By Omoh Gabriel
Much is expected from former World Bank Managing Director Ngozi Okonjo-Iweala who was sworn in yesterday as Nigeria’s finance and coordinating minister by President Goodluck Jonathan. An elated President Jonathan shortly after swearing her in said, “People wonder why we want you back having served in the same capacity before, we want you back to play a key role in coordinating economic issues in the country”. The economy is in shamble and need a firm and resolute, disciplined and reserved personality to drive it and restore confidence back into the system. Already the financial market is in turmoil due to regulators’ inconsistencies.
Dr Okonjo Iweala must be prepared to make President Jonathan take some very hard decisions especially on issues like banking reforms and the current crisis in the money and capital markets, the privatisation of the power sector, the downstream sector of the petroleum industry, breaking what has become, effectively, monopoly in the cement industry, and building rails across the nation; arrest the crashing foreign reserve; check the increasing public debt, making the textile and agriculture funds accessible to targeted beneficiaries and strengthen transparency in revenue allocation.
Ordinarily, Dr Okonjo Iweala, Dr Olusegun Aganga minister of Trade and Investment and Central Bank Governor Lamido Sanusi should spearhead the reform of Nigeria’s economy, but how they deal with tensions between them will determine their success. Okonjo-Iweala has taken the role of Coordinating Minister for the Economy and Minister of Finance, an expanded version of the role she held between 2003 and 2006 when she successfully secured Nigerian debt relief.
She had negotiated in clear terms the conditions on which she would be willing to return to serve in government, including being given broad powers over economic management and freedom from political meddling.
But will she be in a position to call any of the ministers or members of the economic management team to order? At least for now, some major policy decisions on the economy must of necessity be passed through her, unlike in the current situation where decisions are rolled out without due consideration for their economic implications, especially from the CBN.
Okonjo- Iweala is a big personality, well respected internationally and her appointment was met with widespread optimism from foreign investors, diplomats and Nigerians. But it will be interesting to see how her relationship with the CBN Governor pans out considering the fact that they are both very strong characters. The central bank has encroached on areas that have traditionally been the remit of the ministry of finance since Sanusi became governor and Okonjo-Iweala will want to take back the initiative in those areas. What will this amount to in the meeting room of the economic management team where the President will be the Presiding officer? Will this lead to a clash or one submitting to the other?
Revenue allocation transparency
In her first coming, Dr Okonjo-Iweala enthroned the policy of accountability and transparency in governance by introducing the publication of allocation to the three tiers of government from the federation account. The minister must revisit this. This strategy of openness which she initiated continued even after she left the ministry until some people who felt uncomfortable with the disclosure pressured for its stoppage. All manners of excuses, especially lack of funds to pay for newspaper adverts were cited. It initially became irregular and then finally rested. The corruption at the two lower tiers of government is very bad, where local government chairmen are not able to ask governors what happened to their allocations and nobody asks local government chairmen about councils’ allocations. This makes the publication of allocations even more compelling now than ever before.
As the Coordinating Minister of the Economy and Minister of Finance, all eyes would be on her to see the change she can bring to bear on the nation’s struggle to pull out of extreme poverty affecting well over 70 per cent of the populace. She must not flatter herself into believing that she is welcome by all Nigerians. Of course there were efforts by vested interests to block her nomination and even after her name was forwarded to the Senate by President Goodluck Jonathan, these forces still tried to stop her clearance. The opposition was an organised efforts by those who benefit from the rot in government, those who are opposed to due process, those who do not want transparency in government revenue generation, allocation and procurement, and those who virtually live on the economy.
Dr. Okonjo-Iweala’s employment boosting policies, as mentioned at the Senate hearing won’t fly without power supply for Small and Medium Enterprises to blossom. She must introduce policies that will diversify the economy and its revenue base. Today, Nigeria unfortunately depends on imports of fuel to keep the economy running. Nigeria produces crude oil, sell to other nations and buy refined products from them. Thus the cost of fuel in Nigeria includes not just refining but two-way transport fare. The minister will have to develop strategies to ensure that crude is refined locally and even exported instead of the current export of crude without adding value.
As the Minister hinted during her screening at the senate, the issue of subsidy cannot be faulted. There should be subsidy but the subsidy in Nigeria is going to the rich who can afford their bills. Subsidy is a sensitive issue anywhere in the world but the minister must work with her colleagues in the economic team and the organised labour to work out a compromise that would save Nigerians from the hands of the cartel that imports fuel and wants the nation’s refineries to continue to either remain shut or perform at minimum capacity. It is only when private refineries commence operation in the country that Nigerians will reap the full benefits of being an oil producing nation.
Growing Debt Profile
One legacy the Minister left behind in 2006 was the debt deal with the nation’s external creditors in which a huge portion of the nation’s external debt, $ 18 billion, was written off in return for the payment of $12 billion. However, the debt profile has, once again, began to build up, with the latest record provided by the Debt Management Office, DMO saying the nation’s external debt has risen to $ 4.5 billion. The domestic debt is worse, standing at approximately N4trillion.
Dr. Okonjo-Iweala must not forget so soon, the humiliation the nation went through to rid her of the debt burden and therefore put in place, mechanisms that would check unnecessary borrowings by both the federal and states governments. In particular, she must watch the governors closely and make it impossible for them to raise funds from the capital market to waste on their excesses. As governor Peter Obi of Anambra told journalists recently, “no government should borrow from the capital market unless to fund a bankable project which has the capacity to generate income to repay such borrowing”.
Crashing External Reserves
In spite of the high oil prices at the international market, rather than rapidly growing, the nation’s foreign reserve has been crashing. It was put at $34.88bn, as at last week. The CBN governor, Mal Sanusi Lamido Sanusi has attributed the depleting reserve to the huge food import bill of N 630 billion per annum, a situation even the president said is unacceptable. Beyond food which the nation has capacity to produce even more than her needs, unnecessary items including toothpicks, ear cleaners, foot mats, bicycles and the like are imported into the country without check. The minister has to review the import prohibition list and the tariff regime with a view to discouraging the importation of items on which the nation comparative advantage.
In his latest move, Sanusi supported the nationalisation of three Nigerian banks three week ago, well before a recapitalisation deadline of September 30 set by the apex bank and before the arrival of Okonjo-Iweala. The pre-emptive move has been seen by many as inflicting pain on investors who have been dumping their bank shares in the capital market.
Sanusi has been a staunch supporter of the local currency, naira, pumping U.S. dollars into the financial system to curb depreciation. When asked about the naira in her screening, Okonjo-Iweala said she supported the action but also said it was not a long-term solution. However, the pair share many common goals. Okonjo-Iweala has pledged to tighten fiscal policy and ensure the country “lives within its means”.
Okonjo-Iweala’s return means she will need to work with, not just Sanusi, but other successful reformers including Olusegun Aganga, Mustapha Chike-Obi, head of AMCON and SEC boss Arunma Oteh, who have turned Nigeria’s financial markets inside out over the past two years. Sanusi and Okonjo-Iweala clearly have the ability to drive forward the reforms vital for Nigeria’s future but they will need to quickly settle areas of potential conflict and mark out their territories or their combined strengths will go to waste.
As Dr. Ngozi Okonjo-Iweala returns to her former office as Nigeria’s Minister of Finance, these are several issues and challenges that she must prepare her mind to tackle head-on if she is to make any meaningful difference on the Nigerian economic scene that is riddled with various distortions and deliberate policy summersaults that has made progress extremely difficult over the years.
