Financing our future
By Kemi Adeosun

Writing this, my third article on the economy, I’m keenly aware that the question Nigerians want answered is: what is government doing to address our economic challenges? The first thing to state is that there are no quick fixes, but our strategy is clear and the expected outcomes are pretty compelling. Our immediate economic imperative is to provide a Keynesian stimulus to reflate the economy. The 2016 focus is underpinned by a desire to radically reposition Nigeria’s economy. This administration believes very strongly that the previous direction was far from optimal. We are pursuing a fresh direction consistent with our belief in building a resilient economy.

The strategy itself is worth reiterating. The 2016 Budget is being debt funded and the borrowings are targeted at the financing of capital projects to address the infrastructure deficit, create jobs and build the platform for optimisation of the non-oil economy that will see Nigeria prosper. To this end, we have commenced an aggressive programme of fiscal housekeeping: increasing revenues and reducing recurrent expenses. This will ensure that we move towards our objective of financing recurrent expenditure from revenue, rather than borrowing as obtained before now.

In addition, we have signalled through our financial decisions that we are moving away from oil. Government investment in oil will be limited. We are inviting private sector participation in the funding of cash calls for our Joint Ventures rather than tapping the Federation Account. This is guaranteed to improve our cash flow. As I have stated previously, oil is important but oil is not enough. Therefore, if faced with an option to invest borrowed funds in our railways or power or fund oil cash calls, we will strategically fund non-oil. This is in the knowledge that there are private sector solutions to the funding needed for oil, but few sources other than government for investment in physical infrastructure.

The debate about whether Nigeria should borrow is well intentioned and cannot be dismissed without careful analysis, given our antecedents as a nation. I am in agreement with those who argue that Nigeria should not borrow simply because its debt to GDP level is low enough to accommodate such borrowing. There must be a clear business case backed by justifiable benefits. I believe that Nigeria has such a case at the present time. Simply put, we need capital investment to grow our economy. At 13% debt to GDP, we compare favourably with the threshold of 30% for developing economies. Our low debt to GDP ratio is not exactly a positive attainment because it is accompanied by critically low level of infrastructure investment. It is actually a false economy. Low capital formation is a risk which, if uncorrected, hinders future economic growth and this is already evident.

Borrowing, as we propose, will increase debt to GDP to 16% and still leave us significantly lower than our peer group including Ghana at 70%, South Africa at 50% (2015) and Angola at 31% (2014). Appropriate levels of fiscal deficit have been used to grow many of the most successful global economies. As ours develops, our sources of revenue will grow, diversify, and become less susceptible to external shocks. Our need to borrow will reduce accordingly. It’s important to note that capital spending creates an asset, and this gives a return over time in the form of growth. Infrastructural projects such as rail and roads create jobs, generate taxes and stimulate further spending. This is the economic multiplier effect that capital spending brings. Therefore, while an increase in public spending may create a deficit in the short term, the resultant increase in productivity will lead to a higher rate of economic growth and greater tax revenues. According to the International Finance Corporation (IFC), for every one billion US dollars invested in infrastructure in developing economies, between 49,000 and 110,000 jobs are created.

Our borrowing policy will remain conservative and will see us access the lowest available funds, hence our decision to approach multilateral agencies in the first instance, for budget support at concessional rates as low as 1.5% per annum. We have also secured commitments from Export Credit Agencies that are tied to specific capital projects including key initiatives in power, transport and other infrastructure, and at semi-concessional rates. The balance will be sourced commercially to create a blended cost of capital that’s as low as possible. We are addressing the relatively high debt service to revenue ratio which saw 28.1% of our 2015 revenues devoted to debt. This will be done through a systematic restructuring of inherited debt portfolio into a profile that is aligned with our medium term outlook as well as an increase in our revenues.
Borrowing is not our primary focus. Increasing our Internally Generated Revenue is critical because it is sustainable; and because much of the funds collected went unremitted to Government – something we are tackling now. Our Revenue Team holds daily revenue sessions with MDAs during which clear targets are set and agreed; monitoring and evaluation are continuous. We are deploying cash-less revenue collection processes in our high earning agencies to ensure maximisation of our receipts. We are working through Treasury Single Account balances with a view to identifying monies that can potentially be used to fund the budget and reduce borrowing.

Other costly leakages are being blocked. We have completed a detailed review of tax and duty waivers and discovered that in some cases, Nigeria lost significant revenues and with limited benefits. We are set to begin consultations with stakeholders on a revised policy aligned with the best interests of Nigeria.

