Those who fought tooth and nail to remove United Kingdom-educated Kemi Adeosun as Nigeria’s finance minister because she did not go back to Nigeria three decades ago to serve her country for 12 months but got the quality education and experience she needed to stand tall in the global arena may be having a rethink, as worrying signs recently laid out by the International Monetary Fund (IMF) in Washington D.C. are finally confirming what many already knew, that the current finance minister Zainab Ahmed, appointed by President Muhammadu Buhari certainly because she comes from northern Nigeria has failed woefully.
At least, under Adeosun, it was clear what the government policy was in improving the tax system, increasing revenue, refinancing loans, diversifying the economy, focusing on key infrastructure and fighting corruption through many mechanisms, including the whistleblower policy which brought in billions of naira to Africa’s most populous nation.
There was also a strong communication team to explain key policies of the government to the people.
It just seems like that was hundred years ago as those days are now over. Under the current administration, it is impossible to see clarity in policy formulation while the communication team is extremely ineffective, almost non-existent, simply feckless.
The only visible thing the current finance minister Zainab Ahmed and President Buhari have successfully done regarding the collapsing Nigerian economy is to pile up billions in foreign and domestic debts.
On Tuesday, the World Bank approved nearly $2.2 billion loan for Nigeria to invest in six projects, including improving immunization, enabling a stronger business environment for the private sector, expanding the digital economy to promote job creation, and increasing public and private sector capacity on governance and social and environmental safeguards.
The money for the six projects will come from the International Development Association (IDA), the French Development Agency, the European Investment Bank and the federal government of Nigeria.
Although the World Bank chiefs tried to focus on the projects rather than the debt and repayment conditions as well as the time it would take to pay back the billions of dollars being borrowed by the Buhari administration, the new loan pushes Nigeria’s domestic and foreign debt to over $80 billion, and comes barely a year after the global bank disbursed about $2.4 billion to Nigeria.
Nigeria’s reported domestic debt was already put at $55.6 billion and foreign loans at $25.6 billion or a total of over $80 billion.
The Buhari administration believes to ease the debt burden, Nigeria has to borrow more with low interest and long repayment periods from many institutions including the World Bank and the African Development Bank.
Even as Buhari and Zainab Ahmed continue their borrowing spree, snatching billions of dollars from anywhere they can at the time Transparency International recently rendered a damning verdict on the fight against corruption in Nigeria, the economy is on a downward trend.
Just last Monday, The International Monetary Fund (IMF) downgraded its forecast of Nigeria’s economic growth from 3 percent to 2 percent, saying that fiscal deficit was deteriorating, inflation rising and vulnerabilities increasing.
The fresh assessment of the Nigerian economy came after an IMF staff team led by Amine Mati, Senior Resident Representative and Mission Chief for Nigeria, visited Lagos and Abuja from January 29-February 12, 2020 to conduct its annual Article IV Consultation discussions on Nigeria’s economy.
“The pace of economic recovery remains slow, as declining real incomes and weak investment continue to weigh on economic activity. Inflation—driven by higher food prices—has risen, marking the end of the disinflationary trend seen in 2019. External vulnerabilities are increasing, reflecting a higher current account deficit and declining reserves that remain highly vulnerable to capital flow reversals. The exchange rate has remained stable, helped by steady sales of foreign exchange in various windows,” said Mr. Mati.
He said “high fiscal deficits are complicating monetary policy. Weak non-oil revenue mobilization led to further deterioration of the fiscal deficit, which was mostly financed by Central Bank of Nigeria (CBN) overdrafts. The interest payments to revenue ratio remains high at about 60 percent”.
“Under current policies, the outlook is challenging. The mission’s growth forecast for 2020 was revised down to 2 percent to reflect the impact of lower international oil prices. Inflation is expected to pick up, while deteriorating terms of trade and capital outflows will weaken the country’s external position”.
According to him, recognizing these vulnerabilities, the Nigerian authorities have taken a number of welcome steps.
“These include measures to boost revenue through the adoption of the Finance Bill and Deep Offshore Basin Act and; and improve budget execution by adopting the 2020 budget by end-December 2019. The tightening of monetary policy in January 2020 through higher cash reserve requirements to respond to looming inflationary pressures is welcome. Progress on structural reforms—particularly in Doing Business, finalizing power sector reforms, and strengthening governance—is commendable”.
However, major policy adjustments remain necessary to contain short-term vulnerabilities, build resilience, and unlock growth potential.
Mr. Mati added: “Non-oil revenue mobilization—including through tax policy and administration improvements—remains urgent to ensure financing constraints are contained and the interest payments to revenue ratio sustainable. Recourse to central bank overdrafts should be limited and the mission supports the authorities’ plans to use the low domestic yield environment to front load their financing requirements.
“Further tightening of monetary policy—albeit through more conventional methods—is needed to contain domestic and external pressures arising from large amounts of maturing CBN bills. The mission reiterated its advice on ending direct central bank interventions, securitizing overdrafts to introduce longer-term government instruments to mop up excess liquidity and moving towards a uniform and more flexible exchange rate. Removing restrictions on access to foreign exchange for the 42 categories of imported goods would be needed to encourage long-term investment.
“Banking system vulnerabilities should continue to be addressed. The mission welcomed recent efforts to reduce legacy non-performing loans. The introduction of risk-based minimum capital requirements would also help strengthen bank resilience. Notwithstanding the significant increase in lending, concerns about shortened maturity, asset quality and conflicting monetary policy signals call for revisiting the minimum lending to deposit ratio directive.
“Structural reforms—particularly executing the much-delayed power sector recovery plan, implementing the anti-corruption and financial inclusion strategy, and addressing infrastructure and gender gaps—remain essential to boosting inclusive growth.
“Nigeria’s border closure will continue to have significant economic consequences on the country’s neighbors. It is important that all involved parties quickly resolve the issues keeping the borders closed—including to stop the smuggling of banned products.
“The team held productive discussions with senior government and central bank officials. It also met with representatives of the banking system, the private sector, civil society organizations and development partners. The team wishes to thank the authorities and all those it met for the productive discussions, excellent cooperation, and warm hospitality.”
All these bad news are being delivered at the same time security has collapsed and Boko Haram has returned in full force while bandits are on the increase.
The situation is so bad that just today, Thursday, the Lagos State House of Assembly accepted a bill that will pave way for a regional security apparatus while the federal government in disarray continues to sleep on the job.
Simon Ateba is the publisher of TODAY NEWS AFRICA in Washington DC