Wednesday, December 26, 2018 05:10PM / By Minister of Finance
Being an opening address at the World Press Conference delivered by the Honorable Minister of Finance, Federal Republic of Nigeria at the maiden World Press Conference, Abuja Monday, 24th December, 2018
1. Good morning ladies & gentlemen, I welcome you all to this Press Conference. As you are all aware, this is my maiden press briefing since I assumed duties as the Minister of Finance for the Federal Republic of Nigeria in September 2018.
2. I expect that this conference will be interactive as we discuss the key developments of the Ministry in the past three and half years under the present administration.
3. You will recall that the Ministry of Finance regularly had this quarterly press briefing and going forward, we will continue to engage you on a quarterly basis.
Global Economic Trends
4. The global economy is generally expected to slow down in 2019 with a modest growth of about 2.7%. The same trajectory is expected for Africa, with the continent projected to grow slightly more by 2.9% in the same year.
5. Commodity based economies including Nigeria are likely to continue recovery from the rapid commodity crash witnessed from 2014 to 2016. This development represents challenging times amidst this year’s volatility in oil prices that has fallen from $86/barrel in October to $62/barrel early this month.
Nigeria’s Macroeconomic Landscape
6. Beyond the security of lives and properties, the earnest desire that prompted Nigerians to elect President Muhammadu Buhari in the 2015 general elections was the need to fight corruption and resuscitate the ailing economy. As you may recall, before this government came into office in 2015, Nigeria’s economy was already in decline, occasioned by the sharp drop of crude oil prices in the international market.
7. Nigeria had always depended on crude oil for as much as 70 per cent of government revenues and 90 per cent of foreign exchange earnings. As the previous administration had not built fiscal buffers and saved for the rainy days when crude prices were above a $100 per barrel, it was not possible to draw on savings to spur economic growth. Coupled with the need to diversify the economy, building fiscal buffers became critical when the economy went into recession at the second quarter of 2016.
8. In response to these economic challenges, the present administration developed and implemented the Economic Recovery and Growth Plan (ERGP) in 2017. Based on the prudent management of resources and implementation of sound fiscal policies, the economy exited recession in Q2, 2017 and is back on the path of sustainable growth. As at Q3 2018, the economy grew by 1.81% marking the 6th consecutive quarter of growth.
9. A key thrust of ERGP that entails diversifying the economy away from oil was actualised as evidenced by the growth in the non-oil sector which grew by 2.05% as at Q2: 2018. Indeed, as at Q3: 2018, services GDP recorded its best performance in 20 quarters, growing by 2.64% in Q3: 2018 compared to 2.12% in Q2: 2018 and a contraction of -2.66% in Q3: 2017.
10. Similarly, inflation rates improved from a high rate of 18.7% in January 2017 to 11.28% in November 2018. Our External Reserves on the other hand, grew from $28.3 billion in 2015 to US $42.49 billion as at mid December 2018 representing significant improvement that has helped stabilize the economy, including our currency exchange rates. Our FX market remained relatively stable from 2017 with the convergence of the NIFEX and NAFEX windows witnessed by November 2018.
11. Our current account balance as a percentage of GDP moved from a deficit of (3.2%) in 2015 to a surplus of 2.8% in 2017. Reflecting on these, I would say that the macroeconomic terrain was challenging but I am working closely with other members of the Economic Management Team (EMT) to build on these achievements to further improve our economic performance.
The Fiscal Terrain
12. The fiscal environment on the other hand, has been much more challenging, especially with regards to revenue generation. Whilst this year’s revenue performance presents an improvement from last year, with a recorded increase of 40% as at the end of the third Quarter of 2018, this performance is unsatisfactory to our administration when compared with the targets that we set out to achieve with an overall revenue outturn of 53% in the same period. Indeed, Mr President in his Budget Speech delivered on Wednesday, December 19, 2018 indicated that “…Whilst we are most encouraged by the improved performance of the economy since we started implementing our Economic Recovery and Growth Plan, there is an area that continues to be a cause of concern. That has to do with our unsatisfactory revenue performance. Although we have sustained efforts at boosting tax revenues, our progress has been constrained by the relatively low level of growth, having just emerged from recession. This has restrained our tax revenue drive. As we have returned to the path of growth, I have directed that action on all our revenue initiatives be expedited.”
