Okonjo-Iweala: Criticism of the Economy Must be Based on Facts

Shortly after the 2013 IMF/World Bank annual meetings in Washington DC, the THISDAY team comprising Tokunbo Adedoja, Kunle Aderinokun and Ndubuisi Francis, engaged the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, on a number of issues in the economy. While admitting the challenges confronting the economy, she highlighted the progress that has been made. Excerpts:

We are all aware of the opposition by some state governors to the establishment of the sovereign wealth fund. It is now a year since the fund, which is being managed by the Nigeria Sovereign Investment Authority (NSIA), was set up with a seed capital of $1 billion . How much has been added to the initial $1 billion capital?

On the $1 billion and we now need to discuss after setting up the NSIA council and the board. I think the next step is to convince the governors that they should start saving more in the NSIA. But you know that if you talk of savings now, you will almost be drowned because they are shouting that they don’t have enough money. So, this is a dialogue that we have to continue because we don’t want to stop at a fund of $1 billion given Nigeria’s size. Look at Angola; they have got $5 billion and so with other countries. You really need to have a strong buffer that is why we need to increase the size of the SWF. I know that in this country ultimately, that will happen on a voluntary basis. Any state that doesn’t want to save in the SWF should not be made to and those who want to save in it should go ahead and if the federal government wants to save any of its resources, it should be possible to do that. But for now we are trying to invest the $1 billion responsibly so as to demonstrate to the states that the fund can make good returns for them. Following all that, I think in the months and years ahead, we look to increase the size of the SWF.
How far has the federal government gone with the payment of entitlements to PHCN workers following the privatisation of the gencos and discos?

Well, I think you need to check with the Ministry of Power because we have assigned them to do all the necessary ground work and I believe they are making good progress to pay them. As you know, at the beginning, N45 billion in the budget was set aside for paying some of the workers and we are doing it gradually and much of the proceeds from the sales are going to go towards settling the entitlements of PHCN workers. So very little of it will actually be going to the budget. Of the slightly more than the $2 billion that was received, all it eventually will go towards the settlement of the entitlements of PHCN workers. The expectation is that everybody will be taken care of and from what I know is that they are making progress on that.

Now what is the situation with some of the revenue generating agencies that were not remitting their revenues to the federal government? You threatened to close down the accounts of some of these agencies and thereafter you briefed the media that N38 billion had been paid?

We are still at N38 billion. As you know, to get that N38 billion, we took action and some of them when we made the announcement, sent money, but some did not and we actually went in and executed what we said- that is, we went to where they were keeping the IGR and we took. We have not given up and we are still working.

Did you close the accounts?

No, we told the managing directors of the banks to remit the money in the accounts to the treasury and they did. They remitted it into our account with the Central Bank. In some cases, we took virtually everything there while in other cases, we left a reasonable amount. It was a case by case situation.

So, how much were you expecting from the agencies?

We expected N58 billion and we have gotten N38 billion

How do you feel when people criticise you especially on your position on the state of the economy?

I don’t get overly excited. I just want people to have facts. You will find that most of the accusations and statements made are not based on facts. In Nigeria, we need to start learning to use facts; we must not make statements out of emotions. Let us look at the facts. When you say the economy is collapsing, what do you mean? What are the criteria or indices as Mr. President said? There are some internationally accepted measures to rate an economy as strong, it is not that Okonjo-Iweala wakes up and says an economy is strong. Such accusations must be based on certain things and that is the problem we have at home. People make completely unfounded statements.

So, we must always try to correct that all the time. Because we know what we are talking, we are not alarmed or concerned, but we just make sure we put the facts straight. You know there are internationally reputable agencies that are accessing every country based on those criteria. If an international agency comes and say everything is bad in Nigeria, people will jump and acclaim it. It will be headline everywhere because it had condemned Nigeria. But if it now says Nigeria is doing well, you will not see it in headlines. Every media, politician and ordinary Nigerians know what is right, but the political elites, many of them are bent on just giving out the wrong information.

I am not running the IMF, the World Bank, the Fitch, Standard and Poor’s and others. These are independent agencies that rate all the countries according to standard economic criteria and Nigeria is part of the globe. When the people now say that based on certain criteria, things are going well, what is wrong with that? They are not saying that the economy is perfect; they are even acknowledging the problems. In Nigeria, you have to be calm, you have to have a sense of humor, wear your responsibilities carefully, but you have to always tell the truth. Nobody has ever stopped from telling the truth.

Will the Mortgage Refinance Company (MRC) the federal government is promoting, replace the Federal Mortgage Bank? And if not, what is going to happen to the Federal Mortgage Bank with the coming of MRC?

