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BUDGET 2016: How projects will create jobs — Adeosun, Finance Minister

In this interview, the Minister of Finance, Mrs Kemi Adeosun, explains the economic vision of the Muhammadu Buhari administration and insists that given the plans on ground, Nigerians stand to gain more in the very near future with an economy that is set to be buoyant and a nation that would become stable and more prosperous.

What sort of national strategy do we have to develop our economy?  Do we even have one?

Minister of Finance, Kemi Adeosun
Minister of Finance, Kemi Adeosun

Yes we do have.  But it’s very important for us to situate it so that Nigerians will know where we were from and what we inherited.

We inherited the worst of both worlds.  We’ve been through a period where there was high crude oil price but we did not save.  In fact, we have been borrowing money for the past few years to pay salaries and we’ve also been owing contractors.  So, when Mr. President said he inherited an empty treasury, some people made issues out of it, but that is the truth. Worse still, oil price went from about $110 to $28; so we came in at a very terrible time and we didn’t have the opportunity of recovery.  It is common sense that oil prices are always volatile and we needed to save but we didn’t do that.

So, what’s our strategy?  We need to reset the economy to have a more diversified revenue base.  Oil is only 13% of our GDP, but it represents 70% of revenue to government; so if anything happens to oil prices, it creates a big problem.  But the concern really is, what happens to that 87% of GDP, why is it contributing so little to the purse? And that 87% is more stable; so if we can mobilise all that into the purse, then we can maintain some level of stability.

The other thing is to ensure that when government is spending money, it is spending it wisely.  We’ve looked at what was being spent before and we discovered that only 10% was being spent on capital.  Capital is what grows your economy.  What was being done before was money was being spent on travelling, training, salaries, allowances – those things don’t grow the economy.

So you plan cutting down on all those?

Absolutely.  This budget that is being passed has 30% commitment to capital.

Just for perspective, Ethiopia that everyone is now referring to as the wonder child of Africa did 60% when they were trying to get back.  We were doing 10% and that is the reason we are where we are.  We will try to maintain 30% minimum.

Breaking it down, capital means roads, power, rail, housing – the things that create jobs.  Recurrent doesn’t create jobs. In some parts of the country, if we have roads, then agriculture becomes viable.

The issue of saving, persuading states to save, has been a major issue.  Now you’re bailing them out. How do you convince them to start saving?

I think it’s a bit unfair to say the states did not want to save.  We have to make the right argument.  I was in a state government.  What was happening was that we were coming to Federation Account meetings and the so-called Excess Crude money, supposedly being saved for us, was going down and people said that is not right.  If you want to save for us, then stop taking out of the money.  It was at that point that governors said they wanted the money shared.

But that was then. What is important now is that everyone has learnt.

We saw some of the governors making a fuss about the savings and fighting.  How come the states too did not save?

Let me explain the structure of the FG/state money. 52% of the revenue goes to the Federal Government.  So even if the states insisted on spending their share, the Federal Government did not save its own share of 52% too. In fact, the Federal Government was borrowing to pay salaries.  If states infringe, they must be held accountable, but I think it is unfair for the Federal Government to say the states forced it not to save.

I don’t think we should be trading blames.  We should sit down and ask what lessons have we learnt?  The important thing is that we must have savings and, even if we don’t have the cash, we must invest. The Saudis have about $700billion  unspent. We have just about $20.  The Emirates built Dubai.

Unfortunately now, we cannot save when you’re owing and because there is so much to be done – we can’t even pay salaries.

Last month, the whole governments shared less than N300billion.  Salaries for the Federal Government  workers alone gulp N165billion, so I couldn’t even pay salaries and we had to borrow.

But some people ask, why should we borrow – at least funds are being recovered?

We are working on recovering the money and not all the money is in yet.  There’s money being recovered from oil theft, payroll fraud and so on.  Government will brief Nigerians at a particular point in time.

Are you really bailing them out or you’re offering them a facility?

