Ahmed: Nigeria Has World’s Fastest Growing Social Investment Programme

0

Minister of Finance, Mrs. Zainab Ahmed, in this interview says the federal government’s intervention through its Social Investment Programme is targeted at lifting the most vulnerable persons in the society out of poverty. She also speaks about the school feeding programme which currently takes care of 9.5 million pupils as well as clarifies issues around the growing number of beneficiaries in the government’s Marketmoni and Tradermoni. Obinna Chima presents the excerpts:

As good as the federal government’s policies might look, a lot of Nigerians are still not convinced. Also, when you look at the amount the government has borrowed so far and the infrastructure projects, some are still not convinced about its impact and some feel the targets in the ERGP are not realistic? Also, when you say government’s borrowing is for capital project, where do you classify NNPC’s N1 trillion subsidy and what is the update on the VAIDS programme?

Let me say that the targets that we set in the Economic Recovery and Growth Plan (ERGP) are very realistic and achievable targets. And because you have a revenue target and you perform 50 per cent or because you have a projection target, for example, when you look at our budget we said that NNPC’s production target should be 2.3 million barrels per day, but we do have a production capacity that is over 2.5 barrels per day. So we have been told by people when your average performance is two million, why do you still set it at 2.3 million barrels per day? We will say because you have to incentive agencies to perform. Because agencies are under performing does that mean you just sit back and just reduce the targets? What you should do instead is to find out what are their challenges and drive them to achieve those targets. So the targets are realistic targets. And NNPC’s expenditure and fuel subsidy is not a capital expenditure and we did not and we will never use borrowed funds to pay for recurrent expenditure like fuel subsidy. The current regime that you are referring to as fuel subsidy is different from the previous fuel subsidy regime. What we have now is under recovery, it is the cost of the NNPC’s operations. It is the cost of buying the refined products, storing them and distributing them. In the previous regime there was cost of borrowing that is added because you are engaging a marketer and there was also profit that you have to add. So this is achieving better efficiency and then you have only one agency of government that buys and then sells to the marketers. So fuel subsidy is not a capital expenditure, it is a business expense of NNPC and the federal government is not using borrowed money pay for fuel subsidy. Investment in infrastructure is very important for any economy to grow in a manner that is sustainable. So, when you are building rail lines or roads, you don’t do that and complete it in one day. It takes time to build and it is only when you build and the assets are put to use that the citizens will get the impact. If you say there is no impact, ask the people that are riding on the Kaduna-Abuja rail line every day. The benefit of that rail line is very significant. You can go between Abuja and Kaduna, do business in the morning and go back to Kaduna in the evening. The road that is being constructed now between Lagos and Ibadan, when completed, it is a 50- year investment. You will not have a situation where you have to invest more on that road. And the most important access road in this country is that road because it is the heart between the ports and Lagos, to the rest of the south-west and indeed, the rest of the country. So, that is a very critical road and because it is not completed, people are still complaining because there is traffic. But the construction has to be done first of all before the benefits are reached. The Voluntary Assets and Income Declaration Scheme (VAIDS) programme ended last June, and we had an increase in tax payers’ base of five million and that was a significant improvement. In terms of revenues realised, we had N92 billion. But the most important benefit of the VAIDS programme for us in finance ministry, is the data that we gathered from that exercise. That is because we now have the data base of those individuals who were previously not in the tax net, who we can on a routine basis ensure that they pay their taxes. And we are building up on this exercise. The Federal Inland Revenue Service (FIRS) has a scheme called the high net worth individual scheme, similar to the VAIDS programme. It is a programme where they identify high net worth individuals through the level of their transactions in the banking industry, through their ownership of businesses and they pursue such high net worth individuals and make them pay tax. These are both individuals and as well as companies. The result of this is that the FIRS performance improved by 40 per cent last year, compared to their performance in 2017. So this is both a combination of the automation effort, the VAIDS programme and the high net worth individual programmes and it is growing. So there is significant improvement.

The World Bank projected that Nigeria’s economy will grow by 2.3 per cent this year and the IMF said the economy will grow by two per cent, while the federal government is projecting a 3.01 per cent growth. What are you seeing that you think the World Bank and IMF are not seeing? Secondly, considering the country’s high debt service ratio, why wouldn’t the government go for aggressive revenue mobilisation so as to increase capital expenditure?

