Why President Buhari Needs Emergency Powers To Fix The Economy – Adeosun | Independent Newspapers Limited
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Why President Buhari Needs Emergency Powers To Fix The Economy – Adeosun

Buhari; emergency powers; economy
Posted: Sep 21, 2016 at 12:38 pm   /   by   /   comments (0)

Kemi  Adeosun, Minister of Finance  was a guest on Channesltv on Tuesday where she spoke on the efforts of the  Federal Government  to revamp the economy.  TEMIDAYO AKINSUYI who monitored the session brings the excerpts:

Everyone is talking about the state of the economy. You did brief the Senate before they went on recess.  If you have to face them again, what will you be telling them has changed since your last discussion with them?

I think the biggest change of course, has been that then we were anticipating that we will move officially into recession.  I think that was why I first said that ‘technically, we are in recession’, and that was also confirmed by the NBS statistics. Now, we have been in negative growth really, since 2012.  There has been a slowdown and we were hoping that we will avoid recession. But we are there now. What does that mean in terms of our tactical plans? Our plans haven’t changed. It remains the same and that is, we need to stimulate this economy and we are going to do so largely by redirecting expenditure from recurrent into capital  because we believe that capital expenditure will create jobs  and create more productivity in the economy in the long run and help us to  diversify. So, my message will be that nothing has changed in terms of strategy and plans. Clearly, we need to look at other scenarios and when we did our planning, the best case scenario, the most likely scenario and the worst case scenario plan. So, we had planned that if this happen, we will have to change our funding means.  And that’s what we are really looking now as a realisation as well as to supplement the money we can raise.  But the overall strategy, the overall solution to the Nigerian problem hasn’t changed. That is, we’ve got to make this economy more productive, we’ve got to create more jobs and to do so, we‘ve got to invest in our capital infrastructure.

There are talks about the executive arm of government sending an executive bill for emergency powers for the president to help drive the economy out of recession. Are you privy to that bill?

I am not privy to the bill but I am privy to the thinking behind it. There are a number of bottlenecks that we have already identified and which we think that given where we are, it might be worthy looking at how to unlock them. Let me give an example. We have pumped a fairly large amount of capital into the economy through various ministries, departments and agencies, some of whom have deployed it very quickly and are ready for more and we are about to release another tranche of 350 billion. We just concluded that meeting to allocate that money but there are some ministries that have been slowed down by the procurement processes. It is about transparency versus speed. We want transparency, we want open tenders because that gives us the best price and that is what also gives opportunities to Nigerians to bid for and to get government contracts; but if it is taking 12 to 16 weeks to get through the bureaucracy, at this point in time we feel we can’t afford those delays. So we need to say ‘look, procurement laws are made for usual times and these are unusual times, can we consider temporarily relaxing some of the conditions?’ Similarly there is a transaction we are working on at the moment which is a very pivotal transaction with General Electric (GE). They want to run freight on our old rail system which will create huge number of jobs across the country. But it’s bogged down in rules that say ‘you’ve got to do this and that you’ve got to advertise and keep it up for a while’. We don’t have that time. So, there are some areas where I think it would be useful to have some legislative amendments.

Over the week, we did hear the CBN governor said that the worst of the recession is over. Did you buy that?

I do, to the extent that we’ve had problems with oil price.  And just when we thought that things couldn’t get any worse, we started having problems in the Niger Delta. So, we started having problems with oil quantity.  It’s very difficult to see what else can go wrong.  So, our worst case scenario in terms of our planning has already happened. I think that is what he was trying to say. From now on, the only way really is up. The only way is recovery, the only way is forward. When it started, we did our scenarios. We say what really can go wrong?  If you look at where we are now, the oil price is low, the quantity is low and we are in recession.

Don’t you think the oil price can get any lower?

If you look at the oil prices, it’s global and it’s driven by global factors and indeed, speaking of the oil price, that’s one of the things when we look back and say ‘how did we get here?’ That is one of the signal I think that we missed. In 2010, when the oil price was $110, the Americans did something very significant.  They allowed exploration creating the shale oil industry.  At that point, they were producing 5.2m barrels of oil per day in America and they were the biggest buyer of oil in the world. They signal to the world that they are not going to buy oil anymore and they are going to become self-sufficient. They began to explore oil in America. It was obvious that we cannot drive down the oil price. Those were really the signals that I think we missed.

What about our quantity?

Our quantity at the moment cannot go up but we hope that with engagement going on in the Niger Delta, we can get back up to where we need to be. That is critical to what we are doing.  We are doing it to get the quantity back up because the price is low. And for us to be able to fund our budget and stimulate the economy, for state governments to be able to pay salaries and indeed, for federal government to be able to meet its obligations, there is a certain minimum level of oil revenue that we just need and that’s the reality. Government has accepted that and we are working towards achieving that.

You want the CBN to lower rates. How do you plan to ensure that this happens?

As you know, the CBN is fully independent of the Ministry of Finance and the Monetary Policy Committee (MPC) is the independent economists that look at monetary policy are indeed meeting today.  My position has been that this government is trying to spend its way out of trouble and that spending, much of it is being borrowed. If you increase the interest rate, you increase our cost of debt service. So, in an ideal word, I need low interest rates.   I think business, when you are in recession; typically, you cut interest rates to stimulate activity. So, we would love to see the MPC consider on how they can help us lower interest rates because we think in terms of business activity, which will deliver great result for Nigeria. I do understand what they were trying to do, which is, they are trying to manage inflation. But if you actually look at the structural nature of this inflation, it is unlikely to really respond to monetary policy initiatives. It’s structural inflation.