Recession: The worst is over- Adeosun
Barely 48 hours after the governor of Central Bank of Nigeria, CBN, Mr. Godwin Emefiele, appeared before the senators last Tuesday, where he painted a gloomy picture of Nigeria’s economy, with inflation and stagnation being experienced simultaneously, the Minister of Finance, Mrs. Kemi Adeosun, last Thursday appeared before the same Senators. Unlike Emefiele’s session that was held behind closed doors, her appearance was not held in an executive session and she used the briefing to unveil plans and administrative actions that were aimed at promoting private investment in roads, and other infrastructures. Soon after the Finance Minister was ushered into the Senate Chambers by the Special Assistant to President Muhammadu Buhari on National Assembly Matters( Senate), Senator Ita Enang, she went straight to the rostrum from 12.05 to 1.55pm, where she stood to lecture the Senators on the nation’s economy with questions asked by the lawmakers and answers provided by the minister. Mrs. Kemi Adeosun did not hide the fact that the nation’s economy was sick; she told the Senators bluntly that Nigeria as a country was in recession and in a very tough place. Kemi Adeosun Mrs. Kemi Adeosun’s official and point blank verdict on the nation’s economy came two days after the International Monetary Fund, IMF, forecast on Nigeria in its latest World Economic Outlook( WEO) titled “ Uncertainty in the Aftermath of the United Kingdom Referendum” and posted on its website showed that Nigeria’s growth projection for this year was revised downwards, from the 2.3 percent it had forecast in its April report, just as it also foresees a 1.1 percent growth from the 3.5 percent it made in April. The Finance Minister was summoned to brief the upper Chambers on the state of the economy and issues relating to the implementation of 2016 budget as well as the Monetary/ Fiscal policies adopted to salvage the current economic situation. During the session, the Minister, who told the Senators that the President Muhammadu Buhari government inherited negative reserves and heavy salary and wage bill of N165 billion, disclosed that so far, the government has released capital vote of N247.9 billion, with plans to release an additional N60 billion very soon, just as she disclosed that the Federal Government has released N74 billion to works in the last two months, compared to N19 billion the ministry received for the whole of 2015. Agriculture has also got the sum of N21.9 billion, compared to the N4 billion the ministry got last year, adding that transport got N22 billion compared to the N6 billion it received last year. Mrs. Kemi Adeosun also used the session to react to recent report by the International Monetary Fund, IMF, on the nation’s economy when she said that the government was not disturbed over such remarks, urging Nigerians not to always panic every time the IMF speaks against the backdrop that the international body is to carry out global economic surveillance. The Finance Minister, expressed optimism that Nigeria as a country would get out of the recession because Nigeria is not the only country experiencing recession at the moment. Here are excerpts from her interaction with the Senators. NIGERIA’s ECONOMY Recession, yes, technically; but the worst is over – Kemi Adeosun (Finance Minister) In economic terms, if you have two periods of negative growth, you are technically in a recession. But I don’t think we should spend too much time on labels, we are in a tough situation, whether you call it recession or not, we are in a tough place, but the most important thing is that we are going to get out of it. Technically, we are in recession, but I don’t think we should dwell on definitions, I think we should really dwell on where we are going. Everything we are doing is moving outside of it, our social intervention programmes have been funded, those of providing reliefs to the very poorest, right down to every single local government would be touched by that programme. We have started and we will continue with it. We are not the only country in recession, many countries are doing far worse than us. But for Nigeria, what Nigerians want to know is ‘how is that going to affect me’ and I want to assure everybody that what we are doing is going to work and it is going to turn this economy around. CAPITAL VOTES RELEASED IN THE LAST TWO MONTHS About the capital releases that we have done so far, N247.9billion has been released so far with another N60 billion to be released imminently. Specific details of releases: for example the Ministry of Works has received N74 billion in the last two months compared to N19 billion for the whole of last year. Agriculture, which is the strategic focus of this government, has received N21.9 billion compared to just N4 billion for the whole of last year. And transport has received N22 billion compared to just N6 billion for the whole of last year. I believe the speed and the extent of our releases shows that the government intends seriousness around reviving this economy and we are very confident that the work we are doing will bear fruits. Agriculture We have already begun to see increase in food production in our agriculture; we are expecting a bumper harvest. How are we going to store to make sure that prices don’t plummet? All the things we are doing are consistent with what we said we would do. We have done a painful adjustment but we want to assure Nigerians that we are on a right track; we are in the right hand. No money is being wasted, no money is leaking, every naira is being accounted for fully. ARE THE RELEASES CASH BACKED? The releases are fully cash-backed. We have stopped the practice of releasing or approving releases that have no cash-backing. We have changed that process; we now start from the position how much cash do we have and then we release appropriately. So, all releases are cash-backed. We predicated the budget on N197 to the dollar and the rate is now N280. The impact will be on the revenues beacuse even