https://www.youtube.com/watch?v=tZcwG36gq3Y

The Minister of Finance, Kemi Adeosun, on Tuesday explained that the Federal Government opted for a conservative borrowing plan to fund the critical sectors of the economy and to ensure that future generation is not saddled with the burden of debt payment.

The Minister, who described borrowing as inevitable in view of the current realities in the nation’s economy, spoke at a town hall meeting/policy dialogue for good governance organised by the Alumni Association of the National Association of the National Institute of Policy and Strategic Studies, in conjunction with the Federal Ministry of Information and Culture in Abuja.

Stressing the urgent need to fund infrastructure, Adeosun said: “We have to invest in our infrastructure to allow the private sector to thrive, which will create jobs and unlock the economy.

“We have to adopt a very conservative borrowing programme, but we must borrow because for us to do rail, we need funds.
“Eith other needed infrastructure we need funds.”

HT https://www.youtube.com/watch?v=tZcwG36gq3Y

Text of Speech Delivered by the HMF, Kemi Adeosun at the 2016 Nigeria Diaspora Day Conference

All Protocols Observed

I want to thank you for your interest in the Nigeria, story the fact that you are here shows a patriotic commitment that is worthy of commendation.

Diaspora are a key part of the Nigerian Community and have a key role to play at this critical time. We must never become so comfortable abroad that we forget or worse still despise our roots. Rebuilding Nigeria is an important mission for the next generation, who deserve the chance of a Nigeria that provide opportunities for them. Other diaspora communities retain strong links to their motherland and we must do so in order to retain the fabric of our families and our value system. This government is rebuilding Nigeria based on fundamental values that shaped the childhood of many of us and which were sadly abandoned by a few in pursuit of aggrandisement wealth that they can never spend. of at the expense of the many. Those fundamental values are hard work, enterprise, honesty, and self reliance.

What Nigeria needs now is an economic patriotism that will support this administration’s efforts to reposition the economy. That starts with a clear understanding of the issues so that we can jointly pursue the structural adjustments needed. There is a need for patience and acceptance that fundamental shifts need time to be developed properly with adequate windows for consultation before they can be successfully implemented.

However, once implemented they will be permanent in ensuring that we maximise all our endowments to compliment oil, rather than relying on oil which has created “’economic laziness”’ Nigeria has in the past spent like a stereotypical oil economy , which has lots of oil and a low population. In reality we have some oil but a very large population. Our 2.2 M bpd must be shared by 170M of us whereas Kuwait has 2.9M barrels and 4.1 M people. So we simply can not afford to operate as if oil was unlimited. That adjustment should have happened many decades ago and had it been done we would not be experiencing our current challenges.

Nigeria is the 5th largest receiving country of remittances in the world with an estimated US20Bn according to World Bank data. with the largest source being the USA with an estimated US$5.7Bn or about 27%. The Central Bank’s introduction of a more flexible exchange rate which closes the gap between the official and parallel rates. We believe that improved technology and e payments systems as are being advocated for use in our recently introduced Social Welfare Programme create a reliable platform for us to ensure that funds are reaching their intended recipients. The fight against poverty has for the first time ever been embraced formally at Federal Government level with the inclusion of N500Bn in the budget for social intervention programmes. Supporting the poor is a responsibility of the entire Nigerian community including the diaspora.

Remittances are a key part of our national income and this points to the strong family ties that form the fabric of Nigeria’s society and this we must not lose sight of. As emigrant remittances are very stable it is important that they are channelled into where they are most needed,. We will create investment products and opportunities that will encourage and incentivise you to remit funds. These include our planned infrastructure bonds and social housing funds.

I urge you to support family with positive investments that will have long term impact as well as day to day income support. Supporting families to become self sufficient will reduce dependency in the long term Government is looking at how
we can facilitate this structural support with a number of initiative. For example we are looking at de-risked franchise opportunities in the job creation programme You Win. This will enable investment of a fixed sum into a “managed” business opportunity with training support as well as monitoring and evaluation. Similarly less money would be remitted to cover medical emergencies if we would simply commit to paying health insurance premiums for our families here in Nigeria.

