She said as a result, the World Bank and the International Monetary Fund must seek means to embed savings in national constitutions devoid of political manipulations.
TheCable reported that Okonjo-Iweala spoke on the topic: ‘Inequality, growth and resilience’ at George Washington University, United States of America.
The two-time minister recalled that Nigeria was able to save $22bn under former President Olusegun Obasanjo, which she noted saved the country in 2008 during the global economic meltdown.
Citing the Chilean example, she said, “We tried it in Nigeria, we put in an oil price-based fiscal rule in 2004 and it worked very well.
“We saved $22bn because the political will to do it was there. And when the 2008/2009 crisis came, we were able to draw on those savings precisely to issue about five per cent of the Gross Domestic Product as fiscal stimulus to the economy, and we never had to come to the bank or the fund.”
She added, “This time round, and this is the key now, you need not only to have the instrument but you also need the political will. In my second time as a finance minister, from 2011 to 2015, we had the instrument, we had the means, we had done it before, but zero political will.
“So, we were not able to save when we should have. That is why you find that Nigeria is now in the situation it is in, along with so many other countries.”
On solving the problem of political will and manipulations, she said, “That is the question that I ask; what do we need to do to these countries to save over a period of long accelerated growth?
“We need to devise mechanisms not just that are good technically, but find a way to either embed them in the constitution or find a way to separate them from the political manipulation so that these countries can survive over time.
“To build resilience, African countries need tools and mechanisms, and it is doable and we need to interrogate ourselves why we have not done it.”
Okonjo-Iweala added that manufacturing was critical to growth in Nigeria and the rest of Africa, quoting manufacturing at just 11 per cent of the continent’s Gross Domestic Product, and nine per cent in Nigeria.
“I do not believe that we can be resilient, except if we can encourage manufacturing, even on the goods we consume, services, entertainment industry and agriculture.
“I think these are the kind of questions that policymakers struggle with on a daily basis, and that is what we are going to answer to get resilience.
“If we don’t get these mechanisms, we politicise them, find ways to transform the base of the economy and create jobs, including in manufacturing, I believe we are going to go into this looming deceleration that is being talked about.”
Meanwhile, the Managing Director of the International Monetary Fund, Christine Lagarde, on Thursday urged the Federal Government to seek help from international institutions, including the IMF, on the Nigerian economy as the sharp drop in oil price continued to batter Africa’s largest economy.
Speaking at the IMF in Washington DC, United States, Lagarde said Nigeria needed to be open-minded on foreign exchange and swiftly approve the 2016 budget.
She said, “Our recommendation is that Nigeria seeks help from the international institutions that can best help
“Second, that Nigeria is open-minded in using flexibility of the exchange rates in order to absorb some of the shocks. We believe that this is more efficient than to have a list of products that are barred from being imported to the country.
“Third, we believe that it is really important that the budget be completed, decided and approved, and we stand ready to help Nigeria if it wants to seek our help.”
Lagarde, who was in the company with the IMF First Deputy Managing Director, David Lipton, and spokesperson, Gerry Rice, also called on Nigeria to diversify its economy, adding that oil prices might be low for longer.
TheCable quoted her as explaining, “I believe, having visited Nigeria in January, that it is also really important that the country looks at diversifying its economy, because it cannot rely exclusively on commodity prices only, particularly oil, because it might very well stay low for longer.
“Nigeria is full of energy, smart people, and can really transform some of its activities, including the agricultural sector, where there is just too much by way of imports, when there could be a lot of transformation in Nigeria and local consumption.”
She also spoke on the viral revelations by the Panama Papers, calling for international cooperation, while assuring the world that the IMF would be “happy” to play a role in resolving such worldwide issues.
Lagarde reiterated that countries must reinforce their commitment to durable global growth and employ a more potent policy mix.
“A three-pronged approach with monetary, fiscal and structural actions can work as a virtuous trinity, lifting actual and potential growth, averting recession risks, and enhancing financial stability,” she said.
Many local and international economic experts have called on the Central Bank of Nigeria to adopt a realistic exchange rate by adjusting the value of the naira against the US dollar.
The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said Nigeria needed to adopt an exchange rate policy, as the current approach was not sustainable in the long run.
“Rationing the forex and refusing to adjust the exchange rate peg is a slow but painful death approach to currency policy. The approach we are adopting will continue to inflict problems on our factories and companies,” the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.
Analysts at Afrinvest West Africa Limited, an investment bank and research firm, said the naira started falling drastically at the parallel market when the CBN introduced foreign exchange restrictions.
They argued that there was a need to review the list of the items banned from the official forex market.
However, President Muhammadu Buhari has insisted that he will not devalue the naira, saying he saw no benefit that such an endeavour would bring to the poor.