though the budget opposes just any projection and, so, when the actual comes in at N280 what will simply happen is that the revenues in nominal terms will increase and that will flow through into the revenue performance. What will happen is that the amount of the deficit will go down because the revenue will convert dollars to naira and will give more naira in nominal terms so that will be the impact there. ON THE PROJECTED IMPLEMENTATION OF 2016 BUDGET The projected rate of implementation of the budget, I found out, is the difficult question to answer, simply because there are quite a few moving parts in terms of our revenue and many of our revenues will come in quarter 3. For example, most companies’ year end is December so it is from September that they begin to pay their taxes for the year. I am very confident that we will do very well; at least we will do over 60 percent based on projections, but I think that our revenues will be better if the economy sustains its trajectory. Areas of priority I think we have been fairly consistent that we needed to invest in infrastructure and in our releases, we have tried to prioritise those areas and also to work with seasonality. For example Works Ministry needs to have their money during the dry season because during the rainy season work stops and we are trying to time the releases to ensure maximum impact. What Buhari’s government inherited as reserves I think at a time like this blaming who was responsible doesn’t actually take us anywhere, but I will tell you what I inherited. I inherited very little by way of reserves; I inherited significant debt – contractor debt. Cash calls of $5 billion dollars outstanding to the oil companies. I equally mentioned the fact that many of the contractors even though we have paid them N107 billion, find it very difficult to work because they are owed and some of them have not been paid since 2012. Their claims are over N390 billion. So, I didn’t inherit reserves that are positive, I inherited reserves that tend to be more negative than positive because the economy is actually in very good hands and we are doing absolutely our best to get through this difficult period and I explained how we are doing that. We have been extremely disciplined around our spending; we are investing in essential infrastructure and I gave the metric we have released N74 billion to Works in two months compared to N19 billion for the whole of last year. We are doing everything possible to avert and to manage the situation which we didn’t create, unfortunately, but which we inherited and we as a nation must all get out of. ON IMF’s VERDICT ON NIGERIA HEADING TOWARDS RECESSIONS I am not too worried about the IMF projection, I will tell you why because one of its functions is global economic surveillance. They equally issued a negative report on Britain as a result of Brexit. I don’t think we should panic every time IMF speaks. I think we need to be confident around what we are doing and where we are going. I remain extremely confident as I said around Nigeria; IMF has given its projections which is that we may continue into negative territory and I am not sure what we have seen suggests that. Agriculture output seems to be going up. If you even look at inflation which is very high, the month on, that reduced and that tells you that things are moving in the right direction. If you look at what is happening in the petroleum sector before subsidy, we were subsidising around 45 million dollars litres of fuel a day. Now without subsidy, usage has dropped to 26 million litres so what that tell you all is that the smuggling that was going out of the country based on the subsidy that we are providing have stopped and those are real savings to the economy which we are now redirecting into the essentially infrastructure that will get this economy going. ON BORROWING We have been borrowing largely from the domestic market because we needed to get the exchange rate sorted out to enable us borrow from the international market. The international borrowings will begin to come in quarter – three that is always our projection; we would take initial money from Nigeria as we sort things out and we go on the road to borrow internationally. INTEREST OF NIGERIANS The question about the interest of Nigerians, I think it is a very good one. Job creation and reserves. One of the things that I mentioned that we have done is release this money for the first time for the social intervention programmes and we have released N15 billion of capital and we put in N5 billion this month for recurrent and so that recurrent will continue to increase as they roll out the implementation of things like the duty calls, the agriculture extension workers and the other job creation initiatives. Also beyond that, what we have done on the payroll was that the police were able to recruit 10,000 new officers; but there is no impact on their salaries because we have cleaned up those who have or who should’t have been there and so they can now create 10,000 new jobs. So, there is quite a bit of job creation activity going on as a result of some of the interventions we have done. 2017 BUDGET On the 2017 budget, I believe the minister of budget and planning has started working on putting that document together and I am very sure in good time for us to go back to the calendar that we like which is the December calendar. OPTIMISM ABOUT THE ECONOMY I think if we are in recession what I will like to say is we are going to come out of it and it would be a very short one because the policies that we have would ensure that we don’t go below where we need to go and I think with what we are doing, we would begin to turn the corner I believe by quarter three. I can confirm there is no more subsidy, it is a market driven price and indeed one of the good things that we are now seeing is that prices have actually come down, there is now competition between filling stations for market share which is a good thing which means overtime the market would continue to correct itself.