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Nigeria has the capacity to confront major threats – Okonjo-Iweala

By on October 27, 2014

On the front burners at the 2014 IMF-World Bank Meetings were the issues of falling oil prices at the international market and the deadly Ebola Virus Disease, that are  threatening many economies.  But the  Coordinating Minister for the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, told Kunle Aderinokun that notwithstanding the threats, Nigeria has the capacity to contend with them

The World Bank launched Global Infrastructure Facility Fund at the just-concluded IMF-World Bank meetings. What does Nigeria stand to benefit? How is the country keying into it to solve the country’s huge infrastructure deficit?
I think the launch of  GIF alongside the launch of the AfDB Africa 50 Fund are very good developments. Given that the world needs trillions of dollars and Nigeria itself needs a lot of resources for infrastructure; at least, we need almost $15 billion per year of investment and it depends on how you define infrastructure. We need roughly that amount and we are only investing $5 to $6 billion between the public and private sectors, which means we have a huge gap. So having these facilities launched by these institutions is very beneficial. You notice that China is also going to develop an infrastructure bank that is going to be only for Asian countries and then the BRICS are also putting up facilities, which is also to finance infrastructure. We’ve now got a global movement to tap the liquidity in the world market to finance trillions of dollars-worth of infrastructure and Nigeria stands to benefit from this, being a member of The World Bank Group, once the facility is functioning and the resources have been raised, we will definitely be looking to them to  invest in Nigeria.

I understand there was a meeting you had with Islamic Development Bank Group. What did Nigeria take out of that meeting?
Islamic Development Bank is a multilateral institution, most people don’t know this. It is designed exactly along the same lines of The World Bank, African Development Bank , just that the terms for its loans are a little bit different and follow Islamic jurisprudence and legal system, so interest is not charged. They engage in profit sharing or fees in lieu of that and we have a very good relationship with them, we have a seat on the board; so it’s just like any other bank. We had a very good meeting with its President where we focused on what they can do to support Nigeria. A number of things are in the pipeline: they are supporting bilingual education, trying to make our Quranic schools also serve the purpose of introducing the standard form of education, merging them, you know we are very interested in that so that those who go to Quranic schools can also learn Mathematics , English and other subjects, so that they can function like a normal system. They are supporting us with lending across nine states. They are also financing some infrastructure- water supply, roads and so on, in several states and we discussed that. Very importantly, they are supporting PINE (Presidential Initiative for the North East), where we have requested about $40 million.

The National Security Adviser had taken a delegation to see them to discuss this issue and Islamic Bank is willing. They wanted to discuss the element of that because of course the financing had to be discussed with the finance minister.
They are about to give us the $40 million, it has not been given yet and that was why they came to meet with us. That was part of the discussion: how we will structure the support for the Presidential Initiative for the North East. And they will be supporting a range of actions designed to help the people in the region. They are supporting productive activities in agriculture, infrastructure, even conditional cash transfer; it’s a whole range; it’s like a multi-sectoral  support for the North-east.

Nigeria was highly commended for the swiftness and effectiveness in  containing Ebola Virus Disease.  How many countries have approached you at this meeting  for help in terms of strategies to tackle epidemic?
The way it has shaped out, because we had one large meeting , organised by the World Bank President, Dr. Kim Jim, that had everybody round the table, all the actors plus the three countries that are at the epicentre, it was at that point that Nigeria was asked to do more in the context of the global response . In addition, the US also asked if we could do more. If I could remember, I had a conversation with Liberia, Sierra Leone but really, the request came at that meeting where everybody who could support was asked to try and do something.  And what they will like from us is more assistance with medicals; they are looking for medical personnel from every country because now they are setting up field hospitals, isolation units, military hospitals, the US, the UK, the EU but they don’t have enough medical people to man these hospitals and so they are asking if we can send those teams.  They are also asking for additional financial supports, additional training for medical people from these countries.

