Presidency, Finance Ministry Insist Economy is Strong

Minister of Finance, Dr. Ngozi Okonjo-Iweala

•Ministry confirms loss of revenue  

•Clarifies discrepancies in ECA account balances with CBN 

•N’Assembly awaits amendment bill for 2013 budget

Chuks Okocha, Ndubuisi Francis and Onwuka Nzeshi

In an apparent reaction to the statement by the opposition Action Congress of Nigeria (ACN) that the Nigerian economy is in the doldrums, the presidency and Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, Wednesday declared that in spite of the various challenges, the Nigerian economy remained strong.
They, however, confirmed that there has been an increased loss of revenues due to an upsurge in the incidence of illegal crude oil bunkering and oil theft.

The clarification on the status of the economy coincided with the revelation by the Speaker of the House of Representatives, Hon. Aminu Tambuwal, that the National Assembly will soon be in receipt of the 2013 Budget Amendment Bill that will address the grey areas in the budget assented to by President Goodluck Jonathan on Tuesday.

A statement issued by the finance minister’s Special Adviser, Media, Mr. Paul Nwbuikwu, also clarified the discrepancies in the account balances in the Excess Crude Account (ECA) reported by the ministry and the Central Bank of Nigeria (CBN).

According to the statement, specific issues have been raised in recent times on the health and prospects of the Nigerian economy, the composition of the external reserves, and purported discrepancies in account balances reported by the Ministry of Finance and the Central Bank of Nigeria (CBN) on the ECA.

“First, the Nigerian economy is strong.  Our economic performance is robust when viewed against a whole range of objective factors.
“Inflation is now down to single-digit at 9.0 per cent in January 2013, compared with 12.6 per cent in January 2012. The exchange rate has been relatively stable, and the fiscal deficit at just under 2 per cent of GDP is on a downward trajectory, and below our threshold of 3 per cent of GDP.

“Our national debt is at a sustainable level at about 19.4 per cent of GDP. Overall, GDP growth for 2012 was 6.5 per cent, and projected at 6.75 per cent for 2013, compared with the projected global growth of 3.5 per cent.

“The above facts have been independently noted and validated by international ratings agencies such as Fitch, Standard & Poor's and Moody's which have upgraded the country's economic outlook, even as other countries are being downgraded.
“In addition, Nigeria's bonds have recently been included in the Barclays and JP Morgan Emerging Market indexes,” the minister said.

She, however, acknowledged the socio-economic challenges the country faces, adding: “We know we still have a long way to go but let us keep working to correct what is wrong and stop focusing on the denigration of what is being done right.
“In this regard, we need to create more jobs for our youths to curb unemployment. Poverty needs to decrease at a faster pace, as we do not want excessive inequality to be a feature of our economic growth.

“For example, the recent poverty statistics released by National Bureau of Statistics showed a slight decline in poverty levels of about 2 per cent between 2003 and 2010. This needs to be further accelerated.”

The finance minister also identified the cost of governance, which also needs to be reduced, stating that the government is taking steps in this direction.

“We have reduced the share of recurrent expenditure in the budget from 74 per cent in 2011 to 71 per cent in 2012, and to 68 per cent in 2013. We aim to push for a 60-per-cent recurrent and 40 per cent capital budget ratio in the medium term,” the statement added.

The minister pointed out that as part of the Transformation Agenda, the president had emphasised the diversification of the economy to promote inclusive growth and create jobs, adding that this was being achieved through investment in agriculture, housing and construction, manufacturing, aviation, power, roads, rail, solid minerals and the information and communication technology (ICT) sectors by both government and the private sector.

These sectors, she added, are gradually transforming the economy, and creating jobs in the process, noting that the economy is moving in the right direction.

On the nation’s reported level of external reserves, the minister said it comprises three parts—the CBN's external reserves, the ECA, and the Federal Government's funds belonging to agencies such as the Nigerian National Petroleum Corporation (NNPC) for joint venture cash calls and so on.

This, she said, is simply a matter of definition, and follows international best practices and reporting guidelines and is thus unnecessary to continue to dwell further on this issue.

“There have also been claims of inconsistency of account balances provided by the Ministry of Finance and the CBN. It is worth noting that the Ministry of Finance typically reports its balances following Federation Accounts Allocation Committee (FAAC) meetings, which often take place at the middle of the month, whereas CBN data are reported at the end of each month.

“There is thus a time lag between the reports from the two institutions. As a result, there are usually some differences due to 'transit items' which are yet to be reconciled in both accounts.

“In addition, for quite a while, the CBN excess crude reports have included the $1 billion allocated to the Sovereign Wealth Fund as this is still domiciled with the CBN, whereas the Ministry of Finance does not regard it as part of the distributable ECA.
“There have also been issues raised regarding the rate of growth of the foreign reserves and the ECA.

