With a background in Law and public service experience, spanning more than a decade and half across both the legislative and executive arms of government, Minister of Budget and Planning, Udoma Udo Udoma, is certainly well groomed for his task of helping the federal government strategise the nation’s way out of economic doldrums and set it on the path of recovery and growth. In this interview with Bolaji Adebiyi, Iyobosa Uwugiaren and Ndubuisi Francis, he speaks about the success rate and challenges of the Buhari administration’s efforts at economic recovery and growth
Tell us about the Economic Recovery and Growth Plan (ERGP). How far have you gone with its implementation?
You recall that when we came in, we met an economy in decline. That decline started in 2014, and the major cause of the decline was the collapse in crude oil prices and the dependence on a single commodity and we didn’t have any buffers unlike the previous time it went down. So, we decided, first of all, to come up with a short-term plan which was called the Strategic Implementation Plan embedded in the 2016 Budget. We came out with a budget which was a reflationary budget to stop the slide, and the strategic implementation plan of that budget was meant to capture the various short-term measures while we’re working on a longer term.
This longer term plan involved extensive consultation with all the stakeholders including the National Assembly, our international partners and the states, particularly the commissioners for planning as well as the governors. We also consulted extensively with the private sector on a number of sessions and it was after the consultations that we came out with the Economic Recovery and Growth Plan. The reason for that extensive consultation was that we wanted a national document that everybody would feel they are a part of, because in order for it to work, you have to have the total commitment of everybody. And when the plan was launched, the general reaction to it was extremely positive; people welcomed it.
Consequently, as a result of the plan, confidence started coming back into the economy because people like the plan. The plan is anchored on the private sector, and the private sector like the plan. So, if you look at the trend of the economy, you look at, for instance, our foreign exchange reserves which had been going down all along, you would notice the improvements we have made. It went down in 2016 to as low as $23 billion. After the plan was launched, it started going up. Right now, our foreign exchange reserves are over $36 billion, which is higher than what it was when we actually came in as a government. So, people believe in the plan. The plan was focuses on five execution priorities. The first was stabilising the macro-economy.
The other four are agriculture, energy/power, transport infrastructure and manufacturing. The idea was to make Nigeria a much more productive, looking inwards in all these areas. Agriculture has gone up. We targeted rice; rice imports have come down. Now that we are preparing for Christmas, you will see that most politicians who will give out rice will be giving out local rice. As a result, we are now out of recession. You will recall that the ERGP was launched in April. By the end of the second quarter after the plan had been launched we had a very small growth of 0.7 per cent. In the third quarter, the NBS (National Bureau of Statistics) numbers showed that we had growth of 1.4 per cent. So, you can see the trend in the economy; confidence in the economy is coming back.
One of the various initiatives in the ERGP is making business easier because we want the private sector to invest. Everybody complained that the business climate in Nigeria was not very friendly. In order to tackle that, we decided to use the World Bank survey (because that was an independent survey) as our standard. Our ranking by the World Bank survey was number 169. We decided that as part of the plan to improve by 20 places in the first year, and possibly improve below a hundred by the year 2020.
A presidential committee on the Ease of Doing Business was set up, headed by His Excellency, the Vice President and all the key ministers involved are part of it. We also have the private sector people that we invite as necessary. We are also working with the states because some of the measures are targeted at things like ease of acquiring land titles that are done at the state level. Some other things are done at the federal. For instance, company incorporation and getting visas on arrival. We went all out with a number of reforms. As a result of those reforms, in the last ranking which the World Bank published, we had actually moved up 24 places even more than we targeted. Our target was 20 places. These are all things flowing from the ERGP.
We still have a lot of work to do though. From January, we will be conducting what we call labs. We will pick the key areas, we will then bring together investors, business people and the various agencies and the particular ministry responsible for the area to identify all the bottlenecks that are still left, which need to be removed or improved upon to generate additional investments. We will have the labs basically in three areas, agriculture and transportation; power and gas; and manufacturing and processing.
