<\/p>\n
Q: How is Nigeria faring in the face of the dwindling oil prices?<\/p>\n
Ans: I will like to say one thing: there has been some attempt to make
\npeople feel that there is no hope; that this situation is so difficult;
\nthere is hopelessness. I said from the beginning when oil prices began to
\nfall by 50%. I said that this will be a tough year; but there is hope.<\/p>\n
There is light at the end of the tunnel and the reason is because we have
\nworked so hard as a country under this administration to lay the basics
\nfor us to exit this situation and get back on a good path. And that is
\nwhat gives me hope. Why do I say that? First of all, let\u2019s come back to
\nthe fact: we now have a Nigeria which is the largest economy on the
\ncontinent and that is important. We have to keep stressing it because it
\nmeans we\u2019ve got the sectors. We\u2019ve got the base which will enable us to
\ncarry out that diversification and be able to have a stronger economy in
\nthe long term that create the jobs and gives our young people hope.<\/p>\n
So, it is very important to note that. We didn\u2019t know that before. When
\nyou look at the structure of the economy and you see that the growth \u2013 all
\nthe analyses have shown that the growths from this economy have come from
\nthe non-oil sector that Agriculture has been doing well. And that also
\ncome to the present situation, because Agriculture has been doing well, we
\nhave produced more food than ever before – 21million metric tons more
\nfood. We have produced paddy, 1.1million metric tons a couple of years ago
\nto 1.6million metric tons now. In fact, what I am saying about rice is
\nthat it is dry season farming, not to talk of paddy. And we are on our way
\nto really reducing our dependency on food imports.<\/p>\n
Because we\u2019ve got food, prices have been kept relatively stable and
\nreasonable. You can go round the market. We have gone round from different
\nplaces to check and the prices of foodstuff are reasonable unlike other
\noil producing countries. That is helping us manage the situation for the
\naverage Nigerian.<\/p>\n
Q: What measures are in place to strengthen Nigeria\u2019s reserves?
\nAns: I know this is of concern to Nigerians, manufacturers looking for
\nmore foreign exchange, others paying their school fees and tuition abroad
\nand even ordinary people. But I also feel that with this strong base that
\nwe have, if we just keep steady, we will be able to exit and the value of
\nthe Naira will strengthen because we have got the different sectors. And
\nthere are two ways we have to do it, and I think this is what Nigerians
\nwant. Instead of depending on oil, we have to look at the two ways to
\nstrengthen our reserves because that is the way we can strengthen the
\nvalue of our currency. There are two ways: one is to reduce demand for
\nimports and that is why I think our demand for agriculture imports is very
\nimportant for us to watch that. And then reduce our demand for foreign
\ngoods.<\/p>\n
I have always encouraged Nigerians that even strengthening the value of
\nthe Naira is not just government actions alone, it is in our hands. If we
\nbuy more of what is made here in our own country and reduce the demand of
\nthings made outside, that means we can increase our reserves and the
\nCentral Bank does not have to continue giving money to import all those
\ngoods that we don\u2019t need. The second way is for us to start exporting
\nthings other than oil. And that is where again I feel encouraged because
\nwe are laying the foundation for that. You will recall that in the 60s, we
\nwere exporting groundnuts, cocoa, cotton, rubber and many agricultural
\nproducts and suddenly we didn\u2019t keep up. We have the ability to go back to
\nthose but not just exporting the raw materials and we already have people
\nin these sectors adding value. What we need to do is to expand growing the
\ncocoa, processing it here for our own internal demand and export it. And
\nthen we earn foreign exchange.<\/p>\n
There is an area which is unexploited where we can earn foreign exchange
\nwhich we are not. When I go around the continent, every single African
\nwoman wants Nigerian clothes. I know this may sound strange to lots of
\npeople. Those of us here, don\u2019t we import shirts, trousers, from the UK?
