The Nigerian delegation comprised myself, the Governor of CBN, The PSF and some Chief Executives of the parastatals under the Federal Ministry of Finance. The uniqueness of this delegation is that we also have some members of the Transition Team here with us....CONTINUE READING
Let me start with the overview of economic developments. We met at a time of high global uncertainty with successive shocks of the war in Ukraine, rising inflation, fragmentation and monetary policy tightening and most recently the financial market stress in the Silicon Valley Bank, Signatures Bank and Credit Suisse Bank. Over 345 million people in Developing countries facing acute food insecurity and 700 million people living in extreme poverty most of who are in Africa…..CONTINUE READING
The delegation attended a couple of statutory, bilateral and side meetings. Let me mention a few.
Statutory Meetings: At the IMFC where I represented 22 countries, I spoke on the need to monitor financial stability risks and the need for moderation, open and rule-based trading system to allow for the free flow of essential supplies.
I also called for the speedy implementation of the G20 Common framework on debts. While raising concerns on delays in debt restructuring for some countries. I encouraged cooperation between creditors and the affected countries to ensue completion of the programs.
I also used the opportunity to highlight macro-economic development in Nigeria including ongoing engagements with all critical stakeholders on the need to mobilize additional resources for remove the fuel subsidies and free up resources for investment in the social sector. I am happy with the retention of the IMF growth forecast for Nigeria at 3 per cent which is consistent with our internal projections even though our desire is to have higher GDP growth.
At the Development Committee of the WB, we discussed the on-going WBG evolution agenda which is in response to the G20 Independent Panel on Capital Adequacy Framework. We encouraged the Bank to remain focused on the twin goals while enhancing its operating and financing models to enable it cope with increasing transborder and global challenges. We encouraged the WB to consider access to energy as one of the global challenges for SSA.
At the G24 Meeting, I commended members for their support that led to election of Dr. Iyabo Masha of Nigeria as the first African Director.
Bilateral: I also had bilateral meetings with MIGA to consider how best Nigeria can leverage MIGA resources in infrastructure investment and discussed some pipelines.
I also met with Senior Management of IFC Vice President for Africa, where we agreed to grow Nigeria’s portfolio in the real sector. We also had preliminary conversations on the possibility of IFC’s visibility in the aviation and maritime sectors especially in the newly modernized airports and some of the seaports in Nigeria. I also facilitated the dialogue between MOFI and IFC.
I also had preliminary discussions with Shelter Afrique on the need to explore an innovative housing program for the IDPs and support the affordable housing scheme
At the FAD of the IMF, we discussed the need to scale up Technical Assistance for FIRS and NCS in growing the revenue potentials of the country.
In collaboration with the WBG, Development Partners and some members of the international community, we held an Event to showcase the massive investment potentials of the country, the current challenges and how we are tackling them.
We also had conversation with them including members of the Transition Team on potential priorities of government and requested for the understanding and strong support of the Developments and Business community for the in – coming government
To conclude, I will echo the key takeaways from the 2023 Spring Meetings. Global environment is still very vulnerable and the need to build buffers. Measured policy stance to ensure that there no tradeoffs between Monetary Policy and Fiscal policies – corporation is more than necessary now. Prudence in undertaking fiscal consolidation with an eye on the most vulnerable including potential scale up of the social safety program.
The $800m fund that you secured from the World Bank seems to have generated some level of controversy on why we need to get some kind of funds for palliatives, Some are of the view that why don’t we use the funds that would have been saved from the removal of subsidy for this purpose. How do you react to that?
The $800m has been negotiated and approved by the Federal Executive Council and we now have a request before the parliament for approval. And once the parliament approves it, we roll. We’ve also been doing preparatory work side by side along the approval process. And that includes the building of the social register which will be used for the electronic transfers of the funds.
We needed to have this ready because when the government eventually removes the fuel subsidy, there will be an immediate transport palliative that will be provided to the most vulnerable members of our society who have been identified, registered, and now contained in our national social register.
This effort is led by the Ministry of humanitarian affairs, disaster management, and social development. They developed that register with the support of the World Bank. The register has about 10 million households and that’s an equivalent of 50 million Nigerians.
The initial design is to disburse cash transfers of N5,000 per month per household for a period of six months. So, whether this is enough is an assessment that we are undertaking with the transition team. If it’s not enough, the country has to raise additional resources to be able to cover more people, extend the period or increase the amount; whichever is finally negotiated upon.
When the subsidy is removed, there would be additional revenue that would now accrue to the Federation Account. One of the things we are working on is how to use this incremental revenue would be used. The money belongs to the federal, state, and local governments. So, we need to discuss on how to use this.
We hope that we’ll be able to still fence this incremental revenue and apply it to measures that will help to ensure that the fuel subsidy removal is actually sustained so that it won’t be another start-and-stop program. But this has to be a collective decision. The current administration and the incoming administration are working on a plan to make sure that we have a consensus on how to use that incremental revenue.
The issue of debt sustainability dominated discussions at the International Monetary Fund/World Bank meetings. The government has always been saying that Nigeria is still within the threshold of debt sustainability but with the increasing borrowing, how much more can we accommodate till it becomes almost impossible for us to borrow more?
