Economic blueprint: Jonathan, Okonjo-Iweala are insincere
Olutayo Olubi
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…Lack focus  —Experts

THE most important and most awaited document to come from the administration of President Goodluck Jonathan was unveiled last Wednesday and it still left very much to be desired. The administration's economic blueprint was released by the Coordinator of the Economy and Finance Minister Ngozi Okonjo-Iweala.

[b]Existing statistics are not impressive, the nation's current debt stock is $39.7 billion, consisting of $5.3 billion, foreign and N5.2 trillion of domestic components; budget implementation is very weak, with overloaded recurrent expenditure and very lean capital expenditure, the nation lacks critical infrastructure; the manufacturing sector is comatose; while insincerity has crippled what would have been a laudable reform in the country's banking sector.

Worse still, the Presidency is doing very little to improve on the Excess Crude Account (ECA), the information issued by the Central Bank of Nigeria (CBN) on July 4, to the effect that the foreign reserves had shed $1 billion in just one week to stand at $31.88 billion as at June 30, 2011 was unhelpful. Same also is the idea of Economic Management Team first introduced by Okonjo-Iweala during former President Olusegun Obasanjo's administration and followed up during the late President Umar Musa Yar'Adua and very recently Jonathan inaugurated yet another set. The integrity of members of the Economic Team is not only doubtful but it is also very certain that the team will accomplish very little, if nothing.[/b]



The plan

The Federal Government (FG), Okonjo-Iweala revealed, plans to remove subsidy in petroleum products, cut recurrent spending; the overhead cost of running government in Ministries, Departments and Agencies (MDAs), to reduce the budget deficit to a manageable level of three per cent of output while boosting infrastructure investment to create jobs.

The returnee Finance Minister speaking further on fiscal discipline and freeing more funds from recurrent budget for more attention on capital, said the move would affect all arms of government and all categories of staff.

According to her, the current situation where recurrent budget takes an entire 75 per cent of total budget could not support the type of aggressive capital development that Nigerians yearn for and must therefore be addressed in such a way that it could be reasonably reduced. Continuing she said “We need to change the budget process in this country. We cannot bring a budget and then have reservations that go back and forth. The executive has its responsibility and I hope the lawmakers will also take responsibility. By 2013 we will have a much saner budget process.”

She said: “We need to maintain macroeconomic stability. We need to manage our fiscal situation in a more prudent manner. Monetary and fiscal policies must work hand-in-hand.” On fuel subsidy, she said: “There has been a lot of debate on fuel subsidies and we have all resolved that (removing it) is a good direction to go on. You have to leave it to us to decide when it is prudent to do so.”

Okonjo-Iweala said: “Nigeria will reduce recurrent expenditure by at least one per cent a year in the next four years, which would bring it down to 70 per cent of the budget by 2014. Recurrent spending accounts for 74 per cent of the country's N4.5 trillion budget. The minister said she favoured the Central Bank's policy of pegging the naira to the dollar to provide stability for businesses, and promised to work with Governor Lamido Sanusi to have an exchange rate that “reflects the economy.”

Okonjo-Iweala further said that Nigeria's total debt figure is currently $39.7 billion which is about 20 per cent of its Gross Domestic Product, GDP, even as she unveiled the priority sectors with which to drive the economy.

She said she would critically review the borrowing processes with a view to reducing the rate, especially the domestic debt. Her words: “One of the things we would do is to pay attention to the debt situation. I know that many Nigerians are looking at it with concern, and you know my stand on debts. We have about N5.2 trillion in domestic debts and about $5.3 billion in external debts bringing total debt figures to $39.7 billion which is about 20 per cent of GDP.”

She identified job creation, building critical infrastructure especially electric power and roads/ rails, anti-corruption, agriculture, manufacturing, fiscal discipline, investment climate reforms, housing, entertainment, as well as, oil & gas as sectors of immediate focus. She noted that Nigeria was not used to trade-offs but that this administration would do so by paying greater attention to the priority sectors.

According to her, “this is not to say that other sectors are not important. It is just that we need to prioritise in the economy. One thing we are not used to doing is creating trade-offs and saying which are the key sectors, we need to focus on. So now we have to make some trade-offs.”

Reality dawns

Okonjo-Iweala warned that addressing the present challenges won't be easy and that she did not have the magic wand for a quick-fix. She assured, however, that with the cooperation of good spirited Nigerians, the National Economic Implementation Team won't disappoint. She said: “The present situation is not going to be an easy one and if you have a budget coming, you have to make choices.”

