As Nigeria battles the twin shocks of falling oil prices and the challenging health crisis due to the coronavirus global pandemic, its economy has been forecast by the IMF to contract by as much as 5 percent in 2020. This has spurred policy makers into a desperate search for sustainable ways to manage the situation. In this exclusive interview with BusinessDay’s Editor Patrick Atuanya, and General Manager, Business Development, North, Bashir Ibrahim Hassan, Nigeria’s minister of finance, budget and national planning, Zainab Ahmed, who is generally believed to have been exhibiting rare brilliance, patriotism and humility in discharging her duties, speaks on President’s Muhammadu Buhari’s plan to salvage the economy of any further impending crisis.
As the chief manager of the Nigerian economy, planner and custodian of the nation’s treasury, what is this administration doing differently from the previous administration in terms of planning for sustainable economic development for the overall benefits of the Nigerian economy?
Since his first tenure, President Muhammadu Buhari has committed to Nigerians that he would be concentrating on the fight against corruption. When he was campaigning for the second term, he made the same promises. So, I will say you cannot divorce his first from the second term as it is a continuation of the commitment of the president.
During the first term, we developed the Economic Recovery and Growth Plan (ERGP), which we have implemented till date. The ERGP is supposed to expire this 2020, the same time the Vision 2020 is expected to expire as well. So we are developing a new national plan that will be a successor to ERGP. It will still be borrowing from the principles of the ERGP.
The ERGP was anchored on the philosophy of partnership with the private sector. It also had key implementation priorities, including agriculture and job creation, that remain relevant today, tomorrow and next 20 years.
The plan also commits to enhancing the efficiency of the power and the petroleum sectors. These are still very relevant today.
We also committed that we will develop and enhance the manufacturing sector with a special focus on the small and medium-term enterprises. That is still relevant today as it was at that time.
There were several major cross-cutting issues which the ERGP committed to; for example, using technology to enhance governments processes and drive the development of the economy. These are still very relevant today.
Also, enhancing and developing human capacity. We have very low capacity indices in terms of health and education. That was a commitment in the ERGP and it is still a commitment today. So, this new plan is going to be drawing from those main principles and philosophies that were detailed in the ERGP.
What will be different is that we will be detailing the implementation of these new plans and we have already started.
Two weeks ago, we got the approval of the federal executive council for the Economic Sustainability Plan (ESP). This is a plan that is for 12 months, designed to help improve the economy and also help our capacity in reaching the health challenges that we are facing today as a result of the Covid-19. It would also help in steadying the economy so we don’t have a deep crash because of the crash in crude oil prices.
It was approved at the end of June but took effect in July and it is expected to run through to next year.
The ESP was developed through an effort that was first of all set up by a steering committee chaired by the Vice president and a couple of ministers as members. Later on, we added more ministers because we need to look into their sectors.
The plan has been fully cost with a full detailed implementation plan. And that is the plan that the Medium-term expenditure framework will take as well.
That is different from the ERGP. The ERGP didn’t have a detailed implementation plan; it didn’t have a costing associated with it. When you cost a plan, then you will be able to implement accordingly. Like the ESP, it cost N2.3 trillion. We were able to identify N500 billion which the president approved out of the government special account; then we now have N1.2 trillion that will be funded through the Central Bank intervention funds that are going out to the private sectors at a very low rate. Also, there is the component that would be funded by other sources, including multilateral sources and possibly the private sector, to the tune of N440 billion.
That is the difference. When you do a plan and you cost it, you have a better chance of fully achieving its implementation. But the principle and the philosophy are the same.
We have a lot of Nigerians that are living in difficult and challenging situations. We have more people who have lost jobs due to the Covid-19 pandemic. So, the ESP is trying to create jobs by going into very large public works, construction of rural roads that would allow us to move goods from farms to markets.
The building of roads creates a lot of jobs and it has a very long value chain effect. Our commitment is to build a lot of rural roads to link farmers to market and bring into cultivation between 20,000 to 100,000 hectares of new farmlands. Our target is to get more people back to their farmlands as soon as possible.
Even as we have achieved self-sufficiency in rice, we also have the target of achieving self-sufficiency in wheat production, because it is still one of our largest imports. We want to cut down on spending foreign exchange to import it. This will enable us concentrate on a few value chains across the whole of the value chain.
We have also designed the ERGP to create mass housing. The target of the ERGP is to create 300,000 houses at low cost, and 80 to 90% of the material used in their construction will be local.
These houses will be in the states. The states will be providing the lands and some primary infrastructure. We will be providing the funds through the Central Bank interventions programme to small size developers, young groups of 3-4-5 architects and engineers.
So in a large housing program, you will have for example 1000 houses and each of these contractors will be given like 50 houses each to build. On that same site, we will have carpenters, block makers, welders and consultants that will be supervising them so that only those items that we can’t get locally will be imported in. With that, there will be a large value chain effect. It is not a white-collar job, but real physical work, that will push people to use their hands.
How do you assure Nigerians that the ESP will be different in terms of implementation than other plans in past years?
This plan is fully a national one. We have the federal government represented, as well as the states and the local governments. We also have different segments of the private sector represented.
