At the just concluded 2013 IMF World Bank Group Meeting in Washington the Nigerian delegation led by the Minister of Finance and Coordinating Minister of the Economy Dr. Mrs. Ngozi Okonjo-Iweala attended meetings back to back and it was difficult tracking them down for a chat. It was at the end of the meetings on Sunday at 6 PM Washington time, that the minister finally had time to brief the Nigeria corps of reporters who converge at the World Bank building in the Washington cold. Some were severing like ants but they have to wait for a staff of the World Bank to take them up to the office the Nigerian delegation shared with other African countries. Perhaps because of the tight schedule, the CBN Governor Sanusi Lamido Sanusi who usually spices up the briefing was absent. His voice of support for the minister was missed.
What was discussed at the various inside the IMF/World Bank Group Annual Meetings?
Outside of finding out what is happening with the economics of the Globe and what precautions or actions we need to take as Nigerians, is the advice that the Bretten Woods Institutions are giving members and I think they was one or two key messages that came out of this meeting.
The first is that the IMF as well as the World Bank feels that the global environment is still quite uncertain, even though growth is recovering in the euro zone and in the U.S. But there is still some uncertainties. I think the growth projections have actually been revised down and I can give you the numbers, but what is worrying almost everybody is the two twin impasses that exist in the US. The impasse over the budget that is the fiscal impasse in the US and the second is the impasse over the lifting of the debt ceiling for which a dead line will be reached this Thursday and if they do not resolve it. It means the US technically will default on its debt, which is not acceptable, and has never happened. This could create adverse movement in interest rates and other parameters within the world economy which could in fact trigger some serious consequences. Every delegate was more or less saying that it will be very helpful to the rest of the world if the US Congress and the Government could resolve this so as to remove the uncertainties that this is creating in the global market.
What are the institutions saying of emerging economies?
Against this picture however, the emerging market countries have also seen slowed growth. Several of them like India have seen growth up to five per cent, Brazil, South Africa they have all seen slower growth. The low income countries are growing robustly and in Africa as you know they are predicting more than five per cent growth for the continent. I think the key issues that that were analyzed are that what could be the vulnerabilities, what are the interconnections, what could be the spillover effect as the economists call them from all this uncertainties. Also of the emerging markets what does this mean to them. These are some of the issues that were talked about
Any suggestions on what countries should do?
More importantly what do countries need to do to protect themselves from these uncertainties? Their advice for countries such as ours is to build buffer strongly which means you should build up your reserves, put aside some savings because you do not know what else is going to happen, manage your expenditures better to protect yourself in case the world should slip back into a recession or other adverse consequences could occur because of these uncertainties. Those are the kind of things that we learned here for us specifically in terms of our macro economics management. Those are the things we have to take into account.
What is Nigeria delegation taking home from the meetings?
Now for Nigeria in addition to hearing this advise, we also heard some very good news and that good news came on two fronts the World Bank Group, that is the World Bank IFC arm through the World Bank President has made known that they want Nigeria to be one of the focus country in Sub-Saharan Africa for their efforts on infrastructure development particularly power which means they are willing to work with Nigeria to invest hundreds of millions of dollars. They have a lending programme of about 100 billion dollars a year but they are willing to use that to pull in more resources from the US through the power Africa initiative from the private sector using the office of IFC to help us address infrastructure problem. So the World Bank is planning to set up infrastructure facilities unit that has just been put together and been talked about and they also said that when this is done, Nigeria will be one of the first countries they will like to be a beneficiary of this giving its large size infrastructure needs.
Which sector are they focusing on?
They want to concentrate on power, as I said and they are already actively working with several private sector power companies that want to invest in Nigeria. They are also promising to give us another seven hundred million dollar in guarantees for the power sector, IBRD guarantees as well as willingness to invest 700 million dollars in transmission.
Are they interested in the power sector only?
We also discuss with them a social safety net issues. We discuss with them how to improve employment creation, how to help those at the bottom end of the ladder who may not even benefit from jobs and they are planning a social safety net programnme of about 400 million dollars which they are going to prepare with us, it is actually called social safety net programme which will support some ongoing work that we are doing like saving one million lives programme, that helps with maternal mortality. There is conditional cash transfers to help improve maternal and infant mortality ratios, train health workers, train mid-wive’s to deliver this services and to improve the nutrition, children immunisation, HIV Aids and malaria. They want to assist with the health related issues and also to provide a source of income at the bottom end of the ladder, they have put aside some money for that.
We also got pledges to help with our statistics. I think the chief statistician is ready to help us improve our statistics. On a general note we got a lot of commendation for the agenda budgeting programme that Mr. President launched in 2013 budget. We had another high level meeting looking at women empowerment and Nigeria got a lot of praise for the effort the president has made in getting more women into the cabinet but most importantly, the concrete effort we are making in the budget with this Gender budgeting. As you know, we have five pilot ministries, ministry of women affairs and our self’s are working with which we announced in last year’s budget that they integrate into their mainstream the goal of getting women empowered within their programmes. If they do so they will get additional budget and we set aside three billion naira as incentive for that.
