We’ll borrow but you’ll see the cash flow that’ll repay that borrowing – Edun

Where are we with the state of the economy?

We are not where we should be. The economy is barely growing above the rate of population growth. But it was not always so, and I think in trying to see the way forward, if we look back- we now have a situation of slow growth, double digit inflation; weak depreciating exchange rate as well as security concern resulting in an economy that is not growing; that is not lifting Nigerians out of poverty.

If we think back, when was the last time the economy was stable; when it was growing; when inflation was low, when the exchange rate was stable and when interest rates were affordable, that period was about a decade ago. Growth was above six per cent around 2013, 2014 and it was because from around 2010 there was a commodity rebound worldwide. Oil prices and volumes were high. Nigeria and the government earned a lot into its coffers, over $80 billion per annum compared to the figure now at around $25 billion.

What those point to is that there was a time the government had enough foreign exchange. It had enough naira revenue to meet its obligations and provide funding for economic growth. It had enough foreign exchange such that when people came in to invest and they needed to import raw materials and machinery, the government could provide the wherewithal. What it points to is that we have a situation where if the government doesn’t have the money it needs to facilitate and allow private funding, other sources of funding such as foreign direct investment, domestic investment by Nigerians in all areas are there. And, we saw some of that in Lagos when Mr president was governor.

He opened up the power sector to private investment, the road sector, infrastructure, waste management and even cemeteries to private investment because the government did not have the funds and there were those who were willing and able to provide jobs and grow the economy by making those investments. That is a pointer to the fundamentals of the president’s strategies – private investment. Worldwide, there is a huge flow of foreign direct investment once you give investors the right conditions.

Which direction is the administration headed?

Mr. President has pointed out priority areas where he’s going to take Nigerians. His key priorities include, to improve the lives of Nigerians by providing food security by ending poverty.

His plan for the economy is economic growth, job creation, access to capital particularly consumer credit that makes goods affordable to ordinary Nigerians. He is concerned about utilising our vast capable human resources by focusing on inclusivity, women, youth – making all have the opportunity to come to the table and contribute to the growth of the economy and society; and likewise, by focusing on security, rule of law, and anti-corruption. He intends to create a fairer and safer playing field for all.

For the team he put together, he’s going to have specific targets, objective measures of performance so that Nigerians can see the target he sets and measure him and the team against them. In the area of inclusivity, we will measure literacy rate, measure out of school children and see how successful the trend in increasing literacy and reducing out of school children will go etc. Measures will be put in place for security, for rule of law, anti-corruption, and likewise for the other metrics. There will be measures that allow Nigerians to check how well the administration is doing.

What are the administration’s strategies to realise its goals?

In terms of how to get to where Mr. President is going to take us, the key is to increase revenue so that the government has enough funding to carry out its obligations and to stabilise the economy as a whole.

On one hand it is by increasing tax revenue not by increasing taxes necessarily but by bringing greater efficiency. The aim is to bring greater efficiency to cut leakages and to maximise the legitimate revenue that should come to the government. Likewise, in order to gain and build public trust, there will be emphasis on efficiency in government’s expenditures and similarly effective debt management. Borrowing has the link to it, the return on investment. We will borrow but you will see the cash flow that will repay that borrowing. The president is going to deliver a better life to

Nigerians by encouraging investment that increases productivity, that grows the economy, thereby creating jobs and reducing poverty.

The president while campaigning promised Nigerians that the poor and vulnerable will not be left behind or left to fend for themselves and that is why he put in place and incentive or an intervention package not only to put fertiliser in the arms of farmers, and food grains on the tables of Nigerians, he also put in place a N500 billion intervention package to produce food to support the move to mass transit.

He put in place immediate relief and support to produce food, goods and to bring down the cost of transportation and that was the response in line with his promise to Nigerians.

On the issue of the N5 billion, it’s a combination of grant from the Federal Government and borrowing by the state.

Though the sum of N5 billion is the amount, you will agree with me that to release such a fund at once across all the states will be self-defeating because it could lead to an inflationary spiral, exchange rate changing. So, it is N2 billion that has been released as an initial intervention and the FCT will be included.

Give us a clue on the state of the team you met at the Ministry, what is your impression of them?

I met a capable, excellent, hardworking and efficient team. What we met as a team was a challenging situation in managing the finances of Nigeria. But as a strong team, we have immediately set to work to come up with solutions. We are expected to come up with solutions rather than focus on the problems; and one of the biggest is liquidity, funding. Until the benefits of removal of subsidy fits through, and until NNPC”s revenue from oil production going up fits through, there’s a challenge to balance the books particularly in terms of foreign exchange. What we can say is that there are quite substantial sources of foreign exchange in Nigeria. There is a lot of cash outside the system which if brought into the system increases the money supply of dollars and increases the reserves.

Thought is being given to that. There are funds in domiciliary accounts which if you give people the incentive, they will utilise those for investment in Nigeria. Nigerians in Nigeria have huge holdings of foreign currency in financial institutions abroad. We need to provide the environment that brings those funds home, that chooses to invest in the Nigerian economy rather than foreign economies, which is what they are doing now.

Finally, we also have a huge source of funds from the diaspora- Nigerians living and working abroad who have families here; and who are interested in keeping a presence here. We have to encourage them to save in Nigeria perhaps by improving payment mechanisms etc.

We have a lot to aim at. There’s plenty of hope and it is our determination to put in place the kind of structures and incentive framework that brings Nigerian money abroad and even Nigerian money outside the system into the financial and economic system to work to create jobs for Nigerians

From perspective of the fiscal side, what is being done in the area of expenditure and revenue?

At the Ministry of Finance, we can assure you that the president will change the pattern. He will turn it around from the path of unsustainability that was threatening the very foundations of the economy. The interventions being put in place are because it took so long for that decision to be taken. It will not take much longer than would ordinarily have been needed for the benefits to fit through. The poor, vulnerable in particular, needs to be helped through that process but rather than being hasty it was just in time.

In the meantime, the responsibility of the president who took that decision is to help people through it. We are in a federation, he’s a democrat, he believes in federalism, he believes in fiscal federalism and equity. The states and local government have role to play, because the correction and removal of fuel subsidy to their finances means that their finances will now be growing because oil revenue goes to the federation account and is shared by federal state and local government. The benefits will go through the system and everybody has a responsibility.
Again, other sources of foreign exchange include recovery of oil production will provide additional foreign exchange liquidity which automatically provides additional naira resources to government.

The additional funding available to government is not so that the government can now try to invest in various industries and ventures, it is so that the government can lay the groundwork that will encourage and create space for the private sector particularly foreign direct investments as well as domestic investment by Nigerians. It provides government revenue in addition to let’s say oil revenue from tax revenue not by increasing taxes on Nigerians.

Access to consumer credit is a critical driver of the economy. People producing need to be able to sell and it is very limiting for you to have to pay for a product that will last five to 10 years. You will now have to pay for it all cash on the same day. There’s emphasis on providing consumer credit at affordable prices so that it would not only be a relief to the consumer but also helps stimulate growth of the economy.  (New Telegraph)