The Debate Over State of the Economy

For many critics of the President Goddluck Jonathan administration, the Nigerian economy is in a quandary, but recently, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala provided a glimpse to counter their claims.
On September 17, 2013, 16 governors of the Governor Chibuike Amaechi-led faction of the Nigeria Governors’ Forum (NGF) met in Abuja, deliberated on some burning national issues, and asked the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, to either improve her management of the nation’s economy according to the provisions of the Appropriation Act 2013 or resign her position. They alleged that her non-compliance with the revenue projection of the 2013 budget was a direct breach of the Appropriation Act 2013.
About 24 hours later, the minister was to provide facts and figures not just on the state of the economy but the performance of the 2013 Budget.
Briefing journalists, the minister affirmed that the budget is only an estimate of spending based on expected revenues and are dependent on two major variables, including oil production volume and price in the international market—two variables that are beyond her ministry’s control.
According to her, while the price of crude oil has not been an issue, the nation is only witnessing quantity shocks as the level of production has been below the budgeted estimates due to oil theft–a challenge, she stated, was being aggressively and frontally addressed by the Federal Government.

Strength of the Economy
While some governors and others might have a different view on the state of the economy, the minister believes that the macro-economic fundamentals are potent. She provided some salient points that cannot be wished away. For instance, how can an economy that is parlous be witnessing activities that point to the contrary?
According to her, nine state governments have filed applications to float bonds while many others are queuing up to do so.
The minister pointed out that all over the world, no one floats bonds in a wobbling or non-performing economy, adding that the applications from nine states were strong signals that the Nigerian economy is strong, in spite of some challenges.
“There’s no place where you float bonds if the economy is not working. The floating of bonds by the states is a demonstration of the confidence they have in the economy,” she enthused.
The scramble to float bonds, she maintained, was because the  Federal Government had created a yield curve, which has made it attractive for both corporate and private entities to borrow, pointing out that the fact that the country is facing revenue shortfalls did not diminish the empirical statistics. on the ground.
But even while there may be quantity shocks arising from a  drop in oil production occasioned by theft, the minister said the country was lucky to have built buffers through the Excess Crude Account (ECA) from which it has drawn to make up for the revenue shortfalls. Without the buffers, the nation would have been going cap in hand for external succour.
“Let me mention to you that our fundamental s are strong. Why did I say that? We have a reserve of $46 billion, Excess Crude Account is $5 billion. Inflation remains at single digit— at less than 9 per cent, which is what we have been targeting. Our exchange rate is relatively stable…”  Although there is a slight decline in GDP growth, it is still better than 6 per cent.
“We had a GDP growth of 6.5 per cent in the first quarter of this year. Second quarter, we are growing at the rate of 6.18 per cent… We are still one of the fastest growing economies worldwide and in Africa as well.
“Fiscal deficit is about 1.58 per cent of GDP. We are maintaining prudent management of the economy. This is why all the validations from outside have indicated that our macro fundamentals are strong,” the minister said.

Budget Implementation
The major grouse of the Amaechi-led faction of the NGF was the 2013 Appropriation Act. For the 2013 Budget, the minister said N850 billion has so far been released to the Ministries, Departments and Agencies (MDAs) with 76 per cent utilisation achieved. To make budget implementation more purposeful,  the practice of releasing capital votes without backing such fully with cash backing is giving way. While the ministry released N400 billion in the first quarter, N200 billion in the second quarter, and N250 billion in the third quarter, N210 billion of the third quarter release has been cash-backed.
The outstanding N40 billion, she said, would be cash-backed after the Federation Account Allocation Committee sharing.

Revenue Shortfall
One area where many critics have latched on to unleash their venom on the administration is on the declining revenue, but often fail to recall some of the fiscal measures taken to reduce food imports, which is said to gulp as much as $8 billion annually.
“We have witnessed some occasional revenue shortfalls, and that is what it has been. I always tell people, you have to look at the economy as a whole. We all know that from time to time, because of the shortfall in oil production and shortfall in revenue, due to the fact that we are growing more of our own food, we are not importing as much, that’s why Customs revenue is coming down. You know when these things happen, it’s good news but from time to time, we have fluctuations and we have been able to manage it,” she said.
Okonjo-Iweala reaffirmed that while efforts were being made to address the oil production shortfall occasioned by theft, the decline in  revenue from imports was in deed  occasioned by a deliberate policy for a drastic  cut on food imports and increased local production.