We thank you for the support of donations in kind, but we have found that these have become avenues for abuse which has resulted in revenue leakage. Donating consumer items under the medical donations has created widows for the importation of expired drugs as well as drugs that are intended for resale. My personal appeal would be that , where the items are available in Nigeria and especially those that are manufactured in Nigeria please donate in cash rather than in kind. Build the safeguards to ensure that your intended objectives are attained rather than incurring the cost of shipping and clearing goods that are readily available in Nigeria and whose purchase will support Nigerian jobs.

As the Central Bank has recently liberalised the exchange rate management , I urge you not to panic by joining those who economists terms as "Irrational". The rate will need time to settle into a predictable path that will be driven by fundamentals Typically with such adjustments, markets will overreact and later correct back down to a fundamentally driven level and the naira will be no exception. Flexible exchange rates will allow our currency to adjust based on fundamental and known drivers, I point out that the recent Brexit announcement has seen the pound under pressure so it is a normal economic phenomenon and not a trigger for panic. Nigeria is going to rebuild stronger with a more resilient and diverse revenue base and I believe that the currency will ultimately reflect this.

Nigerians in the Diaspora are a key part of the Nigerian community both socially and economically and in the current tough economic clime, there is a need for economic patriotism so that we all play our part of rebuild the nation. It starts with a love for the nation, it is followed with honest assessment and supported by action not rhetoric.

We must have confidence in the improving quality of Nigerian made goods and we urge you to patronise them wherever you find them. As part of our diversification , we will be exporting more of your staple foods and we are working to retool our customs, quarantine and other services to focus on export. We are the largest component of African diaspora, so where available look for and purchase Nigerian made goods.

The most important measure that attracts remittances is the confidence that you have in Nigeria’s future. The diaspora in other nations have been nation builders, it starts with a mind-set that Nigeria is a nation we are proud of to do this we must put aside present frustrations and resist the temptation to speak negatively but rather proffer suggestions and volunteer to be part of the solution. To do so we must be humble and respect those on ground in Nigeria rather that come with seemingly ready made solutions, which may prove to be impractical.

All the countries that host the Diaspora community developed over time by a process of continuous improvement driven by a commitment to service. President Muhammadu Buhari is totally committed to this nation and we must therefore recognise the tough situation we have inherited and support efforts that will rebuild our economy. Our rebuilding will not be based on the template of the past where we had GDP growth without development, rather we will pursue an inclusive growth based on our traditional values of hard work, honesty and fair play.

For too long we have spoken about the potential of Nigeria and very little has been done. I am very pleased to tell you that despite our current challenges Nigerians are like never before looking inwards to identify and exploit long abandoned opportunities th
at will lead to long term growth. As painful as it is today, it is gratifying to be discussing with Governors across the nation who are exploiting their God given endowments rather than waiting for their monthly share of oil revenues in the form of FAAC. From rice growing in Kebbi, Ebonyi and Ogun to the commercial exports of vegetables from Anambra, to the exploit of solid minerals in Bauchi Nigeria is waking up and frontally addressing its challenges.


I urge you to join us in whatever way you can to rebuild Nigeria. When in 1707 Britain began to call itself Great it was very far from Great. Indeed even the name Britain was named by the Romans (Britannia) and was a reference to a geographical split between two regions. Britannia Major and Minor . So it does not matter who named us Nigeria and the history thereof, what is critical is where we can go. Let us refrain from habitual negativity from the confines of our comfortable lives as we have just one Nigeria and we must move forward together

Text of Speech Delivered by the HMF, Kemi Adeosun at the National Affordable Housing Summit:


Linking the Capital Markets to Access to Finance for Affordable Housing Delivery



In any nation the provision of Housing is a key barometer of development and wealth creation and as we begin to reposition the Nigerian economy., Nigeria can no longer afford to be an exception.



The statistics about the Housing deficit are well known and well documented the solutions are equally well outlined but what has been missing is a road map for implementation.

The Ministry of Finance has identified the housing sector as a key element in the efforts to revive our economy. We believe that this sector has some unique characteristics that make it a conduit for job, wealth and opportunity creation across income groups and across the entire geography of the nation.

We have critically examined the financial value chain to assess where interventions are required to stimulate activity.

In financial terms there are three clear phases in Housing Provision and each has unique financial needs in which the capital markets play a critical role.

Development
Sale and Mortgage Origination
Mortgage repayment and refinancing
I will briefly analyse these and identify how Government intends to intervene to ensure sustainable and predictable development of the industry.



