Okonjo-Iweala: With Elections over, there’s Greater Foreign Optimism about the Nigerian Economy
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.
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.
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.
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.