Specifically on power, the minister said, “All Nigerians know and many opinion surveys have shown that the thing that Nigerians are most interested in is improving our infrastructure in this country. Something that they can see with their eyes; power and roads as well as the rail and air transport. Nigerians are keen to see improvements and this is very important for us.”

She said that the problems bedeviling the Nigerian economy were built up over a long period of time and that Nigerians should not expect a magic wand from her in the efforts to fix the economy. “I have talked of the challenges that we face. There is no magic wand. I have seen some people writing about one magic wand that will be waved. Certainly not by me, I do not have any magic. There is no single person who can solve the problems of this country. We are a team here in the Ministry of Finance. The President has created the Economic Management Team and we have an Economic Management Implementation Team, because the other team is large, we need a core of people to push implementation.

Experts' opinion

But it is very clear that the hurdles before Okonjo-Iweala go beyond her paper presentation. Two factors will definitely negate the ideas she had outlined; these are corruption and will to implement.

The United States Ambassador to Nigeria, Mr. Terence McCulley, recently, identified corruption, poor economic growth, erratic power supply as well as non-functional public health and education systems as some challenges facing Nigeria.

McCulley also said youth restiveness, religious bigotry and get-rich quick syndrome were other factors militating against the country's growth.

He said: ''Nigeria faces many challenges in the area of good governance, economic growth, sustainable development, erratic power generation and supply, non-functional public health and education system from primary school to the university levels.”

McCulley added that corruption, religious intolerance and bigotry had destroyed the confidence of Nigerians and undermined the notion of public service, noting that in spite of these shortcomings, Nigeria had the potentials of attracting billions of dollars in foreign investments as long as there is a solid commitment to the rule of law and sanctity of commercial contracts.

National Daily investigation revealed that corruption has necessitated the present administration's resolve to conceal crude oil export volumes and revenues. A recent report by the Organization of Petroleum Exporting Countries (OPEC) has revealed that in 2010, Nigeria's crude oil exports averaged 2.464 million barrels per day (MMBD). The figure represented 106.9 per cent of 2010 budget projected petroleum output of 2.3 MMBD (the same as the country's OPEC production quota). The export figure excludes condensates and quantities of crude oil refined domestically, which are still being kept secret. Export volumes in 2011 have not slipped.

Nigeria's sweet crude commands higher price than Brent crude whose price per barrel averaged $79.63 in 2010 and $111.01 in January through June 2011. Budget benchmark oil price per barrel for 2010 and 2011 was $67 and $75 respectively. The Jonathan administration stopped publishing on official websites revenue figures allocated to the three tiers of government from July 2010 thereby hindering informed analysis of oil and non-oil revenue receipts.



Petroleum subsidy

Another major area of contention is the recurring issue of petroleum subsidy. Experts believe that the government's claim that subsidising petrol hinders its ability to create enabling environment for private sector investment in the downstream petroleum sector is false.

The FG made it known that the huge cost of petrol subsidy was draining government resources.

The claims, they stressed, are unproven. Government's implicit characterisation of cheap energy as wasteful is not economically factual. It is sufficiently chastening to contemplate the ramified costs occasioned by the escalating prices of kerosene, diesel and aviation fuel (which are officially deregulated) owing to inadequate supply at a time there is ample foreign exchange for necessary imports.

The absence of the enabling environment for the private sector to exploit the comparative advantage in the petroleum industry is caused not by petrol subsidy as officially believed, but by the inappropriate handling of crude oil export proceeds down the years.

1025:

no matter how anyone sees it, there was an attempt by obj to destroy the personality of okonjo iweala which failed so jonathan is here to do what obasanjo could not do. we must remember that obasanjo failed in his third term/tenure elongation efforts and jonathan has started a tenure elongation problem again.
okonjo iweala must be careful with this pdp of a group.

Gbawe:

Indeed. I like Iweala and have spoken in her defense many times on NL but she is doing an Abati far too early for anyone who respects her to be comfortable with. It is puzzling that the same Iweala who criticized GEJ heavily for the bloated size of Government , while at the World bank, is not talking about doing away with many positions we all know exist for the sake of sharing the National cake to cronies. Okonjo-Iweala , now she is a part of the Government, acts as if she tacitly endorses GEJ's announcement that "leaner Government not possible".

