Okonjo_iweala
Focus of the Spring Meetings
The spring meetings focused on two set of critical issues; the first is weak recovery in the global economy, particularly in Europe and Japan and the rest of the world, with the US showing more robust recovery but not out of the woods per se yet, and the impact of this weak global recovery for the rest of the world.
The spring meetings focused on two set of critical issues; the first is weak recovery in the global economy, particularly in Europe and Japan and the rest of the world, with the US showing more robust recovery but not out of the woods per se yet, and the impact of this weak global recovery for the rest of the world.
The impact of monetary policy in Europe for instance, where the central
bank is unleashing quite a number of monetary easing and liquidity on
the economies and what it means for us.
Embedded in that is the issue of the falling commodities prices not just oil but also other commodities. Iron ore prices and various other commodity prices have fallen and what does that mean for emerging markets and low income countries who are dependent on these and what sort of policies does these set of countries have to take in order to manage the kind of situation.
Embedded in that is the issue of the falling commodities prices not just oil but also other commodities. Iron ore prices and various other commodity prices have fallen and what does that mean for emerging markets and low income countries who are dependent on these and what sort of policies does these set of countries have to take in order to manage the kind of situation.
The conclusion is that generally falling commodities prices like
falling oil prices can become beneficial to global growth and actually
the World Bank is estimating 1 per cent growth in GDP for the world
based on this because consumers and businesses benefit.
But for the countries that export these commodities, of course, it is a challenge. So a lot of time was spent trying to discuss what sort of policies these countries should take in order to be able to manage the situation, and of course Nigeria is affected because our main commodity price has fallen by more than 50 per cent.
But for the countries that export these commodities, of course, it is a challenge. So a lot of time was spent trying to discuss what sort of policies these countries should take in order to be able to manage the situation, and of course Nigeria is affected because our main commodity price has fallen by more than 50 per cent.
There are lots of issues. The other issues debated here are the three
international conferences to take place before year end. As a country,
we should also be interested in these. This year 2015, the year of
adoption of the Sustainable Development Goals and the key issue is
financing of those goals. How are they going to be financed? Not with
billions, but with trillions of dollars. The United Nations Secretary
General attended the spring meetings throughout the entire time and this
is unprecedented, and joining finance ministers in the IMF Committee
talk, to finance ministers and central bank governors about how they can
support ideas for financing of these goals.
There will be in Addis Ababa, Ethiopia a conference in July on financing for development. There will be a United Nations conference in September where the MDGs (Millennium Development Goals) that we have been following these past 15 years will be looked at and the new sustainable development goals will be adopted. In Paris in November/December, the Climate Change conference will hold. These are three major events and Nigeria is part of the global economy. We are also implicated in what is happening in the implementation of these goals. These were the big issues discussed here.
There will be in Addis Ababa, Ethiopia a conference in July on financing for development. There will be a United Nations conference in September where the MDGs (Millennium Development Goals) that we have been following these past 15 years will be looked at and the new sustainable development goals will be adopted. In Paris in November/December, the Climate Change conference will hold. These are three major events and Nigeria is part of the global economy. We are also implicated in what is happening in the implementation of these goals. These were the big issues discussed here.
Alleged N2tr Jonathan Campaign Fund
I am not aware of this issue. As you know, the budget is not the source of financing election campaigns. So I am not aware. In the budget, we stuck to financing INEC, security needed for their campaigns. So I am not familiar with what you are just saying.
I am not aware of this issue. As you know, the budget is not the source of financing election campaigns. So I am not aware. In the budget, we stuck to financing INEC, security needed for their campaigns. So I am not familiar with what you are just saying.
Take-away from IMF/World Bank Meetings
There were some real pieces of policy advice here, but we have been following that advice and we’ve been implementing policies similar to these. So, it’s something we are quite comfortable with.
I mean what do you do when you have this kind of shock where 50 per cent of your revenue falls? You have to make adjustments; so they are recommending fiscal reforms and we’ve already embarked on that in Nigeria. What does this entail? Three things. The first is to look at the expenditure side to see how to plug leakages and curtail spendings that are not strictly necessary and so on. Look at your revenue side and try to raise more revenues and that’s what every finance minister is faced with and this we have been doing. We are trying to cut expenditure and raise more revenues and taxes.
