Breaking News

Our economy in trouble, say Okonjo-Iweala, Aganga, Nnaji

ABUJA—THREE ministers-designate at the heart of the Goodluck Jonathan economic revival team, yesterday, reviewed the Nigerian economy and posited big trouble unless the present consumption pattern is reversed.

Managing Director of the World Bank, Dr. Ngozi Okonjo-Iweala; immediate past Finance Minister and erstwhile Managing Director of Goldman Sachs, Mr. Olusegun Aganga and former Presidential Adviser on Power, Prof. Barth Nnaji; spoke at the Senate screening exercise where they were confirmed as Ministers.

Prof. Barth Nnaji, Olusegun Aganga and Dr. Ngozi Okonjo-Iweala

Okonjo-Iweala who painted a gory picture of the Nigerian economy during a Senate confirmation hearing to return her to her old job as Minister of Finance, asked: “How can we invest in capital if we’re spending all our money on recurrent expenditures.”

The Senate had approved the unanimous opposition by all three Lagos senators to confirm Aganga as the ministerial nominee from Lagos. Other nominees confirmed, yesterday, were Comrade Aba Moro, Benue; Dr. Samuel Ortom, Benue; Senator Idris Umar, Gombe; and Mrs. Viola Onwuliri, Imo.

Screening of nominees

Also confirmed yesterday were Professor Ita Okon-Bassey, Akwa Ibom; and Erelu Olusola Obada, Osun.

The seriousness with which Mrs. Okonjo-Iweala and some of the nominees painted issues were,  however, lacking in the approach of the Senate in the screening of  the other nominees. A number of the nominees were confirmed without as much as a question from the senators who simply asked them to bow and go.

Dressed in a blue blouse and skirt made of African print with black spots and with her landmark headgear, Mrs. Okonjo-Iweala entered the Senate chambers at precisely 12.10 p.m. and was let off at 1.15 p.m.

She was quizzed on several issues pertaining to the economy and for the first time was publicly made to disclose reasons for her unceremonious exit from the Olusegun Obasanjo cabinet.

Noting that Nigeria was eating out of what it should be using to develop itself, Mrs. Okonjo-Iweala said: “I am really worried about the issue of making sure our budget is not eaten up by recurrent expenditure. How can we invest in capital if we’re spending all our money on recurrent expenditures. Can we run a budget that is not negative? Absolutely. We can do it, we have done it. We have been able in the past.

Recurrent expenditure

“I strongly believe that we should try as a country as much as possible live within our means. Right now we need to work very hard because the budget that we have is such that the current expenditure is almost 74 per cent of the budget, therefore, there is not as much left for capital, so we need to work hard to put in place policy that will make it possible to continue to implement fiscal policies that will enable us to tackle the various challenges in the economy while at the same time living within our means.”

She noted that the recurrent expenditure was crowding out other necessary investment in infrastructure especially power and as such solicited the help of senators to help the executive branch of government by giving the push to cut down recurrent spending.

Also noting the effect of unemployment on the economy, she said: “I think the main problems in the economy have to do with creating jobs. We have unemployment rate of about 14 to 16 per cent, but very large under-employment and the issue is how to make the economy growing in a way that it will create jobs, so those fiscal policies have to be supportive of sectors that are going to be job creating, because we now have growth, but we need to translate that growth into jobs, so those are the kinds of fiscal policies that we need to encourage. We should privatize sectors that are job creating.”

Noting the declining performance of the federal budget, she said: “When I joined the administration of Chief Olusegun Obasanjo, the budget implementation was 30 percent in 2003, we got up to 90 and 85 percent as at the time I was leaving. And that was a good for any country. As at now the implementation is at 53 percent. I don’t see any reason why the budget will not be fully implemented, if it is reasonable and delivered on time. Budget will be fully implemented if the revenue is coming with less expenditure.”

Expressing concern that the country was not maximally exploiting its oil revenues, she said: “We are losing reserves, it shouldn”t be, we should be increasing our reserves, at the same time. I am aware that part of the reserve maybe due to decision to support the naira, I don’t think is something that is untoward, but if we want to revalue the naira this will not be the time to think about it. I think we should wait until things are more stable, we are growing our economy, we are creating jobs, we make sure our young people are working and the sectors we have are really giving what they should before we think in that direction.”

Investment in oil sectcor

Answering a question on the Joint Venture Companies, JVC, Okonjo-Iweala said: “On the issue of JVC I think there are number of modalities that many countries use to manage the oil sector, exploration in their countries and investment into the oil sector. I think the problem that we have is that our own portion of the joint venture over time we have difficulties meeting that, but I don’t see anything wrong with them per se, I think in the beginning if you are going to go that route, you really need to have strong presence and advise to make sure that what you negotiate really obeys the law that will be of benefit to the country at the end of the day after the whole process.”

Inevitably, she was drawn to why she had to resign from the Obasanjo government after her successful role in erasing most of the country’s debts to the Paris Club of debtor nations.

She said: “I did not run away, I was here. I resigned, I served the country for about three years and when I determined that I could no longer perform and give to the country the way that I would want, I resigned, which is the honourable thing to do, so I did not run away. When the circumstances are appropriate to serve, you serve and if they are not appropriate, you go and do something else. I think three years plus of service is quite substantial, not only in Nigeria, but elsewhere in other countries, it is regarded as a good amount of time to have given the country and I intend to implement and if Iam cleared I will do my job.”

On the usefulness or otherwise of sustaining the subsidy on petroleum, Mrs. Okonjo-Iweala said that subsidy was a good instrument needful in narrowing the economic gap between the rich and the poor but lamented that where it is not effectively utilized it becomes wasted.

