The Minister of Finance, Mrs. Kemi Adeosun, spoke about efforts by the federal government to stimulate growth in the country and rebuild economic buffers, during an interactive session with journalists at the just-concluded IMF-World Bank Spring Meetings in Washington DC. Kunle Aderinokun, Obinna Chima, and Funke Olaode provide the excerpts:
On global and domestic outlook
Overall, the global outlook is positive, and we welcome that. More specifically to Nigeria, the country’s outlook is equally positive and contrasts with the meetings we had two and a half years ago, when the outlook was uncertain, and there were many concerns about how Nigeria was going to respond. I think the general narrative is that Nigeria has come out from a difficult situation and moving in a positive direction, as all indicators are positive. Inflation is falling, reserves are rising, investments are returning, and growth is rising. Overall, the message is optimistic, but vigilance, and I will explain why.
 On rebuilding buffers.
We are going to use this opportunity to rebuild our fiscal buffers. Oil prices are positive, but we are going to continue to keep our benchmark conservative to allow us to rebuild reserves so that we don’t have any reversal in our growth direction. And to do that, we must continue to focus on domestic revenue mobilisation. That is what is missing in Nigeria’s financial equation. Let me just give some statistics that would allow us to understand that revenue is very important: Our tax to GDP as you all know is six per cent, Ghana is at 20.8 per cent, Niger Republic is at 11 per cent, and India is at 17 per cent. Most countries in the developed economies are about 30 per cent. So, what is very clear is that if we are able to improve our revenue, we can actually grow the economy aggressively and really provide opportunities for our people. Investment in human capital is very important for us to create jobs for our people and improve the livelihood of our people. In order to achieve that, what do we have to do?
 On tax reforms.
We have to continue our focus on tax reform. I spoke specifically at the IMFC on how tax laws and processes have not taken advantage of the digital economy and how much business is being done on the digital space. Many of these companies are not registered in Nigeria. Interestingly, it is a global problem and many countries mentioned it. The IMF agreed that because of the cross-border nature of the digital economy, it requires a multilateral solution and we urged the IMF to drive standards on how we tax the digital economy and make sure it isn’t an excuse for monies to leave Nigeria.
 On state-owned enterprises.
Another area we are looking at is the area of state-owned enterprises. Of course, in a country like Nigeria, state-owned enterprises are very significant, and I am talking about companies like the NNPC, where we get a lot of revenue from. We must manage our state-owned enterprises and cost-control very well. We must make sure we maximise our revenue. An oil price of $72 to a barrel is positive, but if we don’t manage that opportunity, it doesn’t really translate to growth and better revenues for the economy. I am sure all of you were here when oil price was $140 to a barrel; it didn’t necessarily translate to growth. Now, we have to make sure we block those leakages. As the chairman of FAAC, I am driving a process to improve governance and reporting from the NNPC and other state-owned enterprises, to make sure that all the monies that we were supposed to get come in. Interestingly, we had a dinner for Africa finance ministers and the former CBN Governor was there and he talked about the time when he said $20 billion was missing. What would that amount of money have done for Nigeria? We must make sure that every naira that we expect to earn from this elevated oil price comes in and translates to growth for our people.
On domestic debt.
The final issue that was raised, which has been very topical, is the issue of domestic debt. The general message was that Sub-Saharan Africa’s debt was rising and I don’t think anybody is disputing it. Many Sub-Saharan African countries have debt to GDP ratio of about 60 per cent. Ghana is at 68 per cent, Ethiopia is at 50 per cent, and Nigeria is at 20 per cent. If you look at the metrics that we have, we don’t intend to grow our debt aggressively. That was never the module. The module in the ERGP (Economic Recovery and Growth Plan) is to use the debt funding to avoid a prolonged recession and to replace the revenue mix. So, we must remain vigilant because we have no intention of growing our debt stock aggressively. We are managing our debt service to revenue cost by issuing fewer treasury bills and less compounding of interest and we are very conservative in our debt managing structure because we believe that we need to grow our economy positively using the module we had defined. One of the interesting things that came up in the Internal Monetary and Financial Committee (IMFC) was China. China has a debt to GDP ratio of 250 per cent. Everybody at the IMFC was very shocked to hear that. So, all that infrastructure you see in China were funded by debt. We are not going that route. We feel that the opportunities that China had to grow then don’t exist for Nigeria. So, we don’t think there is any case for accumulating debt. What we want to do is to grow our economy progressively. We would continue to use leverage to grow our economy because we can’t continue to focus on oil prices to fund all the infrastructure we need.
On fiscal sustainability in states.
Sub-national governments were not left out. You remember we started the Fiscal Sustainability Plan (FSP), which the states signed up to. The World Bank liked the programme and they have allocated $750 million for what they would pay for results projects to state governments, which would force them to do many of these fiscal reforms that are needed, such as to publish their budget, financial accounts, comply with IPSAS, digitise their payroll and set up efficiency units. Those reforms would now be replicated in the states. But they can only get the money when they have done the reform, which I think is very important. As we know, the federal government alone can’t drive the economy. If the states are not in sync, it won’t work. So, we need this incentive programme to ensure that everybody is in line and moving in the same direction.Â
On US-Nigeria investment summit.
I attend the IMFC, which is the highest decision-making body of the IMF, and I represent 23 African countries in that role. One of the things I have to do is to issue statements on behalf of those 23 countries, which include most of the Anglophone countries, South Africa and Mozambique. My primary role here as well as having the Nigerian hat on, is to represent the 23 African countries. There has been some controversy over the scheduling. I was here as a governor of the IMF and member of IMFC to represent the 23 African countries and that schedule is what I must adhere to. I think maybe there were some scheduling challenges there.