Good.  We are not bailing them out.  We are restructuring fiscally.  We’ve told them what to do.  We’ve told them to go and do biometric capturing of the workforce because you must know those you are paying.  We’ve told them to sign up to a restructuring plan and that if they don’t, then we would not help them.  That was the agreement at the NEC last week and all the governors are subscribing to the need for sustainability because the era of wastage is over.

There were two interventions that this government did.  People have said that we don’t need to bail out states, but I tell you, apart from Lagos, Abuja, Rivers and maybe Ogun, if government does not pay salaries, then the state is grounded – the state is the highest employer of labour.  Over two million people are employed by state and local governments and if you do not pay them, then economic activities stop.  That’s why the recovery is slow because when people don’t get salaries, they can’t buy things and pay for services and the multiplier effect of that is considerable and we are trying to stimulate this economy; but you cannot stimulate an economy if two million people across the nation don’t get salaries.

In other countries, companies have been bailed out and they moved on.  But the governors are asking for more, so when will it stop?

That’s exactly why we are asking them to sign up to the responsibility of restructuring and it is conditional.  For instance, they would have to agree that they won’t spend more than a particular percentage of revenue on salaries; I must not grow my overheads by a particular figure.  To adjust an economy takes time because a governor cannot just sack people because we are dealing with human beings.

The first step is to even know the people you are paying.  The ephemeral government has done it and we discovered ghost workers.  Clean your house first and look at your IGR and how to meet expenses.  that’s a condition.  What we’ve done is to give them a restructured loan.

In blocking leakages, we can’t afford to keep wasting money.  For instance, last year, for the whole year, we spent N19billion on roads but we spent N64billion on travel – to me, that was very shocking.  We have set up an Efficiency Unit to look into that.  We have issued guidelines – one of the guidelines is not popular and we don’t care.  You cannot travel First Class on Federal Government money.  You cannot travel Business  Class except you are a Minister or Permanent secretary.  Everyone else should go on economy because you are doing government business; so why fly Business Class?

We’ve started to negotiate with the airlines now because of the volume of business and we are demanding for discounts and we are getting the discounts. In one case, we had discounts of 50% and that is huge savings.

What about instances where states have spent their money on Federal Government projects because people live in states?

Yes.  That is a valid point.  The Federal Government owes states some money: Maintenance of federal roads.  Let me give an example like the state I worked for. The police is a federal issue but all the cars were bought by the state government; operational cost like fueling was done by the state government and this is being replicated across the country.  If the  Federal Government does what it is supposed to do, then the state government can focus on its own primary assignment, then things can begin to work properly.

The budget was pegged at $38 per barrel but it has gone to about $40 and it may go higher.  It is hoped that this time we would save.

I get a bit uncomfortable when people pin their hopes on oil prices because that is exactly why we are where we are.  When it was $110 per barrel, what did we do with it?  Nothing.

Yes, there should be an excess and we must invest.  The SWF is doing well and we would do more in the area of investment.  Even with the 30% capital expenditure that we are looking at, government alone can not fill the infrastructure gap because it is so wide and that is why the SWF becomes a good channel to attract more funds from abroad.

On ghost workers and the need to prosecute offenders

The EFCC has set up a unit that deals with payroll fraud but what we’ve discovered is that there is actually a syndicate that operates.  We spend N165billion every month on salaries and pensions and, when we came in, there was no control and, once you get on the payroll, they pay you forever – even dead people were being paid – but we have set up a continuous audit team and its business is to audit and check randomly and that’s how we got some but I don’t like calling them ghost workers because some of them died and we continued paying; some changed jobs and were still collecting money from two sources.  It is more important to check how they did it than who did it.  On a quarterly basis, all the heads of agencies are sent their payrolls to sign off and we discover, in some instances, that some do not even know some of the people whose names appear.

You promised N350billion that would be injected into the economy. How far have you gone with that?

We are waiting for the budget.  Once the budget is signed, we are ready.  We asked the big construction firms, ‘How many people are you re-engaging once you get some of your money’ because we need to get Nigeria moving again.

