Business and Economic Review

April 2015 Business and Economic Review RTC Advisory Services Ltd. Nigeria Outlook Post-2015 Elections RTC Advisory Services Ltd 1

Introduction Short-Term Political Risk Defused. The Euphoria of Change May Quickly Dissipate. Significant Economic Challenges Remain. The Global Context Remains Ambiguous. RTC Prescriptions Conclusions Outline The outlines of the configuration of the incoming government of President-elect Muhammadu Buhari may be beginning to emerge with constitution of his transition and inauguration committees. The incoming government is trying to lower public expectations after the euphoria of victory and as the reality of the economic and social challenges the government will face become clearer. In this report, we review the scale of the opposition APC victories, carry out a reality check and provide our own policy prescriptions Introduction 2

Short-Term Political Risk Defused RTC Advisory Services Ltd The peaceful conclusion of the 2015 general elections and the concession by the incumbent swiftly de-escalated Nigerian political risk and led to euphoria in markets with exchange rates and capital markets rallying With political risk defused, at least in the short-term, markets and investors may now return to decision-making based on fundamentals. While short-term political risk based on apprehensions over the conduct and outcome of the elections has diminished, new sources of political risk may emerge over time, but in the short term, relief is the predominant emotion Political Risk 3

Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross River Delta Ebonyi Edo Ekiti Enugu Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba Yobe Zamfara FCT Abuja 5/13/2015 Analysis of Presidential Election Result 0.97% 2.66% 7.29% 48.59% 40.49% PDP-Jonathan APC-Buhari Others Rejected Votes Accredited Absentees Analysis of Presidential Election Result 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 Jonathan Vs Buhari: State by State Result Analysis 1,000,000 800,000 600,000 400,000 200,000 - PDP-Jonathan APC- Buhari Presidential Election Result: State by State Analysis 4

46% Regional Analysis of Buhari's Votes 1% 16% 3% 16% 18% South East South West South-South North Central North East North West Regional Analysis of Buhari s Votes Regional Analysis of Jonathan's Votes 13% 6% 11% 37% 19% % South East South West South-South North Central North East North West Regional Analysis of Jonathan s Votes 5

Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross River Delta Ebonyi Edo Ekiti Enugu Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba Yobe Zamfara FCT Abuja 5/13/2015 2015 Composition of Federal House of Representative: Party Analysis 0% 0% 0% 40% 2% 58% ACCORD APC APGA LP PDP SDP Composition of Federal House of Representative by Party 25 Composition of Federal House of Representative : State by State Analysis 20 15 10 5 ACCORD APC APGA LP PDP SDP 0 Composition of FHR: State by State Analysis 6

Federal House of Representative: Gender Analysis 4% Male Female 96% Classification of Federal House of Representative by Gender Federal House of Representative: Age Analysis 4% 10% 40% 46% 30-39 Years 40-49 Years 50-59 Years 60-69 Years Classification of Federal House of Representative by Age 7

Classification of FHR by Academic Qualification 3% 0% 9% 28% % SSCE/WASCE/GCE NCE/OND/DIP/GRADE II HND/BSC/BED/LLB/BL PGD/MSC/MED/MA 46% PHD OTHERS Classification of FHR by Academic Qualification 2015 Composition of Senate by Poltical Party 44% 56% APC PDP Composition of Senate by Political Party 8

Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross River Delta Ebonyi Edo Ekiti Enugu Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba Yobe Zamfara FCT Abuja 5/13/2015 Composition of Senate by Political Party: State by State Analysis 3 2 1 APC PDP 0 Composition of Senate by Political Party: State by State Analysis 23% Senate: Age Analysis 3% 18% 56% 40-49 Years 50-59 Years 60-69 Years 70-79 Years Classification of Elected Senators by Age 9

