From Amechi Ogbonna, Washington DC,USA
Amidst widespread criticisms by various stakeholders that President Muhammadu Buhari’s economic team has failed to deliver the urgently desired growth and development to Nigerians, Finance Minister, Mrs Kemi Adeosun, has promised that the economy would soon rebound as government has tied up the loose ends that had frustrated the delivery of “change dividend” promised by the administration.
At an interactive session with Nigerian journalists who covered the just-concluded annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington DC, USA, Adeosun, said that despite the current recession largely triggered by the collapse of crude oil prices and slow down in global economy, Nigerians should expect better days ahead.
According to her, the long term economic prospects for the country are looking bright, especially with the renewed commitment of its development partners including the World Bank Group to assist the government diversify the economy. She spoke on a wide range of issues including illegal financial flows, synergy between fiscal and monetary authorities, infrastructure and SMEs financing among others.
Excerpts:
Nigeria’s economic outlook
Generally, the outlook that was presented at the meetings of the World Bank Group was that the global economy will remain subdued and that outlook has some implications for us in Africa generally, and in Nigeria specifically. There is therefore the need to apply the full combination of monetary, fiscal and structural tools to ensure that we are able to return to growth.
We had validation of our economic strategy, that is our strategy to transform Nigeria from consumption driven to investment driven model and whilst in the short term, there has been some pain and some dislocation no doubt, but the long term economic outlook for Nigeria remains confident.
One of our key objectives coming out here was to see how Nigeria could better take advantage of our relationships with the multilateral agencies and with our friends and supporters in the ministries of finance and treasury departments of the various countries to improve the economy of our country.
On the basis of that, we had a number of bilateral meetings with UK Department for International Development, the US Treasury among other partners.
The key attainments from this trip – we met with the World Bank and the country team as a group and – one of the discussions was that there was an unacceptable low level of disbursement of funds on Nigerian projects. Indeed, the rate is 13 percent at the moment which is unacceptably low. We agreed on a number of measures to reverse this, and these include; review process of originating projects, project designs and implementation issues to understand why certain projects are performing at such a low rate.
Meetings with development partners
We had high level discussions on the challenges in the power sector. These challenges were seen to be financial challenges and therefore agreements were reached that there will be a workshop in Abuja in November that will be attended by the World Bank Group, IFC, MIGA which provided partial risk guarantees, the Ministry of Power, the Ministry of Finance, the CBN, NNPC for the gas perspective, the GENCOs, DISCOs and all the stakeholders in the power sector, including the World Bank, which will be bringing its specialist to see how they can proffer financial solutions to the challenges of power in Nigeria.
We also met with the Japan International Cooperation Agency (JICA) and we secured their commitment to facilitate trade and investment in Nigeria, and specifically they have agreed to make investments in agriculture and fisheries sector. We have made progress on the Jebba hydro projects which is also a power project.
Our constituency which represents South Africa, Nigeria and Angola had a meeting here and we reviewed the fact that the allocation to our countries are among the poorest particularly from the IFC and this is unacceptably low, so what we have agreed to do is that we will be hosting a meeting in Abuja in March 2017 for the three finance ministers and the idea is that we will benchmark and scale up our technical capacity to ensure that we are able to get more of what is available for the three countries.
We equally secured commitments from the Canadian ministry of finance to support us in the PPP platform for roads as they have successfully developed a PPP platform for road investment and they have offered to support us on the technical front in that regard.
The delegation also presented the family home fund which is our affordable housing project to a number of prospective investors and development partners including the World Bank, IFC, MIGA and the Islamic Development Bank, and we have already received indicative interest and we’ll be coming back to tie up those funding commitments.
We planned and have agreed technical support in the area of domestic revenue mobilisation and we’re going to make more use of the IMF’s online training in financial management, while incentivising our staff who are interested in taking these courses to do so.
Finally, we had a meeting with the IFC which is the private sector investing window of the World Bank Group even though they have significant investment in Nigeria, it is limited to a number of sectors which they significantly want to scale up and we’ve agreed with them on two things. One is that we’ll host a road show to showcase Nigeria’s indigenous companies that could be eligible for IFC inward investment. Next we’ve agreed with them also that we should try to develop a pipeline of products rather than waiting for IFC to look for companies. The Ministry of Finance would take a proactive role in showcasing some of our eligible companies for IFC which we believe will crowd in more private sector investment and the jobs and growth that we need.
