Aligning Fiscal Strategies for Economic Recovery

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The recently-concluded National Economic Council on Finance and Development may have lived up to its billing in terms of idea generation and highlighting need for shared vision and alignment of purpose between the federal and state governments, reports Olaseni Durojaiye

As handlers of the nation’s economy, experts and operators continue to explore ways of navigating the economy out of the current recession continues, the recently concluded National Council on Finance and Economic Development (NACOFED) 2016 conference has been viewed as yet another initiative in the right direction. The nod of approval, among other arguments, is based on the need for both the federal government and the states to be fully aligned on both fiscal and monetary policy directives adopted by the federal government to navigate the current economic challenges.

The conference, which was hosted by the Minister of Finance, Kemi Adeosun, had as its theme “Enhancing Revenue Generation and Obtaining Best Value for Money in Expenditure”, and drew participants from diverse group.

Among the attendees were Minister of Mines and Steel Development, Dr. Kayode Fayemi; Comptroller-General of Customs, Commissioner for Finance and Budget of the 36 states of the federation, Colonel Hameed Ali ((Rtd); and Executive Chairman of the Federal Inland Revenue Services (FIRS), Mr. Babatunde Fowler. Business leaders drawn from the private sector included Managing Director of Guaranty Trust Bank (GTB), Mr. Segun Agbaje, Chief Executive Officer of Financial Derivatives, Bismark Rewane and a former Director General, Budget Office of the Federation, Bode Agusto. Former President, Olusegun Obasanjo, who was also an august visitor at the two day conference, shared his experience running the country with participants while Governor of Ogun State, Senator Ibikunle Amosun, declared the conference open.

Choice of Theme
The choice of the theme was instructive and observers insisted underscored government’s determination to diversify the economy and explore other sectors with huge revenue earning potential. Besides, getting the buy-in of various state governments also sit well with observers given that it is important that government at the states are carried along and made aware of where and how they could key into the federal government’s revenue generation vision and fiscal discipline if the country must get out of the current recession very quickly. This is even more so as sharing same vision will benefit the various state governments particularly as regards internal revenue generations from both taxes and solid mineral, which many maintained abound in almost all the states of the federation.

Adeosun noted that much in her opening remarks when she stated that, “An important outcome of the engagement being policy alignment and consistency towards achieving fiscal sustainability.”
Setting the tone of deliberations at the conference, Adeosun had stated that, “Our diverse oil and gas sectors, solid minerals, manufacturing, agriculture, information technology and entertainment sectors are united by their common need for world class infrastructure. Until we fix our infrastructure our businesses will be hamstrung by high costs and will be unable to compete.

“We are working to act as an enabler by investing decisively in power, roads, housing, transportation, airport infrastructure and education. To date we have released and fully cash backed over N700 billion and we are preparing another tranche in November. These investments are reviving long abandoned projects across the nation and directly and indirectly creating employment and wealth building opportunity.

“For this economy to move in our chosen direction of growth and job creation it is critical that every tier of government, every agency of government are synchronised towards our collective aims. Maximising revenue on the one hand but making sure that we obtain best value in expenditure on the other hand.

“The Fiscal Sustainability Plan, which was designed to reposition state finances by ensuring widened revenue focus and cost control as well as improved transparency and accountability, is a partnership commitment to jointly improve public financial management. The FSP is now entering its first phase of monitoring and as we have done in the past we shall not shy away from taking tough decisions if we see states not meeting their commitments,” she stated.

Alternative Revenue Source
Even before the conference organisers chose the theme for the conference, many observers and analysts alike had long identified the country’s mining sector as replete with huge revenue earning potential and this has historical proof. The sector also generated earnings and contributed about four – five per cent of the country’s Gross Domestic Product between 1960 and 1970.

The maritime sector is viewed as another very viable sector and this explained why Alli and Fayemi were brought in to share government’s vision with participants, especially commissioners for finance and budget of the states. There is also a consensus of opinion among various stakeholders that the tax receipts of the country could also be improved given proven cases of tax evasion that is believed to be rampant among businesses operating in the country.

Nigeria boasts of a very rich mining history that was globally renowned, from as far back as 1902. Jos, Plateau State became a centre of tin mining long before independence.
According to Fayemi, in his presentation at the conference, up till 1960, Jos was the sixth largest producer of tin in the world. Similarly, Enugu, Enugu state became known as “Coal City” due to robust mining activities introduced under British rule.

Speaking at the occasion, Fayemi noted that, “The facilitation of this gathering of stakeholders to discuss the place of non-oil sectors as a sustainable alternative in enhancing revenue generation, demonstrates the commitment of the organisers to contributing to the building of cohesion between governments across all levels, academia, and industry towards sustainable economic growth.
Speaking further, Fayemi disclosed that the ministry had put in place some institutional reforms to remove bottlenecks to doing business in the sector and ensure a win-win situation for all stakeholders as a way to reactivate economic activities in the sector.

“To thrive as a mining economy, Nigeria needs to clear up certain misconceptions as well as rebuild certain critical institutional relationships. For example, to ensure harmony in mining, the administration believes that it is important that we find a new mechanism to manage the relationship between the states and federal government. Mining is on the exclusive list. That does not mean we cannot work together to solve problems for investors and communities …

“We realise that in order to give you (state governments) good reason to work with us, we need to create avenues for a greater degree of financial participation and revenue sharing. It is therefore my pleasure to announce to this august audience that state governments are now beneficiaries of thirteen per cent (13%) derivation from mining revenue. This is a significant shift, that signposts our commitment to facilitating a win-win situation for all stakeholders,” he explained.

Obasanjo’s Recipe
Interestingly, two of the current administration’s approaches to getting out of the economic recession: proposed sale of oil assets and borrowing at low cost, received the support of former President Olusegun Obasanjo. The former president supported the approaches during his keynote address at the conference and canvassed privatisation of the Nigerian National Petroleum Corporation (NNPC) in a transparent manner adding that the country could re-purchase the assets when it regains its economic balance.

The call by the former president further increases the number of supporters of the move to trade off certain per cent of some high yielding oil asset to finance economic recovery even as the government explained it planned to re-acquire any asset traded off when the economy bounces back.
Speaking at the conference, he stated that “we are spending more than what we can earn. We must borrow as quickly as possible, ‎let us meet who can borrow us with a reasonable interest.”

“We started NNPC about the same time Norway started … and look at where we are. I said it this morning, two institutions that we’ve not tampered with badly or not tampered with at all in the last six years, was NLNG. The second one was pension fund which is going to about six trillion which has captured only 7 million people out of over 20 million wage earners, if we can even double that, you imagine what that can be.

“I see no reason why 49 per cent of NNPC cannot be privatised, don’t give it out to cabals, friends, relations, kiths and kins, let it go public so that even my driver can buy 10 per cent of NNPC and there should be limit to the share any individual or any corporate organisation can buy, there is nothing wrong in that.

“The NNPC will then be run as NLNG was run. The NLNG, they are doing wonderfully well and NNPC was doing very well until we started running it not the way it should be run and if it can be run this way in the past, who says it can be run that same way in future, we must prevent re-occurrence,” he concluded.