The plan development process also has a steering committee which comprises very high level persons, some ministers and representatives of the private sector, including the Manufacturers Association of Nigeria (MAN).
Then we have a central working group, which is the second level, and then we have about 54 technical working groups representing various sectors like housing, women, roads, health, education and so on. The chairs of this working committee will be members of the central working group.
The mode of development itself is an improvement from what has been done in the past because we want to make sure that there is value. In each of those committees, we have legislators as members, either themselves as chairs of committees or those they nominate from the legislators to represent. Also, from each zone, we have six people nominated from the states hence, it is typically a national plan.
When you have a national plan that people can call their own, it has a higher chance of being successfully implemented. This is because you are not deciding as a federal government from Abuja that when I go to Zaria local government, I will build them a hospital. No, that is not needed because their priority might be a school and not a hospital.
Detailing how the plans will be implemented and cost is also important to the success of this plan. We are doing a long-term plan, which will go for about 30-40 years. We are waiting for the president to inaugurate the steering committee because they will be the ones to make that call.
But the detailed plan that I am talking about will be a 5-year one. So we have a long visioning document which will be a long term plan, but it will be detailed in 5 years and, of course, there will be an annual review for implementation.
When the vision 2020 was done, one of the things that were recommended was that it should be backed by law, but that never happened. When you back it by law, there is a chance that when a new government comes in, they won’t just change the main focus. But there is also a risk. If you say something that should run for about 40 years be backed by law, then take a clue from what happened this year with the Covid19. All those things that had been planned now needed to be changed. So if you put it into law, you will have that restriction, which is one of the things we are considering.
We might consider just passing into law the visionary documents and say we want to, for example, in terms of infrastructure, bridge our infrastructure gap from say 70 per cent to like say 50 per cent in the 25 years.
Or you want to move your revenue from 18 per cent revenue to GDP to 30 per cent revenue to GDP in the next 30 years. But in terms of the detailed implementation, if we cast it into law, it will hamstring your flexibility during implementation. So the steering committee that is made up of very high-level Nigerians will have to make that consideration, but our suggestions will be if we want it to be backed by law, it should be the visionary, not the detailed implementation. And, of course, we will see what happens since there will be lawmakers in the committee.
What are you seeing in the economy that is making the government optimistic? Also, do you think the government is doing enough with all these stimulus packages and commitment to the economy?
We got approval for a stimulus package of N2.3 trillion. For an economy that is as large as ours, if we can do a fiscal package that is around 10 percent of GDP, it will be better. But we are doing the best within the limitations that we have and that is why implementation is very important.
The National Bureau of Statistics (NBS) has already done an initial assessment that the economy could go into recession to as much as 4.2 per cent by 2020 but if we are fully able to deploy this N2.3 trillion, we might end up in -0.59 per cent. That is a bit fair. It means that, by the end of Q1 2020, we should have been out of the recession and back to steady growth. So the implementation of the ESP is very important.
Fortunately, the Nigerian economy has proven to be quite resilient. People tend to forget that even though we are called an oil-dependent economy, the oil sector only constitutes about 9 percent of our economy, meaning around 91 per cent of our GDP is the non-oil sector.
As the oil crashed, it has had some impact on the non-oil sector, but it was made worse by the impact of the Covid-19 due to the lockdown, which affected trade and services, some of the biggest drivers of our GDP. We are not under any illusions. That is why we came out to say we are going into recession, so that everyone is aware and takes precautionary measures.
The Q1 report was a good one, but when you compare it with Q1 2019, it was still deep. We expect Q2 to be much lower than Q1. If we don’t go into a negative trajectory by Q2, then that’s a plus because that was the worst time or if we go into negative growth shallowly, that would still be fine; and Q3 and Q4 will also be fine.
Even in our Federal Account Allocation Committee (FAAC), we kept being surprised because we were expecting a huge dip. The last FAAC we did recently, we saw a revenue of around N690 billion.
What was responsible for the boost in FAAC?
What happened was that, when oil and non-oil revenue dabbled, there were still many other stimulators that were acting as a stabilizer for the economy. The Federal Inland Revenue Service (FIRS) is also active in pushing, even though this is a time where you can’t push so much in terms of collection of taxes.
Sincerely, we have hope that we might even escape this recession, or, even if we slide into a recession, it will be a shallow one that will be easy for us to come out of. That is the target of the ESP.
One area we always hear a lot of worries about is the debt that has accumulated, increasing the debt service commitments that the government has to repay. How do we hope to manage ourselves out of these problems?
I want to challenge BusinessDay to take a critical look at all our projects. People just sit in their offices but do not know where these projects are.
I must say that we have major infrastructure projects situated across the country. Last week, we did a Sukuk signing on each of the four major roads across the six geopolitical zones. There are also ongoing projects that are now 100 per cent funded. These are works that are moving across the country.
Go to Apapa and see the roads Dangote is doing. There is also the 2nd Niger bridge. There is the Abuja-Kaduna-Kano road that is also going.
Four major airports have been fully rehabilitated, including those of Abuja, Lagos, Kano and Port Harcourt. Some rail lines are also functional, and all these projects were not available before.
