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AfDB is developing the real sector — Yahaya

Shehu Yahaya2

Dr Shehu Yahaya is Executive Director for Nigeria and Sao Tome and Principe at the African Development Bank (AfDB). In this discussion with AnnualMeetings Daily excerpted below, he speaks on the impact of the Bank in Nigeria and Sao Tome and Principe, the areas that require increased intervention from the Bank in these two countries and the qualities the next AfDB president should possess.

How would you describe the activities of the Bank in your constituency in the last one-year?
In terms of our activities in Nigeria, the Bank is guided by its Country Strategy Paper (CSP) for Nigeria for the years 2013-2017, which is based on two strategic pillars —supporting the development of a sound policy environment; and investing in critical infrastructure to promote the development of the real sector of the economy.

Nigeria had for a number of years called for a Field Office that would serve the complex needs of the country. In response to this call, the Bank in 2013 approved the upgrading of its presence in Nigeria from a Field Office to a Department equipped with more human and physical resources to engage more effectively and strategically with the country, at both the public and private sector levels. The Bank’s decisions are in line with its Decentralization Strategy, through which it seeks to be nearer its clients.

A number of important projects were approved for Nigeria during the course of 2013 including:
•    UA 98.78 million ADF loan and UA 0.25 ADF grant for the Agricultural Transformation Agenda Support Program
•    UA 120 million ADF Partial Risk Guarantee and UA 2 million loan in support of Power Privatization Program
•    UA 75 million line of credit to Fidelity Bank
The following projects, which were appraised during the course of 2013, are to be approved in 2014:
•    USD 200 million and ADF loan of UA 3.3 million loan for the Urban Water Sector Reform and Port Harcourt Water Supply and Sanitation Project.

There are currently 19 public sector Bank-financed operations undergoing implementation in Nigeria amounting to about UA 800 million. The breakdown of the Bank’s approved public sector portfolio shows that infrastructure projects account for 75 percent of the portfolio, followed by agriculture (16 percent), social sector (6 percent), multi-sector (2 percent), and environment (1 percent).
The Bank’s private sector portfolio during the course of 2013 comprised 15 operations amounting to about USD 1.4 billion. These include seven fast disbursing lines of credit to commercial banks; lines of credit to the Bank of Industry (USD 500 million) and Nexim Bank (USD 200 million), which were approved in 2011 but have not been disbursed; two technical assistance grants; one direct equity investment; and two infrastructure public- private partnerships.

We also have activities in Sao Tome and Principe. The Bank’s Country Strategy Paper for Sao Tome and Principe, approved in 2012 for the years 2012-2016, focuses on the single pillar of providing capacity building and institutional strengthening, particularly in the area of economic and financial governance. With the prospect of oil production beginning in the country in the coming few years, the Bank seeks to enhance São Tomé and Príncipe’s financial, legal and regulatory frameworks for managing its natural resource revenues.

In the context of its Decentralization Programme, the Bank in 2013 deployed its Country Economist for Sao Tome and Principe from its head office in Tunis to take up full residence in Sao Tome. This has helped to improve country dialogue, addressed challenges in communication between the Bank and the country and created a new awareness for business opportunities in the country.

The following five Bank-financed projects were ongoing in Sao Tome and Principe during 2013: UA 4 million Livestock Development Project (LDP II); UA 3.5 million Human Resource Development Project (HRDP); UA 5 million Infrastructure Rehabilitation for Food Security Project Support; UA 480,000 project for General Population and Housing Census;  and UA 7.5 million Public Financial Management Institutional Support Project (PAGEF), being financed by an ADF Grant of UA 5 million and Fragile States Facility Grant of UA 2.5 million. In addition there is an ongoing UA 200,000 Technical Assistance and Capacity Building Programme being financed by the African Legal Support Facility. Significant steps were taken by the Bank and the Sao Tome and Principe authorities to improve the pace of implementation of these projects, through addressing procurement, disbursement, and project implementation delays.

Kindly give us an update on the relationship between the Bank and Nigeria?
The AfDB has for the past 50 years been an important financier of development projects in Nigeria. In recent years, Nigeria has tapped from both the AfDB and ADF Windows to finance projects that are considered vital for the implementation of the Transformation Agenda of the President Goodluck Jonathan Administration. Nigeria has also relied significantly on the Bank to deepen its financial sector and generate jobs through the provision of lines of credit for on lending to SMEs. Examples of project approved for Nigeria in recent years include:
•    UA 200 million ADF loan to finance the Agricultural Transformation Project.
•    USD 200 million line of credit to the Nigeria Export Import Bank (NEXIM), a private sector loan to be backed by a sovereign guarantee.
•    UA 63.9 million Zaria Water Supply and Sanitation Project.
•    USD 200 million and ADF loan of UA 3.3 million loan for the Urban Water Sector Reform and Port Harcourt Water Supply and Sanitation Project.
•    USD 300 million ADB sovereign budget support loan for the reform of the Nigeria Energy Sector.
•    USD 500 million line of credit to the Bank of Industries (BOI), a private sector loan backed by a sovereign guarantee.
•    USD 75 million line of credit to Fidelity Bank.

Nigeria is, however, not only a recipient of AfDB financing but also the leading shareholder of the Bank responsible for 8.6 percent of the Bank’s paid-up capital. Nigeria has participated fully in all of the Bank’s capital increases. For the most recent Sixth General Capital Increase, which was approved in 2010, Nigeria has undertaken and is on course to pay up USD 468 million in contributions over eight years.