13. In view of this, I am prioritizing revenue generation and as a result, steering my team to implement some revenue growth strategies that aims to boost revenue performance by deploying the following initiatives among others.Revenue Growth: A Strategic Priority
14. We have recently constituted 8 Tax Appeal Tribunals (‘TATs’) across the nation to accelerate the resolution of over 209 pending cases relating to tax revenues of about US$18.804 billion, N205.654 billion &€0.821 million. This is critical to ensure that tax payers get a fair hearing and expedite resolution of tax disputes. Furthermore, through this tax dispute resolution mechanism, we hope to reduce incidences of tax evasion and improve payers’ confidence whilst ensuring fairness and transparency of tax.
15. To take advantage of innovative technologies, we plan to leverage data, technological tools & platforms to foster collaboration, grow the revenue base and improve collections. Given the span of stakeholders that form our port community and for the sake of improving ease of doing business, we plan to deploy a national single window/trade platform that we expect to enhance customs collections to about 90% over a few years.
16. We will also improve collaboration between our revenue collection agencies including the Nigerian Customs Services (NCS), Federal Inland Revenue Service (FIRS) and other trade partners to share information and intelligence that will help improve revenue and make collections more efficient.
17. By automating many of our revenue collection processes such as the deployment of healthpay in the health sector, edupay in education and e-Collections by our Revenue Authorities, we have seen revenue shore up to record high levels. More specifically, FIRS deployed the e-Services platform that has automated the end to end tax process from registration to collection of Tax Clearance Certificate (TCC).
18. The tax initiatives spearheaded by FIRS also include the automation VAT collection at source in some key sectors. Under my tenure as the Finance Minister, I intend to continue championing such digitalization transformation initiatives that have proven to be a good way forward for our revenue generation drive.
19. To improve accountability, transparency and ultimately the performance improvement of Government Owned Enterprises (GOEs), the expenditure plans of these entities are reviewed. This initiative will be backed by a more proactive revenue tracking & monitoring.
20. Consequently, we are working towards establishing a credible baseline and thereafter, we will proactively manage the realisation of budgeted revenues under the auspices of the Presidential Revenue Monitoring & Reconciliation Committee that is headed by the Director General (DG) of the Budget Office of the Federation (BOF).
21. The Committee has been working judiciously to reconcile revenue data as far back as 1999 and will be reviewing our revenue performance on a monthly basis. This data will be useful in tracking the historical trends and in setting stretch targets to drive the performance of key revenue generating entities.
22. Finally, we will continue to invest in the capacity building of the financial system (in terms of tools, people & skills) so that we can optimally manage the finances of this country from both the revenue and expenditure perspectives.
23. Our expenditure performance, cannot be in isolation of revenues as expenditure outturn largely depends on our ability to generate the revenues that we budget for with any deficit funded through borrowings. In 2018, amidst the delayed passage of the budget, we have been able to execute 67% of the expenditure budget. Our capital releases as at December 2018 stands at 50% of the capital budget. We plan to perform better this year by driving up revenue generation to improve the fiscal space for spending.
24. We have adopted a prudent debt management strategy that ensures that we invest what we borrow in capital projects. Although our debt of 18.4% of GDP as at June 2018 is at a sustainable level and particularly low when compared with our peers, the debt service to revenue ratio is unsatisfactory to our administration. Consequently, reducing the debt service expenditure is a priority in addition to enhancing the foreign debt mix in our debt portfolio which often presents a cheaper source of funds. In this regard, in addition to growing revenues to reduce the need for borrowings, the Ministry in close collaboration with the Debt Management Office (DMO) is working on the following:
a) Reduce debt servicing expenditures by reducing our domestic debt that was 64.3% at end of the second quarter of 2018
b) Increase our uptake of foreign, long term external debt that is not only cheaper but often has longer maturing periods
25. We inherited a total of N7 trillion naira worth of debt & liabilities when we came into administration in 2015, which we are working towards honouring by making payments. These debt & liabilities include:
a) Pension/Salary Arrears: N740 billion
b) Oil subsidy: N350 billion
c) Paris club over deductions: $5.4 billion
d) Joint Venture (JV) Cash Call: $6.8 billion
e) Contractor/Export Expansion Grant (EEG): N1.9 trillion
f) Refund to States for roads: N488 billion
26. As part of President Muhammadu Buhari-led administration's efforts to ensure all pensioners get their entitlements, the Ministry of Finance, recently made the following payments among others:
a) Through the Pension Commission (Pencom), we have paid the sum of N54 billion to settle outstanding pension arrears from 2014, 2015 and 2016, as well as paying pensions claims up to March 2017
b) Based on verification outcome by the Presidential Initiative on Continuous Audit (PICA), we have also paid over 2,000 former workers of our defunct national carrier- Nigeria Airways Limited
c) We are making monthly payments of 9,215 former workers of NITEL/Mtel after over 12 years via Pension Transitional Arrangement Directorate (PTAD)
d) Also paid over N571m as gratuity and arrears to 174 Biafra War Affected Retired Police Officers (WARPRO) in October 2017
Our Public Financial Management Initiatives
27. In respect to Public Financial Management (PFM), we are implementing many initiatives that ensures predictable &reliable budget outturns, efficient financial management, increased transparency & accountability and value for money.
