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Sunday, October 24, 2021

Innovative Financing, Critical Enabler For Sustainable, Inclusive Development In Nigeria – Finance Minister

Given the link between poverty and insecurity, innovative financing is a critical enabler for sustainable and inclusive development in Nigeria, according to Mrs. Zainab Ahmed, Honourable Minister of Finance, Budget and National Planning.

Mrs. Ahmed, who recently delivered this year’s Nigerian Defence Academy (NDA) convocation lecture entitled ‘The Governance, Security and Development Nexus in Nigeria: Innovative Financing as an Essential Enabler’, explored the governance, security, and development nexus in Nigeria with a specific focus on the critical role that innovative financing must play; particularly against the backdrop of the COVID-19 pandemic, the 2020 drop in crude oil prices, and the recent increase in insecurity across the country. 

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The Commandant Nigerian Defence Academy, NDA, Maj Gen Ibrahim Manu Yusuf, presenting an award to the Honourable Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed at the convocation lecture

She noted that progress in critical areas (such as agriculture, human capital development, infrastructure, job creation and security) is severely constrained due to low revenues, high debt servicing, and limited financing options.

She reflected on the important nexus; and also discussed some of the innovative initiatives of this administration and specifically of the Ministry of Finance, Budget, and National Planning and its agencies that are aimed at ensuring financing for the country’s sustainable and inclusive development, particularly in the wake of the COVID-19 pandemic.

On her position that sustainable and inclusive development is the goal, Mrs. Ahmed stated: “At the core of the programs and projects under implementation by this administration is the attainment of sustainable development. By sustainable development, I mean ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’, a definition adopted by the United Nations (UN). It means development that is not only sustainable but is inclusive with the wellbeing of our citizens at its core. 

She noted: “This definition is in line with the Addis Ababa Action Agenda, the global framework for the Sustainable Development Goals (SDGs), which defines three dimensions of sustainable development: the promotion of inclusive economic growth, protection of the environment, and promotion of social inclusion. Goals 16 and 17 of the SDGs specifically address the goal of sustainable development. The former seeks to promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels while the latter recognises the need for a strong implementation framework and global partnerships to achieve this goal.

In her words: “The goal of attaining sustainable development across the African continent is further distilled in Agenda 2063, the African Union’s masterplan for the transformation of the continent. The first aspiration of the agenda is a prosperous Africa marked by inclusive growth and sustainable development with the second and third aspirations referencing a desire for good governance, peace and security. 

According to her, these continental and global commitments to which Nigeria is a signatory align with this administration’s short to medium-term development plans, which centre on economic, social and environmental sustainability issues. Yet, with sustainable development as the goal, several underlying conditions in our domestic environment must be established and maintained. Governance, specifically good governance, and security are critical enabling factors for sustainable development. 

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On good governance and security as precursors to sustainable development, Mrs. Ahmed noted that governance is a ubiquitous phrase in development circles and its definition varies across development organisations. “The United Nations Development Program (UNDP) defines governance as ‘the system of values, policies and institutions by which a society manages its economic, political and social affairs through interactions within and among the state, civil society and private sector.’ For the European Commission, ‘governance concerns the state’s ability to serve the citizens and refers to the rules, processes, and behaviours by which interests are articulated, resources are managed, and power is exercised in society, she also noted’.

“At the World Bank, governance is defined as ‘the traditions and institutions by which authority in a country is exercised for the common good’. The importance of governance in sustainable development is underscored by its selection as a special theme for the IDA 18 and 19 replenishment cycles of the World Bank Group. These replenishment cycles are the means by which development programs implemented by low-income country members of the group are financed. The ‘Abidjan’s Declaration’ which sets the framework for the IDA20 replenishment also prioritises peace and security as ‘prerequisites for a sustainable economic recovery’ following the coronavirus pandemic. 

Stating further, she said: “By placing the modifier, ‘good’ before the word governance it is implied that a specific type of governance is sought while another type, which we can call misgovernance, is to be discouraged. Rather than engage in an academic debate about the appropriate definition of good governance, I will take the liberty to simply define it as governance synonymous with the goals of sustainable development. 

On security, Mrs. Ahmed said that the concept of security is much easier to grasp as it affects the wellbeing of individuals, families, communities, and nation states. “However, it extends beyond the safeguarding of lives and property to the protection of computer systems and networks from cyber-attacks and the use of resilient and flexible strategies to respond to the unconventional tactics of asymmetrical warfare.

“According to the African Development Bank (AfDB), the annual global cost of conflict is estimated at $100 billion. Fragile and conflict-afflicted states are found to lag behind on most development indicators, experiencing higher levels of malnutrition, child mortality and lower school completion rates. As we all know, insecurity discourages investment, lowers productivity, and destroys livelihoods. Progress on the Millennium Development Goals (MDGs) was found to be slowest in fragile and conflict-afflicted countries and for this reason, human security is viewed as essential to the attainment of the SDGs. 

She further noted that a consensus has emerged recognising security as a precondition for sustainable development. “Defence and security agencies are an intrinsic and essential element of the governance structure of any nation with the level of security determining the sustainability of development. In the absence of security, the governance structures in a nation state are vulnerable to collapse, thus undermining sustainable development. 

“Thus, security and good governance are foundational and fundamental to the attainment of sustainable development. They form a critical part of the super-structure on which economic growth and development can be achieved in any country. 

Further looking at the poverty-insecurity-governance nexus: ‘the doom spiral’, she brought to bear the positions of world leaders and experts. “There is a near global consensus amongst world leaders, policy experts and academics declaring that the fight against poverty is essential to ensuring global peace, security and stability. A direct relationship exists between governance, poverty, and insecurity. 