Senate: Gender Analysis 6% Male Female 94% Classification of Elected Senators by Gender Classification of Elected Senators by Academic Qualification 3% 2% 12% 9% SSCE/WASCE/GCE NCE/OND/DIP/GRADE II 31% HND/BSC/BED/LLB/BL 43% PGD/MSC/MED/MA PHD OTHERS Classification of Elected Senators by Academic Qualification 10

With the conclusion of the state Governorship and House of Assembly elections on April 11, the APC now dominates the Presidency and National Assembly (Senate and House of Representatives) at the Federal level and most of the state governments The APC is dominant in the South-West, North-West, North-East and North-Central while the PDP is now essentially a South-South/South- East party. The PDP will have to ponder its future as our prediction of a de facto coalition due to large scale defection from the party is realised. The PDP brand appears toxic except in the SS/SE where ethno-regional factors gave it some lease of life. The Erstwhile Opposition Party Dominates State Governorships APC PDP APGA South-West Lagos Oyo Ogun Ondo Osun (4) Ekiti (2) South-East Imo (1) Enugu Abia Ebonyi (3) Anambra (1) State Governorships 11

APC PDP APGA South-South Edo (1) Rivers Akwa-Ibom Cross-Rivers Bayelsa Delta (5) North-Central Plateau Benue Nasarawa Niger Kwara (5) Kogi (1) State Governorships (contd.) APC PDP APGA North-West Kano Kaduna Zamfara Sokoto Jigawa Katsina Kebbi (7) North-East Borno Yobe Adamawa Taraba Bauchi (4) Gombe (2) TOTAL (22) (13) (1) State Governorships (contd.) 12

The APC government of Buhari is on the face of it in a comfortable governing position, with majorities in both houses of the National Assembly and an overwhelming majority of state governments But as recent jostling for the leadership of the incoming Senate and House of Representatives reveals, things are not so straightforward. The APC is fundamentally an electoral platform of disparate interests and factions and having won the presidency, the stresses may now be internal A Comfortable APC Majority Divisions between the APC s Northern and Western factions and achieving consensus over power-sharing between regional factions, across sectarian lines, between party leaders and other fault-lines Dealing with the excluded Niger-Delta and South-East especially as efforts to investigate Jonathan and his cohorts may sow seeds of crises in the Niger-Delta The appearance of a new hegemony will quickly breed resentment in marginalised factions Disappointment over the desire for Change may lead to disillusion especially in volatile youth constituency New Sources of Political Risk??? 13

The Change Euphoria RTC Advisory Services Ltd Composition of President-Elect Buhari s inner circle, economic team and cabinet and preserving team cohesion Policy Posture in relation to power sector privatisation, agricultural reforms, NSIA, transportation infrastructure projects, and other major ongoing policy initiatives and substantive economic policy platform Strategies for prosecuting anti-corruption effort Strategies for managing the Niger-Delta and South-East Snuffing-out and cleaning out the Boko Haram insurgency and addressing its root causes Implementing policies to resolve national social crises Policy Issues and Imperatives

