The Nigerian immediate past Honourable Minister of Finance, Mrs Zainab S. Ahmed, at Bloomberg Emerging+Frontier Forum 2019, participated in the opening panel on Sustainable Finance and Development in Emerging Markets: Challenges and Opportunities.
Below is the overview for the conference provided by the Bloomberg:
“Over the last decade, emerging markets have delivered more growth for the world’s economy than any other group of countries at any time in history. Millions have been lifted out of poverty, and hundreds of businesses have grown to become thriving multi-national corporations. To unleash more potential, what can governments and companies do in sustainability and green finance? With emerging and frontier economies needing close to $4 trillion per year to achieve the United Nations (UN) sustainable development goals, what are the best policies to attract sustainable investment? How can policymakers balance sustainability considerations with urgent priorities?”
As the panel had tried addressing the above concerns and offer solutions, speakers could then share examples of existing national initiatives, and could also expand on what the next 10 years will bring for green initiatives and financing.
Then on the side line, the Honourable Minister Ahmed fielded questions on a number of issues from the press. Excerpt:
Press: president Buhari about returning to the Finance Ministry and becoming Finance Minister once again?
HMF: No. I have not done that. The President is currently in the process of putting together a new cabinet. I have not had a discussion with him about whether I’m coming back to the cabinet or not.
Press: Would you like to go back?
HMF: Yes, I will like to go back to the cabinet
Press: In the same role?
HMF: Yes. In the role
Press: Would you do things differently?
HMF: I had stayed only for 9 months. I had brought out a number of initiatives that I will love to have an opportunity to push. The President has decided himself that he will continue to focus on the Economic Recovery Growth Plan (ERGP); that his key commitment to the populace remains the same. We are just going to need to work faster and harder.
Press: Mrs Ahmed the economy is growing according to data 2.6% at an annual rate. But unemployment is about 23% and inflation is about 11%. What policy direction would the incoming cabinet make that will be different to what they had already been doing?
HMF: We had a very clear and explicit plan, ERGP. This plan helped us to come out of recession. We had done a lot foundational work, a lot of building blocks have been put together. All we need to do is to push further, because the target of the ERGP was a four-year plan, and we were supposed to move the economy out of the recession to the growth path which we succeeded in doing. As it were, we have attained up to 8 quarters of consistent and steady growth; the economy is stable. We have lowered the inflation rate from as high as 18% now to about 11.4%, the monetary authorities have been to stabilise the currency, the Nigerian Naira, for about 12 to 24 months now, the Naira has been consistently stable at N305 to 1US Dollar. So, the indices are all on the right track. All we need to do is to push harder and faster until we are able to reach the growth aspiration of 7% for the Nigerian economy.
Press: Part of the problems is that revenue consistently disappoints and more than half of what you are getting goes to debt servicing. How would you change the matrix quickly so that the government finance might stabilise?
HMF: Since I became the Minister of Finance, my preoccupation has been on how to increase revenue. 2018 closed revenue at an average of 55%, and that was really very tough because when you are underperforming at a level, it means you are stressed in terms of trying to manage the budget. So, we have developed a strategic revenue growth initiative which we have started implementing, and our target is to increase the revenue to 65% minimum up by the year 2019 so that in the next three years, we are able to attain 80% to 85% of our revenue target.
Press: As a follow up to the same question, which makes a good point about the amount of revenue that goes to debt, if you can’t do what you have just said, is Nigeria heading for a deep crisis?
HMF: We don’t have a debt crisis. Our debt is very much at a sustainable level. The Nigerian debt as at December 2018 is about 19.5%, and that is very low compared to all our peers. What we have the revenue problem and we have realised that it is a problem that we all have to collectively address. We also are working on reducing our cost so that when spend on capital, the spending is more efficient, and we can save to apply the money to other sectors. What we have is revenue problem and that is what we need to address.
Press: One of the things that have become an issue with countries that produce crude oil is that the price of gasoline tends to be quite cheap, and that is definitely the case when it comes to Nigeria. You are subsidising the gasoline price in the country, is that sustainable economically and environmentally?
HMF: No, it is not sustainable economically and environmentally. We also have the medium to long term plan, a plan to scale back on that development. But we also have a population that is very poor, a large number of poor populace that we cannot pull out the subsidy without providing an alternative. So, the President has directed us to look at how to provide a buffers before the action of subsidy removal can be taken.
Press: How would you reconcile such policies both that you would take away the subsidy for gas without increase value added tax (VAT)?
HMF: We are looking at increasing VAT from 5% to 7.5%. The 5% VAT is perhaps one of the lowest VAT rate globally, and the increase that we are going to make is just 2.5%. The increase is not going to be made just over night; we are going to do a lot of consultations because in our country, it requires a change by law to make such increase. So, a consultation process will be driven and done with within 2019, so that hopefully by the next budget year 2020, the new increase will take effect. We have just recently had to increase the minimum wage and one of the arguments we had with the labour was that there will be some marginal increase on VAT to enable us handle the implemented cost of increasing wages.
Press: So, what then will you do with the International Monetary Fund (IMF), because there is some concern on the part of the IMF with Nigeria on policies, you may in fact lose the ability to issue Euro bond, your own Euro bonds. What do you see in the future for Euro bonds?
HMF: We see a possibility of still doing another Euro bond roadshow. But the decision we took for 2019 was that we were going to concentrate on realising debt locally which we have always done, but also on raising longer term lower cost loan through concessionary windows from international organisations such as the World Bank and other multinational institutions.
Press: Has the Nigerian economy felt the effect of the trade war between the United States and China, and if so how?
HMF: Well, Nigeria does feel the effect of the trade war between the two nations because we can see also from the movement of our trade balance. For example, when the United States decided to adjust its interest rate, we saw foreign direct investors (FDIs) moving out of Nigeria. We lost as much as N6billion around the Q3 2018. So, we know we are exposed and we also know that we have to build fiscal buffers so that such externalities will not have a major impact on our economy. Certainly, if this war continues, it is a major risk for us. We are watching what is happening, and we will continue to build fiscal buffers.
Press: Right now, the official exchange rate is N306 to USD1. Where do you see the US Dollar going?
HMF: Well, if the US Dollar depreciates, it will definitely affect the Naira because a lot of our … transactions are Dollar-denominated. It will definitely affect the naira.