Development finance is the most critical phase of the programme as it is the foundation on which the entire programme must rest. Currently there is no appropriately priced pool of funding for this phase of the cycle. Interest rates north of 20% can not deliver affordable housing. In addition construction is the riskiest phase in the value chain and therefore needs the most attention, as there is project risk, developer risk as well as the commercial risk of selling the completed properties.

Let me quickly speak to a much misunderstood concept of the potential role of pension funds in housing provision. The pension funds have been frequently touted as a funding solution to most needs in Nigeria including housing. Pension funds do represent a pool of long term funds, they are not an ideal source for housing at the development stage due to the high level of risk associated with this phase. Pension funds must not be used to take direct developer risk. What pension funds need are predictable flows of annuity income to meet future pension payment obligations and this is provided at the mortgage phase rather than the development phase.

The solution for the needs of development phase is creative government intervention particularly at this early stage in the development of the industry, where there is a need to provide proof on concept which will attract private capital. This Government plans, with appropriate safeguards, to de-risk lending to approved Housing Developers in order to stimulate growth of the sector. This de risking process will make it easier for banks to extend credit and for the issuance of bonds by developers. That de-risking process will entail the government providing guarantees and other credit enhancement to make the sector attractive and viable. Issuing promissory notes for the cost of land will reduce initial outlay and reduce developer financing requirements whilst creating valuable assets for the State Governments. During the actual construction phase , the Federal Government will act to reduce the cost of funds for the sector and will guarantee the off take of approved schemes.

However government can not and will not issue a blank cheque guarantee and this is where the critical interface with the Ministry of Housing with its plans for standardisation, will be important. Government will issue guarantees only to qualified developers, operating approved schemes who have assessed and demonstrable capacity to deliver schemes on time and within approved price bands. Standardisation is key to enable monitoring of progress and management of the risks. Standardisation will enable government to quickly identify and correct underperforming projects by applying an objective and measurable template. It will also provide the basis for an easily understood cost and pricing model.

Government provision of leverage and guarantees are critical in attracting private sector funds into the industry. The ideal funding mix for mass housing development will be, developer’s equity, borrowed funds and government guarantees. As the industry matures we will gradually reduce the role of government and enable private capital to support the industry. The initial catalysis from Government is essential to stimulate the growth needed and de risk the sector.

We estimate that we can attract at least N400Billion to the sector each year from domestic sources and even more from international sources. This will create thousands of affordable homes each year as well as considerable employment and commercial opportunities. Nigerians will be engaged as construction workers and artisans through the value chain into the manufacture of materials, finishing and other supplies. Also the management of the housing stock and its maintenance will create a new industry for Housing Management Professionals.

At the second stage, that of mortgage origination, we recognise that the capital market needs large pools of mortgages to create a deep market of mortgage backed securities. In that regard we are advocating the introduction of Housing Co-operatives and other entities that will make titling, risk profiling and the general process of mortgage origination and easier.

We anticipate that buyers of the Housing Stock to provide deposits of at least 20% of the costs of the property and pay the balance monthly with mortgages of up to 20 years. Government is already developing plans to extend the yield curve in domestic securities out to 20 years to provide a baseline price.

We expect that deposits will be built up by a combination of savings and in some cases the opportunity to unlock pension account balances. Introducing the concept of “saving towards a house deposit” will be a novel development which we expect to spawn a new range of housing related savings product offerings by Commercial and Mortgage Banks and will increase the level of savings generally. We equally expect that traditional sources of funding within family and community in Nigeria and in the diaspora to be channelled towards securing deposits. We expect a new generation of a property owning family communities to sprout up across Nigeria.

The provision of mortgages with predictable monthly repayments will free Nigerians from the pressure of sourcing bulk funds to pay annual house rents and will align the cost of housing with the manner in which most people’s earnings are received. That is a monthly repayment will be matched with a monthly income. This will make cash flow easier to manage. Currently the level of mortgage creation in Nigeria is just 1% of GDP compared to 6% in India and 30% in South Africa.

