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The 2019 spring meetings of the International Monetary Fund and the World Bank held recently in Washington, DC, United States. At the meetings, where Nigeria was represented by a delegation led by the Minister of Finance, Mrs. Zainab Ahmed, and which included the Minister for Budget and National Planning, Sen. Udoma Udo Udoma, and the Central Bank of Nigeria Governor, Mr. Godwin Emiefiele, various issues affecting the country were on the front burner. Among the topical issues were economic growth, fuel subsidy removal, Chinese loans, issuance of another Eurobond and management of Sovereign Wealth Fund. At the end of the meetings, the Nigerian delegates fielded questions from journalists. Funke Olaode, Shola Oyeyipo and Martins Ifijeh, who attended the briefing, present the excerpts
Well, we had a successful outing. As you are aware the spring meetings provide an opportunity to review developments in the global economy, examine emergent and associated risks and offers potential policy menu to ameliorate the situations going forward
For instance, on the global economy, the meeting noted the slowing down of the global economy with a revised global growth from 3.3 per cent in 2019 to 3.6 per cent in 2020, mainly due to heightened trade tensions, tightening financial market conditions, softening industrial activity, dampening global investment, monetary policy normalisation and geopolitical tensions like uncertainties over Brexit all resulting in policy uncertainty.
In terms of fiscal policy, government debt to GDP ratios have reached unprecedented levels and this limits the capacity of some of these countries to provide countercyclical policies. Consequently, potential growth remains subdued in most of these countries partly as other factors like aging populations, declining birth rates and raising barriers to immigration weigh in as well.
We suggested that policy makers in EMDEs should prioritise cost-effective policies that increase resilience to shocks, boost overall productivity, raise incomes of the bottom 40 per cent of the income distribution, and involve private sector solutions.
Prioritisation of structural reforms to reflect country-specific constraints will be critical as identified in systematic country diagnostics and country partnership frameworks. For instance,
where fiscal positions are weak, priorities may include shifting public spending towards more productive and poverty-reducing expenditures and improving revenue frameworks.
Where regulatory or tax burdens constrain growth, priorities may include better public sector effectiveness and governance, etc.,
These reforms should be supplemented by steps to strengthen social safety nets, to mitigate climate change risks and to maximise the benefits of new technologies.
We had a meeting with the International Monetary Fund Committee, the managing director requested for a mandate to pursue some negotiations with governors for temporary financing options for ensuring that the fund remains adequately resourced by maintaining the current resource envelope of the fund through borrowed resources. This arose partly due to the delay in completing the 15th general review of quotas. While governors endorsed this position, we called for an ambitious timetable for the 16th general review of quota, which should result in increased quota shares for dynamic economies in line with their relative positions in the world economy, while protecting the voice and representation of the poorest members. In my capacity as representative of 23 African countries, I addressed the MPG and issued a statement calling for normalization of trade relations among the contending parties and called for concerted efforts to support multilaterals and avoid protectionist sentiments.
Also, at the G24, I drew the attention of the WBG to some of the challenges we face in implementing our portfolio like the implementation of the new environmental and social safeguards framework, which tends to slow down implementation of infrastructure projects and called on the WBG to reflect on this and do something about this.
Engagement at the IMFC also focused on the global policy agenda. Governors took note of the key policies to anchor the new multilateralism focusing on domestic policies. Governors underscored the importance of strengthening market competition, encouraging innovation tackling weak governance and corruption and meeting the SDGs. Governors underlined the importance of strengthening international coordination and cooperation to tackle shared challenges, given the potentially damaging effects of trade tensions on global economic developments, and impact of natural disasters on developing countries.
I also participated in the Development Committee meeting but South Africa spoke on behalf of our constituency comprising Angola, Nigeria and South Africa. The discussions here focused on global economic context, mainstreaming disruptive technology in the World Bank Group and implementation update on the Forward Look and lBRD/IFC capital package. For commodity economies like ours, even though commodity prices including crude oil prices are expected to stabilise around $ 67 per barrel in 2019, uncertainty remains high around the forecast. Accordingly, the policy prescriptions for countries like ours are to increase domestic revenues, increase productivity, especially through clearing of supply constraints, diversify the economy and consciously formalise the informal sector and increase the drive for tax revenues. In the area of disruptive technology, we know that disruptive technology is transforming societies and markets across the world including Africa. The World Bank Group is hoping that these disruptive technologies can help Africa increase its productivity, create jobs and reduce poverty.
Human Capital Development
On Human capital development, you will recall that at the Bali meetings last October, when the human capital project was released, many of us were concerned that Nigeria was placed 157 out of 189 and I did promise that we would go back home and address this issue. I am happy to report that we used this spring meetings to showcase what the government is doing in this important area. We have set up an inter- ministerial working group with representatives of the state governors and are currently piloting some initiatives in health, education and of course you are all aware of the social safety nets programmes of the federal government where we have 15 million people already on the register. The WBG was pleased with our efforts and promised to offer some assistance.