\nBut people are here (in Africa) demanding our own clothes. Yet, we are not
\nable to get together as an industry \u2013 the fashion sector – to make clothes
\nwe can export.<\/p>\n
We will be sitting here and other West African nations will come and
\nexploit it. But there is an opening. I am happy that the Minister of
\nIndustry, Trade and Investment is organising and working with the textile
\nindustry and the fashion industry to export, because we can earn so much
\nfrom that. Imagine dressing the whole of Africa and what we can earn from
\nit.<\/p>\n
So, those are the two ways. If we now earn foreign exchange and we
\nconserve by using our products, we will be able to add more to our reserve
\nwhich will underpin the value of our currency.<\/p>\n
Q: Would you say the current economic policies are sustainable?<\/p>\n
Ans: No matter what government there is, there will be a set of policies,
\ninstitutions that will support this country. And that is what I admire
\nabout Mr. President when he talks. You know he talks about how we can put
\nin place something that will last; whether I am here or not here is not
\nthe issue. It is about laying in place the building blocks for the
\nNigerian economy.
\nQ: What is the impact of the government policies on the economy on the
\n\u201ccommon man?\u201d<\/p>\n
Ans: As I said, meeting our salary bill is very important to us and our
\npensions. The second thing is making sure that the health benefits we have
\ngathered in this economy, we don\u2019t lose it. Children must be immunised. We
\ncan\u2019t let down immunisation because we know what that means. Polio
\nvaccination: we are almost close to eradicating polio. This administration
\nhas been working towards that. We have eradicated guinea worms and we must
\nmake sure that all those medicines and vaccinations are kept. HIV and
\nAIDS, there are treatments and all that. And then, there are very
\nimportant infrastructures we focus on doing that.<\/p>\n
The president promised to build the second Niger Bridge. That work is
\nongoing. Reporters have gone out there and noticed that the pilling is
\nongoing. The Lagos-Ibadan road is very important. The rail \u2013 completing
\nsome of the rail and make sure that they are running. These are ways the
\naverage Nigerian can feel the impact of what these governments is doing.
\nI think it means a lot. I encountered some young Nigerians we don\u2019t know
\nwhat it means to be in a train because the train had never worked in this
\ncountry. And now they can ride on a train. Very soon now, this
\nAbuja-Kaduna line will be open.<\/p>\n
Lagos-Kano line has been operating. Even the line to Makurdi and so on.
\nThese are things that impacts and the roads system that have been upgraded
\nconstructed in this economy. Yes, there are so many more. But we are on
\nthe good path, we should applaud it. When your journey on Benin-Ore road
\nhas been made smooth and short, isn\u2019t that impacts?<\/p>\n
When you go to some of our rural areas, and you have access to water
\nbecause boreholes were dug by the MDGs programs and they have solar
\nlightings, that is impact.<\/p>\n
And these are some of the things that we have started in this
\nadministration that are impacting lives. You see that through all the
\nefforts and support of the private sectors, we have created 1.4million out
\nof the 1.8 million jobs that we need each year. That is impacting. Yes,
\nthe 400,000 people who have not yet gotten jobs that year will feel it and
\nyou will feel it if they are your relatives, son or daughters still
\nsitting at home. We are not saying that we have met the mark. But we have
\ngone a long way and steadily we have made solid plans on that path. The
\nPresident has said that he will do two million jobs per year because we
\nare so close to the 1.8 million and we\u2019ve got the specific sectors
\ngenerating these jobs. Not just the special programs we are doing.
\nSectorial investments are very critical. And that is what we are focusing
\non. And I have not mentioned the housing sectors impacts on the average
\nNigerian.<\/p>\n
When you start something, it takes time to grow. We started these housing
\nthing now, and yesterday we have a meeting with the CEOs of the primary
\nmortgage institutions to do a review.<\/p>\n
Q: What Role Has Government Played in Institutionalising the Access to
\nFinance?<\/p>\n
Ans: For small and medium sized businesses in this country which employ
\nthe most people (about 66% of the adult population) contributes 45% of our
\nnational income. We have opened up several avenues to support them not on
\nad hoc basis but apart from what the Central Bank has done, the President
\nkicked off two days ago a new development bank. For the first time, when
\nthis bank start working by the end of this year SMEs will have access to
\nfinance and they can borrow for five years, seven and ten years. We have
\nnever had this before in Nigeria. They will have one and half years of
\ngrace meaning that when they borrow they won\u2019t worry about paying back for
\na year and half and that will give them time to organise themselves.<\/p>\n
This new development bank is a wholesale bank, its job is to mobilise
\nfinancing and liquidity for the agriculture bank, bank of industry and for
\nthe commercial and micro finance banks to now lend to SMEs.<\/p>\n
When you look at this and the situation we are in. And you look at
\nAgriculture and SMEs; you will see that there is hope and that we have
\nlaid the platform for this economy to emerge from the present situation.<\/p>\n
Are there negotiations on ground to support budget deficit?