Compulsory insurance of mortgages is an important function in de-risking the opportunity the default risk must be mitigated to ensure optimal pricing of pools of mortgages. The predictable and insured annuity stream that mortgages will provide make them an ideal investment for the portfolios of our pension funds and we fully expect a very active and competitive involvement at this stage of the cycle. This will overtime reduce the cost of mortgages and will extend the tenure over which they can be repaid. Gradually this will enhance affordability and make the dream of homeownership a reality for millions of Nigerian families whilst providing attractive returns on pension investments.

The ability of Housing to provide avenues for wealth creation can not be overstated. Transforming our workers from tenants to homeowners is how true generational wealth can be developed. The provision of affordable housing is also an essential tool in the fight against corruption. An employee with a 35 year working life must have the reasonable expectation of being able to accumulate tangible assets without the need to compromise. The Mortgage market affords this opportunity allowing capital assets to be acquired from legitimate earnings over the income lifecycle and creating true and transferable value.

Outright homeownership may not be an affordable or an appropriate option for everyone in our society and in defining solutions for affordable housing we must not overlook the needs of some of essential public sector workers such as The Police, The Military and our Customs Service. Many of these professions require their workers to transfer location and thus it may not be feasible to participate in Mortgage purchases. We are therefore exploring shared ownership and other models that will enable capital accumulation but will provide much needed flexibility and affordability. Partnerships that will see redevelopment of existing barrack in prime location is being explored to provide decent but affordable homes for these key workers. In such cases we will fund housing by creating instruments that are a hybrid offering a combination of capital appreciation and income.

We already have the mechanism in place for the refinancing of mortgages through the Nigerian Mortgage Refinancing Company (NMRC). The NMRC was developed with the future needs of the sector in view and as our plans are implemented the role they will play will be a significant and a critical one. NMRC has already raised over US$350Bn of capital via a Series 1 15 year fixed rate bond. It has refinanced over N1Bn of mortgages but we expect this number to appreciate aggressively as we rollout our plans,



There has been much discussion on the housing deficit but there is a need to change the narrative to begin to discuss the housing opportunity. Our outlook is that this will be a private sector led initiative with the government playing a supporting and enabling role. We believe that now is the ideal time for Nigeria to talk the bold and needed steps to implement rather than analyse, we believe that as the turnaround in our economy unfolds the Housing Sector will play a pivotal role rapidly accelerating capital formation and transforming community across our nation.

"We Inherited An Empty Treasury"- Interview with, Minister of Finance, Kemi Adeosun on Sunrise Daily.


https://www.youtube.com/watch?v=3pxDvOAwBEE?list=PL5B1246D55638DD10

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

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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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I am delighted to have the opportunity to address this distinguished and all-important retreat on the Nigerian economy. The purpose of this retreat as outlined in the Retreat Concept Notes is to generate immediate, medium and long-term viable policy solutions to the economic challenges facing us at both the Federal and State levels.

From information at my disposal, if we aggregate public views from the grassroots, city dwellers, the economic managers, consumer groups, the Unions and other stakeholders of the economy, there is near unanimity about the ills of our economy. But naturally, there are divergent views about solutions.

I am going to throw at this gathering some random policy options filtered from across the spectrum of our stakeholders on four (4) selected sectors of our economy.

These are:

* Agriculture
* Power
* Manufacturing
* Housing

I have not touched Education, Science and Technology pointedly because these related subjects require a whole retreat by themselves.
Distinguished Ladies and gentlemen, these suggestions I am putting forward to you are by no means directives but a contribution to your discourse.

AGRICULTURE

On Agriculture today, both the peasant and the mechanized farmers agree with the general public that food production and self-sufficiency require urgent government action. For too long government policies on agriculture have been half-hearted, suffering from inconsistencies and discontinuities. Yet our real wealth is in farming, livestock, hatcheries, fishery, horticulture and forestry.
From the information available to me the issues worrying the public today are:
· Rising food prices, such as maize, corn, rice and garri.
· Lack of visible impact of government presence on agriculture.
· Lack of agricultural inputs at affordable prices. Cost of fertilizers, pesticide and labour compound the problems of farming. Extension services are virtually absent in several states.
· Imports of subsidized food products such as rice and poultry discourage the growth of domestic agriculture.
· Wastage of locally grown foods, notably fruit and vegetables which go bad due to lack of even moderate scale agro-processing factories and lack of feeder roads.