Furthermore, we are identifying funds that can be released from hitherto untapped sources, including idle and underutilised government assets that have commercial potential including real estate. To this end, Ministry of Finance Incorporated (MOFI) is to become a professionally operated Asset Manager, rather than a passive holder of government assets. It will be actively managed to ‘sweat’ Nigeria’s very valuable global asset portfolio. This will generate earnings and constitute additional budget funding.

Gradually and with the requisite safeguards, we will authorise the investment of part of the estimated N6Tn currently held in pension funds into key infrastructure that will provide workers with higher returns on their pension funds while enhancing capital formation and economic growth. Nigeria’s first ever Project Tied Infrastructure Bonds are being designed. These are novel structures that will see borrowings tied to specific revenue generating projects, bringing private sector financial discipline to the project structuring and delivery process, thereby improving value.
Our first quarter-planned release of N350Bn is ready and is sure to have significant impact, in addition to exploring opportunities to reduce contract prices. Our conditions for release of funds are clear and the mandate is a simple one: to define and agree the number of Nigerians to be engaged as a result of this funding. Priority will be given, without apology, to those creating jobs and opportunity for Nigerians. This level of investment, predominantly capital, exceeds the total capital spend for the whole of 2015 and the tempo will be sustained until the green shoots of recovery begin to appear.

John Maynard Keynes’ famous quote on fiscal stimulus - that when economies are depressed, “Government should pay one man to dig a hole and pay another to fill it back” - is an extreme example and suggests an economic benefit in seemingly pointless activity. In Nigeria’s case, the activity to be triggered will be a fully productive one. We will pay men and women to meet our critical needs in power, transport, housing, agriculture, solid minerals, health and education - and lay the foundation for a collective future that is more positive than our current situation may suggest.
One of Nigeria’s greatest strengths is the resilience of her people. Even beyond our shores it is widely acknowledged that if you can survive in Nigeria, you can thrive anywhere. Our ability to overcome obstacles and our ingenuity in exploiting opportunities, are legendary; our economic policy will ensure more of us succeed in creating wealth. There is sufficient diversity of opportunity which our capital investment can unlock. We will always celebrate the emergence of billionaires, of course, but we recognise that a thousand millionaires have greater fiscal impact. Therefore, where the number of private jets was touted in the past as a measure of success, we will take pride in the number of people lifted out of poverty, and the number of new jobs created.

The idea that Nigeria can succeed this time is, for some, unthinkable. But for those of us privileged to be part of this determinedly patriotic team led by President Muhammadu Buhari, it is and will be possible.

Mrs. Kemi Adeosun is the Honourable Minister of Finance, Federal Republic of Nigeria.

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May God help you to see this much needed diversification of the economy to reality. (Amen).
God Bless PMB
God Bless Nigeria!

God bless you ma carry on with the good job you are doing.

Precise,concise,well explained.
.
Unlike one woman who goes about quoting and inflating bogus figures,who couldnt diversify the economy because her mother was kidnapped
.
God bless Kemi Adeosun

Insightful analysis, we await the changes.

It is obvious Lalasticlala hates Kemi Adeosun, this is the third in series of her articles shared on Nairaland, none has grace the FP.

She writes! I like that. It means she's no coward. She is ready to put her ideas forward and ready for the criticisms that will surely follow.

Beautiful brainy lady. More wisdom and strength to you.

NA to write article and blow fonee she sabi. Zombies need to meet TB Joshua for deliverance. See them above.








Provost wailers community typing from filling station

Very robust analysis and sets a well thought out strategy to solve Nigeria's economic problems

God Bless Kemi


God bless PMB

God bless Nigeria

Kemy11:
NA to write article and blow fonee she sabi. Zombies need to meet TB Joshua for deliverance. See them above.








Provost wailers community typing from filling station

don't worry you shall be delivered from the predicament your heroes have put you in.

na this kain news i wan dey read not those distractive and misinformed news moved to fp by nl mods

God Bless Kemi Adeosun

God Bless PMB/VPYO

God Bless Me

God Bless FRN

Realdeals:
Insightful analysis, we await the changes.

It is obvious Lalasticlala hates Kemi Adeosun, this is the third in series of her articles shared on Nairaland, none has grace the FP.

Nothing in the article is revolutionary or strategic ane u want Fp.

Can this administration mention one new initiative pls.

Everything is copy, paste and rename. E.g. YES which is an adulterated version of Youwin.

I don dey tire

otil1:



Nothing in the article is revolutionary or strategic ane u want Fp.

Can this administration mention one new initiative pls.