An examination of the President-elect Buhari s Transition and Inauguration Committees reveals a very modest change component.. The Change Euphoria Names Position Age Background Current/Previous Position(s) State Powerful Permanent Secretary-Northern Nigerian Public Service, Federal Ministry of Information, Bureaucrat and Education and the Federal Ministry of Industries; Head, Committee on Assessment of Super Federal Government Parastatals; Chairman of ABTI-American University of Nigeria, Yola; Permanent Principal Founder, Benue Valley Farms; Head, Federal Government Panel on Poverty Alhaji Ahmed Joda Chairman 85 Secretary Alleviation; and Chairman Nigerian Communication Commission Adamawa Faculty member, Lagos Business School (LBS), Pan-Atlantic University; Principal Consultant, Edward Kingston Associates; Member, Advisory Board of CBO Investment Dr. Doyin Salami Vice-Chairman Early-Mid 50s Management; Member, Monetary Policy Committee of the Central Bank of Nigeria and BSc, MSc, PHD Member, Federal Government Economic Management Team. Ogun Mr. Boss Mustapha Powerful Middle-Belt Politician Adamawa Malam Muhammad Hayatuddin 60s Former Banker and NNDC official Alhaji Abubakar Malami 59 Deputy Comptroller-General of Customs. Kebbi Brig-General Lawal Jafaru Isa Buhari s Transition Committee Military Administrator, Kaduna State; Leader, United Nigerian Development Forum; Director, Bank PHB (now Keystone Bank). Former Sec-Gen of ACF Senator Hadi Sirika Pilot; Member, Nigerian Senate Katsina Chief Audu Ogbeh 68 BSc, MSc Deputy Speaker, Benue State House of Assembly; Federal Minister of Communications; Minister of Steel Development; and National Chairman, PDP Benue Solomon Dalong Lawyer Plateau Mrs. Bola Adesola LLB, MSc MD/CEO, Standard Chartered Bank Nigeria Limited; Managing Director, Kakawa Discount House Nigeria; Executive Director, First Bank Nigeria; Board Member, FMDQ OTC PLC; Treasurer, Citibank; and Executive Board Member, FATE Foundation Lagos Political Significance 15

Names Position Age Background Current/Previous Position State Chairman, Chapel Hill Denham Group; Co-Founder and Executive Director, Stanbic IBTC Plc (formerly Investment Banking & Trust Company Limited); Founder, Denham Management Mr. Wale Edun 60? BSc, MSc Limited; Chairman, Livewell Initiative; and Commissioner for Finance, Lagos State. Ogun Political Significance Mrs Nike Aboderin 50s BSc SSA, Trade and Investment, Ogun State Government. Ogun Executive Governor, Abia State; Chairman, Conference of Nigerian elected Dr. Ogbonnaya Onu 64 BSc, MSc, PHD Governors; Presidential Candidate, APP (now ANPP); National Chairman, ANPP Abia CEO, NB Plc; Director, Dangote Cement Plc; Director, Union Bank of Nigeria Plc; Director, Transnational Corporation of Nigeria Plc; Chairman, National Population Mr. Festus Odimegwu 62 BSc, MSc Commission Chief John Oyegun 76 BSc Executive Governor, Edo State; Chairman, Technical Working Committee of CODER; and Chairman, All Progressive Congress Edo Gov. Rotimi Amaechi 50 BSc, MSc Speaker, Rivers State House of Assembly; Executive Governor, Rivers State; Chairman, NGF; and DG, Buhari Campaign Organisation Rivers Commissioner of Education, Rivers State; Member, Constitution Drafting Committee for the Federal Military Government; Minister of Petroleum and Prof. Tam David West 76 BSc, MSc, PHD Energy; and Minister of Mines, Power, and Steel Rivers Chairman, Optmedia Limited; Director, Afromedia Plc; Public Relations Officer, Nigerian Airport Authority (now FAAN); and National Publicity Secretary, All Lai Mohammed 63 LLB Progressives Congress Kwara Malam Adamu Adamu Secretary Journalism Columnist, Daily Trust Buhari s Transition Committee (contd.) The members with policy and economic credentials in the transition committee are Dr Doyin Salami Alhaji Muhammed Hayatudeen Mr Olawale Edun Mrs Bola Adesola Ms Nike Aboderin Mr Festus Odimegwu These individuals are fairly credible and may hopefully have sufficient clout to influence the policy direction of the incoming government. We hope given his commitment and ability that the VP-elect will be as influential in the incoming government as many South-Western voters hoped. There is already chatter that suggests APC leader Bola Tinubu is not getting as much influence in the evolving dispensation as he may have expected. However Tinubu is a very resourceful and pragmatic politician, who can be expected to extract a fair deal for his faction whatever the odds. The Change Euphoria (contd.) 16

