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INTERVIEW: Nigeria’s Rising Debt: Time will vindicate Buhari’s govt – Finance Minister


With mounting criticisms over the country’s rising debt stock, the Minister of Finance, Budget and National Planning, Zainab Ahmed, told PREMIUM TIMES’ Business Editor, Bassey Udo, that only time will vindicate the current administration’s decision to borrow big to develop infrastructure, grow the economy and create wealth. The minister, during the exclusive interview in her office in Abuja to mark her one year in office, said that the situation could have been worse but for the government’s proactive fiscal measures to push back on the impact of COVID-19 on the global economy. Excerpts:

PT: You are one of the few ministers in recent history to combine three powerful portfolios – Finance, Budget and National Planning. How much of a challenge is this on your shoulders?

AHMED: Well, it’s not so much a challenge, because I do not work alone. In his second term, the President, in his wisdom, formed the Ministry of Finance, Budget and National Planning, bringing together the planning and budgetary functions of the government.

The essence of the decision was for the country’s budget implementation to be guided by the government plans. Over the years, planning and budgeting processes were not going together.

In his first tenure, that objective was largely achieved. But, with some identified gaps between what the Ministries of Planning and Finance were doing, specifically as related to the government’s budget function, in terms of preparation, execution and monitoring/evaluation, there was (a) need for the merger.

As a minister, my role was to coordinate the three major functions. And I must say my job has not been as challenging as one would think, because I have a solid support base from the Minister of State for Budget and National Planning and three capable Permanent Secretaries in the Ministry of Planning and two others in the Ministry of Finance.

We keep making progress on a daily basis, because we have the right core structures in place. Apart from the new ministries, the team collectively supervises about 18 agencies, with shared supervisory responsibilities among directors representing the Ministries in most of the Boards of those agencies.

We have a system of tracking performances and determining what is working and what is not. On a weekly basis, we have management meetings to review updates on what progress and challenges have been identified as well as refine efforts to achieve overall goals and objectives on (an) ongoing basis.

PT: What are the challenges in pursuing those responsibilities?

AHMED: The first major challenge at the beginning was the fragmentation of efforts between the various ministries.

One of the first things I did, on taking over, was to develop the strategic revenue growth initiative (SRGI). The biggest challenge the country is facing is low revenue yields to support the government’s programmes.

After examining the entire revenue ecosystem, the SRGI was designed to bring all the key revenue generating agencies together, including the NNPC (Nigerian National Petroleum Corporation), DPR (Department of Petroleum Resources) and others not directly under the Ministry of Finance.

But, today, we are making some progress. It is an ongoing process, although one of the most difficult things is to change the attitude of people, or the ways they do things. The challenge is even bigger when considered that there is a huge revenue gap to bridge with the ERGP.

The government’s target was to attain a revenue-to-GDP (gross domestic product) level of 15 per cent by 2019, from 6 per cent in 2015.

Gradually, the level inched up to about 8.2 per cent last year. Sadly, with the slowdown in the global and Nigerian economy, we are seeing the ratio beginning to decline already.

The implication is that when the revenue is not performing at a rate the government is planning, the government would struggle to fund all its programmes and activities. This is a significant challenge the government is living with on a daily basis.

The government has been trying to joggle providing for social development, in terms of health, education, security, social investment, infrastructure and other sectors. Everything has a legitimate and important demand on the government’s limited resources. The government revenue cannot do everything. Therefore, the government ends up borrowing massively to finance these development efforts.

But it is not irresponsible borrowing. The government has always ensured the borrowings were tied to and applied on major infrastructure and developmental projects, while using its revenues to pay salaries and other obligations to institutions categorized under the Constitution as beneficiaries of first line charge.

PT: Clearly, the impact of poor revenue on budget implementation is huge. Like you’ve said, this has compelled (the) government to rely more on borrowing to do most programmes. What’s your assessment of the implementation of the 2020 budget?

