Investing in Nigeria: World Bank Support

1. Investing in Nigeria: World Bank Support Steven Dimitriyev Senior Finance and Private Sector Development Specialist Nigeria Country Office Email: SDimitriyev@worldbank.org

2. World 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

3. Riskiness of World Bank Portfolio Risks of investing in Nigeria mirror risks of World Bank portfolio

4. Why is Riskiness Improving?Nigeria is maturing, consolidating, and taking lead Challenges Achievements

5. Sectoral Distribution of World Bank Portfolio - 2007 • From 2009 on, this pie chart will show radical shifts: • Private Sector-led Infrastructure investment programmes will lead

6. Removing the obstacles to competitiveness;ongoing agenda to improve business enabling environment • 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…)

7. 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

8. Top performers on Doing Business (2008)

9. Potential for improvement in ranking Taiwan – 50 Botswana – 51 Italy – 53 “Nigeriana” – to 51 After wider adoptation of already existing best practices Ethiopia – 102 Bangladesh – 107 Nepal – 111 Nigeria - from 108

10. Nigeria - low labor productivity and high unit labor costs

11. Share of firm’s reporting each constraint as serious

12. Impact of Constraints on Indirect Costs on Firms: Int’l Comparison % of sales

13. NEW “Flagship” Investment Promotion Programmes (cross-cutting and sectoral) DFID GBP 6.5 million grant IFC $1.8 million grant • 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 ICP (Subnational Investment Climate Programme) • 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) IDA $ 180 million DFID GBP 70 million grant

14. NEW “Flagship” Investment Promotion Programmes (cross-cutting and sectoral) IDA $300 million PPP Infrastructure and Finance $ 100 million for Capacity Strengthening $200 million for Financing: Liquidity fund, PRGs IDA $500 million POWER SECTOR Gas-powered IPP; Gas supply PRG, PPA IDA $500 million TRANSPORT and AGRIBUSINESS Roads, Railways, Ports and Downstream Processing

15. 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