•Emefiele: CBN committed to exchange rate stability
Kunle Aderinokun and Obinna Chima in Bali, Indonesia
The federal government yesterday insisted that Nigeria was not in any way near a debt crisis.
Also, as part of efforts to enthrone transparency in the Nigerian National Petroleum Corporation (NNPC), the government disclosed that in the next few days, a new reporting template would be introduced for the corporation.
Minister of Finance, Mrs. Zainab Ahmed, disclosed this yesterday while responding to questions during a media briefing at the end of the International Monetary Fund (IMF)/World Bank Annual Meetings in Bali, Indonesia.
This is just as the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, pointed out that due to the ongoing interest rate normalisation in the United States, which has been predicted to extend to some other advanced economies in Europe, the central bank would focus on maintaining a stable exchange rate so that businesses can plan and to avoid a problem in the banking system assets.
Emefiele also revealed that there were plans to privatise more national assets, such as the Aluminium Smelter Company of Nigeria (ALSCON) by the Economic Management Team of the federal government.
The federal government is seeking approval to issue fresh Eurobond of about $2.8 billion.
Already, the nation’s total debt stock (federal, FCT and states) had been put at N22.38 trillion ($73.21 billion) as at June 30, 2018
But Zainab maintained that, “We don’t have a debt problem because at the ratio of three per cent of Gross Domestic Product (GDP), we have one of the lowest debts, in fact the lowest debt among our comparative countries.”
According to Zainab, “What we have is a revenue problem and we need to work to increase our revenue to ease our debt service obligations.”
She stressed the need for government agencies to enhance domestic revenue mobilisation so as to ease the debt service burden.
“We have a lot of headroom to borrow but we are not rushing to borrow more because we have to consider the foreign debt service that we carry,” she explained.
The minister promised that going forward, once a sum is released for capital projects, a schedule of the projects the funds is expected to cover would also be released.
“Subsequently, we are looking at the possibility that when we release capital projects, we would clearly determine what projects the funds are released for,” she said.
Zainab added: “We really are in a situation where we have to consider increasing building fiscal buffers because even though the global economy is going positively upward, there is still a lot of fragilities.
“A lot of countries, including our own, and the next wave of recession that might hit the global economy might not be the one that any country can quickly come out from unless the country has sufficient buffers.
“So as a country, both the federal and the states, we have to look at how to save more and we have to look at how to invest more in critical infrastructure that will yield revenue.
“There are only a few countries in the world that have saved so much in the world that any shock will not affect them. So we have to do this to protect ourselves from external shocks that we are now seeing coming from increase in rates in the US,” she added.
According to the finance minister, the proposed Eurobond that would be issued this year, if approved by the National Assembly, would be to fund the 2018 budget.
“The budget has approval for us to borrow both locally and internationally and we have a bond issuance within the range of $2.8 billion that we need to raise before this year closes. That will be used to finance the capital projects in the 2018 budget,” she added.
On the new reporting template for the NNPC, Zainab explained that a committee that was set up by the president on revenue mobilisation was among other things, mandated to ensure that all revenues of government agencies are reported in a transparent manner.
The committee, according to her, had been working to support the Federation Accounts Allocation Committee (FAAC), “and they have agreed on new reporting template for NNPC which is still being negotiated. NNPC has reviewed the template and made its input and FAAC has also reviewed the template.
“The essence is for NNPC to make its reporting more granular so that more information will be provided. We hope that in the next few weeks, it will be concluded and the new reporting will take effect. Reporting has been a concern for the whole of FAAC both state and federal government.
“In terms of taxing multinationals, on the instrument we will be using in taxing them, we are already taxing companies with the rates approved in the tax laws,” she added.
According to her, there is no plan to review upward taxes in Nigeria.
“Instead what we are trying to do is to identify people who are supposed to pay tax, but they are not paying. A lot of efforts is being put to expand the tax base as well as improving the tax collecting processes and it is already yielding results,” she said.
Exchange Rate Stability
Meanwhile, Emefiele said there was no cause for alarm owing to the recent decline in the country’s external reserves.
He, however, stressed that even though there was need to build buffers, “unfortunately I must say that we are in a period where it is difficult to talk about building reserve.
“It is a choice we have to make and at this time, the choice for Nigeria is to maintain a stable exchange rate so that businesses can plan and we don’t create problem in the banking system assets.
“Naturally, when this happens, it results in weakening of assets, rising non-performing loans (NPLs), and other wide implications. This is why we will maintain the posture we have and we believe that it is sustainable in the short run,” Emefiele said.
According to him, practically, all emerging markets have suffered, not just by depreciation, but also loss of reserves since the interest rates normalisation commenced.
“India, for example, has depreciated almost 14 per cent, Ghana by almost 12 per cent, New Zealand by about 12 per cent, Indonesia by another 12 per cent, Australia by eight per cent, South Korea – eight per cent; Japan – six per cent; Thailand – six per cent; Philippines and Vietnam have also lost, but Nigeria has lost little or nothing.
“While we are at this meeting, our host country has reported a loss of about $20 billion in foreign exchange reserves and at the same time suffered currency depreciation, which is the same for the rest of the emerging market economies.
“For Nigeria, we have lost only reserves by a margin, in my view and at the same time, we have managed to sustain stability in our foreign exchange market. I think we have done a very good job, not only trying to maintain a stable exchange rate, but trying to avoid depreciating our currency so far in this early days of normalisation.
“We have lost reserve, yes, somewhat marginally in my view, and at the same time, we have managed to sustain stability in our foreign exchange market.”
Udoma Reacts to Human Capital Index Report
Minister of Budget and National Planning, Senator Udoma Udo Udoma, who said although the country didn’t perform better in the recent Human Capital Development index which was released by the World Bank last week, he attributed the decline to “cumulative neglect over a period of time.”
This, he said, was one of the issues the Economic Recovery and Growth Plan (ERGP) was set up.
“So, what I want to say, basically, is that it has been the focus in the ERGP. We have increased funding to those areas that bother on human capital development because we are conscious of investing in our people. But it takes time for these things to manifest.”