28. The Presidential Initiative on Continuous Audit (PICA) has saved the Federation billions of Naira from the audit outcomes of their engagement. As part of this administration’s zero tolerance on corruption, PICA’s findings on ghost workers has been acted on by convicting 4 civil servants that were involved in compromising the Integrated Payroll and Personnel Information System (IPPIS) platform, with 11 other people currently under investigation by the EFCC.
29. We have implemented several initiatives targeted at recovery, including:
a) Whistleblower unit that recovered over N8.5 billion and $465 million among others from the 1,051 investigations conducted from tip offs received
b) Efficiency unit that has been charged with reviewing Federal Government’s overhead expenditures
c) Voluntary Assets & Income Declaration Scheme (VAIDS) under which over N35 billion was recovered with a significant recorded increase to our tax base
d) Asset tracing team that discovered assets that were not reported in the books of accounts of the Federation
30. Going forward, we plan to launch Project Lighthouse that seeks to use of big data analytics to provide intelligence to the tax authority on eligible tax payers and their real taxable incomes & assets.As we plan to roll out the IPPIS to all other MDAs in 2019 and optimize Government Integrated Financial Management Information System (GIFMIS), we are set for an improved PFM system that ensures an efficient and cost effective public service delivery for our citizens.
Real Sector, Social Investments, Power And Infrastructure
31. In cognizance of the need to invest in social programmes and human development, the Social Investment Programme under President Buhari is the largest and most purposeful social safety net programme in the history of Nigeria. So far more than 9 million children are direct beneficiaries of the Home Grown School Feeding Programme. For instance, the N-Power enrollees, who are being paid N30, 000 monthly stipends has increased to 200,000 with (another 300,000 new enrolments being processed, to take the number to 500,000 this year).
32. In support of healthcare, we have committed up to US$21 million to invest in three healthcare projects which are being executed as public private partnerships with three federal medical institutions under the management of NSIA.
33. The projects include two modern Medical Diagnostic Centres, one co-located with Aminu Kano Teaching Hospital and the other co-located with Federal Medical Centre Umuahia. These two diagnostic centres will provide modern radiology and laboratory services to patients in Kano and Abia States and their neighbouring regions.
34. The third project is an Outpatient Cancer Treatment Centre co-located with Lagos University Teaching Hospital, a centre which will be the first of its kind in Nigeria and will provide advanced radiotherapy and chemotherapy services, addressing a significant provision gap for patients suffering from cancer in Nigeria.
35. To support industrialization and our Small and Medium Scale Enterprises (SMEs), funding for subsidized interest rates is provided for through Development Finance Institutions (DFIs) such as the Bank of Industry, Development Bank of Nigeria and Bank of Agriculture to mention a few. For SMEs, we have rolled out specific initiatives to make funding available and accessible, including the Government Enterprise and Empowerment Programme (GEEP) that have so far reached 1.1 million as beneficiaries across the 36 states of the federation with N27.4 billion in interest-free loans under the TradeMoni, MarketMoni and FarmerMoni among others.
36. To support growth in the real sectors, this administration has invested in some agricultural initiatives including the Green Alternative, the Anchor Borrowers Program anchored by the Central Bank of Nigeria (CBN) and in a bid to provide the much needed agricultural inputs, the Presidential Fertilizer Initiative (PFI) has revitalized sixteen (16) blending plants with a combined installed capacity of over 2.63 million metric tons of NPK fertilizers. These initiatives have given impetus to the remarkable growth witnessed in the agriculture sector.
37. The PFI for example led to an estimated savings of $150 million in foreign exchange as a result of the local sourcing of two of the project raw materials and the local blending of the NPK fertilizer, and based on 2016 fertilizer subsidy figures, an estimated ₦60 billion has been conserved yearly in subsidies in addition to over 20,000 direct and indirect jobs that have been created across the entire value chain.