The figure that the World Bank and the International Monetary Fund (IMF) provide as to the potential of growth of any country, is in most cases at variance with the country. That is because we have more information about what we are doing as a country than they do. We have more information on the various indices relating to growth in our country than the World Bank and the IMF. And I am not saying they are wrong because they are seeing it from a prism that is different from ours. The ERGP as well as the 2019 budget projects that Nigeria’s GDP will be 3.01 per cent by the end of 2019. What this means to us is that we are saying this is a growth target but what do we have to do to get there? It is broken down into what each sector has to contribute. We have to now drive implementation on a sector by sector basis so that the contribution leads us to this growth. So when you say target, the target is supposed to drive performance. So if you say targets that are low, what you are doing is that you are dis-incentivising improved performance. The debt service obligation, I said earlier on, is higher than what we would like, but we are able to meet our debt service obligation at an average of about 50 per cent of revenue. That is not good enough. When you look at the budget, the debt service performance is supposed to be 25 per cent, but because the revenues are under performing it results to an average of 50 per cent. So what we have to do is to address revenue. And we are embarking on several revenue initiatives.

A report last year indicated that Nigeria has displaced India as the world poverty capital. How do you reconcile that with all you said the government has achieved?

Nigeria’s Human Development Index (HDI) report by the World Bank is one that saddened all of us. Let me first of all say that where we are in terms of the low indices is a process that took years to happen. And the things that we are doing to reverse it will not manifest in one or two years. The base line of the data that was used for that report was prior to the Social Investment Programme (SIP) that we are currently undertaking. Another reason is that India has taken some radical measures which they have implemented over a coupled of years that made them drop off from being the highest. So, there are things we are doing that are not yet recorded and then, the efforts that India did. And we are also following the same part that India took. We have to identified the most vulnerable persons in our society and put in place policy measures and we are implementing them so that they will have impact. Let me give you an example, we are feeding children in schools and today we have reached 9.5 million pupils. This is in two and half years. Brazil that has the most aggressive social investment programme in the world, when we visited them in the second quarter of last year, the number they have covered was about 41 million pupil. And they have they have been doing this for about 40 years. So, we have the fastest growing social investment programme in the world today. That feeding programme has a multiplier effect. It is helping us to address the issue of poor school enrolment which is part of the measurement of the HDI report. It is helping us to improve our poor nutrition indices which is part of the measure of the human development index report. It is also helping us to provide jobs for women. We have up to about 100,000 women that are now cooking for these 9.5 million children. One meal a day, includes eggs, chicken, fish and beef, that is what some of these children don’t get at home. The cooks also have to engage other people to help them because each woman has at last 100 children to feed. So, she may end up employing two or three people. It has created employment. And then the farmers, because we insist that the food has to be bought locally and no imported goods. The farmers’ production has increased exponentially because they now find out that they need to produce more. So, it is a journey and for us that report was a wake-up call. It means we have to further redouble our efforts in the social investment programme so that in the next two years when the assessment is done, the report will be significantly favourable to Nigeria.

Talking about the government’s SIP, how much has been disbursed so far under the Tradermoni and Marketmoni, what is the repayment process and who audit the funds considering the comments we have seen around it in recent times?

The Tradermoni and the market money are all managed by the Bank of Industry. We started with the Marketmoni which is providing loans between N10,000 to N100,000 on the average. And by the middle of last year, we realised that we have only been able to cover 350 beneficiaries. Yet, our target was to reach 1.6 million beneficiaries. So the Vice President who is the Chairman of the SIP said there was need to fast track the access to these facilities. And then in town hall meetings, he now found out that there are some people at the lowest cadre are not even being addressed at all, such as the traders in the market that are selling pepper, onions and tomatoes with very small inventories. So he said lest find a way to reach all these people quickly. We now went back and did some investigations, we found that there are technology services that can enable you provide money using the mobile phone, provide a loan using the mobile phone for beneficiaries. And you also recover the facility using the mobile phone. So the Tradermoni is providing N10,000 to very small traders using the mobile phone and the recoveries of those fund is also using the mobile phone. And when a trader pays the N10,000, then he is entitled to N15,000, when he pays the N15,000, he is entitled to N20,000 and it grows. So we are helping to grow a large number of people. And we found that it makes a difference in the lives of the people because it is in those businesses that we think are small they trade and manage their families, pay school fees and take care of hospital bills. Today, the Tradermoni has gone up to over one million people and the target we have in the next four years is to grow that to 10 million.

 

What is the government doing to resolve the strike embarked by the Academic Staff Union of Universities (ASUU)?

 

ASUU is on a strike again and for us in government ASUU strike is something that has become matter of routine and it saddens us. We were told by ASUU that some years back that there were some negotiations and some commitment by the previous administration to provide to ASUU about N1. 1trillion. They are asking for N1.1 trillion, where will we get N1.1 trillion to give to ASUU?  It is not realistic. So, we told them the best we can is to give you then N20 billion and we gave them N20 billion last year. And this year also the government has approved another N20 billion to give to them and that is being processed. Apart from the budget of the Federal Ministry of Education, there is also the TetFund that is also designed to be used by the tertiary institutions. You cannot bail out the deficit that we have in the education sector in one year.  The first two tranches of funds have been provided to ASUU towards that N1.1 trillion. And by the way I really still need to find out how they came to N1.1 trillion, it maybe more than that, I don’t know. This is money that is supposed to be used to build infrastructure within the university system and there is Tetfund specifically set to build infrastructure within the university system. So, we have a lot of work to do between ourselves. And as we speak, the Accountant General is processing another N20 billion for ASUU and another N15.8 billion in what is called earned arrears. So ASUU needs to face the reality that the economy is not buoyant for us to pay them N1.1 trillion. It is simply not possible, because the resources are not available for us to do that, even if they are, you have to also ask whether the university system as it is structured has that absorptive capacity. You also want to make sure that the funds that you provide were actually used to roll the infrastructure that the system requires.

