Okonjo-Iweala: With Elections Over, there’s Greater Foreign Optimism about the Nigerian Economy
The 2015 Spring Meetings of the IMF/World Bank ended recently in Washington DC, United States of America. The meetings provided a window for the outgoing administration at the federal level and representatives of the incoming government to appraise curren
TFocus of the Spring Meetings he 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.
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.
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. 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.
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
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.
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 &