This is because agriculture is very important to this administration and one of the constraints to bringing down the cost of food is transport cost. So that is why we are doing both together. The second one we are going to do is power and gas, because a lot of our power is actually gas. So we have to optimize gas to improve our power and if we can improve our power it will make a very big difference in the lives of Nigerians and our productivity and our ability to compete. The third is manufacturing and processing, because if you are going to access agriculture, you need processing, because that adds value to agriculture. So, manufacturing is very important because it will actually create more jobs than agriculture.
We are very optimistic we would achieve our targets and we are grateful to Nigerians who clearly have so much confidence in what we are doing.
What challenges have you experienced in the implementation process?
The major challenge that we have as a government is revenue. With the collapse of the oil price, our revenue keeps going down, so we need alternative sources of revenue for the government. The major source of revenues for most countries is through taxation. But our tax to GDP ratio is very low, it’s about 6 per cent. The average in Africa is about 16 percent. So, if we could take up our tax to GDP ratio, then we will have enough revenues. Revenue, therefore, is our greatest challenge and we are attacking that in various ways. We have introduced the tax amnesty programme, and we are also looking at how we can maximize independent revenue that the federal government gets from all our agencies. Under the Fiscal Responsibility Act, we are entitled and require a certain percentage of pockets but the way that some of them make their expenses, you find out that we are not getting enough in terms of the remittances to the treasury. We have introduced the Treasury Single Account so that we can monitor them better, but we need to do more. We probably need to look at amending the Fiscal Responsibility Act so that we can get more revenues from the various government agencies.
Generating revenue to run government is our number one challenge because we have a very high salary cost. About 70 per cent of our recurrent expenditure is on salaries and pensions. But at this time, we cannot afford to embark on a massive retrenchment because the economy is not so prosperous. Our option is to take up the tax collections without increasing tax rates. Those who have well-paying income would have to pay their taxes, but we are not increasing the tax rates.
Some critics say the reason for non-compliance with taxation is because there are multiple taxation and that the rates are high?
What I would like to say is that on a total overview of our taxes, we do not believe that our taxes are very high. But these are things that we can review from time to time.
The ratio of recurrent to capital expenditure has remained high in favour of recurrent, sometimes as high as 80 per cent. Is there a chance that we can equalise them?
When we came in 2015, the amount that was allocated per capital in the whole budget was about 16 percent. So we committed to take it up to 30 percent and so in 2016 it’s was 30 percent and in 2017 it was 30 percent. It has not been easy to achieve that 30 percent because the reason the recurrent is very high is that the major part of it was salary and some overheads. We can cut down the overheads but salaries and pensions cannot be dramatically cut. The only way we can bring it down, which we will like to, is to take up revenues. What will happen is, as a percentage of the budget, you can now have a much higher percentage for capital. That is why revenues are so important because we don’t think it is right to embark on retrenchment.
Budget implementation has been problematic. What are doing about that?
We are working closely with the National Assembly. For instance, in the start of 2016, we released over N1 trillion for capital; the highest in recent times. So we have actually done very well compared to the previous administrations in terms of the amount that we released. So, this year, the budget year started in the middle of June, for a budget that has not run for six months, I should we are doing well because over a trillion has been released; N450 billion in June and another N750 billion last week. Of course you know the recurrent is fully implemented annually. There was a delay in the 2017 budget release and that delay was because most of the capital budget is to be funded by borrowing and some of that borrowing are to be sourced internationally, and what we had to do first was to get approval from the National Assembly. It was only after we got the approval, that we were able to continue the funding of the capital budget.
Legislators have complained that the budget figures and items are repetitive and riddled by errors.
Things are much better today. When I first came in, the budget had so many errors and mistakes. We sanitised the budget and things are so much better today than what we met. However, we will continue to address whatever gaps and issues. What we encourage people to do is when you spot anything that you feel will be a problem, tell us and we will address it. With regard to the specific issue of carryover, I already explained that in the 2017 budget, we told the MDAs carryover at least 50 per cent. That is why you will see that many of the projects in the 2017 budget will be repeated in the 2018 budget. This is because we are not likely to fund them in full in 2017. The fact of the matter is that we don’t want an abandoned project. Some projects in the budget take years before they are completed.