\nWe have entered negotiations with the international financial
\ninstitutions, specifically the African Development Bank and the World
\nBank. They have resources for us already programmed. We ask them to turn
\nthese resources into budget support for us. We are negotiating for
\n$2billion that will come in foreign exchange and remember that the terms
\nfor these loans from the World Bank and the African Development Bank are
\nquite reasonable compared to what we can get outside. These are the money
\nthat are been set aside for us and we decided to draw on it and we have
\ndecided to bring in budget support to come in foreign exchange.<\/p>\n
It will disburse in two tranches and we are advance in negotiating with
\nthem and these will bring in some needed foreign exchange that will now be
\navailable for our private sector people to have access to. It will
\nalleviate the situation and this is something we have started working on.
\nWe have been working on it daily and night with them because we need to
\naddress the need of manufacturers and others in the population. That will
\nhelp ameliorate the situation.<\/p>\n
The tenure of the loan will be standard. We will probably have about five
\nyears grace before we have to repay for about 25 years.<\/p>\n
Q: Where Does Nigeria\u2019s Debt Stand?<\/p>\n
Ans: I can tell you as someone who was central in the negotiation of the
\nforgiveness of our debt cancellation that we are not near the situation we
\nwere before in terms of external debt. Our external debt is about 2% of
\nour GDP.<\/p>\n
Remember that when we went to negotiate, we were almost at 70% of the GDP
\nand most of it was external. We have hardly any domestic debt at that
\ntime. We have been very careful on our debt. We are prudent in terms of
\nthe way we borrow.<\/p>\n
We have more of domestic debts. What we are trying to do is to reduce the
\ndomestic borrowing so that we don\u2019t crowd out the private sector. We have
\ngot some foreign borrowings which is just 2% of our GDP. The domestic debt
\nof both federal and states government is about 12% of the GDP. So
\ntogether, it is about 14% of GDP. And the norm and threshold for a
\ncountry like Nigeria size is about forty something of the GDP. We are well
\nbelow that.<\/p>\n
However, we also look at something called debt service to revenue; so we
\ncan\u2019t just say our debt is low compared to our GDP which is what the world
\nmeasures. We must look at our ability to repay and that is one of the
\nreason we are very prudent because debt service to revenue, we don\u2019t want
\nit to increase too much. Two years ago, it was 19% of GDP, it has risen to
\n22% and we don\u2019t want it to go too much beyond that. I think if we get to
\nsomething like 25%, we will be very strict and we are presently strict. We
\nhave been able, in this administration, to repay outright some of the
\ndomestic debt we owed. We paid back about N75billion and that was a very
\ngood thing instead of just rolling it over.<\/p>\n
Countries are coming here to request our assistance in debt management.