Names Position Age Background Current/Previous Position State Timipre Sylva Co-Chairman 51 BSc Member, Rivers State House of Assembly; Executive Governor, Bayelsa State; Bayelsa Political Significance Chief Pius Akinyelure BSc, MSc Executive Director, Finance and External Relations, Mobil Oil Nigeria Plc; Chairman/Director- Wema Bank Plc, Credite Bank Ltd, Odu a Investment Limited, Oluwa Glass Plc, Okitipupa Oil Palm Plc, Odu a Telecomunications Limited, Cocoa Industries Nigeria Ltd, Hallmark Bank and West African Portland Cement Plc. Chairman/Director- King Guards Nigeria Ltd, Seg Mahsen & Co.(NIG) LTD, POA Investment Ltd, Eres N.V Nig. Ltd, Transnational Computer Technology, SPA dredging Company Limited, Pak Oil Marketing Limited, ACOP Properties Limited, Betta Consortium (Ikoyi Hotels) and CAT Construction Company Limited. Ondo Mrs. Abike Dabiri Erewa 53 BSc, PGD, MSc Hon. Member, Federal House of Representative Lagos Ms. Sharon Ikeazor LLB, MSc Women Leader, CPC; Anambra Prof. Tony Anwuka 64 BSc, ME, PHD Public Administrator; Vice Chancellor, Imo State University, Imo Alhaji Kawu Baraje BEd National Secretary PDP; Kwara Sen John Shagaya (rtd) 73 Senior Military Officer; Member, Nigeria Senate Plateau Hadiza Bala Usman 39 BSc Bring Back Our Girls #BBOG Katsina Buhari s Inauguration Committee Names Position Age Background Current/Previous Position State Political Significance Babagana Kingibe 70 Secretary to FG; Minister of Power and Steel; Minister of Internal Affairs; Minister Foreign Affairs; Nigeria s Amb. to Greece and Pakistan; AU Special Envoy to Sudan; Special Representative, Chairperson of the African Union Commission; Head, AU Mission in Sudan (AMIS) and Darfur. Borno Ismaila Isa Funtua Bulletine Construction Katsina Senator Binta Masi Garba 48 Vice President of Commonwealth Women Parliamentarians (CWP); Delegate, National Conference; Member, Federal House of Representative; Chairman, Adamawa State Chapter of APC; and Elected Senate Member Adamawa Engr. Babachir Lawal MD, Rholavision Engineering Limited; Vice Chairman, North East of All Progressives Congress. Hon. Samson Osagie 48 LLB, MPA, LLM,MSc Hon. Member, Federal House of Representative Edo Buhari s Inauguration Committee (contd.) 17

The Key Fundamental Factors remain:- Low Oil Prices Which continue to remain low, though reaching $60 pb Fiscal Imbalance As a result of the above and Nigeria s structural dependence on oil proceeds for exports/reserves/currency values and government revenue/budgets Prevailing Social Crises Poverty, Unemployment, Inequality, Illiteracy, Crime and Insurgency Weaker Economic and Corporate Performance Reduced GDP growth projection and weaker demand for goods and services The Fundamentals are Stark! Having raised public expectations in securing power, the presidentelect is seeking to lower the sky high expectations of the populace The government seems to have made a decision to remove petroleum subsidies, a sensible policy measure the opposition strenuously opposed three and a half years ago. Irrespective of its merits, removal of fuel subsidies will be politically costly for the incoming regime Most of the policy reforms the APC may have to implement (subsidy removal, public sector rationalisation etc. ) are straight out of the outgoing government s policy book Paring Back the Change 18

There is a strong lobby within political and regional circles for reversal of power sector privatisation, one of the policy risks we identified in a change scenario. In our view, such policy will be a major and defining mistake! There may also be an inclination to effect changes at the CBN as well as an explicit intent to revisit the missing $20billion matter as the PWC report may have been discredited in the eyes of the public. Of the three pillars on which the APC s change campaign was anchored (corruption, security and economy), the economy may be the Achilles heel! The Change Euphoria (contd.) Source: BudgIT Meanwhile Civil Society will hold Buhari/APC to their Promises 19