“Poverty is a direct cause of insecurity, and insecurity in turn further exacerbates poverty and impacts governance. These mutually reinforcing phenomena have been coined the ‘doom spiral’; poverty is both a cause of insecurity and an outcome of it. 

According to the Honourable Minister, empirical analysis by renowned scholars such as Paul Collier has confirmed the causal link between poverty and conflict. “He cites that the biggest predictors of conflict are not ancient ethnic hatreds, political rivalries but rather weak economic performance, low incomes and an over reliance on natural resources. As economies prosper, and incomes increase, the risk of conflict decreases; for each percentage point increase in per capita income the chance of conflict decreases by the same one percent. 

“According to the former United Kingdom (UK) Department of International Development, a country with a per capita income of $250 has a 15 percent likelihood of internal conflict over a period of five years, much higher than a country with $5000 per capita income which has only a one percent chance of conflict.

“We recognise, therefore, that peace, justice, and accountable institutions are critical to the achievement of Nigeria’s sustainable development agenda.  Therefore, the challenge is clear, the biggest priority for African nations including Nigeria is to address the root causes of insecurity, and strengthen governance.  To guarantee sustainable development peace, and stability Nigeria must rise and tackle poverty decisively. Signalling the importance of this, the federal government has made it a national priority to lift 100 million Nigerians out of poverty in the next 10 years. 

Mrs. Ahmed did spend some time discussing the impact of the COVID-19 pandemic on the Nigerian economy, and highlighted some of the government interventions that resulted in the exit in Q4 2020 from a 1-month recession, and the continued increase in gross domestic product (GDP) growth.

On Nigeria’s approach to innovative financing, she stated that the government has continued in its efforts to proactively close the SDG financing gap and ensure the appropriate conditions for national development, partially through ongoing reforms aimed at enabling the business environment, creating the right fiscal space for investments, and supporting our diversification away from oil and gas. This, according to her, is being achieved in part through continued implementation of the Strategic Revenue Generation Initiative (SRGI) (a suite of initiatives aimed at enhancing revenues); strategic cost-cutting measures; and through incremental fiscal reforms via the introduction of annual Finance Bills. 

“Furthermore, we are currently finalising our next generation medium and long-term national development plans; and thinking critically about financing that is sustainable, with increased private sector engagement. Our goal is that external funding and borrowing will serve as catalysts, while we shore up our domestic revenues and put in place the necessary frameworks and implementation plans to ensure a resilient recovery.  Such an approach will allow us to sustainably finance critical sectors, including human capital development, infrastructure, agriculture, and security. 

“We are also working collaboratively across ministries, departments and agencies (MDAs), and with the state and local governments to address financing for key cross-cutting issues. This includes working to significantly reduce poverty and harness our demographic dividend to achieve sustainable and inclusive growth, partly through job creation and by enabling the private sector, particularly micro, small and medium enterprises (MSMEs), and prioritising human capital development. 

“We continue to re-imagine the social contract between government and its citizens, and deepen our commitments to the Open Government Partnership (OGP), and to open and transparent governance and citizens engagement. The OGP is an international multi-stakeholder initiative focused on improving transparency, accountability, citizen participation and government responsiveness to citizens through technology and innovation. 

“Since joining the OGP in July 2016, Nigeria has made progress in deepening transparency, accountability and openness in the management of public resources, especially in terms of the budget process. Nigeria is currently implementing 16 commitments from its 2019-2022 Action Plan. These commitments relate to fiscal transparency, anti-corruption, extractive transparency, inclusiveness and public service delivery. 

In her lecture, Mrs. Ahmed also stated: “Furthermore, we are scaling interventions aimed at improving the economic empowerment of women and girls – a key driver of economic growth, improved development outcomes, and improved economic resiliency.  

This includes enhanced access to financing and capacity building for women-owned businesses. Additionally, we are focusing on enabling digital transformation and disruptive innovation, a key driver for MSME innovation and scale up across the country. Without a pragmatic financing strategy, development plans simply remain lifeless aspirations. With this important recognition the Ministry of Finance, Budget, and National Planning has leveraged the current shift in development financing practice, and is adopting new and scaling up existing innovative financing approaches to set Nigeria decisively on the path of sustainable development, peace and prosperity. 

Apart from speaking on the impact of COVID-19 on Nigeria’s economy, innovative financing as an essential means to sustainable development, peace and security in Nigeria, and some other specific initiatives, among others, concluding, she said: “Although good governance and security are instrumental to sustainable development, I believe that causality also runs in the other direction with growth and economic development creating a safe and secure environment where all Nigerians can pursue their livelihoods. The most recent GDP data which reports real GDP growth of 5.01 percent in the second quarter of 2021 is very encouraging news as it indicates the Nigerian economy is on a solid path to recovery. It is important to note that much of the growth was driven by the expansion of the non-oil sector of the economy where most Nigerians are employed.

“Successful implementation of Nigeria’s sustainable development agenda requires that we mobilise domestic and innovative financing; while also fostering collaboration at the national and regional levels; between governments, the private sector and international financial institutions. A resilient and thriving Nigeria requires that we work collaboratively across the federal and state government, and hand in hand with citizens, civil society organisations (CSOs) and the private sector.  

“We will continue working to accelerate revenue generation and mobilise the necessary domestic resources to fund our budgets and support the development of targeted social intervention programmes where necessary. With this approach, international aid and financing will be used to boost domestic funds, rather than replace them. This is especially true in critical human development areas such as health and education, where funding constraints remain a challenge.

“Through innovative financing, meaningful private sector engagement, strategic deployment of development funds and the strategic use of tools, Nigeria and the entire African region will be better positioned to grow back better, sustainability, and more inclusively.

Yunusa Tanko Abdullahi
S.A Media and Communications to the Honourable Minister of Finance, Budget and National Planning

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