Nigeria has for the last 38 years used the Bank as its primary channel for addressing the developmental needs of less-endowed African countries. As the third Window of the Bank Group, the Nigeria Trust Fund (NTF) has provided UA 333.2 million worth of financing for 76 operations in 34 African countries. As at 31st December 2013, the equity balance of the NTF amounted to UA 165.772 million (USD 255.288 million). Approvals from the NTF in 2013 amounted to UA 31.2 million, nearly double what was approved in 2012 (UA 14.10 million).

Furthermore, Nigeria has established a USD 25 million Nigerian Technical Cooperation Fund (NTCF), which is administered by the AfDB. It finances technical and capacity building activities in Africa in the areas of science and technology, health, private sector development and finance, agriculture, education, public administration, regional integration, and gender development. The NTCF is the only trust Fund managed by the Bank that is promoted by a regional member country.

Nigeria has been vocal in supporting the Bank’s involvement in crafting an international response to the Food crisis of 2005-2006; the global financial crisis of 2007-2009; the Arab Spring of 2011 and the ongoing crisis in the Sahel. Through the Group of Ten Ministers of Finance and Central Bank Governors, Nigeria continues to provide input for the Group of 20 Advanced Countries (G20) through the Bank.

In what areas in your constituency should the Bank increase its intervention?
Bank Group resources available to support São Tomé and Príncipe comprise an ADF-13 allocation of UA 7 million and an additional UA 2.5 million technical assistance envelope from the Fragile States Facility. The Bank is in addition able to provide private sector financing to São Tomé and Príncipe to the amount of about USD 5 million a year. Although very useful, these resources are inadequate for the country. We therefore, would like to see the Bank leverage its lending instruments, policy dialogue and partnerships to serve Sao Tome and Principe better. The Sao Tome and Principe authorities have a robust pipeline of projects to be financed in the coming few years. Some of these projects include: a deep-sea water port;  lines of credit for on lending to commercial banks; electricity transmission project; and construction of a water reservoir. We are of the view that as an anchor investor, the Bank can help crowd in investments from DFIs and other private sector lenders to fund these projects.

Another area where the Bank can do more is to encourage Sao Tomians to work for the Bank. A breakdown of the Bank Group Staffing Statistics shows that there is not a single member of Staff from São Tomé and Príncipe working at the Bank.  While interns from Sao Tome and Principe have in the past been recruited, more concerted efforts must be taken to ensure that suitably qualified people from the country are employed as professionals.

In the case of Nigeria, I believe that in line with its Ten Year Strategy which focuses on inclusive growth, Nigeria would like to see the Bank finance projects with a high employment generation potential, particularly in economically depressed areas. The Bank’s economic sector should focus on generating ideas for the Federal and State Governments in the following areas: domestic resource mobilization in order to rebalance the Nigerian economy away from oil; competitiveness and value-addition, particularly in the industrial sector; and addressing economic and political fragility. The Bank should play a more influential role in shaping policies in support of the President Jonathan’s Transformation Agenda.

In 2013 the Bank made effective use of a UA 125 million Partial Risk Guarantee (PRG) to support Nigeria’s ongoing power privatization programme. The PRG will cover private lenders financing priority power projects in Nigeria against the risk of independent power plants defaulting. The Nigerian authorities would like to see more use of this facility in support of Nigeria’s energy reforms.  As the ADF Partial Credit Guarantee (PCG) instrument and the Private Sector Credit Enhancement Facility (PSF) come on-stream, Nigeria would like to see them utilized in Nigeria.

The Nigerian authorities would wish for the Bank to develop innovative ways to finance infrastructure projects in Nigeria in conjunction with indigenous Pension Funds, which currently have resources in excess of USD 25 billion.

What kind of President does the AfDB need at this time?
Since 2005, President Kaberuka has rightly focused the Bank’s attention on infrastructure, private sector, governance and human capital development. Discussions at all levels indicate that these areas are still regarded among the most important in the region. The next President of the Bank must consolidate on these strategic areas, within the context of the Bank’s Ten Year Strategy, cross-cutting areas of inclusive growth and green growth, paying increased attention to generating jobs, local/regional value-addition, environmental challenges and the imperative of gender development.

The new President must be able to lead a renewed focus on the achievement of development effectiveness and quality. He or she must propel innovative approaches to provide more support to countries with low debt levels that currently do not borrow much from the Bank and to generally diversify the portfolio of the Bank, without abandoning our high-end clients. While maintaining the support of the current ADF countries, much more needs to be done to attract more countries from the Region, the Gulf, Asia and Latin America to provide concessional financial resources to the Bank to enable it support our more vulnerable clients, particularly fragile countries needing long -erm support. These should be pursued at the same time with concerted efforts to help member-countries develop and manage their own resources from tax, mineral and other revenues to enhance self-dependence.

While the Bank does not engage in political activities in its member-countries, it is also a fact that politics has a profound impact on development and development effectiveness. The next President of the Bank must therefore have the stature, the commitment and the vision to engage, along with other partners, in dialogue with governments and other stakeholders in RMCs to help minimize conflicts, fragility and corruption.

To be able to accomplish all these responsibilities, the next President must maintain the highest standards in the Bank and continue to attract staff of the highest calibre, professional competence and integrity. This is a pre-requisite for the achievement of his mission.

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