Positioning Nigeria for a Prosperous Future

The Honorable Minister of Finance, Kemi Adeosun writes on realigning the Nigerian Economy on the track of fiscal growth, diversification and sustainability

Since the middle of 2014, when the price of crude oil fell dramatically, Nigeria’s finances became challenged. This is not hard to explain: we’ve historically depended on crude oil for as much as 70 per cent of government revenues, and 90 per cent of foreign exchange earnings. The outcome – pressure on government’s finances – was by no means unusual. A similar fate befell most oil-rich countries around the world.

Where Nigeria possibly stood out was in the fact that during the preceding three years when oil prices were in excess of 100 dollars per barrel, the Government did little in terms of saving and investing for the future. Our Sovereign Wealth Fund, which was established in October 2012 with just US$1 billion, did not receive any further inflow during the oil price boom. Instead, billions of dollars were squandered through corrupt oil and defence contracts. It is a terrible thing for a country to fall on hard times without a savings buffer. There was nothing unexpected about our downturn. It was the inevitable result of the choices we made or didn’t make during the years of boom.

What is remarkable, yet not as talked about, is the way we have worked so hard to exit the recession, reset the economy and reposition it for a brighter future for the present and future generations of Nigerians. The Administration of President Muhammadu Buhari is laying the foundation for the kind of economic growth that makes a real impact in the lives of citizens.

The downturn has inspired unprecedented levels of fiscal responsibility, in line with President Buhari’s determination to fight Nigeria’s endemic corruption.

Shortly after taking office, he issued a Presidential order mandating the immediate implementation of the Treasury Single Account (TSA) system, consolidating thousands of government accounts scattered across deposit money banks into a unified system that is transparent and easy to centrally monitor and track. Under the old system, it was common for government accounts to be converted into personal use, but under the TSA this is impossible. Also, the proliferation of accounts encouraged rent seeking rather than questionable practices.

Budgetary reform has also taken a lot of our time and attention. We are pioneering the use of software to prepare our annual budgets, which allows greater transparency and the ability to track changes.

We have insisted on using biometric verification in the deployment of our Social Investment Programme, which includes a Job Scheme for unemployed graduates, a School Feeding Scheme for Primary School Pupils, a Conditional Cash Transfer scheme targeting a million of our poorest citizens, and a Micro-Credit scheme for artisans, farmers, and traders. In the past the Social Investment payments would have been done as cash handouts.

A similar insistence on biometric verification for the federal payroll has resulted in the detection of tens of thousands of bogus beneficiaries – or ‘ghost workers’, as we often refer to them, in Nigeria – and savings running into billions of naira every month.

We are pursuing unprecedented cooperation with foreign governments and powers, as part of our transparency and anti-corruption drive. For the simple reason that a disproportionate amount of public funds looted in Nigeria end up in the United Arab Emirates’, Nigeria has signed bilateral agreements with the UAE Government on extradition, exchange of information, and repatriation of stolen public funds.

One strong demonstration of our political will has been a Whistleblowing Scheme we launched months ago that empowers citizens to report public corruption. The impact in terms of recoveries has exceeded our expectations. The tighter rein on public finances allowed us invest US$500m in our Sovereign Wealth Fund, during a recession.

A lot of the work we have done over the last two and half years has been focused on dismantling the old ways of doing things, rebuilding them, and empowering and fortifying our institutions with technology to block loopholes, discourage abuse, and prevent a relapse into the destructive ways of the past.

The new Nigeria we seek will not happen without this kind of foundational reform that imposes on us new ways of thinking and of doing things. The early results are already being seen. A concerted focus on agriculture has seen our rice imports from Thailand dropping by 90 per cent between 2015 and 2016, and replaced by locally grown variants.

As oil has let us down, we have started to do what we should have done decades ago, invest in agriculture and mining. Throughout the recession, agriculture recorded healthy growth. As we emerge from the recession, its impact is certain to multiply and position Nigeria for a prosperous future.

Let me point out that the most important elements of any reform effort tend to be the least flamboyant. We are confident that in the months and years ahead, Nigerians and the world will see the full impact of the foundational resetting that the Buhari administration has been focused on since 2015.

There is of course a lot of resistance to reform, by vested interests within and outside the system. But we are not fazed. The work of reform goes on. It is, to borrow from the Nigerian novelist, Chinua Achebe, morning yet on Creation Day. Not very long from now, Nigerians and the world will look back on this recession we have just emerged from, and realise that it was the turning point in Nigeria’s journey to true growth and greatness.

Kelvin Emmanuel

About Kelvin Emmanuel

The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510. The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn. Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.