In conclusion, our engagements were extremely positive. We met jointly with the CBN, the rating agencies as you know the rating agencies have recently had some rating action on Nigeria
We would consider restructuring, reallocating or even canceling irredeemable project components. We would strengthen our implementation capacity including our capacity for monitoring and evaluation.
We would have regular monthly meetings now with the World Bank Group and there would be regular briefings of Federal Executive Council and the National Economic Council on the performance of Nigeria’s portfolios. And that’s because some of these projects are at state governments’ level.
So it’s very important to bring to the attention of the governors failing World Bank projects in their states so that we can actually access this money which of course is concessional money and is aligned to our development goals.
We believe it’s unacceptable that Nigeria should be drawing down on such a low rate, especially at a time like this when we really need these investments and how do we make it possible for them to get foreign exchange for them to run their factories so that prices can be moderated at the level that the purchasing power of our people don’t look totally eroded. Those are some of the engagements and I am pretty much optimistic that as we continue those engagements, they would yield results.
Contingency plans to protect Nigerian banking system
Basically, what you find from the reports of the World Economic Outlook, when you have situation where there is a weak global outlook as we have now, practically all financial markets suffer same kind of issues such as weakening of balance sheets and the rest of them. But I must say that for the Nigerian banking environment, it is not as bad as people think, given that we have strong prudential guidelines and ratios in place. I think we can only continue to strengthen the banks by putting in place strong prudential regulations that would continue to shield the banks and Development Bank of Nigeria.
Meetings with rating agencies
We met with the rating agencies. As you know, they recently had some rating actions on Nigeria. We met with Moody, Fitch and S&P had interactive session with them, updated our economic plans and gave them the picture of what we are doing. Overall, it was a very positive engagement in which we had some takeaways and we remain very confident that the strategy we are pursuing will result in some quick recovery for the Nigerian economy.
Disagreement with MPC on interest rate
When you are doing expansion, you need low interest rate and that is the general economics. If you actually listened, I said monetary policy committee are independent, they know what they are seeing on the monetary supply side. So, do I still need lower interest rate now, yes! And for as long as I am running a deficit financing, I need it. But does that mean that they should lower interest rate at once, no. There was never a call on my part that they should lower interest rate. They asked me what I want and I said I need lower interest rates. Remember that I am borrowing externally and internally, so one of the things that we have always said is that we need to come out of the naira and borrow internationally because it is now very low. Many countries have even negative interest rate. So that is an opportunity for us. Just because the monetary policy committee finds themselves in a situation where they are looking at their indicators like inflation and money supply among others, they make their decisions based on that and that is always respected. I don’t see a disharmony but I believe that what I said then was blown out of proportion. I am not a member of the committee and I don’t see what they do. We are all working together with one objective, which is to get the economy growing.
There would always be times of dislocation in any economy but overtime things will work together in harmony on a number of fronts.
Returning Nigeria’s stolen funds
Based on our commitment to reverse the trend of illicit financial flows which has seen significant money flow out of Nigeria, we have reached some high level agreement on a number of initiatives which we believe can bring significant repatriation of monies back into the Nigerian economy, particularly money that has flown out as a result of tax evasion. And we would be briefing Mr president on specifics before coming back to provide you with more detailed information.
When we talk about illicit financial flows, there are a number of issues involved- those from corrupt practices, tax evasion, tax avoidance and those who under paid taxes. But we are working hard to bring them back to the country to help in financing our development process. But we will come back to you with details of strategies after I have briefed Mr president on our discussion.
Development Bank of nigeria
Agreement was also reached on the final steps for the take off of the Development Bank of Nigeria which had been stopped due to some issues. We now have resolved all those issues, the recruitment process has now been finalised with management team put in place. This will release $1.3 billion which is aimed at supporting our SMEs which are part of the growth engine that will spur our economy. Today, SME lending is at low rates but this will now be facilitated through the DBN and we are ready to resolve other outstanding issues.
Difference between DBN and BoI
The Bank of Industry is specific to industrial production financing while the Development Bank of Nigeria will be for SMEs and many of them are traders who don’t qualify for BOI facility as well as services. The focus of DBN is SMEs and giving them low cost loans. We have been able to crowd in money to the tune of $1.3 billion, from the World Bank African Development Bank and the European Investment Bank.