Already, if you see in the 2015 budget, these two things are already done. We cut the cost of governance and raised more revenues. The third side is efficiency of resources used, of the revenues we already have, and we have embarked on that. With the support of the World Bank, we have introduced an instrument that will look at all the projects we have and see, in a constrained resource environment, which ones are the most efficient and effective to implement and then you finance those first. So on the three counts, we are already moving. The other areas you look at are the structural reforms you have to do in the economy. What are those impediments to growth and expansion of the economy that you work on and what you do to stimulate the real sector of the economy? So, all the recommendations really, we’ve been working on them; I think we are well aligned with what is being said.
Impact of Measures to address oil price slump
There were some real pieces of policy advice here, but we have been following that advice and we’ve been implementing policies similar to these. So, it’s something we are quite comfortable with.
I mean what do you do when you have this kind of shock where 50 per cent of your revenue falls? You have to make adjustments; so they are recommending fiscal reforms and we’ve already embarked on that in Nigeria. What does this entail? Three things. The first is to look at the expenditure side to see how to plug leakages and curtail spendings that are not strictly necessary and so on. Look at your revenue side and try to raise more revenues and that’s what every finance minister is faced with and this we have been doing. We are trying to cut expenditure and raise more revenues and taxes.
Already, if you see in the 2015 budget, these two things are already done. We cut the cost of governance and raised more revenues. The third side is efficiency of resources used, of the revenues we already have, and we have embarked on that. With the support of the World Bank, we have introduced an instrument that will look at all the projects we have and see, in a constrained resource environment, which ones are the most efficient and effective to implement and then you finance those first. So on the three counts, we are already moving. The other areas you look at are the structural reforms you have to do in the economy. What are those impediments to growth and expansion of the economy that you work on and what you do to stimulate the real sector of the economy? So, all the recommendations really, we’ve been working on them; I think we are well aligned with what is being said.
Impact of Measures to address oil price slump
In the short term, you can’t have immediate response when you put in
tax measures. You have to collect the tax. So, the measures have been
put, most of them are encapsulated in the budget which has to be passed
and we are recommending passage of the budget so that first of all, we
can begin to implement some of these measures, so you don’t run against
the ceiling or the deadline of June at which time we must have a budget
passed or we will be in violation of financial regulations. So we have
to give it time. The luxury taxes, they’ve sent out letters to collect
the taxes. So, implementation is on. If we just concentrate and focus,
we will soon begin to see a response but it’s early days yet.
Influence of Politics
I think you are mixing up issues. There is the history of the past. You know, every finance minister looks at their political economy, why certain things were not able to be done or were done.
Now we are in a situation where a new government is coming in so the hope and expectations are that those things that were not done they will be able to do them. Now that the election climate is over, things have calmed down and we can move on.
I think you are mixing up issues. There is the history of the past. You know, every finance minister looks at their political economy, why certain things were not able to be done or were done.
Now we are in a situation where a new government is coming in so the hope and expectations are that those things that were not done they will be able to do them. Now that the election climate is over, things have calmed down and we can move on.
So, I think we should really look at moving the country forward because
this is a critical year for the economy and a lot of the things that
need to be done should be done. That was what I was trying to
articulate. But you see, from Goldman Sachs that people are not looking
at Nigeria just in the short term, they look at the longer term
prospects of the country and even the medium term and what they see is
that the fundamentals are good. On the one hand, people say things are
difficult but on the other hand, there is a lot of optimism from outside
now that the elections are over and things are settled. People see a
lot of potential for the country to move forward. That is what we have
always said that the Nigerian economy may have some short term
difficulties to get over this year but the fundamentals are strong and
we’ve been building on the fundamentals for quite some time. So, if we
continue to build on them, we are going to have an economy that is
robust down the road.
