Ahmed: Economy Still in the Doldrums


Since her emergence as Finance Minister about eight months ago following the sudden resignation of her predecessor, Kemi Adeosun, over certificate forgery, not much has happened under Zainab Shamsuna Ahmed, reports Ndubuisi Francis

In spite of the economy exiting recession, there had been a subdued economic outlook, with downside risks persisting.

During the recent Article IV consultation in Nigeria by a team of the International Monetary Fund (IMF) economists to assess economic and financial developments and discuss the country’s economic and financial policies with government and central bank officials, many things stood out.

The IMF observed that although the Nigerian economy exited recession (real GDP increased by 1.9 per cent in 2018, up from 0.8 per cent in 2017), however growth is still too weak as a result of persisting structural challenges.

Among the team’s observations include large infrastructure gap, low revenue mobilisation, governance and institutional weaknesses, and banking sector vulnerabilities, which according to the IMF, are dampening long-term foreign and domestic investment and keeping the economy reliant on volatile oil prices and production.

The IMF also noted that the current economic expansion is below where it ought to be to reduce poverty and improve human development indices, such as healthcare and education.

For the IMF, policy choices such as continued foreign exchange restrictions, and petrol subsidies are the major culprits.

It noted that over the medium term, absence of strong reforms, growth would hover around 2½ per cent, implying no per capita growth as the economy faces limited increases in oil production and insufficient adjustment four years after the oil price shock.

Asphyxiating Debt Burden

There has been growing apprehension over the nation’s burgeoning debt burden. This concern was again reinforced by the IMF during the recent Article IV Consultations.
Acccording to the IMF, interest payments by the federal government on its outstanding debt will remain elevated at unsustainable levels of 63 per cent of FGN revenues for 2019, and falling slightly to 50 per cent of FGN revenues by 2020.Total FGN debt, it added, will also rise to 26.8 per cent of GDP in 2019, and 27.7 per cent of GDP by 2020.

Reforms Recommended

The position of the IMF on the need for economic reforms further lend credence to the fact that the flagship Economic Recovery and Growth Plan (ERGP) which Zainab Ahmed was a major facilitator when she was the Minister of State for Budget and National Planning has failed to meet most of its targets

The IMF urged the authorities to reinvigorate implementation of structural reforms to diversify the economy and achieve the Sustainable Development Goals.
The Fund alluded to the importance of improving the business environment, implementing the power sector recovery programme, deepening financial inclusion, reforming the health and education sectors, and implementing policies to reduce gender inequities.

It also emphasised the need to strengthen governance, transparency, and anti-corruption initiatives, including by enhancing Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) and improving accountability in the public sector.

Gauging Her Performance So Far

There is still not much to applaud over budget implementation and revenue generation.
However, the minister made a major drive to boost government income with the launch earlier in the year, of the Strategic Revenue Growth Initiative (SRGI) to generate more revenues to finance national development.

According to the minister, the SRGI will be implemented in the areas of achieving sustainability in revenue generation to optimally collect revenues to maintain fiscal buoyancy and resilience.

But the move to improve revenue generation is coming with a proposal to increase Value Added Tax (VAT) as well as the removal of subsidy on fuel, two critical areas which have created serious apprehension in the land.
Under Ahmed’s watch, the Excess Crude Account (ECA) has been drawn down from over $2.5 billion to about $183 million, leaving the economy with little or no fiscal buffers.