Everything is copy, paste and rename. E.g. YES which is an adulterated version of Youwin.

I don dey tire

It is pointless making a general statement without highlighting specifics

Why do you think the policies espoused in the article are not strategic?

Where did she copy it from?

Criticism should come with facts and shouldnt be based on sentiments

Roads, Railways and Electricity is what government should focus on.

Delivered with precision and urgency of purpose .

Intensify your work and translate the words into reality.

That's a finance minister not the textbook heavy weight who hid behind order from above to wreck havoc on the system.

Nigeria now has a finance minister unlike the puff puff bean bag figure inflater called okonjo iweala the corrupt looter.

Well thought out Kemi.

We believe in you and the president. You met a bad economy, dwindling revenue, loads of debt and fallen oil price but you have not borrowed to pay salaries, you have been coping and you even paid the subsidies owed by Ngozi and Jonathan. You made sure you bailed out the states from debts and betters things are still coming .

Though we are going through lots of challenges now as a Nation, I still have hope that thus administration would get it right before 2018.

The ministers should begin to communicate more with us. I've read plans from Fashola, Kemi, Kachikwu... Still waiting for others.

And please Buhari should sign the budget before he travels again

KINGinVALHALA3:

Mr man, don't say what you know nothing about.
YES isn't an adulterated version of Youwin as you stated but a brainchild of Adams Oshiomole YOUTH EMPOWERMENT SCHEME (YES) in Edo state.
These initiative in Edo was in vogue even before Goodluck became president.
And hope you haven't forgotten oshiomole is apc?

So you agree that current YES programme is copied?

Topeakintola:


It is pointless making a general statement without highlighting specifics

Why do you think the policies espoused in the article are not strategic?

Where did she copy it from?

Criticism should come with facts and shouldnt be based on sentiments

Please help point readers to the projected policies that are strategic.

Meanwhile hope you know the meaning of strategic. Or you believe that presenting a strategy means it is strategic.

Put simple, what in that writeup has potential to position Nigeria pivotally in the global coming of nations? Or project us into known economic blocks like BRICS?

Anyone who loves this woman should advise her against authoring such articles filled with wishlists and obvious contradictory policy positions. A monthly statement of activity showing progress and achievements and way forward is a more honourably way to connect with the outside world.

Or is she projecting that she's better as a columnist that a manager of national economy- our own Chancellor of Exchequer?

Topeakintola:


It is pointless making a general statement without highlighting specifics

Why do you think the policies espoused in the article are not strategic?

Where did she copy it from?

Criticism should come with facts and shouldnt be based on sentiments

I didn't see any specific policies.
Just ambiguous textbook economic postulates.

Nothing we haven't heard before from previous finance ministers.

The contradictions are glaring here, which just goes to prove there is no core policy thrust of this Administration.

This explains why the finance minister of a nation in the midst of an economic emergency, finds enough time to pen useless and shallow economic treatises to a populace too busy looking for fuel to power their vehicles and generators.

First of all, what are the so-called economic priorities of a government that budgets N29b for agriculture and N49 for propaganda ?

Aside from being duplicated, inflated and padded, can someone, perhaps Kemi Adeosun herself, pls tell us what is sooooo revolutionary about this budget ?

Where is the boost in education, health, and labour ?
It's certainly not in the budget ?

Less reliance on oil, and N50b for oil exploration ?
Who are you kidding ?

What single measure has this government implemented to boost non-oil exports ?

My friends in the non oil exports sector tell me that this government's new policies and new bureaucracies introduced are strangulating them.
What gives ?

And talking of borrowing, if you borrow this much just to fund this year's padded budget , how much will we have to borrow next year and the year after ?

Does anyone Smell a DEBT trap and sinkhole by 2019?
I do.

Hello Greece, Hello Argentina.
He goes a borrowing, who goes a sorrowing.


If the previous government could grow our economy year after year with very low DEBT to GDP ratio, then shouldn't we at least be praising them for prudent financial management ?

Isn't it just common sense to prudently manage what we have now, rather than borrowing for CAPITAL projects that are even yet to be specified, let alone blueprinted for ?

So we want to borrow first, and then figure out what specific capital projects to spend the money on ?

Lol.
If the President did not study his budget proposal before presentation to Parliament, then We all have to wonder when he found the time to decide and plan the specific capital projects for which we are to borrow several billion dollars.

Dear Kemi Adeosun, your UNICORN MEAT of an economic analysis is dead on arrival.

Kindly give us the real UNICORN MEAT.

APC , feeding grade A UNICORN MEAT to Nigerians since 2015AD.

mej67:


Please help point readers to the projected policies that are strategic.

