Managing Director of the World Bank and former Minister of Finance Dr Ngozi Okonjo-Iweala thinks this year’s budget may not work.

Mrs Okonjo-Iweala was delivering a lecture on "Safeguarding Nigeria’s Fiscal Health: Some Considerations for the Present and the Future" at the 24th and 25th Convocation lecture of the University of Calabar yesterday.

She said: "It is hard to justify a deterioration in the consolidated fiscal balance of close to 14 percentage points of GDP in one year on the grounds of fiscal stimulus and we need to pull back.

"I am also concerned about the realism of the 2010 budget assumptions of a reference oil price of US$67 per barrel and production of 2.35 mbd. If oil revenue assumptions are not met, more drawdowns from the ECA would be required on the back of the already substantial depletion in 2009."

Mrs Okonjo-Iweala advised the government to spend money transparently and effectively, ensuring that there is a payoff in terms of faster non-oil growth and future taxes as well as improvement in human capital. It should also eliminate infrastructure bottlenecks in power, transport and ports.

She said: "While the 2010 budget targets a consolidated fiscal deficit of about 5 percent of GDP, I am concerned that the reference oil price and quantity assumptions may be unrealistic, leading eventually to larger deficits and more borrowing than targeted."

She said fiscal deficit must be curbed and the overall debt situation, particularly domestic debt, carefully monitored. The Debt Management Office (DMO) must be given the administrative and other resources as well as the cooperation it needs to build up a comprehensive database for domestic debt, covering all the states in addition to the Federal Government.

In Mrs Okonjo-Iweala’s view, the integrity and centrality of the OPFR must be upheld and "additions to and drawdowns from the ECA need to be handled with the utmost transparency and discipline."

Specifically, she recommended that fiscal deficits and borrowing be restricted to the financing of public investments supporting long-run growth and poverty alleviation; as well as imposing ceilings of say 15-20 percent of GDP on the consolidated domestic debt of the government and an overall ceiling of 30 percent, which is half the level prescribed for the far richer Maastricht (EU) countries".

Mrs Okonjo-Iweala praised the reforms in the banking sector. She said:"While the emergence of distressed banks accounting for some 30 percent of banking system assets is regrettable, the manner in which this situation is addressed represents a huge signaling opportunity. The transparency and evenhandedness with which these banks are intervened and resolved will have a major impact on Nigeria’s reputation as a potential regional financial centre. This reputation took a bit of beating as a result of the way the interbank foreign exchange market was treated early last year. But there is now the opportunity to remedy this".

She noted that the banks became distressed because of connected lending, exposure to the oil and gas sector and margin lending for buying stocks, which led to problems when the stock market crashed. While CBN took decisive steps to avoid a systemic crisis, a big unfinished agenda remains.

According to her, CBN recognises the need for stronger supervision. For supervision to work, Nigeria will have to overhaul and modernise its infrastructure for accounting, financial reporting, collateral registration and credit rating and "any bank bailout raises the spectre of moral hazard. Nigeria must take steps to avoid situations where good fiscal policy resulting in growing ECA assets is undone by bad loans on the balance sheets of banks, as we have already seen to some extent.

While citing bad conditions in order countries, she said: "I am pleased to note that several steps have already been taken to limit moral hazard, including dismissal of the CEOs of the banks receiving liquidity support; publication of lists of all major non-performing borrowers; and pursuit of responsible bank managers and borrowers by the Economic and Financial Crimes Commission (EFCC)".

mama-gee:

[color=deeppink]That woman makes me sick!
Show some respect to this woman. She made a candid observation supported by facts on the negligence of those who prepared and passed the budget.

waooo:

Iweala's breath taking analysis on Nigeria's 2010 budget and the way out will only serve as a mystery to those shouldered with the responsibility of putting things in place in Nigeria. To me it’s a waste of speech.

Redman44:

Unfortunately, people like Dr Ngozi Okonjo-Iweala are not really appreciated in Nigeria. Her views will not be taken seriously by the Presidency and will only end up on the pages of our newspapers as News items. A lot of things has been said about Nigeria at hundreds of convocation ceremonies in Nigeria, but I doubt if there is a government or private agency that compiles these information for future use and record keeping. In Nigeria, we don't really appreciate deep thinkers and innovators. That is why Nigeria is still lagging behind in all departments in the comity of nations. We find it difficult to work with a blueprint and rarely follow a charted plan of action. And this is 85% due to corruption, greed and dirty party politics. How many of the theses done by scholars in our tertiary institutions are used by the Federal Government to boost Nigeria's development? Dr Okonjo-Iweala did her best for Nigeria. God bless her. Cheers.


www.vibes-extra..com

thelion1:

Iweala. . . . . . anoda thief!!

Typewriter:



Look how they put him in the middle so that they can pull him very well! Puppeteers

Worst is the string they use is so strong and personified by Turai that why most Nigerian can not cut that string- what a pity. she will soon be the worst hit by the lost.

Last time I heard it was OBJ the master puppeteer pulling the political strings, not Turai, and that he has in fact not stopped pulling.


Furthermore, now that IBB is planning a come back. Well, people like Prof Ngozi should know what to do to stop that monster and must do just that.

While citing bad conditions in order countries, she said: "I am pleased to note that several steps have already been taken to limit moral hazard, including dismissal of the CEOs of the banks receiving liquidity support; publication of lists of all major non-performing borrowers; and pursuit of responsible bank managers and borrowers by the Economic and Financial Crimes Commission (EFCC)".

thelion1:

Iweala. . . . . . anoda thief!!

Ibime:

So whats the issue here, that Okonjo is wrong, or that Jarus was being "deliberately misleading" about Okonjo's position. . . . either Papabrowne is right that Okonjo is for the reforms, or Seun is right that Jarus misread Okonjo's position about the reforms. . . . . connundrums, connundrums. 

PapaBrowne:

I think I disagree with Okonjo first on the budget analysis and then on the point where she notes that several steps have been taken by the CBN limit moral hazard

On the budget analysis, the question is Where are the pointers to the assumption that we would be seeing a dip in oil prices any time soon?. All the pointers indicate that oil prices would keep rising or at least stay on a high hovering between the $70-$80 range.
As it is now, demand keeps growing and as we enter the summer months, gasoline consumption would naturally drive demand even higher. There is no likelihood of a price dip in the nearest future. The last dip in oil price was as a result of the economic catastrophe. That is not likely to happen anytime soon again.
If at all prices dip, I don't see it is as so much of as problem in itself as we can always use the current excess we are having to mitigate against any potential fall.
I think though that the benchmark of $67 is a bit ambitious, however it does not in anyway signal the potential for failure in budget implementation.

mama-gee:

That woman makes me sick!

Wow!, It's nice seeing Seun Create a thread after many years.

Me_Aboki:



She noted that the banks became distressed because of connected lending, exposure to the oil and gas sector and margin lending for buying stocks, which led to problems when the stock market crashed. While CBN took decisive steps to avoid a systemic crisis, a big unfinished agenda remains.

According to her, CBN recognises the need for stronger supervision. For supervision to work, Nigeria will have to overhaul and modernise its infrastructure for accounting, financial reporting, collateral registration and credit rating and "any bank bailout raises the spectre of moral hazard. Nigeria must take steps to avoid situations where good fiscal policy resulting in growing ECA assets is undone by bad loans on the balance sheets of banks, as we have already seen to some extent.


For crying out loud, the woman is an economist; where has she therefore erred by giving advice on the economy

sley4life:

illegal budget