IMF VISIT JONATHAN

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The Managing Director,
International Monetary Fund, IMF, Ms
Christine Lagarde, yesterday, warned
Nigerian leaders to immediately
commence the process of rebuilding the
nation’s depleting reserves or face an
impending economic disaster that would
possibly arise from another global
financial crisis.
She said: “A sustained slowdown in
advanced countries will dampen
demand for Africa’s exports, and,
together with continued financial
market uncertainty, this will likely inhibit
private financing flows, remittances, and
concessional financing. Her comment
came on the heels of mounting debt
pressure in Europe, declining economic
growth and unemployment in the
United States of America, China and Asia
generally.”
Speaking at an interactive session with
private sector leaders, organised by the
Federal Ministry of Finance and the
Nigerian Economic Summit Group, in
Lagos, Lagarde, cautioned that unless
the country restores its fiscal buffers,
such as shoring up its foreign reserves,
oil reserves, foreign exchange rate and
churning out people-friendly policies, it
will not be able to withstand the shock
of an economic crisis which is currently
ravaging Europe and other advanced
countries, with the threats of it
spreading to emerging economies.
International Monetary Fund (IMF)
Managing Director, Christine Lagarde (C)
shakes hand with President Jonathan
after their meeting with Finance
Minister Ngozi Okonjo-Iweala (R) in
Abuja.
She further cautioned that the country’s
growth programmes be all-inclusive and
be capable of creating jobs and bringing
about a revival in the real sector.
It will be recalled that Nigeria’s excess
crude account dropped from $20 billion
at the beginning of 2009 to $11.2 billion
in 2010 and further to about $4 billion in
2011. The account has been a source of
contention between state Governors
and the federal government. The fund
was used to beef up revenue allocation
to the three tiers of government
following the dwindling revenue
accruing to the federation account as a
result of the global economic recession
that has resulted in the fall of prices of
crude oil the major revenue source of
the country.
Former Minister of state for Finance Mr.
Remi Babalola had told the nation that
“the global economic meltdown
impacted on Nigeria’s excess crude
savings and the external reserves, as
both declined from their levels of $20.44
billion and $50.11 billion in 2009.
The amount saved from oil windfall in
the country’s excess crude revenue
account has been depleted and what is
left will not protect the country from
any financial down turn should oil price
fall below the budget bench mark. The
savings in the Excess crude account has
been disbursed and what is left based
on what the three tiers of government
in the country agreed on will not be
enough to make any significant impact
on the budget if the prices of oil fall
below the budget bench mark.
Nigeria’s growth should be all-inclusive
— IMF
Largade said an all-inclusive growth is
better sustained and will ensure that
more people are brought into the
growth equation. She pointed out that
Nigeria needs to build a more inclusive
society where every Nigerian would
have equal access to economic and
developmental opportunities.
According to her, policies need to tread a
fine line between defending against the
global slowdown in the near-term, while
also preserving fiscal resources for
investment in much-needed
infrastructure that will help promote
employment and growth.
She advised that government focus on
restoring the fiscal buffers that served
the continent and Nigeria so well during
the last economic downturn, as this will
help prepare the country for another
economic crisis, if it eventually gets to
Africa.
According to her, establishing the
Sovereign Wealth Fund and emphasizing
the use of oil revenues for stabilization
and investment are important
advancements. Pressing ahead with
these reforms is particularly important
given the external environment—
namely, the need to rebuild fiscal
buffers.
She stated further, “A sustained
slowdown in advanced countries will
dampen demand for Africa’s exports.
And, together with continued financial
market uncertainty, this will likely inhibit
private financing flows, remittances, and
concessional financing.
“The potential for greater volatility in
commodity markets could cause further
disruptions, with winners and losers
within the region. The risk of a drop in
world oil prices if global demand
weakens is the key watch point for
Nigeria.
“Faced with these risks, my main worry
is that many countries do not have as
much capacity to absorb shocks as they
did three years ago. Added to that, the
global slowdown could be more
pronounced this time around.”
Lagarde lauded the economic policies of
the Jonathan administration and called
on Nigerians to support the
programmes and policies of the
government.
Don’t expect reduction in recurrent
expenditure — Sanusi
Also speaking, Governor of the Central
Bank of Nigeria, CBN, Mallam Sanusi
Lamido, said Nigerians should not
expect a reduction in recurrent
expenditure in subsequent budgets
unless the country undertake a review
of its constitution.
Sanusi, who spoke in Lagos at a
conference in which the Managing
Director of the International Monetary
Fund, IMF, Ms Christine Lagarde and
private sectors leaders were in
attendance, said the Nigerian
constitution, is designed with a number
of fixed costs elements which will
always account for a high recurrent
expenditure in the budget.
According to Sanusi, Nigerians should
not clamour for a reduction in recurrent
expenditure or blame the government’s
economic team for this; instead,
Nigerians should be asking if we have
constitutionally wired ourselves to have
lower cost of governance.
He noted that people should be bothered
about a review of the constitution to
address the issues responsible for the
high recurrent expenditure.
He said, “Nigeria’s constitution provides
for a bi-cameral legislature, 36 states
with each of the states having a national
assembly and 778 local government
areas. The constitution also provides for
a minister from each of the 36 states
and many others. All these have put a
certain fixed cost element on the
country’s expenditure profile. “Until the
constitution is reviewed to address
these issues, Nigerians should not
expect any reduction in recurrent
expenditure and cost of governance.
Sanusi warned that any attempt to
effect a reduction in the recurrent
expenditure will result in massive
retrenchment or a downward review in
the salaries of public officers.
Fuel subsidy: Nigeria spends $16bn in
11 months — Sanusi
Sanusi further warned that unless
Nigeria removes subsidy on petroleum
products as planned,the country could
be plunged into a major crisis if the
country was later forced to undertake
the removal by forces outside its
control. Sanusi said fuel subsidy is
putting enormous pressure on Nigeria’s
reserves and the economy in general.
He noted that the Federal Government
has spent $16 billion in the last 11
months on both the importation of fuel
and subsidy to oil marketers. According
to Sanusi, $8 billion was sourced by oil
companies for the importation of
refined petroleum products while $8
billion was used in subsidizing the
products, bringing the total to N16
billion within the last 11 months.
FG Committed to reduction in recurrent
expenditure — Okonjo-Iweala
However, Minister of Finance, Mrs. Ngozi
Okonjo-Iweala, said the federal
government has put in place measures
to bring about a significant reduction in
recurrent expenditure and an increase
in capital expenditure in the next couple
of years.
She said the government is committed
to reducing the recurrent expenditure to
below 70 per cent and is targeting the
increase of capital expenditure by 10
percentage basis points before the end
of the current administration. She called
on Nigerians to support the
programmes and policies of the Federal
Government, saying that the
government is taking the issue of
implementation of its programmes
seriously. She said the 2012 budget is
designed to create the right fiscal
conditions that will make the economy
work.
“Nigerians should watch and see the
results of government programmes and
policies. We are plugging leakages in the
system and we call for the support of
every Nigerians. In the course of our
activities, some people will be displaced;
these people who are displaced will not
give up easily, they will engage in a
fight and we are fighting back,” she
said.
Okonjo-Iweala said the government is
targeting a significant increase in
investment in Nigeria, especially in the
petroleum sector; hence it is working
towards re-presenting the Petroleum
Industry Bill to the National Assembly.
She said the Bill, which will be re-
presented to the National Assembly in
the next of couple of days, will address
a number of the bottlenecks recorded in
the first Bill.
UUU