Source: BudgIT Meanwhile Civil Society will hold Buhari/APC to their Promises Source: BudgIT 20

Significant Economic Challenges RTC Advisory Services Ltd 9 Inflation Rate 8.5% 8 7 Inflation Rate Inflation Rate (%) 21

IN BILLIONS 5/13/2015 15,000,000 13,000 12,000 11,000 10,000 9,000 Market Capitalisation Market Capitalisation 45,000 40,000 35,000 30,000 25,000 20,000 All Share Index All Share Index 22

Rates (%) Market Capitalisation (N'Bn) 5/13/2015 FDI and Portfolio Inflows: Q4 20 Financial Indicators: Pre and Post Election Analysis 18 16,000 16 12 10 8 6 4 2,000 12,000 10,000 8,000 6,000 4,000 2,000 Inflation Rate Interest Rate Market Capitalisation 0 Mar' Apr' May' Jun' Jul' Aug' Sep' Oct' Nov' Dec' Jan' 15 Feb' 15 Mar' 15 Apr' 15 0 Financial Indicators: Pre and Post Election Analysis 23

Naira 5/13/2015 Exchange Rate: BDC vs IFEM 230 220 210 200 190 180 170 Exchange rate BDC Exchange rate IFEM 160 150 Mar' Apr' May' Jun' Jul' Aug' Sep' Oct' Nov' Dec' Jan' 15 Feb' 15 Mar' 15 Apr' 15 Exchange Rate: Pre and Post Election Period Indicators 2012 2013 20 (Prelim.) 2015 (Proj.) Real GDP (2010 BP) 4.3% 5.4% 6.3% 4.8% Oil and Gas GDP (4.9%) (13.1%) (1.3%) (1.6%) Non-Oil GDP 5.9% 8.3% 7.3% 5.5% Crude Oil Production mbpd 2.3 2.2 2.2 2.3 CPI 12% 7.9% 7.9% 11.5% Excess Crude Account/SWF $11.0bn $3.8bn $3.6bn $1.5bn Exports (Growth) 1.8% (0.9%) (5.1%) (37.4%) Imports (Growth) (10.6%) (4.9%) 9.7% (16.6%) Current Account Balance (% of GDP) Selected Macroeconomic Indicators (Source: IMF Article IV Consultation March 2015) 4.4% 3.9% 2.2% 0.2% Terms of Trade 1.0% 0.4% (2.6%) (25.6%) Price of Nigerian Oil (pb) $110.0 $109.0 $100.6 $52.8 24

Indicator Measure GNI per capita $2,710 (2013) Population 168.8million (2012) Poverty 46.0% (Adult) GINI Index 48.8 (2010) Life Expectancy 52 (2011) Social Snapshot (IMF Article IV Consultation March 2015) The Global Context RTC Advisory Services Ltd 25

April 2015 World Economic Outlook (WEO) Projections 26

30/03/2015 31/03/2015 01/04/2015 02/04/2015 03/04/2015 04/04/2015 05/04/2015 06/04/2015 07/04/2015 08/04/2015 09/04/2015 10/04/2015 11/04/2015 12/04/2015 13/04/2015 /04/2015 15/04/2015 16/04/2015 17/04/2015 18/04/2015 19/04/2015 20/04/2015 21/04/2015 22/04/2015 23/04/2015 24/04/2015 25/04/2015 26/04/2015 27/04/2015 28/04/2015 29/04/2015 30/04/2015 01/05/2015 02/05/2015 03/05/2015 04/05/2015 05/05/2015 06/05/2015 07/05/2015 5/13/2015 66 64 62 60 58 56 54 52 50 Daily Basket Prices OPEC DAILY BASKET PRICES 66 64 62 60 58 56 54 52 50 48 46 44 42 WEEKLY BASKET PRICES OPEC WEEKLY BASKET PRICES 27

