Nigeria’s President Muhammadu Buhari will likely assign portfolios to ministers this week. Among the most anticipated appointments will be the office of the Minister of Finance.
In Nigeria, the Minister of Finance oversees setting and implementing the economic policies of the government. Under Buharinomics, this portfolio has been characterized by controversies and (perhaps this sounds harsh) incompetence.
Whomever President Buhari decides to appoint to that portfolio this week will have his or her work cut, out and could be expected to remain in the portfolio for the next four years. Never before, in the democratic dispensation ushered in since 1999, has the portfolio of the next Minister of Finance been so important.
Thus, it is crucial that whoever is appointed sets the ball rolling immediately, making a mark in the first 100 days in office. Nairametrics surveyed opinions from economists and analysts on what their expectations are from the Minister. Unfortunately, most of the requests instructively laid down by our analysts may not be acceded to, nevertheless, it still is important to lay down the marker.
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Fiscal Quagmire: According to Wale Okunrinboye, the Head of Research at Sigma Pensions, the Minister will need to produce a credible plan for improving Nigeria’s fiscal revenues. Nigeria is yet to recover fully from the 2014 crash of the price of oil, as the government has had to rely on increased borrowings to finance capital and recurrent expenditure.
- Since President Buhari assumed office in 2015, the country’s debt profile has increased by almost 107% in naira value.
- In the first quarter of 2015, Nigeria’s total public debt stood at N12.4 trillion or $64.2 billion, while it rose to N24.9 trillion or $81.27 billion in March 2019.
- Analysis of data obtained from the Debt Management Office also shows that Nigeria has spent a total of N7.04 trillion to service both domestic and external debts under President Muhammadu Buhari’s administration alone.
- Nigeria currently spends over 50% of its revenues on debt servicing.
Unfortunately, the government plans to fund the 2019 budget with even more borrowing. We do not expect the Finance Minister to go against this plan.
Relationship with CBN: According to Yomi Fawehinmi, an Oil and Gas expert and Economic commentator, the new Minister will have to secure better coordination with the Central Bank of Nigeria. During the last regime, Nigeria’s Minister of Finance, Kemi Adeosun, had a cordial relationship with the Governor of Central Bank in the eye of the media, but often differed on policy coordination.
- While the government pursued economic expansion via monetary handout to the poor, the Central Bank towed the way of the hawkish monetary policy.
- The Buhari government has spent billions on grants to farmers as it pushed through its agricultural policies.
- While it favoured the way of grants and soft loans to farmers and other preferred sectors of the economy, the Central Bank often raised lending rates to discourage excessive borrowing, part of a grand plan to stifle demand for forex.
- In the case where there was coordination, it was a disaster. Case in point, the way the government handled the exchange rate crisis and its synergy on pseudo banning of importation of 41 items.
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Yomi believes that the government will have to focus more on policy coordination if it encourages private sector investments. He also believes that transparency in public finances is key in improving investor confidence in the management of economic coffers, especially the CBN.
Unfortunately, this too is unlikely to happen, as the president is more inclined towards interference. Just last week, the president declared that he had instructed the CBN Governor to stop providing forex to suppliers of food.
Budget Implementation: Nigeria’s 2019 Budget has its fair share of positives, even if most critics of the government still highlight its shortcomings. Nevertheless, the new Minister will have to ensure that the budget implementation plan is robust and cash-backed.
- Out of the N8.9 trillion earmarked for the 2019 Budget, N2 trillion was budgeted for Capital Expenditure.
- Critical sectors such as Power, Works, and Housing are badly in need of funding to complete projects across the country and initiate new ones.
- Massive infrastructural work across the country can help stimulate its economy.
Ighodaro Alonge, a Fund Manager, and Financial Analyst believe that the government should reduce its wage bill, particularly recurrent expenditure. It is however unlikely that the government will cut down on recurrent expenditure.
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In fact, over the years, the government has achieved 100% spending on recurrent expenditures but far less on capital expenditure. It could also be beyond the purview of the Minister of Finance to implement budget across the economy.
CBN Ways and Means: In 2016, the Emir of Kano Sanusi Lamido Sanusi accused the CBN of contravening section 38.2 of the CBN act by borrowing more than the required threshold to the Federal Government. This has not deterred the CBN, as the apex bank has continued to lend money to the government.
- As at May 2019, the CBN has lent a whopping N6.8 trillion to the FG in the form of “overdraft for Budgetary Expenses” as contained in its data.
- The CBN Ways and Means, which the Emir of Kano alleged was being violated, is also drawn to the tune of about N277 billion only.
- The government is likely to continue to rely on the CBN to fund its budgetary expenses, hoping to repay someday from oil receipts.
Dr. Nonso Obikili, an Economist, believes that the new Minister should rein in on the indirect financing of the FG by the CBN. With oil prices falling and the government increasingly failing to achieve its budgetary targets, it is unlikely that the new minister will have the balls to stop this ill-advised policy.
It is interesting to note how similar all the recommendations are including that of @Ugodre, the founder of Nairametrics.
See the table below:
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Please clarify if the recommendations of both Dr. Nonso and Ighodaro are the same. Both recommendations are verbatim in the table provided.
Thank you Femi, it has been updated.