Meanwhile hope you know the meaning of strategic. Or you believe that presenting a strategy means it is strategic.

Put simple, what in that writeup has potential to position Nigeria pivotally in the global coming of nations? Or project us into known economic blocks like BRICS?

Anyone who loves this woman should advise her against authoring such articles filled with wishlists and obvious contradictory policy positions. A monthly statement of activity showing progress and achievements and way forward is a more honourably way to connect with the outside world.

Or is she projecting that she's better as a columnist that a manager of national economy- our own Chancellor of Exchequer?

Hogwash!

Stop playing with words and learn the art of objectivity.

I am not too sure that you are aware that this is the third part of a series of articles penned by the Minister.

For your benefit and other myopic critics, she did highlight in earlier articles on the importance of engendering institutional frameworks to support future policy direction.

In response to your ill thought out theory about the BRICS- Block, can you share your notion of the current realities in those countries? You might want to reconsider the difference between conceptual models and the practical realities of modern economics.

*This article has clearly spelt out future economic direction. It will use public spending to stimulate growth. Is it risky? YES

But the minister has made an argument for the reasons for that strategy. I think it is strategic. Why do you feel it isnt?

Topeakintola:



*This article has clearly spelt out future economic direction. It will use public spending to stimulate growth. Is it risky? YES

But the minister has made an argument for the reasons for that strategy. I think it is strategic. Why do you feel it isnt?

Kindly elaborate, quote or point out the so-called future economic DIRECTION.
And pls, while you are at it, perhaps you can point out in what way it different or even more practical than vision 2010 and other lofty economic plans we have heard of over the past 30yrs.

The finance minister is doing what all finance ministers do; Selling or promoting her government.

Her write-ups are too vague, short on specifics. Just the normal mumbo jumbo that we are used to hearing from finance ministers.

Following...

plaetton:


Kindly elaborate, quote or point out the so-called future economic DIRECTION.
And pls, while you are at it, perhaps you can point out in what way it different or even more practical than vision 2010 and other lofty economic plans we have heard of over the past 30yrs.

The finance minister is doing what all finance ministers do; Selling or promoting her government.

Her write-ups are too vague, short on specifics. Just the normal mumbo jumbo that we are used to hearing from finance ministers.

Didnt you do comprehension or summary in secondary school? haba! The minister was only stating the Fiscal policy thrust of the Government is to utilize the huge borrowing (not because of our GDP to debt ratio which is still within acceptable threshold but because it is needed based on obvious realities) to stimulate the economy through the provision of public goods like roads rail Power etc These provide the impetus for the manufacuring sector to grow and provide the bedrock for greater IGR generation (which more of it is targeted to fund subsequent budget)which is more sustainable and less vulnerable to the whims of external shock.
Coupled with other measures employed like plugging loopholes for theft and embezzlement of Government funds, employment of cost cutting measures, tapping into and exploiting areas of hitherto unknown areas of revenue all of the above is achievable and will be achieved.
THEY HAVE GIVEN US THEIR PLANS, (WHICH I CAN'T FAULT OR CRITICIZE RIGHT NOW), LET'S SEE THEIR ACTIONS AND LEVEL OF IMPLEMENTATION. I BELIEVE RESULTS AND PERFORMANCE (OR LACK OF IT) IS WHAT WE SHOULD JUDGE THEM ON, NOT ACTION PLAN OR POLICY STATEMENT.

I hope she is not serious about playing "kalokalo" with pension fund.

Dollar is N320 and you are here writing about Keynesian theory. If we needed a grammarian, Obahiagbon is there. If we needed economic theorists, we have the likes of Dr. Kalu Idika Kalu. We are talking about practical reality not bogus grammatical theses to confuse the uninitiated. The market woman who pays quadruple her usual fare does not understand your theories and grammar. All she knows is that pure water was N5 but now it is N20, and so someone would have to pay for the difference. Get cracking. Things are already down south. Inflation has hit double digits first time in over a decade. We are not the only oil producing nation. Others have since moved on.
One final note of caution though is that you should not forget that State of Osun also borrowed to fund "infrastructure", I hope your infrastructure are self-financing and not like Amaechi's monorail. Again why are you borrowing N3Trillion to fund approx N1.8Triilion Capital projects? Are you saying you are spending about N1.2Trillion borrowed funds on recurrent expenditure? Why then are you theorising on matching capital cost to borrowing

When will one dollar be equivalent to N1? When will the prices of goods and services become reasonable once again?

Fuel