There is Abuja, Kaduna, Ibadan, Lagos. There is the Ibadan to Kano which is also just picking up. There is the Itakpe-Warri rail line which is now able to move cargo from Itapke to Warri. A lot of major work is going on. I think the issue is that many people just look at their environment alone and feel nothing is happening.
But there are lots of projects that we have taken on that would drive growth, and that is what is different from what you have now compared to before. We need to make these developments now not tomorrow because it is these developments that will enhance businesses for them to pay more taxes to the government.
It is not that it is fun sitting down and just borrowing, it is carefully planned and we designed our budget in such a way for capital projects to be funded because the revenues are short. And there are capital projects across every zone as several major projects are going on.
What is the situation of the $22 billion foreign loans tied to various projects across geo-political zones?
It was the borrowing plan for 2016-2018, which is to the tune of $22.7 billion. It was finally approved by the national assembly. There are a lot of major projects. About $18 billion of that is major infrastructure projects that are going to be implemented.
Also, when you look at our borrowing costs, we are borrowing at a cost that is around 1-2 per cent. We have 20-25 years to repay these loans. I tell you, you can’t get any better than that.
What we did was to make sure that we are using the funds for projects that will have meaningful returns in the future. We are concerned about the level of borrowing because we are struggling with revenue so debt repayment is a task for us. We are paying and we have never failed in any debt service despite the difficulty.
What we are paying now is not a debt taken in the past 4-5 years but those taken 30 years ago. So we have added to it because the government is a continuous process. The thing is that we are so confident that we can show what we are doing with the money, that these are physical projects that are adding value to the economy and people can see.
Are we in the position to raise the $22 billion any time soon?
The borrowing plan is part of the requirement that before FGN borrows, it must get approval from the Legislature. The money is not something you are borrowing in one day. So to the lender, they want to ensure that you have full approval of the government. That approval will enable us to review and continue negotiation of the process. Also, we are not under any obligation to take everything. We take the ones that we will commit to carefully knowing that we are adding to the debt because, for anyone you take, you are adding you are also increasing your future debt repayment.
Do you have a communication blueprint inserted in the planning so that you have the buying of the Nigerian citizens?
We have a communication working group. We selected communication experts in that working group. Of course, their work starts from when you are developing the plans but the most important aspect is even when the plans have been done. As you are developing the plans, you need to also continue to communicate the process. So we have a communication workgroup and their responsibility is to develop a communication work plan during the development and after the developmental processes.
What are your major achievements as a minister of finance, budget and national planning? What legacies will you be leaving behind?
One of the first things I developed when I came on board was a strategic revenue growth initiative (SRGI). It’s a program that harnessed all the key priority interventions that needed to be implemented that will increase and expand our revenue base. We are implementing that and we are seeing some progression. Yes, the covid19 situation has set us back, but we are still moving forward.
The SRGI is a very important initiative that I have done. During our work, we developed for the first time in the last 20 years, a finance bill aimed at closing the loopholes that we have in about seven different fiscal bills that we have in the country.
One of the most important things for me is that we were able to reduce taxes for SMEs among several other things. There are about 87 provisions in that finance bill but, left for me, that is the most important one. The essence for me is that it allows these SMEs to retain money in their business so that they can grow their businesses and employ more people. We did that not knowing that the pandemic would erupt. What we did with the finance bill — in reducing taxes for SMEs then — is what countries are now doing in the wake of the pandemic.
Another thing for me was amending the budget cycle back to the January to December fiscal year. Again, for more than 13 years, our budget cycle has been distorted. Even though the government budget is small when you look at it to the economy at 10 percent of GDP, it has a multiplier effect for all of the economy – for both small and big businesses.
So I consider bringing it to what the constitution provided January to December as a major achievement, and we are working to ensure that it doesn’t change, and we will deliver on that.
Please tell us about the Treasury Single Account (TSA), because it has been a long time since we heard of it.
The TSA is doing very well. It helps us to see all of the government transactions — both revenue and expenditures. I must say it has been very useful in managing government liquidity and also managing the transparency of their operations.
On the back of the TSA, we have a transparency portal that is hosted on the website of the accountant general of the federation that will disclose payments that are made across different ministries and agencies from N5 million and above. You can access it as a public. You choose an agency that you want to see. You select any expenditure line item. That is also one of the unique things we have done.
It has also enhanced the transparency commitment of the president because transparency is a necessary part of accountability. So when people know that the whole country can see what they are transacting on and people can ask questions and answers must be provided, it sends a signal to them to sit up as whatever development they are making can be seen.
There is a proposed N15 trillion infrastructure company to leverage pension funds. What role will the finance ministry play in getting the pension funds to build all the infrastructure that we need in Nigeria?
It is still a work in progress. The CBN has announced it. Before then, we did skeletal work under NERC and we submitted it to the president on the need to commit some part of pension funds to invest in infrastructure.
We plan to make sure that we design debt instruments that are long-term because that is what pension fund administrators need, schemes that are safe with government guarantee behind them, so this money will now be available for government infrastructure and limit the need for us to borrow outside as we can use funds internally to develop our infrastructure.
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