One has to also wonder why a neglible 1% decrease per year on recurrent spendings , amounting to pathetic savings not at all useful to impact positively on capital spending, is all that Iweala can offer given her vociferous previous criticism of the "unacceptably" high amount of our recurrent expenditure. To be honest ,and with all due respect to Okonjo-Iweala, this "economic blueprint" is highly insipid and uninspiring. it is not even one of consolidation let alone "transformation".

2bosun:

Whilst I agree with your logic, I think it's a bit too early and unfair to level criticism at her. A 1%/yr cut on the roughly N3trn recurrent expenditure amounts to N30bn/ yr, cutting the fuel subsidy- N1trn/yr. So in 3 years theoretically, she's talking about saving close to 4 trillion Naira, which is about  the size of the total national debt- a massive ask in 3 years if you ask me. We need to understand that it takes time to correct an economy that has been mismanaged for such a long time. It'll also take more than papers and theories but also the will of the government to fight corruption.

What I don't get is pegging the Naira to the dollar, a move China is currently regretting because America is inflating their domestic economy by printing more dollars- which is having ripples in the Chinese economy. It would be more sensible to disburse the monthly allocations to 3 tiers of government in dollars (or exchangeable certificates) and let the market conditions dictate the value of the Naira.

That Ngozi Okonjo-Iweala Press Conference Is Much Ado About Nothing!
Posted: August 25, 2011 - 21:16
Goodluck Jonathan and Ngozi Iweala
By Femi Lawal

Honestly, it is the same appetite of the Nigerians for Foreign Goods that informed the encomiums showered on Iweala, Aganga, Nnaji etc, as Ministers.

From this Iweala's press conference comments, I'm of the opinion that the Secondary School Economics teachers in Nigeria would have a better Finance or Economic Management Agenda than Iweala.

First, Iweala claims that her ability to reduce the Recurrent Expenditure from the staggering 74 % to the equally staggering 70% at the end of 4 years, is a feat that would boost the neglected Capital Expenditure in Nigeria. I can now see why she spent a hell of a time to CLEAR HER DESK at the World Bank. If Nigerians understand what that bureaucratic terminology connotes.

Secondly, United States that is larger than Africa has only 15 Federal Ministers (Secretaries), while the poor Nigerian Government that is about the size of the State of Texas, has 42 Federal Ministers that are paid higher than the US Federal Ministers. Yet, Iweala that has just come from Washington DC, has not said a word about the size of 42.

Truly, Nigerian Government has no business with more than 10 Ministries with 10 Ministers.

According to Iweala, the Nigerian Budget is N4.5 Trillion (i.e. $30 Billion). The Nigerian Recurrent Expenditure is about 75% . That is $ 22.5 Billion (75%) out of 30. Her entire efforts as Nigeria's Economic Manager in 4 years would bring the Recurrent Expenditure down to $ 21 Billion (70%). And this would be the solution to Nigeria's Capital Development.

With the NASS Quarterly Constituency Allowance that increased from N23 Million to N42 Million added to their monthly Salary, the NASS (Senate and H of Rep) consumes less than $750 Million (less than One Billion Dollars) from the total Budget of $ 30 Billion (or from the $ 22.5 Billion Recurrent Expenditure). Iweala has not said what the Presidency and the 42 Ministers consume from the Total Recurrent Expenditure.

If Iweala wants to address Nigerians through a Press Conference in a Transparent Manner, she should be bold to tell Nigerians what the Nigerian Government collects as Total Revenues Annually. Telling Nigerians that the Budget is N4.5 Trillion ($ 30 Billion) and you want to reduce Budget Deficit to 3% is meaningless, and crooked at best. Besides, deliberately varying the mixture of Naira and Dollar at a Press Conference to mislead, does not improve anybody's Credibility.

In the last 3 years, Crude Oil has sold at the average of $100 per Barrel. That is about $60 Billion in a year, for which the Nigerian Government gets about $ 40 Billion (about 60% of the proceeds). This excludes Internally Generated Revenue and the Revenue from other Exports.

So, Iweala should come Public with the Nigerian Total Annual Revenue Collection in the face of the Annual Budget of $ 30 Billion that suddenly results in 3% or more Budget Deficit.

There is no evidence that Iweala verified the said $37.8 Billion IMF/World Bank outstanding Loan before negotiating Debt forgiveness in 2005.