This programme has gotten a lot of notice. The Ministry of Agriculture, Ministry of Communications and Technology, Ministry of Water Resources and Ministry of Works and Ministry of Health are all participating in this pledge and each one has pledged to meet the goal.
Works has pledged that they will get about 200 women, they plan to mainstream attention to women by training women contractors and sub contractors trying to make sure that some contracts are awarded to women owned businesses within the works ministry and training women contractors in both health, agriculture communication technology have come together to say that they will want to reach about 5 million women with mobile telephone that can allow them have an E-wallet system for their agriculture input, fertilizers and seeds. They can also receive extension messages on those phones telling them how to plant their crops. They can also receive advise on health through those phones and that will be a very important addition, so these are some of the things we did through that gender programme and we presented it here and it was highly acclaimed actually to the point where they said they were going to get community of finance ministers in other countries to try these approach of integrating gender into their budget.
Did you meet with any other development partner?
We also had meetings here with the USASID and they also made some pledges. The administrator of USASID said they will also want to work with us on the power sector in co-financing with the world bank They came to work with us previously on social the safety net as well and U know, they are willing to put some existing monies to rearrange that into additional programmes for us in those areas.
So really, what we saw here was a whole lot of excitements and support for what Nigeria is trying to achieve.
Why Standard and Poor rating now?
The other bit of good news is that the ratings agencies met with us to finalise their ratings and that the first one has reported which is Standard and Poor, you already have that out in the news. They reaffirmed Nigeria’s strong, economic position whilst admitting that the country faces challenges which we all know, so that has not been hidden under the table. They have talked about the issue of short fall in oil and oil theft, they have talked about the employment issues, the inequalities issues, all these things are on the table but in spite of all that, they recognise the attractiveness of Nigeria as an investments destinations and the strong macroeconomic management that is underpinning the country’s economy as well as the strong growth prospect, you know, so we got that news, so we are waiting for, which say by next week and eventually down the lines for Moody’s own assessment.
Is the Nigeria Sovereign wealth planning to invest in infrastructure?
Absolutely, the NSWF, is here also, although I have not seen them, but I know they have been around, they have been talking with IFC, and you know, the NSWF is looking at several infrastructure project, I think they have already announced that their board has approved their participation in second Niger Bridge. They are looking at several other projects from some dam, irrigation and water projects in the north of the country to other infrastructure projects in the south of the country, so they are looking and will be announcing their investments decisions soon. That’s going on, and they are actually pulling in, as you know, like they are talking to IFC which might co-invest with them; other sovereign wealth funds are also looking forward to co-investing. They are even trying to pull pension funds; but that is going on whilst at the same time, this effort to increase infrastructure financing from other organisations, they are all working in parallel but also talking to each other. You know, so the Sovereign Wealth Fund is doing all of these but this is an additional effort by the world bank to help us finance transmission, yeah we had to raise $1.9 billion, there is an emergency assistance programme that the ministry of power has said it is necessary to get our transmission going and that is over the next two to three years.
Why is a World Bank guarantee needed for power?
Because we have so many independent providers generating power so we are signing many power purchase agreement and many of them want to be backed by guarantee.
She further to said that “on the guarantees there were no special conditionality as this was going to support the private sector, so all they want is that the sector investment itself is buyable and that we have signed a proper power project agreement that protects the private investor and also protects government. And in other for the private sector to access this guarantee there may be specific things within the private sector project that they may want them to do.
What are these multilateral agencies really trying to do with Nigeria?
What they are really trying to do is helping us to mitigate risk, with private sector investing in the power sector, there is risk. These multilateral agencies intervention is meant to make them more comfortable, since we are developing into a private market for power in a way we never did, their participation will make investors comfortable to participate in this because this money is there to back and provide a guarantee in case their investment do not quite work out in a way that they thought.
Because we have so many independent providers generating power so we are signing many power purchase agreement and many of them want to be backed by guarantee.
What is the conditionality attached to these guarantees?
There is no special conditionality attached to the guarantees as this is to support the private sector, so all they want is that the sector investment itself is buyable and that Nigeria has signed a proper power project agreement that protects the private investor and also protects government. In order for the private sector to access this guarantee there may be specific things within the private sector project that they may want them to do.
But what they are really trying to do is helping us to mitigate risk, private sector investing in the power sector there is risk, this is meant to make them more comfortable, since we are developing into a private market for power in a way we never did, makes them comfortable to participate in this because this money is there to back stop and provide a guarantee in cause their investment don’t quite work out in a way that they thought.
How will Nigeria hedge against the uncertainty discussed at these meetings?
We need to step up the buffers that we have, we need to improve our revenue base because that’s also a way of stepping up the buffers and we are targeting non-oil revenue, so we starting may be two weeks from now efforts of the Federal Inland Revenue Service FIRS, to plug the leakages and step up our tax collection.
According to Markenzy 65 per cent of companies in Nigeria which paid taxes two years ago have not filed recent returns. We want to know why. If we find them out, we will make them pay and that will be another source of revenue.75 per cent of companies that have registered with the Corporate Affairs Commission CAC, have not filed in their taxes returns, we want to know if these companies are real. Also companies that have been benefiting from some tax relief and incentives which have expired, we are going to audit them all.
