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She added that developing a programme for a comprehensive review of taxes and the means of improving collection, by working closely with FIRS, were high on her ministry’s agenda. But interestingly, she noted that the multiplicity of taxes was being looked at with a view to streamlining the whole procedure at the Federal, State and local levels.
The minister then described how the government is making every effort to rein in government expenditure, within the 2013 budget issuing retirement bonds, and a sinking fund for the purpose of reducing debt by repaying or purchasing outstanding loans and securities held against the state. As Iweala-Okonjo reiterated to the New World Nigeria delegates, it is pivotal for the country to continue to stimulate growth even as it navigates the current uncertainty of the global economy.
As for the international financial institutions reaction to Iweala-Okonjo’s initiatives, Nigeria’s sovereign credit ratings have been upgraded since she returned to the Nigerian cabinet a little over a year ago. Fitch have rated Nigeria as BB- stable while Standard & Poor’s have assigned a B+ Positive status, upgraded from the B+ it suggested in December 2011.
These ratings have helped Nigeria’s Eurobond to better its performance. The price rose to US$109.02 in late July against US$103.49 at the beginning of year, and its yield fell to 5.41 per cent from the 6.23 per year recorded at the beginning of 2011. Foreign Reserves have also risen slightly from US$32.9bn at the end of 2011 to US$37.7bn in June 2012 but have declined recently on the back of global developments to stand at US$36.4bn The target is to accrue US$50bn by the end of the year.
Minister Okonjo-Iweala was able to confirm that Nigeria’s Excess Crude Account has improved. This is all positive and welcome, but as the minister commented, Nigeria’s economy remains vulnerable, and buffers need to be built up. A key plank to this policy is to establish a sovereign wealth fund, officially known as the Nigerian Sovereign Investment Authority (NSIA). The NSIA actually consists of three sovereign wealth funds: a future generation fund; an infrastructure fund and a stabilisation fund. Already, US$1bn has been earmarked for investment in the three-arms of the fund, and transferred from the Excess Crude Account which it had been intended would be closed down to be replaced by the new Authority.
Three of the top positions in NSIA had been filled, after an exhaustive process that began last February with 713 applicants, shortlisted to 16. Two of the top executives, namely the CEO and chief risk officer. However, in a curiously worded statement by the Ministry of Finance “upon completion of due diligence, the candidate for chief investment officer has been dropped and the position will be re-advertised shortly”.
Nevertheless, a strong non-executive board had been selected. They are the former deputy governor of the Central Bank of Nigeria, Mahey Rasheed as chairman (the former managing director of JP Morgan who now sits on the board of First Bank of Nigeria), Arnold Ekpe (the outgoing CEO of Ecobank), Hide Zeitlin, Bill Awosika, Bisi Soyebo, Hassan Usman and Stella Ojekwe-Onyejeli as members. Uche Orji, will serve as NSIA’s chief executive and managing director effective from 1st October.
Orji has worked at UBS as well as at J.P. Morgan Securities in London, and has held top positions in the Thomson Reuters Extel Survey. He was previously an analyst and fund manager with Goldman Sachs Asset Management based in London and worked for Diamond Bank Ltd and Arthur Andersen LLP.The crisis in Nigeria’s banking sector appears to have been resolved with all 24 banks now fully capitalised, the Asset Management Corporation of Nigeria (AMCON) playing a key role in the rescue of the eight banks in which the Central Bank of Nigeria performed an emergency intervention. A range of financial soundness indicators are also in positive territory. The Industry Capital Adequacy Ratio, for example, is now above 18%, with non-performing commercial loans now standing at about five per cent.
Attention is also being given to the capital markets with the introduction of a forbearance package to market operators; a review of taxes, stamp duties, and other charges; stimulating an increase in the number of listed companies; and increasing pension fund investment.
And a week after the New World Nigeria investment summit, Okonjo-Iweala presented the Medium Term Fiscal Framework of the 2013 Budget to the Federal Executive Council. Echoing what she said in London, she actually christened her budget ‘Fiscal consolidation with growth’.
According to her, Nigeria’s projected revenue for 2013 was put at N3.891trillion (US$24.4bn) while expenditure has been set at N4.929 trillion (US$30bn). She said government would reduce recurrent expenditure from 71.47 per cent in 2012 to 68.66 per cent next year, adding that capital expenditure will increase from 28.53 per cent to 31.34 per cent in 2013. The budget was based on oil production of 2.53mn barrels a day, with the benchmark price at US$75/barrel.
She announced, “The focus of the Federal Government’s proposals on ‘Fiscal consolidation with growth’ Budget 2013 is that it should make a practical impact on the areas that matter most to the Nigerian people, job creation, power supply, roads, rail, other infrastructure and, of course, agriculture.”
In a further development, Nigeria plans to issue a Eurobond of up to US$1bn by the end of the year which will be earmarked for investment in the country’s oil and gas sector. In replying to a question from African Review about the long-mooted issuance of diaspora bonds, Okonjo-Iweala said that she hoped that a tranche of this issuance will be reserved for diaspora investees.
The minister, who enjoys wide-spread international respect and domestic support, also pledged that the country’s resources would be managed prudently and transparently, while ensuring that priority was given to the key growth sectors of the economy and national security.
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