Federal Government To Diversify Nigeria's Economy Base

The Coordinating Minister for the economy and Finance, Dr. Ngozi Okonjo-Iweala, yesterday, disclosed that the Federal Government was set to diversify the economic base of the country in order to achieve its Vision 2020 vision even as she tasked the Central Bank of Nigeria, CBN, to ensure that interest rate was reduced to enable the real sector borrow from banks at reduced cost.

She also stated that the Federal Government was targeting $70 per barrel as crude oil price benchmark for the 2012 budget. Speaking at an investor conference organised by FBN Capital in Lagos, Okonjo-Iweala said the current situation where recurrent budget takes an entire 75 per cent of total budget could not support the type of aggressive capital development that Nigerians yearn for and must, therefore, be addressed in such a way that it could be reasonably reduced.

She said: “We need to change the budget process in this country. We cannot bring a budget and then have reservations that go back and forth. The executive has its responsibility and I hope the lawmakers will also take responsibility. By 2013 we will have a much saner budget process.”

On the bailout for the capital market, she said: “The stockbrokers in the capital market will soon have a relief from their margin loans facility with the banks. We would soon announce the modalities as the DG of Securities and Exchange Commission (SEC), Aruma Oteh has been on the front burner to ensure that the market regains its pride of place.”
According to her, “Nigeria has room to lower interest rates but still keep inflation in single-digits. Of course interest rates were jerked up recently by 275 basis points. That helped steadying the currency, but I think there’s a room now for us to start aiming for it to come down.”

Following the current state of infrastructure in Nigeria, Okonjo-Iweala said the country needed about $10 billion yearly to finance infrastructure for desirable growth and development of the economy, arguing that increasing non-oil sources of revenue is germane to enable the country accelerate its growth and development. She noted that the government was very serious about its commitment to support the agribusiness. Adding that she will today give assent to guarantee agreement with all major banks to increase lending to agric sector.

She further stated that Nigeria can move from BRICS to BRINCS, saying “ It is possible only if we do things right as being planned by the current government.” BRICS is an acronym for Brazil, Russia, India, China and South Africa, while BRINCS include Nigeria .The acronym highlights the role of developing economies in world finance, and explores their impact as emerging powerhouses.

Ngozi Okonjo-Iweala said: “Nigeria will reduce recurrent expenditure by at least one per cent a year in the next four years, which would bring it down to 70 per cent of the budget by 2014. Recurrent spending accounts for 74 per cent of the country’s N4.5 trillion budget. Okonjo-Iweala further said that Nigeria’s total debt figure is currently $39.7 billion which is about 20 per cent of its Gross Domestic Product, GDP, even as she unveiled the priority sectors with which to drive the economy.

She said she would critically review the borrowing processes with a view to reducing the rate, especially the domestic debt. Her words: “One of the things we would do is to pay attention to the debt situation. I know that many Nigerians are looking at it with concern, and you know my stand on debts. We have about N5.2 trillion in domestic debts and about $5.3 billion in external debts bringing total debt figures to $39.7 billion which is about 20 per cent of GDP, Gross Domestic Product” she added.

On the Sovereign Wealth Fund which governors have called for its suspension, Okonjo-Iweala disclosed that the executive had engaged the governors with a view to convincing them to allow it to be established as earlier agreed. She said that the federal government recognised the reality of the recent review in workers wages but that she was convinced that the governors also realised that the nation had just one economy.

The minister noted that the total debt figure as a percentage of GDP was not worrisome, as according to her, debt/GDP ratio could become of concern if it hits the 60 per cent threshold, in line with international norm. She said the external debt was “extremely low” but that the domestic debts mainly in Federal Government Bonds and Treasury Bills would be brought down through a systematic approach.

She identified job creation, building critical infrastructure especially electric power and roads/ rails, anti-corruption, agriculture, manufacturing, fiscal discipline, investment climate reforms, housing, entertainment, as well as, oil & gas as sectors of immediate focus. She told journalists that Nigeria was not used to trade-offs but that this administration would do so by paying greater attention to the priority sectors.

According to her, “this is not to say that other sectors are not important. It is just that we need to prioritise in the economy. One thing we are not used to doing is creating trade-offs and saying which are the key sectors, we need to focus on. So now we have to make some trade-offs.”
Okonjo-Iweala warned that addressing the present challenges won’t be easy and that she did not have the magic wand for a quick-fix. She assured, however, that with the cooperation of good spirited Nigerians, the National Economic Implementation Team won’t disappoint. She said: “The present situation is not going to be an easy one and if you have a budget coming, you have to make choices.”

Speaking at the investor conference, The Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Mr. Mustapha Chike-Obi, disclosed that the corporation has acquired bad debt worth 3.14 trillion naira ($19.6 billion) so far from the banking sector. Chike-Obi said, “We have taken about 9,000 loans worth N3.14 trillion since December last year, 200 accounts for 80 percent of the total value. AMCON has recovered “well over” 15 percent of the bad debts and aims to recoup 70 percent of the loans. “We are in discussions with defaulting borrowers as we restructure the loans, we will approach the banks to see if they will want to take the loans.”

While commenting on macro economic stability, Okonjo-Iweala said ,”We need to maintain macroeconomic stability. We need to manage our fiscal situation in a more prudent manner. Monetary and fiscal policies must work hand-in-hand.” On fuel subsidy, she said: “There has been a lot of debate on fuel subsidies and we have all resolved that (removing it) is a good direction to go on. You have to leave it to us to decide when it is prudent to do so.”

Source: Vanguard News

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