Excerpts from a recent interview. Read below...
How is Nigeria faring in the face of the dwindling
oil prices?
I will like to say one thing: there has been some
attempt to make people feel that there is no
hope; that this situation is so difficult; there is
hopelessness. I said from the beginning when oil
prices began to fall by 50%. I said that this will be
a tough year; but there is hope.
There is light at the end of the tunnel and the
reason is because we have worked so hard as a
country under this administration to lay the
basics for us to exit this situation and get back
on a good path.
And that is what gives me hope. Why do I say that?
First of all, let’s come back to the fact: we now have
a Nigeria which is the largest economy on the
continent and that is important. We have to keep
stressing it because it means we’ve got the
sectors. We’ve got the base which will enable us to
carry out that diversification and be able to have a
stronger economy in the long term that create the
jobs and gives our young people hope.
So, it is very important to note that. We didn’t know
that before. When you look at the structure of the
economy and you see that the growth – all the
analyses have shown that the growths from this
economy have come from the non-oil sector that
Agriculture has been doing well. And that also come
to the present situation, because Agriculture has
been doing well, we have produced more food than
ever before - 21million metric tons more food. We
have produced paddy, 1.1million metric tons a
couple of years ago to 1.6million metric tons now. In
fact, what I am saying about rice is that it is dry
season farming, not to talk of paddy. And we are on
our way to really reducing our dependency on food
imports.
Because we’ve got food, prices have been kept
relatively stable and reasonable. You can go round
the market. We have gone round from different
places to check and the prices of foodstuff are
reasonable unlike other oil producing countries.
That is helping us manage the situation for the
average Nigerian.
What measures are in place to strengthen Nigeria’s
reserves?
I know this is of concern to Nigerians,
manufacturers looking for more foreign exchange,
others paying their school fees and tuition abroad
and even ordinary people. But I also feel that with
this strong base that we have, if we just keep
steady, we will be able to exit and the value of the
Naira will strengthen because we have got the
different sectors. And there are two ways we have
to do it, and I think this is what Nigerians want.
Instead of depending on oil, we have to look at the
two ways to strengthen our reserves because that
is the way we can strengthen the value of our
currency. There are two ways: one is to reduce
demand for imports and that is why I think our
demand for agriculture imports is very important for
us to watch that. And then reduce our demand for
foreign goods.
I have always encouraged Nigerians that even
strengthening the value of the Naira is not just
government actions alone, it is in our hands. If we
buy more of what is made here in our own country
and reduce the demand of things made outside, that
means we can increase our reserves and the
Central Bank does not have to continue giving
money to import all those goods that we don’t need.
The second way is for us to start exporting things
other than oil. And that is where again I feel
encouraged because we are laying the foundation
for that. You will recall that in the 60s, we were
exporting groundnuts, cocoa, cotton, rubber and
many agricultural products and suddenly we didn’t
keep up. We have the ability to go back to those but
not just exporting the raw materials and we already
have people in these sectors adding value. What we
need to do is to expand growing the cocoa,
processing it here for our own internal demand and
export it. And then we earn foreign exchange.
There is an area which is unexploited where we can
earn foreign exchange which we are not. When I go
around the continent, every single African woman
wants Nigerian clothes. I know this may sound
strange to lots of people. Those of us here, don’t we
import shirts, trousers, from the UK? But people are
here (in Africa) demanding our own clothes. Yet, we
are not able to get together as an industry – the
fashion sector - to make clothes we can export.
We will be sitting here and other West African
nations will come and exploit it. But there is an
opening. I am happy that the Minister of Industry,
Trade and Investment is organising and working
with the textile industry and the fashion industry to
export, because we can earn so much from that.
Imagine dressing the whole of Africa and what we
can earn from it.
So, those are the two ways. If we now earn foreign
exchange and we conserve by using our products,
we will be able to add more to our reserve which
will underpin the value of our currency.
Would you say the current economic policies are
sustainable?
No matter what government there is, there will be a
set of policies, institutions that will support this
country. And that is what I admire about Mr.
President when he talks. You know he talks about
how we can put in place something that will last;
whether I am here or not here is not the issue. It is
about laying in place the building blocks for the
Nigerian economy.
What is the impact of the government policies on
the economy on the “common man?”
As I said, meeting our salary bill is very important to
us and our pensions. The second thing is making
sure that the health benefits we have gathered in
this economy, we don’t lose it. Children must be
immunised. We can’t let down immunisation
because we know what that means. Polio
vaccination: we are almost close to eradicating
polio. This administration has been working towards
that. We have eradicated guinea worms and we
must make sure that all those medicines and
vaccinations are kept. HIV and AIDS, there are
treatments and all that. And then, there are very
important infrastructures we focus on doing that.