“It is worth recalling that the ECA was established partly to provide a cushion for the Nigerian economy in times of a global downturn.

“In this regard, all three tiers of government, relied on savings in the ECA to plug the shortfall in their revenues following the collapse of oil prices in 2008.

“Moreover, there have been withdrawals from the ECA to pay for petroleum subsidy claims, which increased sharply in recent years from N291 billion in 2007 to about N2,188 billion in 2011.

“Finally, there has been the increased loss of oil revenues due to an upsurge in the incidence of illegal crude oil bunkering and oil theft,” she explained.
Okonjo-Iweala stressed that the outlook for the Nigerian economy remained good, despite the current global economic uncertainty.

“We accept that government should be accountable to its citizens, and transparent to its people in terms of information, particularly regarding public finances.

“In this regard, we have made efforts to publish revenues allocated to all tiers of government, we have published the Federal Government's budgets down to the last details, and we have published the subsidy reinvestments (SURE-P) payments to all tiers of government.

“We have also published subsidy payments to oil marketers and further published the names of companies that defrauded the government in the oil subsidy regime.

“We will continue to make every effort to respond to demands for greater transparency because we believe this lies at the heart of good governance,” she said.

On its part, the presidency stated that the Nigerian economy was not in danger of collapse as all globally financial recognised indices showed that the economy is stable and on an upward swing.

A statement signed by the Senior Special Assistant to the President, Public Affairs, Dr. Doyin Okupe, described the claim by ACN as lacking in substance and was contrary to the verdict of reputable international ratings agencies which have consistently upgraded the country's economy in the last one-and-a-half years.

According to Okupe, “Contrary to ACN’s claim, that the cost of producing a barrel of oil had skyrocketed in 2012 from $4 in 2002, with the actual cost of production standing at approximately $17 per barrel, the cost of oil production never rose as high as the opposition claims.

“Even at the height of restiveness in the Niger Delta area and its consequential effect on the upstream oil sector, the per barrel cost of oil production in Nigeria never rose above $18 per barrel.

“When compared with a sum of between $50 and $70 per barrel spent on production of shale oil by the United States of America, the cost of producing oil in Nigeria, which is $17 dollars per barrel as well as a prevailing selling price of over $100 per barrel, does not support the alarming claim of the opposition.”

Okupe accused ACN of basing its facts on wrong assertions with deceptive undertones, adding, “For a fact, there are incidents of crude oil theft which have existed for several decades before this administration came on board.

“However, the truth is that this is currently being tackled through proactive steps by the government. The opposition is most probably aware of the fact that the president recently secured the cooperation of the Prime Minister of the United Kingdom and French president on measures to prevent refineries in Europe from buying crude oil stolen from Nigeria.

“Similarly, the Jonathan administration has provided more and better surveillance boats to the Nigerian Navy to enhance patrol of our coastal waters.
“This has resulted in the arrest of several vessels engaged in oil theft and these were well reported in the Nigerian print and electronic media.”

The president’s aide drew the attention of the ACN to the Petroleum Industry Bill (PIB) currently before the National Assembly which was conceived to provide for best practices for acreage availability, bidding and awards and therefore would address the problem of dwindling oil and gas exploration opportunities and corruption, among other problems in the sector.

While assuring Nigerians that the Federal Government remained committed to implementing sound economic policies and development of the nation’s infrastructure, Okupe urged politicians to exhibit statesmanship in addressing issues of a critical nature rather than seeking to score cheap points.

In a related development, the end of the row over the 2013 budget might be in sight, as Jonathan is expected to send an amendment bill to the National Assembly on the 2013 Appropriation Act very soon.

The new bill will address the grey areas in the budget, which the president assented to on Tuesday.

Tambuwal disclosed that the amendment bill would be sent soon at yesterday’s plenary of the House of Representatives while formally informing the lawmakers that the president had signed the budget.

Tambuwal explained that in the course of the extensive engagements between the legislature and the executive on the budget, it was agreed that an amendment bill should be sent to the National Assembly to address some of the issues responsible for the delay in signing the budget.

“In the process of going back and forth, some observations were made by the executive on the 2013 Appropriation Bill.

“We are therefore expecting an Appropriation Amendment Bill. I am sure that when it comes, we will attend to it on time and return it to them too,” Tambuwal said.
Also yesterday, Special Adviser to the President on National Assembly Matters, Senator Joy Emodi, commended the president and the National Assembly for the signing of the 2013 budget into law.

Emodi said that the signing of the budget on Tuesday had not only put paid to the alleged budget row between the two arms of government, but further crystallised the virtue and benefit of teamwork and dialogue between the two arms of government.
Emodi urged the leadership of the National Assembly to provide all the necessary legislative support for the implementation of the budget to ensure that it translated to a better life for the people of Nigeria.