These problems I have enumerated are by no means exhaustive and some of the solutions I am putting forward are not necessarily the final word on our agricultural reform objectives:
· First, we need to carry the public with us for new initiatives. Accordingly the Federal Ministry of Agriculture in collaboration with the States should convene early meetings of stakeholders and identify issues with a view to addressing them.
· Inform the public in all print and electronic media on government efforts to increase local food production to dampen escalating food prices.
· Banks should be leaned upon to substantially increase their lending to the agricultural sector. Central Bank of Nigeria (CBN) should bear part of the risk of such loans as a matter of national policy.
· States should increase their financial support through community groups. The appropriate approach should be through leaders of community groups such as farmers cooperatives.
· Provision of feeder roads by state governments to enable more effective evacuation of produce to markets and processing factories.
When I was a schoolboy in the 1950’s the country produced one million tons of groundnuts in two successive years. The country’s main foreign exchange earners were groundnut, cotton, cocoa, palm kernel, rubber and all agro/forest resources.
Regional Banks and Development Corporations in all the three regions were financed from farm surpluses. In other words, our capital formation rode on the backs of our farmers. Why was farming so successful 60 years ago? The answers are simple:
· Access to small scale credits
· Inputs (fertilizers, herbicides etc)
· Extension services.
Now we have better tools, better agricultural science and technology, and greater ability to process. With determination we can succeed.

POWER
Nigerians’ favourite talking point and butt of jokes is the power situation in our country. But, ladies and gentlemen, it is no longer a laughing matter. We must and by the grace of God we will put things right. In the three years left for this administration we have given ourselves the target of ten thousand megawatts distributable power. In 2016 alone, we intend to add two thousand megawatts to the national grid.
This sector has been privatized but has yet to show any improvement in the quality of service. Common public complaints are:
• Constant power cuts destroying economic activity and affecting quality of life.
• High electricity bills despite power cuts.
• Low supply of gas to power plants due to vandalization by terrorists.
• Obsolete power distribution equipment such as transformers.
• Power fluctuations, which damage manufacturing equipment and household appliances.
• Low voltage which cannot run industrial machinery.
These are some of the problems, which defied successive governments. In our determination to CHANGE we must and will, insha Allah, put a stop to power shortages. Key points to look at here are:
· Privatization. We are facing the classic dilemma of privatization: Public interest Vs Profit Motive. Having started, we must complete the process. But National Electricity Regulatory Commission (NERC), the regulatory authority, has a vital job to ensure consumers get value for money and over-all public interest is safe-guarded.
· Government to fast-track completion of pipelines from Gas points to power stations and provide more security to protect gas and oil pipelines.
· Power companies should be encouraged to replace obsolete equipment and improve the quality of service and technicians.

MANUFACTURING

It grieves me that so many manufacturing industries in the country today are groaning and frustrated because of lack of foreign exchange to import raw materials and spare parts.
Painful though this is, I believe it is a temporary phase which we shall try to overcome but there are deeper, more structural problems bedeviling local industries which this Retreat should identify short and long-term answers to. Chief among these problems are:
· Inadequate infrastructure:
Power
Roads
Security
leading to increase in costs of making Made-in Nigeria goods pricier than imports
· High Cost of Borrowing Money:
Manufacturers Association of Nigeria (MAN) has been hammering on the fact that high lending rates make manufacturing unviable and unprofitable.
· Lack of Long Term Funding:
The Nigerian Capital Market has not completely recovered from the 2008 worldwide crisis. Banks’ funding sources are short-term in nature due to sources of the liabilities.
· Under-developed Science and Technology Research: As with Agriculture, Nigeria’s industries are in the main outmoded and industrial practices far behind those in advanced countries.
· Unions:
We need to protect our workers from exploitation, but unions must cooperate with entrepreneurs to substantially improve productivity and quality of products if we are to move forward.
· Smuggling:

Need I say more?

Recommended Actions on industries are:
· The infrastructure Development Fund should be fast-tracked to unlock resources so that infrastructural deficiencies can be addressed.
· There should be more fiscal incentives for Small and Medium Enterprises (SMEs), which prove themselves capable of manufacturing quality products good enough for export.
· Central Bank of Nigeria (CBN) should create more incentives and ease credit terms for lending to manufacturers.
· A fresh campaign to patronize Made-in-Nigeria goods should be launched. Example: all uniforms in government-sponsored institutions should be sourced from local factories.