110 100 90 80 70 60 50 40 Monthly Basket Prices OPEC MONTHLY BASKET PRICES 120 110 100 90 80 70 60 50 40 30 20 10 YEARLY BASKET PRICES 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20 2015 OPEC YEARLY BASKET PRICES 28

66 64 62 60 58 56 54 52 50 Brent Crude Oil: Daily Price Trend Brent Crude Oil: Daily Basket Price Trend Brent Crude Oil: Monthly Price Trend 115 105 95 85 75 65 55 45 BRENT CRUDE OIL: MONTHLY 29

Oil prices have risen in spite of supply outstripping demand projections, basically due to geo-political concerns (War in Yemen- Iran versus Saudi Arabia; Continuing Middle-East tensions in Iraq, Syria, etc.) Even though opinion is divided between analysts over the long term direction, short-term prospects remain muted and fundamentals do not support optimistic price expectations. We retain our short-term band in the range of $50-70 per barrel of oil over the rest of 2015. Oil Price Summary The FAO Food Price Index averaged 171 points in April 2015, down 2.1 points (1.2 percent) from March and 40.5 points (19.2 percent) below its level in April 20. Dairy prices fell most, but sugar, cereals and vegetable oils prices also declined. By contrast, meat values rose in April, their first increase since August 20. The April average puts the FAO Food Price Index at its lowest level since June 2010. World Food Situation Report 30

The FAO Cereal Price Index averaged 167.6 points in April, down 2.2 points (1.3 percent) from March and nearly 42 points (20 percent) below the corresponding month last year. Wheat prices continued their decline in April, influenced by large supplies and slow trade activity, as many buyers await in expectation of even lower prices in the coming months. Maize quotations changed little compared to March, with stronger import demand being offset by prospects for more than ample supplies. Rice prices moved marginally lower, on subdued demand. The FAO Vegetable Oil Price Index averaged 150.2 points in April, down 1.5 points (or 1 percent) from March. The slide was driven by palm oil, the key commodity in the index. International palm oil quotations continued to ease as higher than expected output in Indonesia and Malaysia coincided with weak global import demand. Global soy oil prices, on the other hand, increased slightly, reflecting concerns about slower than usual farmer selling and renewed strikes in South America. Prices for sunflowerseed oil strengthened amid falling world production and export supplies. The FAO Dairy Price Index averaged 172.4 points in April, down 12.5 points (6.7 percent) from March. Milk powders and butter were the main commodities affected. The price weakness affecting the sector reflects a favourable opening to the April-March dairy year in the EU, combined with the abolition of the milk quota system, which raised expectations of abundant export supplies. Dairy prices were also influenced by uncertainty over the level of China's purchases during 2015 and continued import prohibitions imposed by the Russian Federation. The FAO Meat Price Index* averaged 178 points in April, up 3 points (1.7 percent) from its revised March value. The main causes of the rise were higher prices for bovine and ovine meat from Oceania, where herd rebuilding restricted exports. Pigmeat prices also showed some upward movement, while those of poultry were lower. For meat overall, moderately higher import demand in China, Japan, the United States and Vietnam is the main factor underpinning the market. The FAO Sugar Price Index averaged 185.5 points in April, down 2.4 points (1.3 percent) from March and reaching its lowest level since February 2009. The decrease was mainly fueled by reports of higher than expected sugarcane harvesting in Brazil, the world's largest producer and exporter of sugar. Also, India's recent announcement it would raise sugar import tariffs from 25 percent to 40 percent, in a bid to support falling domestic prices, weighed on international sugar quotations. Persistent weakness in the Brazilian currency (Real) against the US dollar also kept the FAO Sugar Price Index under pressure Unlike for other commodity groups, most prices utilised in the calculation of the FAO Meat Price Index are not available when the FAO Food Price Index is computed and published; therefore, the value of the Meat Price Index for the most recent months is derived from a mixture of projected and observed prices. This can, at times, require significant revisions in the final value of the FAO Meat Price Index which could in turn influence the value of the FAO Food Price Index. Much lower US export prices resulted in downward revisions of the Meat Price Index for January (6.7 points) and February (3 points). World Food Situation Report (contd.) RTC Prescriptions RTC Advisory Services Ltd 31

