By Omoh Gabriel, just back from Lima
Nigerian delegation to this year’s IMF/World Bank meetings held several meetings with World Bank/IMF Officials, colleagues from across the globe and institutional investors that picked interest in Nigeria. The delegation led by CBN Governor, Mr. Godwin Emefiele and Permanent Secretary, Ministry of Finance, Mrs A. M. Daniel-Nwaobia had back to back meetings. At the end, they explained what transpired inside the various plenary sessions
These meetings are biannual statutory meetings of the Finance ministers and Central Bank Governors, from over one hundred and eighty countries of the world. We held meetings with some international banks who are thinking of developing some relationship with the Central Bank as well as Ministry of Finance and the Federal Government.
We also held meetings with some rating agencies to provide insight into the Nigeria economy and what we are doing to support and grow the Nigerian economy.
Global economy projected growth
Basically what you can say are some of the main issues facing the global economy is that the world finance leaders as well as the Governors of central Banks came to the conclusion to the point where the global growth was further revised downward, when the Spring Meetings were held in April, 2015, global growth was projected at 3.8 percent. The Growth was revised downward to 3.1 per cent.
For Africa economies in April when we held the Spring Meetings, global growth was projected at over 5 per cent but at this meeting, global growth for 2015 has been revised downward to 3.5 per cent and for 2016 growth for Africa has been projected at 4.2 per cent.
What this tells us is that the slow down as a result of drop in commodity prices or the end of the quantitative easing to the extent that the United States is already contemplating raising rates through assets as well as the geo-political situation has affected many economies to the point that they are slowing down and in some cases some of the economies have also gone into recession.
Countries specific advice
The meeting also concentrated on what can be down to revise the trend and what kind of specific solutions can be provided for the different economies to turn their situations around. Basically, we find that for those economies that are really affected by the drop in commodity prices, and in this case Nigeria, basic solutions suggestions that came up were first that there is the need for Nigeria to diversify its economy in this case from oil or from commodity prices.
This we are already doing and we seize this opportunity to thank Mr. President for the support he has given for most of the intervention that he has made in diversifying the economy away from oil. That has given credence to what we are doing to catalyse the Nigerian economy by making available intervention funds to support agriculture, micro small and medium enterprises, and other various interventions, that we are putting in place to support the Nigerian economy.
Another solution that came up was that five countries that are also affected by commodity prices and other external shock factors should adopt country specific measure that could help address their problems. That further gives credence to the specific option that we have taken, not to continue to adopt an indeterminate depreciation of the Naira. So we will continue to monitor the situation as I have always said and to ensure that we refocus our minds and refocus everything that we do, to the extent to see what we can do to continue to preserve our reserves and achieve some level of stability in the exchange rate.
Permanent Secretary Ministry of Finance
We also had other meetings like the governor said, with NIGAL and IFC; they are already involved in some of our programmes in Nigeria. We told them about some of the reforms we are under taking especially in the area of building infrastructure, because one of the key gap we have noticed is the issue of infrastructure deficit, government is already thinking of setting up an infrastructure fund and is looking for how to raise the fund, So we have discussed with IFC and NIGAL that when we are able to identify some of these infrastructure projects, we get in touch with them so that they will participate in the projects.
We all need to know that it is not only Nigeria that is going through this financial difficulty, our engagement with other ministers of finance, we noted that everybody is struggling, and are coming up with solutions and strategies, to weather the storm for now, and it was agreed that one major way to do it is by way of mobilising domestic resources. And this brings us to the issue of our taxes which is a major issue in our country. We all know the reforms that are already going on in the tax system.
We want to widen our tax base and the government engaged Mackenzie, to work with FIRS to see how Nigeria can shore up its taxes, and in our engagement with the World Bank officials also we sought assistance so that they will work with us so that we can improve on what is already on ground. We are also looking at other areas of revenue generation; our main concern is how do we shore up our revenue? We are going to engage further with the World Bank, how to give capacity support to the Customs, because Customs is one of the key revenue generating agency of government so that we will be able to build their capacity and see how they can add to the revenue base.
World Bank/IMF had warned on this and advised countries to reform, Nigeria has been carrying out reforms. What would you say is the problem?
Yes, they have warned on the need for countries to reform, in Nigeria we have been adopting reforms, this started about two years or more ago, basically the prime issue from the fiscal side, have been the fact that we tried to see how to expand our tax base, so as to improve on revenue, and if you all recall like the Permanent Secretary mentioned, last year the Federal Ministry of Finance engaged Mackenzie; last year it raised about N75 billion as revenue incremental, in 2015, they have been given a target to raise it to a minimum of N150 billion as a way of improving our revenue so as to see how we can shore up our revenue and rely less on oil revenue.
Investors pulling out from frontier markets
Well it is true and I must tell you that in the third quarter of this year alone, I read in a report that said that almost about $48 billion was the capital outflow that left the frontier markets. So, what that means is investors are pulling out their funds and beginning to look at places like the US where they feel that there are opportunities and there is fear that the drop in commodity prices will affect the economies that depend solely on commodity that is why we are saying it is time for us to think as nationalistic as Nigerians that we have to carry our cross by ourselves.
We have to solve our problems by ourselves, nobody from outside is going to solve our problems for us. We will continue to appeal to all Nigerians to embrace, support some of the measures and policy we are putting in place, because all of them are meant to see how Nigeria can diversify the economy from excessive reliance on oil.
We have seen some improvement in the power generation. It is also true that the willing capacity in the transmission grid is limited and I am also aware, we have been in discussion with government. Efforts are being made to encourage investment in the transmission grid so as to improve the capacity of transmission grid to be able to absorb the energy that is generated, so that more power can get to Nigerians.
On Nigeria sliding into recession
Nigeria is not sliding into recession, we have had two quarters of slow growth and like I told you even the World Bank has revised the global growth outlook from about 3.8 per cent to 3.1 per cent at this meeting. Africa has been revised from above 5 per cent to 3.75 per cent at this meeting; it is even projected at 4.5 per cent in 2016.
Everybody is affected, what we are saying is that because we have seen two successive quarters of slow growth, that we all need to embrace the policies that we are putting in place both by the monetary authorities and fiscal authorities so that we can see a reversal, so we can see increased growth not slowing growth. So, no one has talked about the fact that Nigeria is going to go into recession. We are only saying we need to work hard to begin to reverse the trend so that we can move toward positive growth rather than slowing growth.
Subsidy has been in the front burner, we are still debating it whether subsidy should be removed or not, just like the governor said every country is dealing with the issue specific to it, you have to take into consideration various issues before you remove subsidy, it is a political issue, you know we have a new government that is studying the issue. I think with time we will know the position of government on that.
A lot of reforms are in the pipe line, you have seen the issue of the Treasury Single Account TAS which is being fully implemented now and we believe that with time we will see improvement in our revenue; leakages that have been in place will be eliminated. Another major issue I know that was discussed at this meeting like I said is the issue of investing in infrastructure which government is already looking into, discussing it, government is thinking of setting up an infrastructure fun to develop infrastructure that will add value to the economy that will create jobs.
We have already seen what is happening in the power sector like the governor said and we know what power can do if we are able to get the power sector right the effect it will have on our economy so we are looking at the issue of power, looking at agric and its value chain, we are looking at the mining sector, we discussed these with some of the institutions we have engagement with here and when we get home we are going to further reengage with them to see how they can help us especially in the area of capacity building for us to be able to come up with fiscal policies that will help us in the development of our economy.