Interestingly, some of these contractors haven’t been paid since 2012; they showed us the records.

This issue of ‘we don’t have money’ seems to be confounding some Nigerians. There’s the ECA, TSA?

There’s a misunderstanding by Nigerians.

The TSA is a huge bank account where all the agencies of government moved all their money into, in the CBN.  The figure that is being quoted is a little over N3trillion.  You cannot just go there and take out money because it belongs to the agencies.  NNPC’s money is there, Federation Account money is in there, some of the monies have liabilities against them, some are earmarked; so what we are doing is that each agency has a sub-account, so we ask, ‘Of the money, how much is free cash flow? How much is that which you ought to have paid to the federal coffers? So, everything in TSA cannot just be spent.  It only gives us better control.

Before, revenue was leaking.  There are only three lines of government revenue – oil, tax from FIRS and Customs.  All the other revenues stayed  in boards and corporations and funds were not being remitted into the Federation Account and this is one of the indiscipline that oil gave us.  If we didn’t have oil, wouldn’t the money paid for passport go into government coffers?  The money paid to NAFDAC, what happened to it?  These are non-oil revenues that are pretty stable and we have very serious plans of enforcing the accountability.  Government money must be accounted for.

What about the issue of ASUU and TSA?

We have a dialogue going on with them.  The issue is that some universities have Foundation Accounts on which they earn interests and they are saying if TSA will not give them interest then exempt us and we are working on that with the CBN to have certain categories of accounts to be interest-bearing or be exempted and we are in talks with the universities and  not ASUU.

There’s this talk of ministerial debit card. What does that mean?

We’ve discovered that once there is cash, money leaks and so we looked at what the money is being used for – fueling, buying tickets.  So, we issued a debit card to some and then we know who is spending what at any time and then we can trend and ask why are you buying full tank of fuel everyday, where are you traveling to.  We are trying to dry up that cash.  We are going to roll it out soon because we are already trying to pilot with three banks.  So, soon, that would be on stream.

Devaluation has been on the lips of some.  Please educate Nigerians about devaluation and the Bretton Woods institutions?

We are not in an IMF programme, so the issue of conditions from IMF do not arise – it’s so much when you have a balance of payment issue and IMF becomes the lender of last resort.  IMF has a role it plays one of which is advisory.

For instance, nobody knows how much revenue government makes and we are going round now to find that out.

Talk about the economic management team of this administration?

This economic team is made up of the Vice President who chairs it. I’m a member, Minister of State Budget and Planning is a member, Minister of National Planning is a member, Minister of Trade and Investment is a member, Head of the DMO is a member, the Information Minister is a member, DG Budget is a member.  We are running a slightly different structure.  The other time there was a Co-ordinating Minister, the budget was under-funded.

This team is going to turn this economy around for the better. Yes, some people say there is no team but there is a team made up of very competent people in place.

There is a world of difference between just talking and doing.  We are doing and Nigerians will enjoy the fruits of the efforts being put in place by this administration.

The Nigeria/China agreement?

It’s an agreement between the CBN and the Chinese Central Bank.  There is one between the Federal Ministry of Finance and the Chinese government.  What we have done is to approach their EXIM Bank to support us with the rail and some of the power projects and what we expect from that is cheap money to help us actualise these projects.

The interesting thing is that when you try to reflate an economy you spend.  In this instance, we are going to be spending money on things that are very important and it would create jobs – the advanced economies are paying their people to reflate their economy but, in our case, we must spend the money on projects that will provide jobs.

Our economic blueprint is very clear.  We are going to invest in capital projects to ensure that we diversify.  We’ve been talking about diversification since I was a child and we have diversified nothing.  If we just feed ourselves – the fundamental things – we would create jobs.  It’s the structure that we never had.  We import tomato paste from China; meanwhile tomatoes are wasting away in the country. The transportation cost by road is not the best.  If we have rail and if we can process and freeze and move, we can process.

We are trying to have a planned economy for the future and one which meets the needs of Nigerians.  Our economic growth must be inclusive for all to prosper.


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