Institutional Reforms for Sustainable Growth
For three or four years, we’ve had macroeconomic stability. Until the fall in oil prices and then we moved quickly with policies to try and correct that. You see that we’ve built quite a few institutions and put processes in place. There are financial mechanism management and institutions that have been put in place to make managing the finances of the country robust, stronger and more transparent and we need to complete the work, the implementation of the GFMIS (Government Financial Management Information System), the TSA (Treasury Single Account), the IPPIS (Integrated Personnel & Payroll Information System) and so on.
Institutional Reforms for Sustainable Growth
For three or four years, we’ve had macroeconomic stability. Until the fall in oil prices and then we moved quickly with policies to try and correct that. You see that we’ve built quite a few institutions and put processes in place. There are financial mechanism management and institutions that have been put in place to make managing the finances of the country robust, stronger and more transparent and we need to complete the work, the implementation of the GFMIS (Government Financial Management Information System), the TSA (Treasury Single Account), the IPPIS (Integrated Personnel & Payroll Information System) and so on.
We’ve also built institutions in terms of the mortgage and housing
sector, we started to build institutions for managing access to finance
for small and medium businesses, even the central bank has had several
funds but now we have the Development Bank of Nigeria that needs to be
nurtured. We have the Sovereign Wealth Fund that has been named as
number two in the world in terms of transparency and strength and it has
done very well in terms of returns on investment. Then you go to the
real sector, a lot of work has been done on the diversification of the
economy. The agriculture sector; we need to build on that, on the
housing sector, the creative industries where we did quite a lot to
support them to be able to contribute more to the economy, in
telecommunications, on manufacturing, where some good jobs are moving
in. We have helped to support the private sector to strengthen some of
the manufacturing, automobile, cement, consumer goods, so many other
sectors that moved in.
On infrastructure, some major work has been done on roads, on rail, on
inland water ways, aviation. All of these are work in progress. I am not
saying everything has been completed and delivered but they are very
good foundation to continue and complete. I think wrapping all of these
together, there is the potential to really push and get the economy
moving forward.
Taxation
In our economy, it is true that all sorts of entities charge all kinds of fees, from the federal government to ministries and agencies, to states and local governments. They are too many. And sometimes, they don’t raise the kind of revenues that are needed. There is already a process to absolutely harmonise the taxes and rationalise them so that businesses and individuals don’t feel that they are constantly taxed. But the key thing is that the taxes that raise the most revenue for the economy we are not using them as policy instrument. The VAT (Value Added Tax) would probably raise far more revenue than any of these small taxes put up everywhere. We need to do both, we need to harmonise and to streamline and do away with many of the existing fees and charges and focus on the main important taxes that will generate the kind of revenue that is needed and that is the VAT.
In our economy, it is true that all sorts of entities charge all kinds of fees, from the federal government to ministries and agencies, to states and local governments. They are too many. And sometimes, they don’t raise the kind of revenues that are needed. There is already a process to absolutely harmonise the taxes and rationalise them so that businesses and individuals don’t feel that they are constantly taxed. But the key thing is that the taxes that raise the most revenue for the economy we are not using them as policy instrument. The VAT (Value Added Tax) would probably raise far more revenue than any of these small taxes put up everywhere. We need to do both, we need to harmonise and to streamline and do away with many of the existing fees and charges and focus on the main important taxes that will generate the kind of revenue that is needed and that is the VAT.
The five per cent (we also discussed it in the context of the 2015
budget). If we double that, it will bring a lot of money for the states.
And in any case, the governors, at their last meeting of the National
Economic Council, this is what they recommended, that is what they
wanted. So, it is not even an issue of the federal government; the state
governments want it because they know they will get 86 per cent of
that. So let’s do both. There is already a paper that has been put in
order by the FIRS on harmonizing because a lot of work has been done
with the Joint Tax Board. I think this should be moved forward and at
the same time move forward the proposal on VAT.
Concerns over China’s Slow Growth
Slowing growth for China is a global concern, not just for Nigeria. The African finance ministers were right to raise it because China is now the largest trade partner for the continent and if your trading partner is experiencing slower growth that means that demands for your product will be impacted and that is why it is important. It is a concern more so now that the large chunk of our oil goes to China and India. So, if demand from that region slows down because of slower growth, we also should be monitoring.