38. As you all know, Nigeria’s endowment in solid minerals has made the sector the most promising alternative to oil & gas within the Energy & Natural Resource (ENR) space. This has led to the development of a roadmap in harnessing the opportunity that this sector presents for which we are already seeing results as revenue remitted to the federal account grew from about N2.1 billion in 2015 to N3.9 billion in 2017.
39. Similarly, we are keen on exerting more resources into power and infrastructure with Nigeria Bulk Electricity Trading (NBET) continuously identifying and managing fiscal risks of the power sector. We are working hand in hand to find innovative solutions to the challenges faced that pervasively impede the growth of this sector.
40. In a concerted effort to bridge the infrastructure deficit, the President Muhammadu Buhari-led Federal Government embarked on massive infrastructure development across the country. An example of such is the establishment of the Presidential Infrastructure Development Fund (PIDF) in February 2018 by His Excellency President Muhammadu Buhari (GCFR) under the management of Nigerian Sovereign Investment Authority (NSIA).
41. PIDF was established to accelerate the execution of certain critical, strategic infrastructure projects essential to the rapid growth and modernization of Nigeria’s economy. The federal government via this fund has also committed to invest a further sum of ₦97 billion.
42. This will attract and aggregate investment capital for the development of the following five infrastructure projects costing c. ₦2.5 trillion: (i) Lagos-Ibadan Expressway, (ii) Second Niger Bridge Project, (iii) Abuja-Kano Expressway, (iv) Mambilla Hydro-Power Project, and (v) East West Road. NSIA has thus far made a total of ₦71 billion in disbursements towards 3 of the 5 projects which are (i) Lagos-Ibadan Expressway, (ii) Second Niger Bridge Project, (iii) Abuja-Kano Expressway.
43. In Aviation for example, the Ministry made capital releases to fund the Abuja Airport runway was reconstructed within the scheduled six-week period (March - April 2017). Nigeria retained her Federal Aviation Administration (FAA) Category 1 status, after a routine international audit. New Maintenance Repair and Overhaul facility established in Lagos January 2018, has the capacity for aircraft C-CHECKS and other comprehensive levels of maintenance; to save Nigeria $90 million annually.
44. Housing on the other hand, presents a basic need of many Nigerians that is largely unmet. In a bid to bridge the gap, the Federal government in collaboration with the States have created the Family Homes Fund (FHF) that aims at not only providing affordable homes but also create jobs in the economy. The fund of N500 billion is estimated to provide 500,000 homes and 1.5 million jobs for our citizens. So far, over N25 billion has been released with more under processing.
Collaboration With The States
45. The Federal Ministry of Finance continues to coordinate the fiscal affairs of Nigeria across board by collaborating with the States. On taxes for example, we have recorded an increase in number of registered tax payers from 10 million in 2015 to about 19 million in 2018 under the Joint Tax Board (JTB). We have also fostered better comprehension of reported revenues between FAAC members and revenue generating entities as a result of the improved reporting template that we recently introduced.
46. We have provided budget support to states with a release of N1.9 trillion to enable them meet their salary and pension obligations, especially in the face of dwindling oil revenues over the last two years. The support has come in the form of Budget Support Facility, totaling, N606.55 billion, which was extended to the states as of May 2018 with strong incentives for reforms in budgeting, IGR, debt management, overheads, etc. Also because of the improvement in our public financial management, the World Bank has set aside $750 million in the form of concession loans and grant which will be available soon for states to access as we are in the process of going to the Federal Executive Council (FEC) to get the approval.
47. The management of domestic and global fiscal risks is also a key priority. Accordingly, I intend to continue working closely with my colleagues at the Ministries of Budget and National Planning; Industry, Trade and Investment; as well as the Central Bank of Nigeria, to pursue greater coherence and coordination of Nigeria’s fiscal, macroeconomic, monetary and trade policies.
48. You will all agree with me that there are many more pertinent areas of public interest to discuss. As I mentioned earlier, we will continually engage with you on a quarterly basis and I look forward to these.
49. As the members of the Fourth Estate of the Realm, the onus is on you to communicate with the Nigerian public our endeavors in restoring our country back to the path of multi-faceted sustainable development.
50. Finally, I would like to thank the financial correspondents of Nigeria covering all financial institutions under the Ministry of Finance and the country for their stewardship on nation building. With this, I wish you all a merry Christmas and a prosperous new year in advance and now open the floor to questions.
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