Delay or non-implementation of constituency projects has been a sore point between the legislature and the executive. How is this being resolved?
I told you about the delay in implementation of capital projects, and we explained to them the cause of that delay. Now that we have sourced additional funding, funds are being doled out for all projects, including constituency projects.
Why has the delay in the passage of annual budgets become a perennial challenge?
I came in to meet that. We have been engaging the National Assembly to try to get back to January to December fiscal year. It’s important to get back to January to December fiscal year not because of complying with the law, because the National Assembly when they pass the appropriation act they indicate on it that it runs for 12 months, from the date it was signed into law and they have the power to do so. But the reason we want to go back is because it helps planning. It’s good for most private sectors to know what government is likely to spend so they can also plan.
So, it makes for greater monitoring and transparency of the budget. Basically what we have done is to prepare the new budget within three to four months instead of about a year it would have taken normally. It was hard, but we had to do it and we got it ready by October. It was formally submitted to the National Assembly on 7th November. We couldn’t believe we could actually achieve that because in order for you to do that you have to estimate what are you likely to spend in the 2017 budget because our plan was to roll over 50 per cent of the 2017.
The budget will only operate for less than six months so it means that physically it will not be possible to spend 100 per cent of the budget that is supposed to run for twelve months in six months. So we could only spend maximum of 50 per cent. We, therefore, had to estimate how much of that we could spend as at the time that we were preparing the budget in September. You can see the challenge that we had. We, however, completed the budget and we engaged the National Assembly. When we spoke with them, they pointed out some of the difficulties, but they promised to work with us. Maybe they will do it in January this time so that in the following year we will now be able to achieve the January to December.
Even though some members of the National Assembly were initially a bit concerned about how it was going to distort expenditure of the 2017 budget, I think we have managed to persuade them to understand the reason it’s so important we return to the January to December budget circle. Right now, we are getting a lot of cooperation from the National Assembly. I’m sure that given the way that they are working, we are very optimistic that we will get a much earlier budget this time.
Your ministry plans to track donor fund. How would that be done?
This ministry coordinates national donor funding. Since we coordinate, we will be able to monitor it and we think it’s important we reflect it. One of my objectives since we came in is to improve transparency, to put as much as possible in the budget. That was why, for instance, we published the budget proposal in our website and people were able to make comments. Of course it cost us a lot, people who didn’t like some elements in the budget attacked us, but we didn’t mind because we put it up so that we can get a feedback. What we want to do is to get out as much information as possible about the budget because the feedback that we got helped to improve the process. So, one of the things we want to do is to provide information even on general funding, so as we can track performance. We have included an estimation of the general fund that we expect and we will track performances. We are also be able to report our performance so that we know whether the commitments that have been made were received or not.
Are you not worried that the non-oil sectors are still recording negative growth?
The two areas that we are actually concerned about is the manufacturing and services. That is why we are so concerned about improving the ease of doing business so that the services sector can prosper. The services sector is usually the last to respond when you are moving out of recession. We feel we should put more efforts in those two areas.
What is your take on IMF’s recommendation for fiscal consolidation?
Let me say that we work on our own plans not the IMF. We have the ERGP. That is our plan and the IMF and World Bank actually commended the plan. So we don’t work with anything else other the economic recovery and growth plan.
How realistic is your target of 7% economic growth by 2020
We have to achieve it because our population is going up on almost 3 per cent and any growth rate that is not significantly more than the population, we will not even feel it. When we said we grew by 1.4 per cent in the last quarter, people said where was the growth? But when the population is growing too you won’t see it. Nigeria has no choice, we just have to work to achieve that 7 per cent. Basically that is our focus, we will continue to strive to ensure that we achieve that 7 per cent and our target for next year is 3.5 percent.