The president promised to build the second Niger
Bridge. That work is ongoing. Reporters have gone
out there and noticed that the pilling is ongoing. The
Lagos-Ibadan road is very important. The rail –
completing some of the rail and make sure that they
are running. These are ways the average Nigerian
can feel the impact of what these governments is
doing. I think it means a lot. I encountered some
young Nigerians we don’t know what it means to be
in a train because the train had never worked in
this country. And now they can ride on a train. Very
soon now, this Abuja-Kaduna line will be open.
Lagos-Kano line has been operating. Even the line
to Makurdi and so on. These are things that impacts
and the roads system that have been upgraded
constructed in this economy. Yes, there are so
many more. But we are on the good path, we should
applaud it. When your journey on Benin-Ore road
has been made smooth and short, isn’t that
impacts?
When you go to some of our rural areas, and you
have access to water because boreholes were dug
by the MDGs programs and they have solar
lightings, that is impact.
And these are some of the things that we have
started in this administration that are impacting
lives. You see that through all the efforts and
support of the private sectors, we have created
1.4million out of the 1.8 million jobs that we need
each year. That is impacting. Yes, the 400,000
people who have not yet gotten jobs that year will
feel it and you will feel it if they are your relatives,
son or daughters still sitting at home. We are not
saying that we have met the mark. But we have
gone a long way and steadily we have made solid
plans on that path. The President has said that he
will do two million jobs per year because we are so
close to the 1.8 million and we’ve got the specific
sectors generating these jobs. Not just the special
programs we are doing. Sectorial investments are
very critical. And that is what we are focusing on.
And I have not mentioned the housing sectors
impacts on the average Nigerian.
When you start something, it takes time to grow.
We started these housing thing now, and yesterday
we have a meeting with the CEOs of the primary
mortgage institutions to do a review.
What Role Has Government Played in
Institutionalising the Access to Finance?
For small and medium sized businesses in this
country which employ the most people (about 66%
of the adult population) contributes 45% of our
national income. We have opened up several
avenues to support them not on ad hoc basis but
apart from what the Central Bank has done, the
President kicked off two days ago a new
development bank. For the first time, when this
bank start working by the end of this year SMEs will
have access to finance and they can borrow for
five years, seven and ten years. We have never had
this before in Nigeria. They will have one and half
years of grace meaning that when they borrow they
won’t worry about paying back for a year and half
and that will give them time to organise themselves.
This new development bank is a wholesale bank, its
job is to mobilise financing and liquidity for the
agriculture bank, bank of industry and for the
commercial and micro finance banks to now lend to
SMEs.
When you look at this and the situation we are in.
And you look at Agriculture and SMEs; you will see
that there is hope and that we have laid the platform
for this economy to emerge from the present
situation.
Are there negotiations on ground to support budget
deficit?
We have entered negotiations with the international
financial institutions, specifically the African
Development Bank and the World Bank. They have
resources for us already programmed. We ask
them to turn these resources into budget support
for us. We are negotiating for $2billion that will
come in foreign exchange and remember that the
terms for these loans from the World Bank and the
African Development Bank are quite reasonable
compared to what we can get outside. These are
the money that are been set aside for us and we
decided to draw on it and we have decided to bring
in budget support to come in foreign exchange.
It will disburse in two tranches and we are advance
in negotiating with them and these will bring in
some needed foreign exchange that will now be
available for our private sector people to have
access to. It will alleviate the situation and this is
something we have started working on. We have
been working on it daily and night with them
because we need to address the need of
manufacturers and others in the population. That
will help ameliorate the situation.
The tenure of the loan will be standard. We will
probably have about five years grace before we
have to repay for about 25 years.
Where Does Nigeria’s Debt Stand?
I can tell you as someone who was central in the
negotiation of the forgiveness of our debt
cancellation that we are not near the situation we
were before in terms of external debt. Our external
debt is about 2% of our GDP.
Remember that when we went to negotiate, we
were almost at 70% of the GDP and most of it was
external. We have hardly any domestic debt at that
time. We have been very careful on our debt. We
are prudent in terms of the way we borrow.
We have more of domestic debts. What we are
trying to do is to reduce the domestic borrowing so
that we don’t crowd out the private sector. We have
got some foreign borrowings which is just 2% of
our GDP. The domestic debt of both federal and
states government is about 12% of the GDP. So
together, it is about 14% of GDP. And the norm and
threshold for a country like Nigeria size is about
forty something of the GDP. We are well below that.