No, the MRC will not replace the Federal Mortgage Bank. It is there to provide additional liquidity by refinancing mortgages within the country. That means by doing that, if people know that they can package and sell the mortgages they have already made, it will put more money into the system to do more mortgages and that is how mortgage systems work. The Federal Mortgage Bank will still be part of this. We are going to work with the chief executive officer to restructure the Federal Mortgage Bank to find out what to do with its non-performing loans, restructure it so that it can also help us with social and mass housing. The MRC will serve the lower and middle income earners, who are earning a reasonable income, but at the bottom end of the ladder, we need to think of another way and what we are thinking of doing in tandem, in spite of the programme is that about $15 or $20 million out of the $300 million facility will be used towards helping to restructure and reposition the company and then work with companies that produce mass housing. So what we are discussing with the IFC is that when we are doing this, we are not just going to be doing mortgages for those that are relatively well off. We are also going to be doing mass housing and the IFC is going to work with us. They have already started in Ogun state. We have already gotten 14 pilot states that will participate and they will also start working with them, to bring companies that are working elsewhere, to look at the whole value chain of housing and then we will look at models like rent to own, lease to own, so that they can be paying and after 20 or 30 years they can own their home.

What is Nigeria taking home from this year’s IMF/World Bank annual meetings?

We have come to these annual meetings with the objective of finding out what is happening economically with the economies all over the globe and the precautions or actions we need to take as Nigeria and what is the advice that the Bretton Woods institutions are giving us. And there were some key messages that came out of these meetings. The first is that the IMF and the World Bank feel that the global environment is still quite uncertain even though growth is recovering in the euro zone and the United States. But the emerging market countries have also seen slowed growth. Several of them like India had seen growth slipped to five per cent, Brazil, South Africa have all seen slower growth. But the low income countries are growing robustly. In Africa, as you know, they are predicting more than five per cent growth for the continent. So, I think the key issues that we analysed were what could be the vulnerabilities? What are the interconnections and spillover effects from all these uncertainties? More importantly, what do countries need to do to protect themselves and the advice for countries such as Nigeria is to build their buffer strongly which means you should build up your reserves, set aside some savings because you don’t know what else is going to happen and manage your expenditure better. That is, be ready to protect yourself in case the world should slip back into a recession or other adverse consequences could occur because of the uncertainties. So for Nigeria, in terms of our macroeconomic management, those are the type of things we have to take into account.

Now for Nigeria, in addition to hearing this advice, we also heard some very good news. That good news came on two fronts. The World Bank Group has made known that they want Nigeria to be one of the focused countries in Sub-Saharan Africa because of our efforts on infrastructure, particularly power, which means they are willing to work with Nigeria to invest hundreds of millions of dollars. They have a lending programme of about $1 billion a year, but they are willing to use that to pull in more resources from the US Power Africa Initiative from the private sector using the offices of the IFC, to help us address our infrastructure problems. The World Bank is planning to set up a global infrastructure facility being put together and they also said that when this is done, Nigeria will be one of the first countries that will like to be a beneficiary of this, given our large size and infrastructure needs. They want to concentrate on power and they are already actively working with several power companies that want to invest in Nigeria.

They are also promising to give us another $700 million in guarantees for the power sector as well as a willingness to invest $700 million to support transmission. So, this is very good news. We also discussed with them our social safety net issues-that is, we discussed with them how to improve our employment creation, how to help those at the bottom end of the ladder who may not even benefit from jobs and they are planning a social safety net programme of about $400 million which they are going to prepare with us. It is actually called social safety net programme to support some ongoing works that we are doing like ‘saving one million lives’ programme which helps in maternal mortality, infant mortality; there is the conditional cash transfers to help improve maternal and infant mortality ratios, train health workers, train midwives to deliver this services and improve nutrition. They also want to integrate our approach in improving nutrition in children, immunisation, HIV/AIDS and malaria. So, all these things to try and help with the health related issues and also provide a source of income at the bottom end of the ladder. So, they have put aside some money for that. They have already launched the YES-O programme and I think this will be additional. We also got pledges to help with our statistics to help us improve our statistics. We go a lot of commendation for the gender budgeting programme that Mr. President launched in 2013 budget. We had another high level meeting and looking at women empowerment, Nigeria got a lot of praises in the efforts President Goodluck Jonathan made in getting more women into his cabinet. But most importantly, we were commended for the efforts we are making in gender budgeting.