During the launch of your agric programme recently, you said the target was to create more jobs and that it is going to be purely private sector-driven. So, what modalities are in place to ensure that the target – youths and women in the 744 local government areas are reached?

The agriculture mechanisation programme that we launched recently took almost three years before we came to that level. The government of Brazil is partnering with the government of Nigeria to bring in agriculture machineries to be deployed across the whole of the country. Brazil has one of the highest grades of tractors in the world as well as other agricultural implements and it is one of the places that have the most success in agriculture production. They have a model that they use in Brazil which they have been able to export to other countries and Nigeria found out about it, but we saw also the mode of implementation has happened in some of African countries including our neighbour, Ghana, but didn’t really achieve the target they tried to achieve. So Nigeria stepped back and walked to Brazil to design a programme that was specifically suitable for the Nigerian market. So, the $1.2 billion is going to come largely in the form of equipment in completely knock down(CKD) parts. So we have identified six tractor assembly plants, one in each of the six geo-political zones. They will assemble these CKDs into tractors and other implements that will be used in the agriculture sector. And the second thing is the 109 senatorial districts of the country are going to have what we call service centres. These are centres that will be  providing services where it will be needed in terms of agriculture services to farmers around the area. But they will also be providing processing services. So, if you produce cassava, instead of maybe exporting just the dry cassava, they will be able to process it for you. So those centre have been chosen already. These assembly plant would be 100 per cent private sector owned and the owners that will run those centres will emerge through a stiff competitive process. And it will be 100 per cent private sector funded and financed. The government is only providing the policy, framework and any support that they will require. So what it means is that a farmer that used to just take his produce and sell directly to the market will now take to this centre and pay the centre a fee, process it and then go away with the processed product. So if I farm maize, I take it to the centre they produce maize flower and what I am selling is the maize flower. You know that the value addition is actually 70 per cent of the value chain of any agricultural produce. So more value will be retained, a lot of employment will be realised as a result of that and also more wealth will be with the farmer. So that is the design of the programme. We have support from the Deutsche Bank as well as an arm of the Islamic Development Bank to drive this process which largely vendor financed by the government of Brazil.

Over the last three years, the government has been targeting N321 billion as revenue estimates from privatisation and as of today, the number you have gotten is zero. Why has it been so? Secondly, there is an output gap in the gap in the economy and the missing link is the private sector investor and this appears to be a sign of lack of confidence. What is government doing to restore private sector confidence?

The revenue from privatisation and the revenue we classify as independent revenue, that is, revenue from government-owned enterprises, is the weakest link in our revenue performance. We have gone through three budget cycles, but zero revenue from privatisation. We are working with and engaging the Bureau of Public Enterprises to make sure that some of the privatisation are fast-tracked. We also found that there is a very tedious process provided by law, that has to be followed for any privatisation to take place. So, we are working with the BPE to fast-track the sale of some of these essential government assets. And then, we are putting in more attention,  working with the state-owned enterprises to improve their business efficiencies and reduce their cost, so that more operating surpluses and dividends can be paid to the federation. In terms of the output gap in our Gross Domestic Product, while I respect your opinion, the report we have shows that our trade balance has improved significantly. That means the manufacturing sector has picked up, there is more exports recorded by the country and less import, which is a good thing. Of course, it is not at the level that we want, but the movement is a positive one. There is a significant number of foreign direct investments that have come into these country, a lot of which are direct investments. We have large scale businesses, especially in food processing, that have sprung up in Nigeria between 2016 and 2018. They were not there before. We have large rice mills that are producing rice in Nigeria, we have Olam Farms that are producing feeds for chicken and several other products. So, growth has been restored in the manufacturing sector and more factories are being commission. So, there is progress. But, is it enough? Not yet and we hope more investments would come. Our view is that there is significant interest in the Nigerian economy. And I would like to demonstrate this by the interest that we saw when we did the last Eurobond. We set out to borrow $2.8 billion and we were shocked that the performance was about $9.5 billion and we have to choose to see that we reduce and allocate it to the $2.8 billion we set to raise. Investors are happy to see that the fundamentals are being rebuilt and that the trajectory of several key indices are all moving upward. So, we are marking progress.