T H I S D AY, T H E S U N D AY N E W S PA P E R ˾ JUNE 25, 2017
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SUNDAY INTERVIEW
High Debt Service to Revenue Issue is Short-Term Cont’d from Pg. 24 many are trying to drive growth within their own states.
Nigeria’s domestic debt and external debt rose by 40.71 per cent and 45.98 per cent respectively, within two years and there had been fears over the sustainability of the debt because huge funds are being committed to servicing it, which is eating deep into the treasury. Are we not in trouble? Not at all! It is important that we all understand the overall strategy. When we came in, Nigeria was in trouble, there was no strategy to deal with our problems. We had missed the opportunity presented by some of the highest oil prices ever. During that period of high oil prices, Nigeria experienced a rising debt profile, that was a period when we should have been worried about debt. In fact, we should have been alarmed. When income was high, we had no reason to borrow especially when we were spending just 10 per cent on capital. We increased our debt level from N6.5 trillion in 2011 to N10.9 trillion in 2015 and at the same time, reserves declined from US$45.6 billion to US$29.8 billion. That wasted opportunity created the ingredients for slow growth and recession. We looked closely at the situation and realised that in the short term, we needed to spend our way out of trouble, so we set an expansionary budget to provide stimulus spending. This has been successfully applied in many nations to reverse the downward trend by providing counter cyclical intervention. This entailed increasing borrowings to fund capital expenditure and increase aggregate demand to turn the economy around. That was the short-term and very urgent imperative. Our medium-term plan is based strongly on increasing revenue mobilisation. This is important because the preferred alternative to borrowing to fund our investments is to raise revenue to do so. Increasing our revenue is not something that can be attained instantly. For example, in some cases like tax collection we needed data, we needed to sign some treaties and we needed tax policy reforms. We have been working hard on these measures. We recently started training our Community Tax Liasion Officers who will educate citizens and enroll more taxpayers. There are just 14 million taxpayers in Nigeria, it is not sustainable, and even those who are paying, are not all paying what they should pay. Next week, we are launching a major programme in tax compliance which we expect will raise significant funds and drive higher long-term tax revenues. In other areas, we needed to work on blocking the leakages. You will recall that we started with auditing the revenue generating agencies, and identified over N450 billion in outstanding and recoverable operating surpluses. Then, we issued new circulars, outlawing certain expenses that we deemed wasteful. The recent issuance of the Executive Order on the budgets of agencies is about generating revenue to support our reforms. By insisting that agencies submit their budgets for review, we have been able to strip out wasteful spending and this will increase operating surpluses that are paid into the Consolidated Revenue Fund. Already, we are seeing the impact of our reforms. Some agencies like JAMB had not been making returns because they were spending all that they generated but just last week, Jamb paid in over N5 billion in operating surplus. This is a function of our tighter focus on revenue. Such reforms are permanent and we are just getting started, many agencies have been told to revise their draft budgets to align with our objectives. Our focus on revenue is total. Revenue generation is not as rapid as raising debt but it is permanent. Increased revenue will
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ensure sustainability, will prevent us falling into a debt trap and will reduce our debt service to revenue ratio.
The International Monetary Fund and economic analysts, both local and international have stressed the fact that the revenue to GDP ratio of Nigeria’s debt is low but agreed that we’re still in the comfort zone of the debt to GDP ratio? How will the federal government balance the two?
upon?
The Treasury Single Account is a fundamental reform that was necessary to give the Federal Government better visibility and improve the management of its cash position. By closing thousands of accounts and merging them, the Federal Government has been able to save billions of naira in bank charges. An additional benefit is that there is greater visibility of the true revenues of government and this has enhanced accountability. Those who have criticised the policy seem unaware that there are virtually no major economies where the federal government is the biggest customer of privately owned banks. Banks are the engine of the economy channeling funds from savers to borrowers. Already, government is the largest borrower, which means if government is also a depositor, it is borrowing back its own money. In the short-term, TSA may seem painful but in the long term, banks will adjust by driving financial inclusion by bringing in unbanked sections of the population and by lending more to the private sector. Like any new policy, there is always room for improvement and we will continue to fine-tune the policy as we go along.
a case somebody in the foreign affairs ministry who was prematurely retired after whistleblowing but was recommended for re-instatement, the decision that has not been respected by the ministry after two months. However, we know that the Whistleblower Bill has been passed into law. Has the implementation not commenced? If not, what is delaying its enforcement?
The Whistleblower Policy is another new initiative of this administration As I said, our decision to focus on and it is one of the tools in our fight debt initially was due to the urgency against corruption and waste. So far, of our situation, we could have waited it has worked well but with any new to generate revenue but this would policy as previously mentioned, there have prolonged the recession. Our is a need for constant refinement. For medium-term focus is on revenue example, we had to work and legally and we have started in earnest. The define, ‘Who is a whistleblower?’, What high debt service to revenue issue happens when two people provide is a short-term one, and we have a the same information, How do we strategy to address it. It is now about safeguard the system against maliimplementation of that strategy and cious reporting? How do we pay the we have already started. whistleblowers without compromising their identity. So, in response, we have The TSA policy had been largely had to develop a legal agreement, which criticised. While some sections is executed between the information of the economy regarded it as a provider and the Attorney General of laudable policy, which has come to the Federation and it is designed to instill transparency and accountprotect both parties. ability, some others described it as It also places responsibility on a policy, which was introduced to the information provider for false or cause liquidity squeeze and stifle malicious information, which can lead There are still issues with the to prosecution. the economy. In your fair assessment of the policy, has it been whistleblower initiative because On the payment process, we had to successful? Is there any aspect of there are reports that whistleblowers set up a structure to prevent the use the policy that could be improved are losing their jobs; there was even of bank details of whistleblowers to trace their identity, which might have put them at risk. Overall, I think that the Whistleblower Initiative has worked well. It is hard to comment on individual cases such as the one you mentioned since I don’t Our medium-term plan is based strongly on increasing have the full details but by its nature, is a contentious area and disputes revenue mobilisation. This is important because this are inevitable. However, we will keep looking at the the preferred alternative to borrowing to fund our bigger picture which is the deterrent investments is to raise revenue to do so. Increasing effect, preventing looting and also in our recovery efforts. We our revenue is not something that can be attained helping continue to learn as we go, currently, instantly. For example, in some cases like tax collection we are reaching out to the Australian for some technical support we needed data, we needed to sign some treaties and government since they have a very well established and successful unit. We are going to we needed tax policy reforms work out what we can learn from them.