HOUSING
Some estimates put Nigeria’s housing deficit at about sixteen million units. In our successful campaign to win the general elections last year our party, the APC, promised to build a million housing units a year. This will turn out to be a very tall order unless:
· The Federal Government builds two hundred and fifty thousand units. The 22 APC States together manage another two hundred and fifty thousand units.
· We invite foreign investors together with local domiciled big construction companies to enter into commercial housing building to pick up the rest.
· The most frequent public concerns brought to my attention are three-pronged:
1 Severe shortage of housing
2 High rents
3 Unaffordable prices for prospective buyers especially middle and low-income earners.
· In addition, red tape, corruption and plain public service inefficiency lead to long delays in obtaining ownership of title documents.
· Again, there are no long term funding sources for mortgage purposes.
These hurdles are by no means easy to scale, but we must find solutions to the housing deficit. This Retreat might start by looking at the laws.
· Laws
The relevant laws should be reviewed to make the process of acquiring statutory right of occupancy shorter, less cumbersome and less costly. Court procedures for mortgages cases should make enforcement more efficient. Ministries of Works and Housing should upgrade their computerization of title registration system for greater efficiency.
· Mortgage Institutions. Achieving affordable housing for all Nigerians will require the development of strong and enduring mortgage institutions with transparent processes and procedures.
· Mortgage Re-financing Company. This institution when fully operational should ensure adequate support for mortgage financing.

HEALTHCARE

Last of the four areas that time will allow me to say a few words, but by no means the least, is healthcare. In my inauguration speech last May, I remarked that the whole field of Medicare in our country needed government attention. Dirty hospitals! (Few sights are more upsetting than a dirty hospital), inadequate equipment, poorly trained nursing staff, overcrowding. The litany of shortcomings is almost endless.
Sound health system is part of the prerequisites for economic development. Nigerians travel abroad, spending an estimated One Billion US Dollars annually to get medical treatment. Despite huge oil revenues the nation’s health sector remains undeveloped.
In attacking the challenges of this sector we could start with
· More funding for health centres to improve service delivery. World Bank and World Health Organization (WHO) could be persuaded to increase their assistance.

· Strengthening public health propaganda in primary prevention:
* Environmental sanitation
*Stop smoking
* Better dieting
* Exercising

And secondary prevention:

Screening and early diagnosis of diseases
· NAFDAC to intensify efforts on reducing or stopping circulation of fake drugs in Nigeria.
· Ministry of Health should work closely with the Nigerian Medical Association to ensure that unqualified people are not allowed to practice.

Finally I urge participants to learn from the array of experts and resource persons and learn from the shared experiences and perspectives to understand how other countries have transformed their economies and livelihoods of their people for the better. It is also the government’s expectation that this Retreat will highlight the respective roles and responsibilities of each tier of government in adopting and implementing agreed policy initiatives.
I hope this Retreat will come up with practical, viable solutions and recommendations as we chart a course for our nation in this turbulent domestic and international economic environment.

Thank you.

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Financial Discipline… Making Every Naira Count. - Kemi Adeosun

Discipline... it is all in the detail.

Economists have long found Nigeria to be something of a conundrum. The macro picture has always appeared compelling - large population, oil reserves, mineral reserves, endless tracts of arable land, land and sea borders for regional domination. Indeed the absurdity of our underperformance is only surpassed by our ability to accurately quantify our losses and missed opportunities.

In the short period that I have been privileged to serve as Minister of Finance, I have observed that even the most basic systems and controls over the management of our resources are in dire need of strengthening. While we are regaled with and shocked by details of amounts stolen, diverted or wasted, we must face the cold reality that such acts are facilitated by weaknesses in our systems. Even if we successfully prosecute and jail every looter, ghost worker and other economic saboteur, there is every risk that those caught will only be replaced by persons who are just as bad, or worse - unless we radically strengthen our systems and institutions.

Our President’s brave and committed fight against corruption and waste is as much an economic crusade as it is a moral one. The objective is not just to stem the corruption and loss but to execute an economic plan to channel those monies into much needed areas that will support and reposition the economy. In short, the fight against corruption is not about “retribution” and meting out punishment, it is about releasing funds for our economy. I am humbled to be part of the ongoing work on recovery and can report that the urgency in the work, especially our interface with nations where our money has been stashed, is propelled by our need for funds to invest into our economy.