Slowing growth for China is a global concern, not just for Nigeria. The African finance ministers were right to raise it because China is now the largest trade partner for the continent and if your trading partner is experiencing slower growth that means that demands for your product will be impacted and that is why it is important. It is a concern more so now that the large chunk of our oil goes to China and India. So, if demand from that region slows down because of slower growth, we also should be monitoring.
I don’t think we are experiencing any dislocation from that yet but
those are some of the things we need to pay attention to. We also want
them to buy more of our non-oil commodities/products, agricultural
products. They had indicated interest in our cassava chips, for
instance. We want all those things to continue because we are interested
now in exporting more from the non-oil sector. So for those reasons, we
need to monitor what is happening in China. As the growth slows, they
may also be less enthusiastic about access to their lending for African
countries because China now finance a lot of infrastructure, so
countries also worry that if their growth slows, they will not be so
keen on lending to others.
Misconceptions about Unemployment and Job Creation
I beg to disagree with you totally. Maybe some people in the media with vested interests were criticising this but I know that ordinary Nigerians understood the type of jobs that was being done. I do agree that with every other country, inequality is a problem. And if you want to know, it’s very interesting. We were in a panel and the minister of finance for Columbia said that their exchange rate had depreciated by 30 per cent. Columbia is a middle income country and he went on to say that this was a good thing because it would help in the non-oil export; they export about a million barrels of oil a day; but they were not displeased because they felt it will help them to spur their non-oil sector and they want to maintain a diversification of the economy. Nigeria has inequality and poverty but so do other countries.
I beg to disagree with you totally. Maybe some people in the media with vested interests were criticising this but I know that ordinary Nigerians understood the type of jobs that was being done. I do agree that with every other country, inequality is a problem. And if you want to know, it’s very interesting. We were in a panel and the minister of finance for Columbia said that their exchange rate had depreciated by 30 per cent. Columbia is a middle income country and he went on to say that this was a good thing because it would help in the non-oil export; they export about a million barrels of oil a day; but they were not displeased because they felt it will help them to spur their non-oil sector and they want to maintain a diversification of the economy. Nigeria has inequality and poverty but so do other countries.
Inequality is measured by something called the Gini Coefficient; the
closer you are to 100, the more unequal. Some of the countries that
Nigeria admire have worse inequality than we do. Brazil— what is their
Gini— .55, South Africa .63, what is Nigeria’s .48. We have increased
over time so we always have to take things in perspective. Now, we know
that having even one poor person is not something we want and we must
aim at creating wealth for the bottom. But creating wealth entails two
things—you cannot create wealth if you don’t grow. Those you are
criticising are few. The policies that were implemented were aimed at
growing the economy and at the same time trying to correct that
inequality by looking at the sectors that create jobs.
That is why agriculture was so important, that is why housing sector
was launched because it creates lots of jobs, that is why manufacturing
was launched. This is the first administration to even measure the
number of jobs that have been created. Out of the 1.8 million per year
that we need, we already have 1.4 million, but we also have the pool of
unemployed that has accumulated over the years and you also need to
create more jobs to take care of those. So, I think we have a steady
implementation and pushing in the right direction so that those at the
bottom of the ladder are taken care of.
The other thing that was happening are the social safety net similar to
something they have in Brazil, we are building a conditional cash
transfer system that by the end of this year will be in place so that a
woman and her five children at the bottom of the ladder would be getting
some of these transfers if they send the children to school, if they
make sure the children are immunised. So, already, quite a number of
policies are in place to try and create jobs.
I am not even talking about some of the direct programmes, we are just stimulating certain sectors.
There is no magic wand; you just have to work steadily to improve the sectors and then couple it with some direct actions to help those at the bottom-end of the ladder and this is what is going on.
There is no magic wand; you just have to work steadily to improve the sectors and then couple it with some direct actions to help those at the bottom-end of the ladder and this is what is going on.
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