Job Creation
The  agricultural sector is considered one of the sectors  providing mass employment, with over 2.5 million seasonal and full time created.
“When I say seasonal, for example, in rice 450,000 of the jobs created were seasonal. But overall, 2.5 million jobs have been created—seasonal and permanent, and in nine commodity chain—cassava, sorghum, oil palm, cotton, cocoa, dry season  and rainy season rice. We are creating jobs for our skilled and unskilled people in this very important area of the economy. Output is also increasing. All of you are aware of the 1.1 million metric tons of rice that were produced in the north of the country during the dry season. And some of this production have been helping to moderate food prices.
“So, these are the results we are achieving. We are not saying we’re there yet. We still have a lot to do. We are aiming to create more jobs  in that sector (agriculture) and other sectors. We’re well on our way to achieving results.”
In her words, the manufacturing sector has also witnessed increased activities.
Her words: “Very soon, the Indorama Company  is making an investment of $1.2 billion in petrochemicals—particularly fertiliser, in Port Harcourt. Procter & Gamble of the United States of America  is building a new factory and invested $250 million in Ibadan,” she said, noting that  a Ugandan investor  is also investing over $200 million in a plant to manufacture glass through sand, in Port Harcourt while an  over $200 million cold steel rolling factory in Ilorin, Kwara State that is going to employ over 1,900 is being constructed.”
Okonjo-Iweala said Nigerians were also witnesses to the recent signing of agreements running into billions of dollars that will be invested by the Dangote Group, noting that all these would create jobs.
The Community Services Programme under the Subsidy Reinvestment and Empowerment Programme (SURE-P) has so far created 178,000 jobs,  while the Graduate Internship Scheme(GIS) has placed over 2,000 graduates and continuing, just as YouWin has created 19,000 jobs.
“ I think this issue of jobs is one that we are monitoring through the National Bureau of Statistics (NBS). We will be giving you updates from time to time on what is happening there.”

Power Sector Privatisation
The minister is not alone in flaunting the transparent and  successful privatisation of the generation and distribution companies of the Power Holding Company of Nigeria (PHCN) as the signature tune of the Jonathan administration’s Transformation Agenda. The president himself has done so at every fora,  including the recent 54th annual conference of the Nigeria Economic Society (NES).
With close to $2.52 billion realised from the privatisation of the power sector, the minister said the government would be able to take care of the needs of PHCN workers even with N45 billion already expended to take care of their emoluments.

Subsidy Regime
“In 2011, there was a huge public outcry. I want to say to you that this administration has worked hard to clean up the process of subsidy payments. As you know, there was the Aig-Imouhuede Presidential Committee on Subsidy that hired 15 auditors from PricewaterHouse, and bank examiners  to meticulously go through all the claims and recommend ways for making payments.
“ The result of the improvement we made when we fired the old auditors and put new ones in place was that  we put in place different checks and balances. As a result, last year, we brought subsidy payment down to about N950 billion, and we expect that this year, we will pay about N971 billion. To go from N2.2 billion, to N950 billion to about N971 billion, I think it’s a huge achievement in terms of what we have tried to do on this issue of oil subsidy.
“We have cleaned up the system. We expect that tomorrow (today), we will make out another payment to oil marketers because they are due for another payment, and we will be publishing that as we normally do…We take care to ensure  that all the payments we make are being done properly. That has made us to be a little bit slow in paying. But, at least, we have seen what it has yielded. It has led to a substantial reduction in the amount of subsidy that has been paid last year and we expect to pay this year.
Is the economy really in the doldrums? Are those, including the factional members of the ruling Peoples Democratic Party, otherwise known as New PDP (nPDP) fair in their position that Nigeria is on the brink of collapse. Can anyone objectively describe a country that has been meeting its domestic  and international obligations, including prompt payment of workers’ salaries, as  insolvent? Agreed there are pressing challenges in country, but is the drop in oil production occasioned by theft enough parameter to adjudge the country broke even when international ratings have been positive?
For Okonjo-Iweala, the construction of dual carriageways such  as the Kano-Maiduguri, Enugu-Port Harcourt, Benin-Ore, and Abuja-Lokoja roads, among others, are pointers to the strides being made in the area of infrastructural development. In addition to these roads, she said, at least, one road had been completed in a  each of the geo-political zones while many more are on the verge of being completed, including the Oyo-Ibadan road, as well as sections of the Onitsha-Owerri road.
She said 2014 would experience a leaner budget as it would be carefully drawn, taking into cognisance  the discovery of oil in several countries of the world in order not to subject the economy to unnecessary stress.
She said in the next three months, the issue of shortfall in oil production would be a thing of the past.
On revenue and budget, the minister stated that the federal Budget was being implemented, adding: “We have witnessed some occasional revenue shortfalls, and that is what it has been. I always tell people, you have to look at the economy as a whole. We all know that from time to time, because of the shortfall in oil production and shortfall in revenue, due to the fact that we are growing more of our own food, we are not importing as much, that’s why Customs revenue is coming down. You know when these things happen, it’s good news but from time to time, we have fluctuations and we have been able to manage it.”