Nigeria has an historical imperative for structural diversification in three dimensions:- Structure of Domestic Production (GDP) (done) Historically three sectors (Agriculture, Trade and Oil & Gas) accounted for 75-80% of national output. GDP rebasing confirms that the required output diversification has substantially been accomplished with agriculture down to 22%, Services (including telecommunications, finance, real estate, professional services, entertainment/film/ music/broadcasting etc.) being 52% and Industry (including oil and gas and manufacturing accounting for 26% of GDP Structure of Exports (and Reserves and Exchange Rate) Government Revenue and Budgets Diagnosis The second and third diversifications remain outstanding and account for the structural shocks we experience when oil prices decline. The national economic imperative is to diversify government revenue and exports away from dependence on crude oil. This need for structural reform is complicated by the abject social conditions and the low fiscal buffers in terms of reserves and sovereign savings (and we might add the very high popular expectations for welfare policies from the incoming government) Diagnosis (contd.) 32

Removal of fuel subsidies will spur investments in domestic refining and petrochemicals and create a significant value chain. It will release over N1trillion per annum for social spending as well as create domestic high value jobs rather than subsidize jobs in other countries Privatization of existing government-owned refineries will support and reinforce the above policy. Continue privatization in other areas including airports, seaports, rail infrastructure and services and other sectors. Canvassing investments especially FDI into the solid minerals sector will also create a new industry value chain, create alternative export revenue streams and create jobs Entrenching power sector privatization and fine-tuning issues around gas (and sabotage of gas pipelines), transmission, tariffs and new investments. DO NOT REVERSE POWER SECTOR PRIVATIZATION!!! Sector Focus-Solid Minerals, Refining and Petrochemicals, New Upstream Investments, Power and Infrastructure, Agro-Processing, Retail and Construction Deepening Diversification and Stimulating Increased Growth of Domestic Production Implementing the steps listed above Investment climate and competitiveness reforms to improve business performance and reduce cost of doing business (especially power, transportation, multiple taxes and charges, corruption costs) Diversifying exports focusing on sports, entertainment, music, film etc. Provision of increased export incentives and avoiding currency subsidies Increasing and Diversifying Exports 33

Focus on widening tax net rather than over-taxing current payers Consider VAT increase Our counter-intuitive recommendation is to reduce corporate tax rates especially on SMEs and to formulate more realistic tax policies even in respect of personal taxes Expand Tax Generation Source Policy Recommendation Oil Receipts Private Capital (Privatization, PPPs etc.) Borrowings Reducing Corruption and Waste Taxes Currently impaired due to oil market situation. Imperative is for diversification Channel private capital for infrastructure Privatize refineries and airports to free resources and drive efficiency; Pass realistic PIB to spur investments in gas and deep offshore Carefully leverage borrowings-use international financial markets to fund oil sector JVs; use long term development finance for health, education and transportation Public sector reform leveraging Oronsanye Report; Strong and sincere anti-corruption effort; spending reforms; procurement transparency; release resources from fuel subsidies for social spending Tax Reform to widen tax net, encourage compliance and sanction willful evasion Nigeria s Public Finance Sources 34

Conclusions RTC Advisory Services Ltd The incoming Buhari government has its work cut out! It will have to carry out painful reforms at a time public expectations are for welfare reforms. It appears to want to consolidate power within its coalition even as that may lead to tensions within the coalition. And it must deliver on its promise of change even as the emerging composition of its team is a mix of past, present and future players in the national space! Conclusions 35

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