Now that the $ 37.8 Billion Unverified IMF outstanding Loan has gone since 2006; Iweala has just arrived to tell Nigerians of the existence of Another Loan of $39.7 Billion of which she labeled as mainly Domestic Loan in Bonds and Treasury Bills, amounting to a whopping $34.4 Billion (N5.2 Trillion).

What is surprising is that many Nigerians are fast becoming Billionaires in US Dollars in a Country (of more than 150 million people) whose Annual Budget is only $30 Billion; and We Don't Know How and Where their Billion Dollars are coming from.

Nigerians would like Iweala's Team and the EFFC to be Good Enough to lunch an Investigation to Ascertain the Authenticity of this Over-Bearing Domestic Revenue of a whopping $34.4 Dollars. Treasury Bills and Bonds sold to Who?

Lastly, Iweala says the Government would remove Petroleum Subsidy. However, I recall the Removal of the Petroleum Subsidy was the World Bank/IMF Conditionality of 1986. Government, between 1986 and 1993, removed some; and in 1994 Government also removed Petroleum Subsidy and the pump price of Fuel rose from 70k per Liter to N3.75 per Liter in one day. The Nigerian Naira then took a free fall from about N22 per Dollar to N80 per Dollar. So, which Subsidy Removal again is Iweala talking about. Or, is she on a Secret Mission?

The West, in search of where to direct Export trade to revamp their dwindling Economy after the loss of Asia, suddenly advised Sanusi to Devalue the Naira. Sanusi intelligently ignored such Unsolicited Advice.

My question is:
Is Iweala's Secret Mission to Nigeria "the DEVALUATION of the Naira"?; using phantom Petroleum Subsidy Removal as a Front?; just as the World Bank/IMF had earlier prompted Sanusi but got a Rebuff ?

To Nigerians:

The DEVALUATION of the Naira would kill the ability of Nigerians to establish Manufacturing Industries that would have propelled Nigeria into joining the Club of Emerging Markets by 2020.
The DEVALUATION of the Naira would only worsen Nigeria's dependency on Foreign Imports from the West, and compound the raging poverty in Nigeria.

hbrednic:

What a rubbish headline 

netotse:

@gbawe
in the constitution it says there should be a minister from each state of the country including the FCT, OBJ then appointed one from each geographic zone, according to the constitution, the lowest no. of ministers you can have is 36. . .are you asking Okonjo-iweala to single-handedly re-write the constitution? 

Gbawe:

Lets use figures everyone can understand instead of creating confusions with trillions. In 4 years, okonjo Iweala's 1% reduction per year target will only save $1.5 billion over 4 years i.e $375 million per year. Is an extra $375 million per year not a sick joke if the consideration , as Okonjo Iweala herself argued before gaining employment under GEJ, is to make an appreciable amount available for capital spending at the expense of recurrent expenditure? $375 million is approximately half of what the NASS consumes yearly out of the $30 billion budget i.e $750 million  !!!! 

How can Iweala's 1% effort then be seen as anything but a joke when Avenues to seriously wittle down recurrent expenditure are completely ignored such as reducing what is spent on the NASS, Substantive Ministers, Ministers of State, special advisors, etc etc ? This is why the articles states that Jonathan and Okonjo Iweala are "insincere". In real terms , no other word is apt given the highly dubious effort to reduce recurrent expenditure when so many areas of waste and profligacy remain ignored. We can all see the sort of stringent cuts being made by Countries a lot richer and more stable than Nigeria !!! Read the article below dispassionately to understand why many , experts and layman alike, are not impressed by Okonjo Iweala's "economic blueprint"

http://saharareporters.com/article/ngozi-okonjo-iweala-press-conference-much-ado-about-nothing

senbonzakura_kageyoshi:

@ Gbawe, you do have a strong point. Isn't that constitution amendable? If GEJ really wanted to trim the size of his cabinet, couldn't he seek an ammendment to the same constitution? He obviously put no effort into it. If he had gone after an ammendment and the NASS threw it out, then we would know he put an effort into it. Obviously, he didn't. -1, GEJ.

senbonzakura_kageyoshi:

@ Gbawe, you do have a strong point. Isn't that constitution amendable? If GEJ really wanted to trim the size of his cabinet, couldn't he seek an ammendment to the same constitution? He obviously put no effort into it. If he had gone after an ammendment and the NASS threw it out, then we would know he put an effort into it. Obviously, he didn't. -1, GEJ.

Gbenge 77:

I m willing to bet GEJ is a trillionaire.