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There’s progress in developing local currency – Usman, Finance Minister

Posted by By EMEKA OKOROANYANWU on 2008/06/12 | Views: 1463 |

There’s progress in developing local currency – Usman, Finance Minister


Finance Minister, Dr. Shamsuddeen Usman last week in Lagos took a long view of Nigeria’s economy and concluded that all indicators point to a brighter future for the country.

Finance Minister, Dr. Shamsuddeen Usman last week in Lagos took a long view of Nigeria’s economy and concluded that all indicators point to a brighter future for the country.

He said contrary to the view held in certain quarters, the administration of President Umaru Musa Yar’Adua is moving on a good pace and that the government was busy clearing the rot of the past while laying a solid foundation for the future.

He said: "We are trying to go back to the basics, to do things right. We are getting back to fundamentals, getting to do things properly. Things were not done properly before. We are not slow. Fiscal restraint has been the most underlying and supporting factor of the administration."

Usman spoke on the direction of the Yar’Adua administration, the economy and its challenges, Vision 2020 and on other issues.
He said: "Nigeria’s economic performance has continued to be favorable, real Gross Domestic Product (GDP) growth has averaged 7.3 per cent over the last four years. "There is bright prospect going forward. The International Monetary Funds World Economic outlook predicts 9 per cent for Nigeria in 2008 and the recent growth recorded in the economy was in the non-oil sector. Inflation has remained in single digit while the external reserves continue to grow.

The general government balance as a ration of GDP is 3.6 per cent in 2007. It has grown at an average of 7.2 per cent in the last four years.
"Our 2008 budget focused on the completion of on-going projects, while a supplementary budget which aims at addressing key infrastructure such as power and transportation is being planned.
Our economy is at present having a strong banking system even as our capital market is showing vibrancy."

Our debt position
We have a low level of public debt and a sustainable debt position. Our public debt is 11.4 per cent to the GDP, less than median of 34 per cent for BB rated countries.
Nigeria’s debt is sustainable based on debt sustainability analysis as most of our debt is in the local currency. There is an impressive progress in developing local currency debt market which has at 2007 a value of US $18.4 billion with maturities extended to 10 years.

Capital inflow
Capital inflow into the country has been impressive and progressive. For instance, while in 1999 less than $1 billion Foreign Direct Investment (FDI) streamed into the country, in 2000, it went up to $1.2 billion while in 2004 it was $4.4 billion and $5.0 billion in 2005. It more than doubled in 2006 with $14 billion coming into the country, even though it dropped slightly last year to $12.5 billion.
Again foreign remittances were US $7 billion in 2007 as against US $2.26 billion in 2004. All these progress were made because of the macro-economic stability and increased confidence of investors in the country.

Outlook for the economy
Economic growth has been strong and prospects are good. For example, our real GDP growth was 6 per cent last year and it is projected to reach 9 per cent by the end of this year.
Also, the country’s Current Account balance was 16.2 per cent of the GDP in 2007, and projected to be about 12.1 per cent this year.

Policy thrust
The Federal Government policy thrust for this year are to maintain macro-economic stability, improve gainful employment, improve private sector participation in financing infrastructure; provision of enabling environment for private sector and improve investment climate for doing business.
Others are to review old laws and regulations, maintain single digit inflation rate and maintain exchange rate stability.

FG’s reform Agenda direction
It is quite disheartening that despite the recent gains recorded in the economy, infrastructure remains weak, while there is no commensurate increase in the number of people in employment. Even though the poverty level is improving, it is still unacceptably high-risk of attaining the MDGs target of halving poverty by 2015. The energy situation is also unacceptable while there are still problems with the transport sector.

However, there is great scope for improving the educational system while ensuring that macro-economic and absorptive capacity considerations, not oil market development, drive government spending.
We are equally intensifying sectoral reforms at the federal level while also seeking cooperation of states and local governments for reforms in the area of fiscal responsibility and accountability. The government is also trying to preserve financial stability and enhancing supervision of the financial system.
To ascertain properly the size of resources required for the economic growth of the country, the Yar’Adua administration has initiated process of costing public investment required for achieving MDGs while it is also anchoring development management on long-range planning framework based on priority setting, objective resource allocation and programme and policy harmonization.

The government is also integrating the Yar’Adua seven-points Agenda with NEEDS 2 into a three-year, Medium Term National Development Plan (NDP) which will transform policy statement into action plans through strategic planning. The Medium-Term Expenditure Framework (MTEF) and the annual budgets are going to be the instruments of implementation of the National Development Plans (NDP).

Government will also be promoting an all-inclusive growth by focusing on sectors where the poor and the vulnerable groups are dominant. Such areas include, infrastructure provision, especially power, transportation, agriculture, Small and Medium Enterprises (SMEs) and informal sector operations.
We are also breading and intensifying sectoral reforms, insisting the intervention in the public sector must be strategic while also finalizing the legal, institutional and regulatory framework for private public partnership (PPP).
We have also began to revolve again the wheel of privatization after clearing up some discovered garbage. We are also committed to the power sector reforms, including the Multi-Year Tariff order (MYTO).

The Natural Gas Master Plan is on course while we are still committed to the unbundling of the NNPC and at the same time seeking alternative funding for the Joint Venture Contracts (JUCs).
Reforms in tax policy
There are also several other sectoral reforms going on in the economy. For instance, there is now an enhanced focus on tax policy and tax administration with the view to broadening the non-oil export base of the economy.

To achieve this, the Presidential Committee on waivers was set up as efforts are still geared towards reforming the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS). There is also an increasing focus and co-corporation on fiscal federalism through the National Economic Council.
The government is also developing human capacity and putting in place effective organizational structures. In this direction, government is broadening and deepening the reforms of its Ministries, Departments and Agencies (MDAs) from 6-pilot ministries to all MDAs. Government is also embarking on budgetary reforms, including enhancing budget and project implementation capacity.

The other elements of government’s structural reform agenda include strengthening and ensuring compliance with due process, implementation of the Fiscal Responsibility Act, reactivation of the Port Reform Committee and setting up of a committee on Sovereign Weak Fund.
Government is also reviewing its relationship with such institutions as the International Monetary Fund (IMF), the World Bank and African Development Bank (ADB). The President is also embarking on Economic Diplomacy with trips to Davos, the World Economic Forum, China, India, Saudi Arabia etc.
We are also reviewing Nigeria’s Country Rating and would leverage on our growth to achieve a better rating.

Potential risks
Even though our country’s economic outlook is promising, there still exist some potential risks. One is the emerging global high commodity prices, especially food prices which could lead to new attainment of the MDGs, erode the macro-economic gains made over the last five years. Also, our achieved growth is not trickling down to a significant percentage of the population.
Another potential danger is the effect of climate change on the economy and the Niger Delta crisis which has resulted in the disruption of oil activities and supplies.

Conclusion
I will say that the macro-economic framework is ambitious and attainable, our country is now a beautiful bride to foreign investors as evidenced by the huge inflow of FDI, the recent IMF article IV report was very positive on Nigeria’s prospects as rating agencies have also confirmed the prospects for Nigerian economy.
However, we should finalize and implement the NDP, benchmark and assess our performance and continue with the reforms.

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