When briefing the press, African finance ministers  were asking the IMF to be more flexible in its policy  towards Africa in terms of its lending for infrastructure, emergency and disaster financings.  How  are the finance ministers pressing home this demand?
The finance ministers are asking for flexibility in certain areas, one of which is in borrowing towards infrastructure. IMF has some rules that restrict the amount of borrowing that is not concessional that certain countries can do. They are quite happy if countries get concessional money in IDA terms, zero interest rate, 40-year repayment, 10 years of grace. That kind of concession money, that is what they are saying. Countries who are previously indebted and are low income are saying we may need a bit more.
What they are asking for is what is called ‘fiscal space’ . When they have  disasters, when they have Ebola, when they want to finance infrastructure, they want the IMF to give them more rooms to have larger fiscal deficits and to borrow a little bit more on non-concessional terms, that is the flexibility.  Since I’m the representative of the chair of so many countries, this was what we put in the statement. Yes, countries that are low income want to borrow more to be able to finance infrastructure  and if they can’t get concessional borrowing, they want to be allowed more flexibility on non-concessional;  some of them want to go to  the Eurobond market . The other thing is that they want to have room for a larger fiscal deficit  to be able to fight diseases,  build health systems. Its flexibility on that they are talking about. And we advocated for it. We think that the IMF should allow a little bit more of that flexibility and the fund is saying yes, but we need to be a little bit cautious so that countries don’t get themselves into troubles on more debt, which is a nice piece of advice.

In a nutshell, what is Nigeria taking home from the 2014 IMF-World Bank meetings?
Two things. Nigeria has been much applauded on Ebola; the President was applauded because he was very decisive, because he took quick steps, the country really stepped up to the plate. We sent massive communication, 125 million mobile lines, everybody got a text message. We moved to get the protective gears flown into this country, 5,000 pieces of protective gears, we moved to get the isolation units. We moved to get more medical personnel and I think they were up to 600 people, we paid them. There was also unity of purpose; Lagos state and River State cooperated. We changed culture practices, people got advised and I think that really helped Nigerians. All of this was talked about. One of the big outcomes of this meeting was that Nigeria was much applauded and other countries were asking: How did you do it? Let us do the same. That has been very good for us; it has shown that we have the capacity to confront major threats and that was recognised.
The other outcome of the meetings was the recognition, focusing on the global environment. The global environment is still uncertain and fragile. On the one hand, the US and the UK  are recovering. On the other hand, the Eurozone is stagnating, China’s growth is coming down and the emerging markets are not doing well and they constitute a big source of demand in the world market.  The IMF has lowered the growth forecast globally from where it  was. And we are saying, in the light of that, what should each country do? For us as frontier markets and emerging markets, they said even though you are recording growth, please be careful because the world environment is not good.
In addition they pointed out that commodity prices are falling and oil prices have been falling and that is what we have been saying to the country all this time. If you notice we had this debate about benchmark, every time we come forward and say, watch out, these oil prices are not likely to stay and we should be careful as a nation. We should have a reasonable benchmark and each time people fought us and say we are playing the script of the IMF-World Bank; we are seeing it now. Two or three days ago, the price dipped to $84 per barrel, both West Texas and Brent Crude fell to the $80s and that is getting very close to our benchmark price.
In the meantime when we are saying let’s save to cushion, everybody wanted to share the money. They forgot the only thing that save Nigeria from going to the IMF like the other countries was because we had that savings in the excess crude account of about $22 billion and they drew on it and then they got used to spending and  everything was spent. And then we had to start building up again, we got to $9 billion, everybody said ‘share, share’; they shared it down to $2 billion.
Now we are trying to build it up again. We did our modelling and forecast at $5 billion. If we can save that, it will save us for a little while. The IMF did its own model and said we need about $6.3 billion in that ECA  minimum, to cushion us. Right now we have $4.05 billion, so we have a gap of $2 billion. We will try to manage the best we can, we all want the best for our country, which is to make sure that our reputation for keeping a stable economy is sustained. We don’t want one in which the exchange rate is fluctuating, most Nigerians don’t want it. You have to relate the level of reserves and  the amount of money in the ECA to the exchange rate, that’s what keeps it stable. If you now go spending everything and you have a crisis and the oil price fall, you will not have anywhere to turn. And this is what we have been preaching for the past three years and we are being harassed because of it but now we are seeing it happen. What we are doing is  that we want to make contingency plans to keep the economy steady as much as we can through this crisis. But we really have to focus as a country on making sure we have the savings needed to cushion because the world environment is becoming more and more volatile. This was part of the lessons that came out of here but this is what we have been talking.

 

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