.
Generate $200 million in foreign exchange earnings by 2007
from the export of videos.
Develop standards and provide incentives for private sector
investment in the industry.
To achieve these targets, the government will:
Strengthen the regulatory agency for the industry to
facilitate healthy competition, upgrade quality, ensure
appropriate controls, monitor standards, and promote
standardization.
Strengthen the capacity of regulatory and promotional agencies
to promote the industry, enforce standards, and ensure
compliance with copyrights laws. These agencies include the
ministry of information and national orientation, the National
Film Corporation, the National Film Institute, the Nigeria
Copyrights commission and the Nigeria Film and Video Censors
Board.
* Encourage the development of a window of special funding for
the industry through the banking industry.
* Design, develop and impement a formal last track export scheme
to bring export transactions into the formal sector.
* Provide incentives for further private sector investment in
the sector.
Financial services
Over the past decade and a half, the financial sector has
experienced substantial fluctuations in fortunes. These
developments have highlighted their strategic role in Nigerias
development process. Apart from their importance in mobilizing
and efficiently allocating resources, they also play a key role
in pricing and trading risks and implementing monetary and
fiscal policies.
The shift in emphasis to a private sectorled economy deepens
the significance of the financial sector in Nigerias overall
development. There is a strong case for ensuring the efficiency
of the financial system and for dealing with the contradiction
inherent in the fact that despite high profit levels the sector
does not appear to be playing a catalystic role in the real
sector Other concerns include the following:
The capital market remains shallow.
The banking system is dependent on public sector funds as a
significant source of deposits and foreign exchange trading.
Some of the information submitted to the monetary authorities
is not accurate.
Fiscal and monetary policies are not harmon ized.
Bank loans and advances are not repaid promptly.
To build and foster a competitive and healthy financial system
to support development and to avoid systemic distress, the
thrust of policy under NEEDS is to:
Deepen the financial system in terms of asset volume and
instrument diversity.
Drastically reduce and ultimately eliminate the financing of
government deficits by the banking system in order to free up
resources for lending to the private sector
Review capitalization of financial institutions in the system.
Develop a structure of incentives to enable the financial
system to play a developmental role by financing the real sector
of the economy.
Strategies
Given that the success of NEEDS will depend, in part, on the
ability of financial intermediaries to play their roles, the
financial regulatory authorities and monetary policy framework
will adopt the following strategies:
Embark on a comprehensive reform process aimed at
substantially improving the financial infrastructure (legal
codes, information systems).
Restructure, strengthen, and rationalize the regulatory and
supervisory framework in the financial sector
Address low capitalization, the poor governance practices of
financial intermediaries that submit inaccurate information to
the regulatory authorities, and the consequent costs to the
financial system.
In collaboration with banks and other financial institutions,
work out a structured financing plan that ensures less expensive
and more accessible credit to the real sector.
Direct government policy towards financial deepening
(establishing links between rural and urban, banking and
nonbanking, and formal and informal financial systems) and
financial product diversification (filling the missing middle
for commercial financial services for small and medium-size
enterprises with new services based on best-practice
technologies for cash flow financing, leasing, and so forth.
Oil and gas
The oil and gas sector is seen as an external sector, because
there is no link between it and the other sectors of the economy
The key issues requiring attention include the following:
Low local content level and community unrest in locations of
proven reserves
Absence of indigenous technical know-how and a deficient
capacity-building programme
Multiplicity of legislation governing operations in the sector
Absence of a national gas infrastructure (national gas grid
system)
Price and quota volatility
Absence of an independent industry regulator for the various
subsectors
Inefficiency and widespread fraud
Poor safety and regulatory systems
Inadequate financing arrangement for operations, including
cash-call obligations
Petroleum product supply constraints, including inadequate
local refining and distribution capacity
Lack of value-adding activities and processes (integrated
petrochemicals capacity)
Policy thrust
The governments policy thrust is defined by the need to:
* Increase the level of crude oil reserves.