As you know, we have five pilot ministries that the Ministry of Women Affairs and our ministry are working with, which we announced in last year’s budget in getting women empowered and we set aside N3 billion as incentives for that. So the programme has gotten a lot of notice. The Ministry of Agriculture, Ministry of Communications Technology, Water Resources, Works and Ministry of Health are all participating in the programme and each of them has pledged to focus attention on women. Like works ministry has pledged to train women contractors and sub-contractors and also try to make sure that some contracts are awarded to women. Health, agriculture and communications technology have all come together to say they want to reach about 500 women with mobile telephones to have e-wallet system for their agriculture inputs such as fertilisers and seeds. They can also receive extension messages on those phones, telling them how to plant their crops. They can also receive advice through those phones and that will be a very important addition. So these were some of those things we did in that gender programme and we presented it here and it was widely acclaimed. Actually, to the point where they said they were going to get the committee of finance ministers in other countries to try this approach of integrating gender into their budget. We also had meeting with the USAID and they are also keen to work with us on the power sector co-financing with the World Bank and they are keen to work with us on social safety net and they are willing to put some existing monies to re-arrange that into additional programmes for us in those areas. Really, what we saw here was a whole lot of excitement and support for what Nigeria is trying to achieve.

The other bit of good news that we have is that whilst we were here, the ratings agencies met with us to finalise their ratings and the first one has reported, Standard and Poor’s, reaffirming Nigeria’s strong economic position whilst admitting that the country faces challenges which we all know. They have talked about the issue of shortfall in oil and oil theft; they talked about employment issues and inequality issues. All those things are on the table. But in spite of all that, they recognised the attractiveness of Nigeria as an investment destination and the strong macroeconomic management underpinning the country’s economy and the strong growth prospects.

Is Nigeria keying the $700 million for infrastructure expected from the World Bank into the SWF?

Absolutely, the NSIA has been talking with the IFC and the NSIA is looking at several infrastructure projects and I think they have announced that their board has approved their participation in the second Niger Bridge. They are looking at several other projects such as dams, irrigation and water projects in the north to infrastructure projects in the south. So that is going on and they are talking to IFC, which might co-invest with them. Other SWFs are also looking at co-investing with them, they are even trying to pull in our own pension funds and that is going on while at the same time there are efforts to increase infrastructure financing from other organisations. We are working in parallel, but also talking to each other. So, that is an additional effort by the World Bank to help us finance transmission. You know we had to raise $1.9 billion. There is an emergency assistance programme that the Ministry of Power had said is necessary to get our transmission going over the next two to three years and we have raised $1.5 billion of that to support transmission. Part of that is the $700 million that I told you from the World Bank for transmission and in addition, they also $700 million in guarantees for the power sector that they are willing to give us. They already did $600 million in Partial Risk Guarantee (PRG) for gas and we are now asking them to support the power sector because we now have independent providers generating power, so we are signing many power project agreements and many of them needed to be backed by PRG.

What are the conditions for these guarantees or facilities? And what are you doing to address the vulnerabilities that you mentioned?

On the guarantees, there are no special conditionalities because it is going to support the private sector. So, all they want to make sure is that the private sector investments are viable and that we signed proper power purchase agreements to protect the private investments and also protect government. Of course, in order for the private sector to access these guarantees, there may be specific things within the private sector projects that they may want them to do. What they are really trying to do is to help us to mitigate risks. It is meant to make them feel comfortable since we are developing a private market in a way we never did.

For the vulnerabilities, we need to step up the buffers that we have. We need to improve our revenue stance and we are targeting non-oil revenue. So, we are mounting an effort of the FIRS to plug the leakages and step up our tax collection efforts. A study that was done for us by McKinsey showed that 65 per cent of our companies that paid taxes two years ago have not filed recent reports. We want to know why, and if we find out why and make them pay, that will be another source of revenue. 75 per cent of companies that are registered have not filed their taxes and we want to know whether these are real companies registered with the Corporate Affairs Commission and if they are real, why have they not paid, so all these things are going to be launched. There are also companies that have been benefiting from tax relief and tax holidays that have expired and so we are going to audit all of them.

The IMF Managing Director said a poverty reduction fund is now on the table. Is Nigeria going to take advantage of this special fund?

You know, Nigeria is not really asking the IMF for access to any resources. You know, we are now a middle income country and we have actually allowed the sale of gold by the IMF. We are supporting other poorer countries to get access. Nigeria is not taking any financial facility from the fund. We are not under and fund programme. We are running our own economic reform programme which is strong. The fund has validated it.

There was a report that the money for the SURE-P programme for the youth was diverted to constituency project, what is your take on that?

The other day someone asked the question and I explained that under the SURE-P, out of N27 billion, N18 billion was moved to other expenditure. I don’t want to talk about constituency projects. Yes, it is true that of the N27 billion set aside for the programme, N18 billion was moved. So we are now battling with how to continue to pay the youths, who were employed under this programme. So that is an issue and we had pleaded with the National Assembly to help us restore this. We have worked with them on the amendment and they have done something and we have decided to just continue to implement it.

So, please 2013 budget is being implemented. What is being perpetrated by some section of the press is that the 2013 budget has fallen apart is false. The budget is being implemented, it still has some issues, but we decided to go ahead. We will try and find a solution to take care of the missing monies so that we can continue to pay those people under that particular part of the SURE-P programme.

SOURCE: ThisDay