She said that she was especially touched by the wide gulf between the rich and the poor in Nigeria saying that narrowing it was one of the incentives for her returning to the federal cabinet.

She noted: “We have coefficient of inequality. It is this inequality that is holding us down. People keep asking why I want to come back to work, but the reason is simple. In a country where the rich keeps getting richer and the poor keeps getting poorer, we need to bridge the gap. We live in a country, where the rich can just wake up and decide to travel abroad, just as their children school abroad and have access to good healthcare. On the part of the poor, the reverse is the case.”

In addition, Iweala said: “The children of the poor don’t have good schools to attend to and no good healthcare system in a country of 150 million people. That is the inequality we are talking about. We must change this because I know it is possible to do so. I will ensure that we improve the lot of the common people, in order to prevent our young people from moving abroad.”

Aganga who appeared after Okonjo-Iweala also lamented the lopsidedness of the national budget on recurrent expenditure which he said was responsible for the nation’s economic downturn.

Aganga noted that the Nigeria”s huge personnel cost at 75 percent average is a drain on the nation’s resources which has become a burden and an impediment to infrastructural development.

He said: “The level of expenditure has increased significantly. Five years ago it was N1.6 trillion. In 2009 it went up to N3 trillion. In 2010, N4 trillion and in 2011 it is going to go to N4.4 trillion that is hard given the level of revenue we have today.

“The second challenge we have is the level of our recurrent expenditure. In 2009 it represented 30 percent of total expenditure, in 2010 it represented 73 percent of expenditure and 2011 it is going to be 74percent of the expenditure. What that means is that the amount we are investing in infrastructure and development is less than 30 percent of total expenditure, so how can you develop as a country?

That has been the case for the last ten years. If you look at the figure compared to the revenue, the recurrent expenditure in 2009 extended beyond the total revenue. What is happening then is that it means you are borrowing for recurrent consumption. That is bad.

Recurrent expenditure exceeds revenue

“In 2010 your recurrent expenditure as a country exceeded your revenue also. That is bad. There are four items in recurrent expenditure, the first is debt servicing, the second is statutory transfer, the third is pensions and all that, that is small. The biggest is what we call the personnel cost. Personnel cost increased from N851 billion two years ago to N1.3 trillion in 2010. Which is an increase of about 61 percent and has gone up to about N1.4 trillion in 2011 that is where the bulk of the money is. So the issue is on personnel cost.

“We have run a budget every year that has a deficit. The deficit in 2011 is about N1.2 trillion that is why the domestic debt has gone up. That is the challenge we have as country.”

Former Special Adviser to the Presiden on Power, Professor Nnaji, while responding to questions from senators confirmed the  tie between industrial production and power but confessed that 90 per cent of the nation’s industries had wound up on account of lack of power.
Noting government’s efforts in the sector, he said that massive investment was needed into the sector but said that government could not do it alone and hence the need to create the enabling environment for investors to come in. he said that was the reason for the increase in electricity tariff. He, however, affirmed that government would continue to subsidise electricity tariff for the next three years before a complete withdrawal.

Responding to questions on the opposition to his nomination by some groups in the power sector, he alleged a collusion between some elements among one of the unions and those he claimed were determined to allow the poor power supply system to continue.

While noting that a total of 10 billion dollars was required yearly for the next ten years to build up the sector, he said the country has an installed capacity of 5,000 megawatts while the current production level is 2,400MW.

Noting that the absence of more investments would spell doom for the nation’s Nnaji also said that Nigeria in its fifty years of existence had not produced a power study.

Outside investment

On the need for outside investment, he said: “There is no way investors will invest if the tariff does not reflect the cost. It must meet international standard of recovery of cost. For those who are poor, there is a way to reduce the tariff. There is cost subsidy that is actually in the electricity act.”

On whether threats by staff of Power Holding will not affect him, he said: “There are three unions in electricity. You have the pension union, they have not opposed. You have the senior staff union, they don”t seem to oppose. You have the junior staff union and it is a segment of the junior staff that is doing the opposition. But it is based on fear. You have two types of fear here, one is fear of change and in any place where there is a reform in the world, this fear will hold the people in that sector and so it is not different here. They are afraid of change.

“The second is fear of job loss. They are afraid that they will lose their jobs. But it does not make sense to us because we cannot manufacture workers from the air, it must be the same workers that are in the sector that will ultimately be co-opted in the sector.

“Also those who are not really competent may upon privatisation of the companies may decide not to keep such workers. Anybody who is operating a business will want the people who are working to be competent. It is just normal. The plan is not to just leave the workers out there in the cold. The plan had been let us ensure that the workers who benefit are taken care of and also apart from state government and the federal government, it is only the workers that are going to have shares in the companies. So it is just fear and which I understand.”

Three of the nominees, Bello, the Acting Chairman of the Peoples Democratic Party, PDP, Orotom and Senator Idris were asked to bow and go without answering questions.

‘I was a motor park tout’
Ortom, a nominee from Benue State told the senators that before he struggled to educate himself to finally get his Doctorate degree, he had to engage himself at the motor park from where he got money and registered for the General Certificate of Education, GCE, examination.

According to him from the motor park, he started driving commercial vehicles as a way of boosting his income.

Ortom who is the Chairman, board of the Standard Organisations of Nigeria, SON, told the senators that because of the way he a struggled to achieve what he has achieved, he was qualified to be cleared and made a Minister of the Federal Republic of Nigeria.

Moved by emotion, Senator Ehigie Uzamere, ACN, Edo South moved that the nominee should be asked to bow and go saying that his presentation and honesty were enough reason to confirm him. The majority of the senate agreed and he was subsequently asked to take a bow and go.


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.