NIGERIA/FILE: New Finance Minister, Ngozi Okonjo-Iweala outlines plans on tighter spending and jobs creation

Record ID: 235193

  • Title: NIGERIA/FILE: New Finance Minister, Ngozi Okonjo-Iweala outlines plans on tighter spending and jobs creation
  • Date: 25th August 2011
  • Summary: LAGOS, NIGERIA (FILE) (REUTERS) VARIOUS OF LAGOS SKYLINE / BUILDINGS AND BUSY STREETS AND HIGHWAYS
  • Embargoed: 9th September 2011 13:00
  • Keywords:
  • Location: Nigeria
  • Country: Nigeria
  • Topics: Economy,Politics
  • Reuters ID: LVA6I08WSY0ZP4VUAYJIHR8UMIFT
  • Story Text: Nigeria needs to diversify away from a reliance on oil, reduce public spending, boost job creation and finish failing infrastructure projects, the country's top new economic overseer said on Wednesday (August 24).
    Coordinator of the Economy and Finance Minister Ngozi Okonjo-Iweala said Nigeria should try to reduce recurrent expenditure by at least 1 percent a year until 2014.
    "We need to maintain macro economic stability, that's point number one, and under that it means that we need to manage our fiscal situation in a more prudent manner, so we have to look at our spending and see how we can rein in spending," she said.
    Okonjo-Iweala, a former World Bank managing director, also said fuel subsidies would be ended on a timescale yet to be decided and pledged to keep sub-Saharan Africa's second-largest economy within a 3 percent fiscal deficit target.
    Okonjo-Iweala, who was sworn into her new role last week, said Nigeria's cumbersome budget process had to be changed. But she said fiscal and budgetary changes would take a long time.
    "Its not overnight that you are going to change that. It will take you sometime to restructure but we want to see if we can bring down the recurrent expenditure from the presently high 74 percent at least 1 percentage point per year you know, bring it down to a more reasonable figure maybe around 70... to be over the life of this administration," she said.
    Government offices often spend months without knowing how much money they have for the year. Political wrangling meant President Goodluck Jonathan only signed the 2011 budget into law at the end of May.
    "We really need to change the budget process in this country. We have to change it. We can't have a situation where we first of all bring a budget and then haven't thought it through, you know, then we have a lot of interventions then it takes more time then by the time we get it, it doesn't resemble the budget that was handed in the first place, the ministers don't know what to implement and what not to implement. And on our side, in the executive we have to try to work hard and fast to also set the example," Okonjo-Iweala said.
    Bismarck Rewane, a leading economist in Lagos welcomed the minister's remarks but was concerned about how the adjustments would be implemented.
    "The main challenge she will have is how to carry along her team when I say the team, both at the federal, state, local government level that this is time to make a mental adjustment. Nigeria is not a rich country. Nigeria is a well endowed country. Nigeria is not a produced wealth economy; Nigeria is a natural wealth economy. So to trans… to make that transition from natural wealth to produced wealth economy, means a lot of work," said Rewane.
    However, Rewane said if the adjustments were successful, they would change Nigeria, adding that the reliance on oil exports meant fiscal prudence was even more important given the volatility of global oil prices in recent months during the crisis in North Africa.
    Nigeria has the world's seventh-largest natural gas reserves, yet is blighted by persistent electricity outages which force businesses and individuals who can afford them to rely on diesel generators.
    Its focus on making short-term gains on crude exports means that despite being the world's fifth-largest oil exporter last year, Nigeria has to import most of its fuel needs due to a lack of investment in refining infrastructure.
    The increased costs associated with fuel importation and corruption within the industry means the government pays costly subsidies to temper the price for Nigerians, but these will be removed, the new finance minister said.
    "That is a game changer. That can transform Nigeria almost automatically. It will resolve power, it will resolve em, refining and so many things but what is the major constraint to production apart from power, in fact maybe more important than power is the state of the roads. The road infrastructure in Nigeria is deplorable and roads cost money so one, building roads, two maintaining them and three supporting it with rail line infrastructure. That, those are key things. These are very expensive items so you can't have one and have the other. So we got to have to prioritize and give up on some of those things. So I think her work is cut out for her. She's determined, she has a track record of success, she's been around before so I think er I'm cautious, I'm optimistic about the outcome but the, I am not going to under-estimate the amount of work she has to do," said Rewane.
    Most Nigerians live on 2 US dollars a day and ending fuel subsidies is a contentious issue as many believe it is the only benefit they receive from living in an oil-rich country.
    Okonjo-Iweala said the president was keen to diversify the economy with security, entertainment and agriculture sectors that should be targeted for growth.
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