* Ensure regular supply and distribution of petroleum products
through a liberalized and deregulated supply, distribution and
refining system.
* Increase the drive for investments to establish integrated
petrochemical based on gas stream with a majority private sector
interest.
* Increase local content, improving linkages to the rest of the
economy.
* Sustain the focus on the terminal date for ending gas flaring.
Hedge the national economy against volatility in the crude oil
market and OPEC quota.
Harness and exploit the countys huge gas reserves to increase
the use of gas in power generation and boost foreign exchange
earnings from gas.
Foster healthy orderly and competitive development of oil and
gas subsectors through effective and efficient regulation,
standards, and quality control agencies.
Targets and strategies
NEEDS has established the following targets in the sector:
Achieve an OPEC quota increase of 710 percent in 2004 and a
reserve level at 40 billion barrels by 2007.
Design and facilitate the implementation of a national gas
grid by 2007.
Completely deregulate and liberalize the downstream petroleum
sector, including the distribution network.
Unbundle the Nigerian National Petroleum Corporation (NNPC)
and privatize its downstream subsidiaries, and enable the
Nigerian Petroleum Development Company and a professionalized
NNPC to Compete as other oil companies around the world do.
Increase local content in the oil and gas service sector to at
least 50 percent by 2007.
Review and codify the incentives in the oil and gas industry.
To achieve the targets, the government will adopt the following
strategies:
In collaboration with the private sector, ensure the effective
implementation of a national oil and gas policy and a national
gas grid system.
Explore the use of alternative funding schemes in the sector.
Set up long-term financing arrangements in support of local
content.
Develop a database in Nigeria on the countrys oil and gas
deposits, facilities, and professionals.
Review, streamline, and codify existing incentives in the
sector
Facilitate projects that transfer technology and generate
employment in the nonoil sector, especially the petrochemical
industry.
Complete deregulation of the downstream sector by privatizing
the refineries, product haulage facilities, and distribution
network.
Improve security (against vandalism at facilities), and
strengthen the Department of Petroleum Resources and the
Ministry of Environment to allow them to perform their
regulatory functions properly.
Encourage transparency in the management of oil revenue by
implementing the principles of the Extractive Industries
Transparency Initiative.
Facilitate private sector investment in the development of
support industries that use petrochemical products as primary
raw materials.
Encourage oil companies to proactively work towards greater
backward and forward integration with the domestic economy
especially in downstream activities, and partner with or involve
local companies in joint ventures. Where capacity exists,
reserve specific jobs for domestic value-adding industry,
strengthening the domestic base of the sector. Make companies
track records in promoting domestic value-added a consideration
in determining the allocation of future oil and gas blocks.
Implement the National Oil Spill Contingency Plan.
Solid minerals
Nigeria has abundant solid mineral deposits. Some independent
estimates indicate that the countrys solid mineral deposits
could provide more revenue, foreign exchange, and employment
than the oil and gas sector do. Exploitation of these resources
could provide a major impetus for growth and development.
But several factors constrain development of the sector. A
comprehensive geological survey of all solid mineral deposits
has yet to be undertaken. Other constraints include the lack of
adequate proven deposits, the lack of adequate capacities in
mining and processing, the lack of infrastructural facilities,
an unfavourable fiscal regime, and an uncompetitive legal and
regulatory framework. A short-term programme to address these
constraints will be put in place, especially for minerals that
are vital for local industries, such as barytes, limestone,
gypsum, and kaolin, which are currently on the import
restriction list. Under NEEDS the government will vigorously
promote the exploration and exploitation of solid minerals to
provide inputs for local industries as well as for exports.