Our economic plans are not about austerity and frugality; if that were the case then we would not be attempting an expansionary budget. We could have pursued fiscal consolidation and maintained 2015 budget size, and then introduced severe public spending cuts to balance the books by laying off workers and cutting projects. Had we done so, we would by now be the darling of the IMF and other multi-laterals.

Conversely, we are undertaking an ambitious counter cyclical strategy to stimulate our sluggish economy and expanding government spending with a focus on infrastructure, the true catalyst for economic growth. This will have contractors returning to site and re-engaging workers, it will see new projects commencing, arrears released and economic activity reinvigorated across the nation. We plan to take advantage of low global prices for commodities and contract prices. Existing contracts are being renegotiated downwards, with significant savings recorded and new projects priced to reflect current commercial realities. Our spending stimulus is private sector driven, supported by a robust procurement system that will see permanent local capacity built in a number of sectors including oil and gas, housing construction and agriculture. However, and this is the key differentiator, we plan to spend in a disciplined manner that will extract the maximum value for every naira spent.

The process of building the internal control framework to support this need for disciplined spending has begun in earnest. Our Efficiency Unit has reviewed four years of detailed expenditure data to identify trends and is already negotiating volume discounts that appropriately reflect the buying power of government. Personnel remains our largest cost. In addition to the BVN driven cleaning of our payrolls that has so far removed 23,000 fraudulent entries, we have initiated significantly stronger controls over our payroll. These efforts will exert a constant downward pressure on personnel costs until such a time as we have assurance that every payment is accurate and valid. A similar process is now commencing in Pensions. The N160 Billion spent monthly on personnel and pensions related costs demands this as an absolute minimum.

The revenue focus is non oil. We are revisiting historical decisions that are no longer in the best interests of the national economy. The establishment of various Boards and Parastatals to undertake the operational and revenue generating business of government was a well-intentioned attempt to provide separation from policy makers. However, as the economy has grown, so too has the revenue earned in these agencies and their financial autonomy has grown in a manner that no longer fully serves the public interest. Port charges, maritime charges, airport landing fees, visa charges, passport charges, telecoms licence fees, among many others, must be tracked and accounted for. While the Fiscal Responsibility Act was designed to provide control, actual compliance has been poor. The result has been leakage on a staggering scale, as findings from our ongoing audits suggest. This is a serious issue. The upside is a significant revenue opportunity which the TSA implementation has given us sight of, and which we are supporting with a proactive drive for improved accountability.

At the same time, our traditional revenue sources are being supported to be more effective. In Customs, we are making the necessary investments in container scanners and other equipment required to improve collection efficiency. This is combined with the results of a compensation survey which will see the introduction of performance related pay, to reduce corruption and create an alignment of interest that will enhance revenue generation. With FIRS there is a well-defined plan to enhance compliance by widening the tax net. Using data to drive tax compliance, we will ensure that the tax regime is efficiently administered and that everyone pays their fair share.

There is a need for disciplined and effective system of managing our financial resources to ensure maximum value. We will no longer measure performance by the size of our budget or the amount disbursed; we must measure by the impact of that expenditure on the lives of Nigerians. To measure and manage this we have already made some key changes in the way funds are released. We have abandoned the old system of capital releases that funnelled a proportional share of available funds released to each Ministry, Department and Agency. We have a robust system in place where funds are tied to specific outcomes as documented by each agency. This is being supported by follow up reviews to ensure implementation.

As Benjamin Disraeli once said, “We are not creatures of circumstance; we are creators of circumstance.” I am firmly convinced that Nigeria is on the right path. The path of discipline will confront some age old destructive habits. It will challenge some unwritten rules, and I personally will step on some highly placed toes on this journey. All this I am fully prepared for, and so I do not expect nor do I particularly want to be popular.
However, I will act in the best interest of all Nigerians to ensure that we build the economy that we desire and richly deserve.

This is the second of three articles by Mrs. Kemi Adeosun, Minister of Finance, Federal Republic of Nigeria.