On debt sustainability, debt was one of the main things that were discussed throughout the sessions at the World Bank. It is an issue for most developing countries. Today as we speak because of high inflation globally and the continuous quantitative easing by the central banks globally are undertaking, interest rates continue to rise. So, if you have taken a foreign debt, your cost of debt just rises without you doing anything.
So, we all have these challenges such that what you have planned in budget and provided for just keeps changing because interest rates keep changing.
So, it is a global problem, there hasn’t been a specific landing but it is a lot of considerations that globally, there must be some initiatives that would improve the fiscal space of countries that have high debt burden including things like debt standstill or the freezing interest rate at some certain point and several options that are being discussed but there has to be an agreement on what to do.
During covid, there was a DSSI as a global initiative and after that, there was a common framework. So, it something similar that is being worked on. So, this discussion includes the debtor nation, creditor nation, credit rating agencies and the multi-lateral development banks.
There was a report that was published this morning that $23.3m would be paid to consultant as fee for facilitating the $800m, could you please clarify why this amount is being paid?
I have no clue as to what this is about. We raise our funds ourselves. We don’t need consultants to raise funds from these institutions. The $800m, we raised this by discussing with the Debt Management Office, the Ministry of Finance, and the World Bank country office in Nigeria. We don’t need consultants to help us raise any kind of finance. We have internal expertise that has worked well over time, so we don’t need consultants for that.
You spoke about discussions with the International Finance Corporation on the aviation sector, could you let us know what the specific discussions centered on. Are they planning to provide facility for the sector?
When we met with the IFC, they said they were engaging with the Nigerian aviation sector to see how they can provide financing for the operators of the sector. So, the operators of the sectors are airlines that are operating within the sector. So, it would be the IFC funding the private sector to enhance their operations. It could be airlines, or other operators but not the government.
There have been arguments that the removal of fuel subsidy would further push up inflation. The latest figure from the National Bureau of Statistics showed that inflation has hit 22 per cent. Inflation has been a topical challenge for the global economy and has dominated discussions at this meeting. What measures are being put in place as safeguards to cushion the potential effect of inflation increase on Nigerians due to the removal of subsidy?
The fuel subsidy will always come with some challenges like increased inflation, which would naturally happen. It would happen initially; it would spike and then it will moderate and normalize. Anywhere in the world where you remove any kind subsidy, it has that effect. That is why that initial fund is necessary so that you are deploying it quickly and reducing the impact on the lives of the most vulnerable people in our society.
So yes, inflation may go up but our assessment is that it would not go up by much because as it is, the fuel cost in Nigeria or the cost Nigerians are already paying for fuel reflects the high cost of what would be attained when the fuel subsidy is removed.
People are buying fuel at very high rates; it is not the pump price. So, we think that inflation is already built into it. There might be some increase but it would not be a huge spike and even if there is, it would be transient and it would quickly come down and moderate.
Still on the issue of revenue, what are the steps being taken to increase production in the oil and gas sector as the government prepares to remove fuel subsidy?
The National Oil Company is best suited to answer that but first of all, a lot of work has been done to enhance security since September last year, and there have been minimal disruptions in pipelines. But what we also find is that the National Oil Company reports that there is a need for increased investments in the sector and the NNPC Limited has been unable to increase investments in the sector because it is using a lot of its resources to fund fuel subsidy.
So, this fuel subsidy has effects in different facets. When the subsidy is removed, they will now be able to use their resources to invest alongside their operating partners. Their operating partners have been carrying them for some time and they are not doing that anymore to invest.
So, they have to invest in being able to pay given the cash call obligation that are now in default or in some arrears up and those investments will help to increase the production levels in addition to the work that has been security.
In the last eight years, we have had revenue at the forefront on the list of concerns for the government and this would be handed over to the incoming administration. The IMF has also identified revenue gaps as some of the growth problems. Do you see the incoming administration surviving the revenue challenge?
We need to increase revenue by expanding the tax base. The new administration has to consider the review of the Value Added Tax rate by way of increasing it. We have already introduced some new excise duties, so maybe when they stabilize, there may be reviews again by way of the finance act where on an annual basis reviews are done on different tax laws to ensure enhancement. But major work is actually in improving efficiency, enhancing compliance, and expanding the tax base.
The government is planning to conduct a population census but some people are questioning the timing of the census, how do you respond to this?
The census has been a work in progress for the past two years. There is a lot of work that goes on with preparing for a census. There is what we call delineation where the whole country is mapped, every single ward is mapped and numbered including geo-coordinates and GPS coordinates. The next and final step is the actual census. So, there is all of the preparatory work and the equipment has been acquired.
The actual census would take five days to a full week where every household, every person in the household would be enumerated. So, they are going to physically go to houses to do this enumeration and the National Population Commission is ready. They have given us notice that they are engaging about 885,000 ad-hoc staff, they would train them on how to do the counting and how to use the tablet devices they have acquired and then they immediately deploy. There are two rounds, the first one is the housing census and then the second round is the population census.
So, the government has invested so much over the past two and half years in preparing for this census and the nature of this census is once you do the area delineation, by international standard if after 12 or 18 months you don’t use it, you would have to do it all over again. So, it would be wasteful if we don’t push the bar uncompleted.
And we need the census because that is the base and credible data we need for planning and for everything we need a credible census. Over the last 16 years, what we have been doing is estimates and we are using estimates to plan and estimates to do everything. So, we need the census to be done…..CONTINUE READING