We are willing to make adjustments in terms of the trajectory but the objective of 7 per cent is what we must achieve. We believe that Nigeria can even achieve 10 per cent a year or two after our target date. Ethiopia achieved 10 per cent in a number of years. We have the people, the natural resources and land. We believe that even when an economy starts up slowly, it picks up and when you have been contracting, it requires a lot of discipline to stop the contraction, then it starts to grow and as it picks up then you can speed up the growth. We must put in the effort to achieve that 7 per cent by 2020.
This administration has spoken so much about closing the infrastructure deficit. Are you really succeeding in this regard?
If you travel around the country, you would see a lot of work going on in road infrastructure. We increased the budget from about N18 billion in 2015 to almost N300 billion. We are embarking on ambitious rail programme. We have almost completed rehabilitation work on the existing narrow gauge from Lagos to Kano and from Port Harcourt to Maiduguri. We have also embarked on modernisation program, building a new modern track from Lagos to Kano, and from Calabar to Lagos. We intend to ensure that every rail line in this country has standard gauge tracks.
We are discussing with the Chinese and we have provided for the counterpart funding for the railways in the budget. I think at the last executive council meeting, the Minister of Transportation said there were also ongoing railing stock. A lot of work is going on in the railway and road sectors. We are tackling infrastructure, you can see the woks that are going on in our airports and we intend to bring in private sector funding into that. Infrastructure is a focus of this government and it’s a focus of the budget. If you noticed, consistently, the largest allocation for capital has been in power and housing.
But in spite of these works and spending on infrastructure, people are still cash-strapped?
The government is just two years old. You don’t expect us to fix all the problems in two years. These things take time but the most important thing is the direction of movement. Yes, it will take a long time but you can see the movement in terms of even inflation, inflation is coming down. So all the indices that you can see are positive, the ones that are not, we are now focusing a lot of attention in those areas. Manufacturing, for instance, we are devoting almost N50 billion, in the budget, for special economic zones, which we have in different parts of the country. It will take time to turn things around and I appeal to Nigerians to be patient. Things will get better.
What is the government doing about the Orosanye Report?
In the short-term, the government does not believe that it should retrench. So I believe that when the economy begins to improve, we will be able to look at some of those issues. I think the president is very concerned about people keeping their jobs. However, he believes that we should weed out fake workers and as much as possible keep genuine workers.
Fuel scarcity has persisted. What will happen when you cut imports by 60 per cent next year?
I think we just have to get local production up. All the refineries should be working at full capacity. When the Minister of State for Petroleum addressed the press last week, he said they had a plan to ensure that all the local refineries worked at full capacity. In addition to that, we have the private refineries coming up. The Dangote refinery is coming on stream in 2019 with up to 600,000 barrels and that alone is enough for the whole local demand. So with the fixing of the refineries and the private ones, including modular refineries coming up, we might see the end of scarcity of petroleum products.
Fears have been expressed that the next two years would be spent on politicking. Do you think the fear is real?
I can assure you that the president is a focused man. His focus is long-term. We have objectives to meet and they will be completely focused on, knowing full well that our success in this regard would be a legitimate platform to seek further support from the people.
How well are the governors keying into the economic revival of the federal government?
We are using the platform of the National Economic Council, headed by his Excellency, the Vice President, to engage them. All the important issues that the federal government are dealing with presented to the states at the forum.
The NEC is a forum, which is being effectively used to make sure that we coordinate the activities of the state and the federal. For instance, the reason why we achieved much in the ease of doing business is because we work with the states in areas like ease of getting land title and business permit. You may recall in February 2016, we organised a retreat on the economy with all governors and one of the things we identified during the two day retreat was agriculture and the need to work together. Small committees were set up to look into that. As a result of that, some of the governors now got into joint ventures.
So we challenged the governors to look at products in their own states that they can concentrate on and we are working very well together. I will say the federal government has received lots of collaboration with the governors and we are working closely with them.