However, we also look at something called debt
service to revenue; so we can’t just say our debt is
low compared to our GDP which is what the world
measures. We must look at our ability to repay and
that is one of the reason we are very prudent
because debt service to revenue, we don’t want it
to increase too much. Two years ago, it was 19% of
GDP, it has risen to 22% and we don’t want it to go
too much beyond that. I think if we get to something
like 25%, we will be very strict and we are
presently strict. We have been able, in this
administration, to repay outright some of the
domestic debt we owed. We paid back about
N75billion and that was a very good thing instead of
just rolling it over.
Countries are coming here to request our
assistance in debt management. The UK
government named Nigeria debt management
system as one of the best in the world. Even as we
speak, South Sudan and other countries that are
just starting up have come us for expertise in
managing debt. We are not complacent at all. We
looked very carefully at the risks of what we
borrow.
Non Salary Payment has become an issue across
states in Nigeria, should we be concerned?
All of us - states and federal government - have
experienced a drop in revenue. What we have done
is to talk to the states on how do we collectively as
a nation get through the difficult times? And what
we told them is of course they are fiscally, federally
independent but we can share because we have
one economy. We told them how we are doing our
own things and what we are doing is prioritising
payment of salaries to people because their families
depend on it. Prioritise that to make sure we pay
salaries and pensions. When you look at some of
these numbers you will find out that yes revenue
has dropped and it’s tough, but what most states
receive from FAAC is sufficient to cover their
personnel costs. So what we will say is that they
should prioritise payment.
In most states, I have to be clear, what they receive
is just a little bit short of their personnel costs. But
many I have looked through the list now at what
their salary bill is and what they receive and so
they should be able to cover but the will not be able
to do much after that because of the drop in
revenue. So we would advise them to first pay
salaries and then find a way to manage the other
issues. But there are one or there are few that what
they receive falls slightly below their personnel
cost. And in those cases we wanted a conversation
with them some of them that I have seen have
internally generated revenue almost quite significant
so they should be able to make up for the gap from
there. I am looking at those whose IGR is low. I
have not yet seen most of them that I have the
numbers their personnel bill fall between what they
get from FAAC so those ones should be able to
cover.
And some of them are managing very well I want to
say that some are not owing they’ve been paying
their salaries steadily. So we have to commend
them for that. I have looked at it and seen that it is
largely a question of what is your priority. So what
we’ve advised is that with some contractors, the
state governments should negotiate with the
contractors and explain the situation and schedule
the payment. They are likely to be supportive
because they are part of the economy.
How is the e-collect policy of government faring?
Many of the MDAs don’t like the idea of the e-
collect and the treasury single account. But we are
getting them because it is a conversation that we
will be having on this issue and we are getting them
to see that they need to comply. During this time,
our objective is to get as much internal revenue
generated with the e-platforms that will put the
money in an account at the Central Bank.
This will help us avoid leakages which is what all
Nigerians want. With the treasury single account,
we have a tool that helps us to see where the
balances of governments at one time from all
government agencies because we are drawing
resources into the Central Bank. Instead of
agencies with multiple accounts everywhere which
are not being used and the other hand you go
borrowing, we will have an overview and it will help
us to manage our balances much better.
There is no too much of a choice, everybody has to
comply. We don’t want to look as overbearing, so
we are discussing with the agencies and the
banks. We have already got all the capital accounts
into the Central Bank and gradually we are getting
the recurrent account. It also helps the Central
Bank to manage liquidity.
What would you say about the down grade of
Nigeria’s economy by S&P?
I will like to say that two other agencies, Fitch and
Moody have maintained us at the same rate as at
now. They have not tried to change it.
What S&P did is a special evaluation of all oil
producing countries based on the fact that oil prices
have fallen. They decided to do it and it is because
of that not because of anything else. They look at oil
producing countries and I can tell you that we were
the last one to be downgraded. All the other oil
producing countries from Russia, to Kazakhstan to
Venezuela, to Angola, they review them and
downgraded them.
It is a strong mark and credit to Nigeria because if
you read what S&P actually said. They commended
the management of the (Nigerian) economy. They
said it was proactive and ambitious, that the policies
responded in the right way to the drop in oil price.
They are saying that the drop in oil price is not our
fault but the issue is how do we manage it? And
they said we have managed it well; that we have
been pro-active and ambitious. I am quoting them
directly. What the issue is why they downgraded us
is not because of our management which they have
commended, it is because they believe that oil
prices will still be soft for a while and because we
are having elections.
Part - 1 State of The Nigerian Economy by Dr. Ngozi
Okonjo-Iweala - http://youtu.be/sGUtr76lanQ
Part 2 - State of The Nigerian Economy by Dr. Ngozi
Okonjo-Iweala - http://youtu.be/BVDyp8MKjAw
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