AHMED: In spite of these challenges, incidentally the 2020 budget is one the government has had an opportunity to implement nearly 100 per cent. One, because the government had to review the budget fundamentals downwards to reflect the current realities, particularly of the COVID-19 pandemic.

Two, the budget has the benefit of being implemented for the first time for a full year, because its implementation began in January.

Don’t forget this is the first budget to be implemented under the new January to December budget cycle, unlike previous years when the capital components of the budgets were implemented sometimes for just six months.

We are very much on course to meet the target to implement the budget at nearly 100 per cent.

Over time, the government implemented personnel 100 per cent; overheads 70-75 per cent. This year, the target was to implement 100 per cent of even overheads, personnel (salaries, gratuities, pensions) and other non-discretionary expenditures, like transfers to arms of government with first line charge status.

We are also going to perform nearly 100 per cent, because we are going to have the benefit of a full year, and also because we were able to raise financing through borrowing to fund capital expenditures.

It becomes very important to maintain the spending on basic infrastructure, because consumption is what is helping the economy to stay afloat.

PT: If you want to attach percentages to the budget sectoral implementation, what would the picture look like?

AHMED: Like I said, in terms of revenue, which the government had to review by half-year, the overall performance was 72 per cent, which is higher than the past three years’ performances. Personnel emoluments, which have always been 100 per cent, are of course, same as debt service.

On capital, by middle of August, the government did more than 50 per cent, after releasing up to N1.2 trillion, of the N2.4 trillion capital budget for not all MDAs (ministries, departments and agencies) alone, but including those in the service-wide votes relating to government-owned enterprises.

The more than 50 per cent capital budget release is despite the slowdown in the country’s economy as a result of the impact of COVID-19. This is because the government was able to raise funds from local and capital markets as well as funding the government raised from international sources to finance capital projects.

PT: In January, the government introduced the Finance Bill with a rash of taxes, including a revised VAT rate to 7.5 per cent. It was perhaps an alternative source for declining revenues from oil and other sources. Critics say more tax burdens on the people at a time of global economic downturn is insensitive. How do you react to this, vis-à-vis your assessment of the Finance Bill?

AHMED: I don’t agree on the insensitive aspect of your question. Over the years, there were several attempts to increase VAT in the country, without success. But, the government did it, because Labour was involved.

When the government was negotiating for the new national minimum wage, Labour was shown the performance of the economy on the expenditure and the revenue sides. The government made it clear that at the current rate governance was going, it would not be possible to pay the minimum wage they were demanding.

So, Labour understood with the government that some fundamental changes were necessary to enhance the revenue performance, not only at the Federal, but especially at the state level. That is how the government and Labour collectively agreed on the increase in VAT.

Again, although the economy is slowing down, the government still has the minimum wage to pay. So, we cannot go back on the review of the VAT and the Finance Bill.

If we pull back at the Federal and State levels, with the stress already on the economy, we will begin to have difficulties in pursuing development goals.

In fact, some states will fail to meet their obligations to their people, in terms of payment of the minimum wage to the workers. That is why the new VAT rate has to stay, despite the obvious pains. We know the slowdown (of) the economy is temporary, while the payment of the minimum wage is permanent and constant. If there is anything, it will increase, with another upward review.

Regardless, Nigerians forget that in the same Finance Bill, the government provided some tax relief by reducing taxes in the most important sector of the economy – the small and medium enterprises (SMEs).

PT: But that is only a section of the economy and not to the vulnerable and the poor?

AHMED: Yes, but that is the most important sector of the economy. Any economy that is to grow at a sustainable basis must have a robust SMEs sector. It is not the big businesses that sustain the growth of the economy. The SMEs are the ones that employ people, increase general productivity and enhance the general welfare of the citizenry. It is not (the) government that would employ people.

So, the government thought the SMEs should be given relief by zeroing their taxes if they are SMEs with annual turnover of between N25 and N100 million. That, by any standard, is very significant.

During the global economic slowdown, that is exactly what countries were doing. The Nigerian government did its own fortuitously not knowing that the country’s economy would be hit by COVID-19. All we are doing is to implement in the best possible way.

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