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Nigeria: The Economic Upside
By Kemi Adeosun

Nigerians voted for change and to attain that change there is a need to do things differently, in the recognition that doing what we have always done will only result in more of the same. That change has started with the vital offensive against corruption, which has had a huge and adverse effect on our economy. Much of the debilitating underinvestment in our infrastructure that has handicapped our economic growth, has arisen because funds were diverted to enrich a few at the expense of the wider populace. At the lower levels, the waste, inefficiency and culture of non-performance have, like a financial cancer, eaten away at our core institutions. We are already beginning to see change. The slide towards self-destruction has slowed down but we must now work collectively to ensure that we exploit the upside from our situation.

Globally the downturn has hit all nations, rich and poor alike. The manner in which governments have intervened to protect their economies have been diverse and innovative. What is abundantly clear is the fact that the previous consensus about what is best for the global economy is rapidly changing. There is a concerted move towards individualism rather than collectivism. The new normal for the global economy is that there is no normal, each nation must painstakingly work out the best path to follow.

For Nigeria, we believe that the best path to follow is to invest in infrastructure that will unlock the potential in the non oil sectors. We can transition from being a commodity economy to an industrialised, regionally dominant one. Oil is important but clearly, oil it not enough. Iran is a very recent and relevant example of living without oil. The sanctions that embargoed Iran’s oil led to the development of robust petrochemical and other export industries that enabled the country to survive. Iran survived without oil, made tough decisions and is now being feted by investors as the next growth story.

The focus of our economic policy is to redress the infrastructure deficit, unlock the rich diversity in the economy with a determined and focussed turnaround programme. For us it would be a tragedy to have endured so much pain and not emerge better and stronger. The provision of a spending stimulus to the economy is critical to releasing the upside in the economy. Investing specifically in Power and Transportation will release the opportunities in solid minerals, manufacturing and agriculture.

However, government spending alone is insufficient to bridge the infrastructure gap and there is a need to embrace private capital to provide additional impact. We are at an advanced stage of reforming the process for Public Private Partnerships to provide a seamless pathway to attracting much needed private, financial and operational input to service delivery. Private capital brings more than financial resources; it also brings discipline and best practice, creating a benchmark against which the utilisation of public money can be measured.
It is important to link the fiscal housekeeping initiatives that we have started with the wider economic strategy. Specifically, questions around the focus on corruption and the elimination of ghost workers, controlling inefficient spending and preventing revenue leakages, need to be evaluated in the context of how it impacts our ability to stimulate the economy. We have been increasing our level of borrowing annually, and much of that is used to fund recurrent spending. Indeed in 2015 just 10% of spending went to capital items. We spent more on travel, training and stationery than on roads. No nation has ever developed with such consistent underinvestment in capital.

Growing the economy at a rate that will address the employment needs of our huge population requires a fundamental change in how government collects its revenues and spends. The 2016 budget is deficit financed; and the fiscal housekeeping which is aggressively blocking revenue leakages and reducing costs is firmly aimed at ensuring that the borrowed funds are channelled into capital projects, rather than seeping through an inefficient financial management system. This is not only prudent economics but it is a moral necessity, since these borrowings will be repaid by future generations. Therefore, while we focus fully on the macroeconomic indicators; we must and will continue to focus on the micro factors which collectively shape and determine the larger picture.

The road map to attaining our objectives is a tough one, and we may endure the financial pain for longer than we would prefer, but the upside is that we have actually already endured the worst part of the adjustment cycle. The outlook for oil prices is looking more positive but we are fundamentally determined to ignore oil. One word that will resonate across all that we do in government is ‘Discipline’. Financial discipline is going to be a game changer in shaping the future of Nigeria’s economy.

Our focus will make sure that ‘every naira counts’ irrespective of its source. The government is ready and determined to lead this crusade of financial responsibility. The big questions are:

• Is the populace ready to do the right thing in their respective areas of operations?
• Are we willing to be frugal and conservative in expenditure?
• Are we as custodians of the nation’s wealth willing to manage the resources entrusted to us with care, knowing that someday we will be called to account?
• Are we willing to confront those who mismanage our collective wealth regardless of the consequences?

•
Nigeria stands on the threshold, daring to move into previously uncharted territory through identifying and embracing novel economic and fiscal policy stratagems that will release our considerable upside. We are for innovation to create a new workable path, courage, and discipline to implement and build a resilient economy that is not controlled by the oil price.

This is the first of three articles by Mrs. Kemi Adeosun, Honourable Minister of Finance, Federal Republic of Nigeria.

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