\nThe UK government named Nigeria debt management system as one of the best
\nin the world. Even as we speak, South Sudan and other countries that are
\njust starting up have come us for expertise in managing debt. We are not
\ncomplacent at all. We looked very carefully at the risks of what we
\nborrow.<\/p>\n
Q: Non Salary Payment has become an issue across states in Nigeria, should
\nwe be concerned?<\/p>\n
Ans: All of us – states and federal government – have experienced a drop
\nin revenue. What we have done is to talk to the states on how do we
\ncollectively as a nation get through the difficult times? And what we told
\nthem is of course they are fiscally, federally independent but we can
\nshare because we have one economy. We told them how we are doing our own
\nthings and what we are doing is prioritising payment of salaries to people
\nbecause their families depend on it. Prioritise that to make sure we pay
\nsalaries and pensions. When you look at some of these numbers you will
\nfind out that yes revenue has dropped and it\u2019s tough, but what most states
\nreceive from FAAC is sufficient to cover their personnel costs. So what we
\nwill say is that they should prioritise payment.<\/p>\n
In most states, I have to be clear, what they receive is just a little bit
\nshort of their personnel costs. But many I have looked through the list
\nnow at what their salary bill is and what they receive and so they should
\nbe able to cover but the will not be able to do much after that because of
\nthe drop in revenue. So we would advise them to first pay salaries and
\nthen find a way to manage the other issues. But there are one or there are
\nfew that what they receive falls slightly below their personnel cost. And
\nin those cases we wanted a conversation with them some of them that I have
\nseen have internally generated revenue almost quite significant so they
\nshould be able to make up for the gap from there. I am looking at those
\nwhose IGR is low. I have not yet seen most of them that I have the numbers
\ntheir personnel bill fall between what they get from FAAC so those ones
\nshould be able to cover.<\/p>\n
And some of them are managing very well I want to say that some are not
\nowing they\u2019ve been paying their salaries steadily. So we have to commend
\nthem for that. I have looked at it and seen that it is largely a question
\nof what is your priority. So what we\u2019ve advised is that with some
\ncontractors, the state governments should negotiate with the contractors
\nand explain the situation and schedule the payment. They are likely to be
\nsupportive because they are part of the economy.<\/p>\n
Q: How is the e-collect policy of government faring?<\/p>\n
Ans: Many of the MDAs don\u2019t like the idea of the e-collect and the
\ntreasury single account. But we are getting them because it is a
\nconversation that we will be having on this issue and we are getting them
\nto see that they need to comply. During this time, our objective is to get
\nas much internal revenue generated with the e-platforms that will put the
\nmoney in an account at the Central Bank.<\/p>\n
This will help us avoid leakages which is what all Nigerians want. With
\nthe treasury single account, we have a tool that helps us to see where the
\nbalances of governments at one time from all government agencies because
\nwe are drawing resources into the Central Bank. Instead of agencies with
\nmultiple accounts everywhere which are not being used and the other hand
\nyou go borrowing, we will have an overview and it will help us to manage
\nour balances much better.<\/p>\n
There is no too much of a choice, everybody has to comply. We don\u2019t want
\nto look as overbearing, so we are discussing with the agencies and the
\nbanks. We have already got all the capital accounts into the Central Bank
\nand gradually we are getting the recurrent account. It also helps the
\nCentral Bank to manage liquidity.<\/p>\n
Q: What would you say about the down grade of Nigeria\u2019s economy by S&P?<\/p>\n
Ans: I will like to say that two other agencies, Fitch and Moody have
\nmaintained us at the same rate as at now. They have not tried to change
\nit.<\/p>\n
What S&P did is a special evaluation of all oil producing countries based
\non the fact that oil prices have fallen. They decided to do it and it is
\nbecause of that not because of anything else. They look at oil producing
\ncountries and I can tell you that we were the last one to be downgraded.
\nAll the other oil producing countries from Russia, to Kazakhstan to
\nVenezuela, to Angola, they review them and downgraded them.<\/p>\n
It is a strong mark and credit to Nigeria because if you read what S&P
\nactually said. They commended the management of the (Nigerian) economy.
\nThey said it was proactive and ambitious, that the policies responded in
\nthe right way to the drop in oil price. They are saying that the drop in
\noil price is not our fault but the issue is how do we manage it? And they
\nsaid we have managed it well; that we have been pro-active and ambitious.
\nI am quoting them directly. What the issue is why they downgraded us is
\nnot because of our management which they have commended, it is because
\nthey believe that oil prices will still be soft for a while and because we
\nare having elections.<\/p>\n
Part – 1 State of The Nigerian Economy by Dr. Ngozi Okonjo-Iweala –
\n