A serious problem is informal and illegal mining of mineral
deposits. Such activities have led to:
Environmental degradation, including creation of shallow ponds
and abandoned pits, pollution of river systems, river silting,
and high exposure to radioactive and hazardous minerals
Social problems, including child labour and poor working and
living conditions at mine sites
National security risk, due to the migration of foreign
nationals from one site to another, working on sites with both
registered and unregistered titles
Low productivity and waste of minerals, due to poor ore and
mineral recovery during mining as well as inefficient production
and processing techniques
Lack of regard for health and safety
Haphazard sale of mineral products and attendant loss of
revenue to government
High level of smuggling
In many countnes informal mining operations have been formalized
into economically viable and environment-friendly ventures.
These programmes are often used to reduce poverty, as they
provide massive employment in rural areas. In addition to making
the mine fields attractive to investors, informal and artisanal
mining activities contribute to exports. Formalizing these
operations could create sustainable self-employment for at least
500,000 Nigerians, increase revenue payments to the government,
reduce environmental degradation, and diminish social and health
problems, such as child labour and the spread the of HIV/AIDS.
Policy thrust
The goal of government policy in the sector is to provide
incentives and an enabling environment for private sector
investment. The major policy thrust is to ensure the vigorous
and orderly exploitation of solid mineral resources in order to
generate employment, increase revenues and exports, and provide
inputs for local industries. The NEEDS action plan will
vigorously support exploration for base metals and precious and
semiprecious stones. Informal sector mining activities will be
formalized and supported to encourage sustainable production and
create self-employment.
Strategies and specific measures
The government will adopt the following strategies:
Implement the existing legal framework for small and artisan
operators in the sector
Complete the upgrading of the sector, empower the Geological
Survey Agency to become the industry regulator, and provide a
comprehensive database of the locations and estimated reserves
of all known solid minerals in Nigeria that could be mined.
Promote and ensure a systematic and orderly allocation of
bitumen and tar sands blocks in the vast Nigerian bitumen belt,
which stretches from Edo state to Lagos state.
Compile a cadastral register of all available mining rights,
licences, and leases of known minerals.
Codify a system of incentives to attract private sector
investment in the sector.
Simplify the process of issuing licences.
Review the Land Use Act to facilitate entry into the sector
NEEDS outlines several specific measures for the sector:
As an immediate first step, conduct a geological survey of the
entire county in 2004, using remote sensing (Landsat/Radarsat).
That survey will be complemented by aeromagnetic,
electromagnetic, and radiometric surveys. The government will
conduct groundtruthing surveys using the remote sensing results
in the hope of attracting private investment. It will also
immediately begin digitalizing existing maps.
Establish licenced buying centers as the procurement interface
between the mining cooperative and licenced miners on one side
and local users and export markets on the other. Buying centers
can ease the problems associated with marketing products and
enable miners to earn premiums on sales of products near
operational sites. The centers will also help the government
reduce smuggling and collect revenues.
Create extension services. Technical assistance and support
services in prospecting and exploration will be provided to
artisanal and small-scale miners in order to enhance and sustain
their operations.
Renew current legislation through a consultative process with
mining communities, ensuring that public interests social,
economic, and environmental) and community interests (cultural,
social, economic) are considered.
Inventory the number of miners, the environmental status, the
market structure, licensing, and other features of artisanal
small-scale mining in Nigeria.
Promote mining cooperatives and associations of miners in
order to simplify control and assistance (financial and
technical) and guarantee the sustainability of mining, in active
collaboration with community leaders and state and local
governments.
Promote the establishment of central processing units in order
to enhance the value of the minerals.
Promote environmental awareness and environmental
rehabilitation of sites after mining.
Promote training in environmentally acceptable mining and
processing methods in order to improve skills and competence and
reduce health risks of miners and their dependents.
Develop basic infrastructure services in mining communities.
Stimulate and enhance access to financial assistance for
artisanal and small-scale miners.
Promote transparency and participation at all levels of
government and management of small-scale mining activity.
Promote interaction and consultation between different
agencies exploiting natural resources (land, forest, minerals).
Establish and enforce environmental standards for mining
activities. |
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