 On CRS and VAIDsÂ
We signed the Common Reporting Standards (CRS), which really is a reporting standard that forces multinational companies to report their figures in a consistent way, which allows us to compare. And really, the aim is to stop a large percentage of multinationals that earn a lot of money in Nigeria but do not pay push tax in Nigeria.Â
The aim is to ensure that they are not using base erosion and profit shifting to move those taxes abroad. The FIRS (Federal Inland Revenue Service) is implementing it. The FIRS is the main implementing agency for all these tax treaties. As part of what they are doing, they liaise through the CBN with the banks through NFIU (Nigeria Financial Intelligence Unit) to get data. They have online visibility of lots of the transactions.
The key thing is that the volume of companies that are not complying is significant. And we need to build our capacity in that area for us to track them. That is why we went for the VAIDS (Voluntary Assets and Income Declaration Scheme) programme, so that those in default come forward voluntarily, or those who are left. One of the statistics we found is that over 800 companies were registered, which never paid. And we decided to give a window of opportunity to these companies to regularise.
 On level of compliance with VAIDS.
We took the decision to extend VAIDS because we were getting a lot of appeals, especially, from professionals, who said the volume of people that wanted to comply demanded that government gave more time and we considered the options and decided that it was better to have people, who pay voluntarily because it gives us the revenue quicker than to be strict and chase after them. That informed us giving another three months.
The level of compliance has been considerable, especially, personal income taxes, and the states are excited about the number of people, who have adjusted their level of compliance.
Let me give an example with Ogun State. I was speaking with the chairman there and he said the number of people paying N10 million and above in Ogun State had risen to 200. When we asked for that statistics before, I do not think that Ogun had more than 20. So, VAIDS has succeeded in getting high networth individuals really stand up to pay their fair share for national development. I know that the figures for Lagos are very significant. In Lagos, there was one person that paid N250 million and more under VAIDs.Â
It has been a very successful programme and we know a lot of people are waiting for the extension and we want more people to come in. It is part of our efforts to drive revenue.
On debt rebalancing
As I said earlier, when we came in, 80 per cent of our debt was short-dated, that is, it matures in two years or less. What was causing the problem of debt service to revenue was interest compounding. What we did was to restructure, and we told the Debt Management Office (DMO) to stop issuing 90-day bills, but to issue more of 180-day, 360-day and bonds to reduce interest cost. Secondly, most of what we owed was domestic and the interest rate was as high as 19- 20 per cent.Â
Today, what DMO is paying is around 13 per cent because we have restructured that portfolio, refinanced some into dollars and we have taken advantage of the low interest rates in the Eurobond market. The timing of those transactions from what we have been hearing was very good because now there is talk about normalisation, which means Fed raising interest rates and we have already locked in for a period of 30 years at a fixed rate. So, that rebalancing was timely, because we took advantage of the market. That was the first time Nigeria came into the capital market in about two and a half years, and we were 872 per cent oversubscribed. It was a massive vote of confidence on the way we were handling the economy.
 On concerns about risk.
One of the advantages of the Nigerian government borrowing heavily and coming out of the domestic market was to create headroom for banks to be able to lend to the real sector. If we don’t allow the private sector to grow and only government is borrowing, we cannot grow the economy.
 That is the real fiscal buffer in an economy that is growing strongly. That is the real shock absorber. If oil prices falls and the non-oil sector is growing, then we can weather the storm.
We must begin to see Excess Crude Account accumulation and to do that we have to focus on the state-owned enterprises. So, we are going to be working closely with them. In the past, the NNPC used to come and just present figures, now, we are questioning those figures.
On recovered loots.
I will speak specifically about the Abacha loot. That money is subject to the World Bank programme. What we have done is that we have ring-fenced that money – $322 billion. It is in a specific account and it is earmarked for our Conditional Cash Transfer programme, which is a social safety net programme for the poorest. Those are the sorts of projects that we are focusing on. We are taking back these funds to those who need them, to families that have nothing and for mothers. You get N5, 000 if you send your children to school and if you immunise your children, you get N5,000. Those are really conditions to address some of the human capital challenges, such as children out of school, poverty, maternal health, and others.
 On debt service to GDP
Let me restate that debt service to GDP is relatively high. The solution to it is to raise our revenue and that is what we are doing. VAT is up this year, Customs revenue is up and we have talked about what we are doing about state-owned revenue. The number of taxpayers is now 17 million. When we came it was 13 million and it is growing very rapidly.
On GDP projection.
About GDP projections trending downwards, we are very confident that if we implement our plans diligently, we can grow this economy. I attended a meeting of finance ministers of Africa and everybody was saying, “Nigeria, we want to be you. You have a 20 per cent debt to GDP and six per cent tax to GDP, if you fire your revenue, fix your infrastructure, you will grow.†Some of the countries have no fiscal headway. In one of my other colleagues’ country, they have debt to GDP of 68 per cent and tax to GDP of 20 per cent. Nigeria has headroom to grow. What we all need to do is to come together; I think that’s where the National Executive Council (NEC) will be important. All these roads and rails now translating to real projects and jobs for our people. Just a road doesn’t create jobs, what creates jobs is for people to open businesses and taking advantage of opportunities and going to the next mile. That’s why we need the state governments and private sector to key in. We are committed that by 2019, the growth will be far more robust than what we have now if we can remain optimistic and vigilant. We’ve recovered a lot of assets and we’ve redeployed assets. Properties seized, when we see agencies renting, we move them there. We’ve done that a lot.