In view of our efforts as finance ministers, who play a key role in steering the economy and managing risks, including from climate change, climate finance, we were invited to join the coalition of climate finance ministers a coalition of finance ministers with long experience with climate actions and are well aligned with the principles of the coalition. Nigeria endorsed the coalition principles as one of the founding members. Recall, we were the first SSA country to issue a green bond in December ($10.97 billion) for the financing of solar and we are currently in the process of issuing a second green bond N15 billion later this year to finance various sectors in agriculture, power, health and water resources. The issuance is going to be the second one this year and the bond is going to be utilised for some agricultural projects, for some power projects; mostly solar projects as well as projects in the water sector. The essence is that the project must be green. They must be projects that are not contributing to emissions in the society. The green bond is a success one. All the projects that were scheduled to be financed by the green bond have been so financed and the projects are at various levels of completion
Social Safety Net
Also, on the sidelines of the spring meetings, the Governor of Central Bank and I held a bilateral meeting with Queen Maxima of the Netherlands. As you are aware, Queen Maxima is the UN Secretary-General Special Advocate leading global advocacy efforts to advance financial inclusion, opening a path to empowerment for all. Following her last visit to Nigeria about 18 months ago, she wanted to know what progress has been made in the’ area of financial inclusion and how she could be of help. I informed her of the various initiatives like the National Social Net Programme, Trader Moni Scheme, etc. On the fiscal side, I informed her of the on-going work in the area of National Savings Strategy and that we will reach out to the World Bank to help us with this initiative.
Fuel Subsidy Removal
Despite pressures from the International Monetary Fund (IMF) and the World Bank that Nigeria should stop the fuel subsidy regime, the federal government of Nigeria has reiterated that there is no immediate plan to remove fuel subsidy. The subsidy will remain because government is yet to have an alternative to cushion the effect of the removal. So there is no imminent plan to remove fuel subsidy. We are here to discuss with the global community on various policy issues. One of the issues that always come up in the reports, especially IMF Article IV Report is how we handle subsidies. So, in principle IMF will say fuel subsidy is better removed so that you use the resources for other important sectors, and in principle that is a fact, but in Nigeria, we don’t have any plan to remove subsidy at this time. Why? Because we have not yet designed buffers that will enable us remove the subsidy and provide cushions for our people. We will discuss this at the EMT. We have not yet found viable alternative, so, we are not yet at the point of removing subsidy.
Nigeria is set for greater economic growth with the re-election of President Muhammadu Buhari. The slow pace of growth in Nigeria is due to the downward trend in the economy. You know when you are moving backwards, it takes a lot of efforts to stop the decline and reverse it and when it is reversed, at the beginning, it moves slowly. It takes time for momentum to build up and that is why the growth is still a little slow. In my presentation during an investor lunch organised by the Corporate Council on Africa (CCA), I let them know that Nigeria is set for faster growth with the re-election of Mr. President and that in his second term, the President will continue to be committed to his three pronged programme on the basis of which he campaigned, namely, improving security, fighting corruption and reviving and growing the economy. With regard to the economy, I informed them that the president intends to fast track the implementation of the investor friendly policies of the Economic Recovery and Growth Plan so as to generate even faster growth. In particular, I informed them that the president has set up a committee, headed by the Vice President, to produce an implementation guideline for the incoming cabinet.
World Trade Organisation
At this meeting, it was acknowledged that there will be need for World Trade Organisation to begin a process of reform that will lead to an update of the role of the game and aimed at protecting even the weaker economies. We are delighted that the good news is being heard back home. This spring meetings that is being held annually, we have normally in attendance, not only me, but minister of finance, minister for budget planning and other delegates from different part of the world and other very important stakeholders in attendance. The purpose is to deliberate on global economy and based on the outlook and some of the presentation that were made by the honourable minister, casting our minds back, we are leaving Washington DC with level of optimism that the global activity is accelerating in almost part of the world.
Queen Maxima of Netherland is the United Nations Envoy on Financial inclusion and when she visited Nigeria about 18 months ago with Bill and Melinda Gates Foundation, we promised that by 2020, the financial inclusion in Nigeria would be accelerated to 80 percent.
We reviewed the position so far, observing the rate of financial inclusion is moving up aggressively and we are optimistic that in 2020 we would be able to meet the 80 percent target that we had set.
We met with foreign investors who expressed confidence in what we are doing in Nigeria, which had been supported by massive growth we had recently between December and this time. For me, a major takeaway at this year’s meeting, although the GDP numbers for Nigeria is low at 1.9 per cent in 2018, I am encouraged by the expression by IMF committee here in Washington DC that global growth begins to pick up during the second half of 2019 and like emerging market, like India, Brazil, Nigeria will help to drive this growth to the kind of level that is expected by the world community. This means to me that a lot of eyes are on Nigeria and we must work hard to push it. I am hopeful this can be achieved given the kind of interest after President Mohammad Buhari won the election and at this time we have to work on consolidating growth, creating more jobs for our people and there is also need for us to diversify the economy.
Economic Recovery Plan
On the Economic Recovery and Growth Plan (ERGP), the Central Bank, being the monetary monitoring authority in Nigeria, was also part of the process of developing the ERG document which is applauded in all parts of the world as a standard plan that will lead to the development and the industrialisation of Nigeria. It is followed through like a Bible. Naturally, as you know about the plan, you find that sometimes you overshoot the target or sometimes, for one reason or the other you are not able to meet those targets. But by and large, looking at the document that specifies the need for us to achieve micro-economic stability, I can say that we have achieved a relatively stable micro-economic environment in Nigeria with inflation stabilising at about 11 per cent, with exchange rate looking good, with reserves buildup and all that. The slow growth rate is not affecting Nigeria in isolation assuring Nigerians that efforts are on to accelerate growth.
Possible Impact of Brexit
Well, either with or without deal, Brexit, being immigration and trade, portends no danger to Nigeria. I will say Britain and Nigeria have trade relationship but it is not as strong as the trade relationship that we have with China and the United States. For instance, China is Nigeria’s largest trading partner followed by the United States and Britain comes quite low on the scale. If you look at that, in my view, there is not going to be any adverse effect on Nigeria, but we are reviewing it to see the implications, which I would expect to be naturally positive.