Almost 90 days after his inauguration as president of Nigeria for the second time, president Mohammadu Buhari finally swore in his cabinet ministers and assigned portfolios to them last week. About 12 former ministers in the president’s first term made it into the newly inaugurated cabinet to continue doing what they were doing before.
One of the returning ministers is Zainab Ahmed, the minister of finance, budget and national planning, who has the added responsibility of supervising budget and national planning which was a stand alone ministry during the president’s first term. Some people have alluded to the expanded responsibility of Ahmed as evidence of her growing influence in government as she now allocates funds and spends the funds.
Effectively, therefore, Ahmed, is the country’s unofficial coordinating minister of the economy, a role played by Dr. Ngozi Okonjo-Iweala under former president Goodluck Jonathan. She has the duty of preparing and implementing the budget in a manner that will enhance growth. Economic watchers expect her to hit the ground running as the year if fast spent.
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Some analysts have said her direct control over the budget of Nigeria and Africa’s top oil producer could help Ahmed’s drive to bolster government revenues and control expenditure that has more than doubled in the last four years. The Presidency warned last week that low revenues could lead to a fiscal crisis and demanded the tax agency explain its repeated failures to meet collection targets.
In June, Ahmed said the government would hike the rate of value-added tax to 7.5% from current from 5% to bolster non-oil earnings, which at between 3% and 4% of GDP is among the lowest levels in the world.
“It seems she is making it into the inner caucus of the president. For a position as important as finance, that can only be a good thing because it means she will have the listening ears of the president in terms of reform agenda,”said Omotola Abimbola, macro and fixed income analyst at Chapel Hill Denham in Lagos.
“But everything depends on the will of the president,” he added.
Now in his second term, Buhari, a former military ruler in the 1980s, has come under pressure for not moving fast to jump-start an economy still reeling from a 2016 contraction that left millions unemployed in the continent’s most populous country. The economy is expected to grow just above 2% in 2019.
Declining government earnings has hampered efforts to reduce poverty in Nigeria, which has the the world’s highest number of people living in extreme poverty, according to the Brookings Institution.
More pathetic is the recent judgment obtained by a British company (P&D) to seize about $9 billion of the country’s assets (reserves) which may further compound the precarious financial position of the country in terms of its ability to meet due foreign exchange obligations. It is feared that the seizure of that hefty amount will also put the naira under pressure in the event of rising forex demand from end users.
As she resumes at the ministry, the critical and urgent tasks begging for immediate attention include widening the revenue base of the country, effective debt management/containing strategy and producing fiscal measures that can spur growth, development and boost employment.
Because of the drying revenue sources of the government, the country has been operating a deficit budget in the last four years, borrowing heavily to finance the budget. This is because oil revenue is in decline because of declining oil prices in the global market, a commodity that earns the country about 80 percent of its revenue.
The difficult operating environment in the country has also led to the folding up of some companies which hitherto were paying tax to the government. This has made the work of inland and coastal revenue agencies difficult. Two weeks ago, the Presidency queried the chairman of the Federal Inland Revenue Service (FIRS) Babatunde Fowler over the declining revenue profile of the country in the last four years, fearing this may trigger a fiscal crisis..
Nigeria recorded a revenue shortfall of N2.22 trillion (January 2015 and December 2018), mostly from some of its revenue generating agencies who under remitted their collections to the consolidated revenue fund. NEITI last week disclosed that the NNPC failed to remit N77.92 billion, being under-remittance by the corporation to the Federation Account from domestic crude oil allocation in 2017. Other regulatory agencies like the NCC, cbn, ndic, sec, CAC, ETEC are also guilty of under remittance of revenues.
Between the 2015 and 2018 fiscal periods, the revenue target set by the government for these agencies could not be achieved. The cumulative revenue target for the four-year period was estimated at N3.64 trillion.However, during the period the cumulative actual amount generated by these agencies was just N1.42 trillion, resulting in a shortfall of N2.22 trillion.
Another critical task that the minister must address is the issue of Nigeria’s rising debt stock now put at N24 trillion. This government has borrowed so much in its life time that if it continues the borrowing spree this second term, Nigeria’s ability to pay back these loans may be significantly undermined as revenue sources are thinning out.
More importantly, during her first term in office, there was little or no input to the country’s growth enhancing programmes and economic recovery measures from her ministry as the task of making the economy to work again was out sourced to the Central Bank of Nigeria which embraced development activism in addition to its core mandate of monetary policy management.
This is the time for the ministry of finance to be involved in accelerating the process of economic growth by being an active participant rather than a spectator in the task of revamping the economy.