Nigerians on Thursday July 21, 2016 got a piece of bad news – the economy is in recession.
But, there is no need to panic because it will be short, according to Finance Minister Mrs Kemi Adeosun.
Mrs Adeosun, broke the depressing news to Senators in plenary while briefing them on measures adopted to get the economy out of the woods. She said the Federal Government had released N247.9 billion in the last two months for capital expenditure.
She said N60 billion would be released for capital vote in the next few weeks, adding that N74 billion went to the Works Ministry.
All the releases, Mrs. Adeosun said, had been fully cash-backed.
The Minister, however, told the Senators that the recession would be a very short one because the government had measures to reverse the trend.
She said Nigerians should not dwell on the recession but rather on where the country is going through the measures being taken to save the economy.
Mrs. Adeosun said: ”Is Nigeria in recession? Technically. If you go into two quarters of negative growth, technically, we are in recession. But I don’t think we should dwell on definitions. I think we should really dwell on where we are going. I think if we are in recession, what I will like to say is we are going to come out of it and it would be a very short one because the policies that we have would ensure that we don’t go below where we need to go and I think with what we are doing, we would begin to turn the corner I believe by Quarter Three.”
“We are not the only country in recession; many countries are doing far worse than us. But for Nigeria, what Nigerians want to know is ‘how’s that going to affect me’ and I want to assure everybody that what we are doing is going to work and it’s going to turn this economy around,” the minister said.
She insisted that despite the downturn, Nigeria’s economy remained the biggest in Africa and would continue to be so.
On the N247.9billion released, Mrs Adeosun noted that N107 billion was for projects in the Works and Housing sector. Agriculture received N29.1 billion.
She asked the lawmakers to continue to believe in the country’s ability to recover from its economic problems.
The International Monetary Fund (IMF) has said that Nigeria’s economy may contract by 1.8% this year. To Mrs Adeosun, this should not cause panic.
“I am not too worried about the IMF projection. I will tell you why because IMF job and function is global economic surveillance. They equally issued a negative report on Britain as a result of Brexit,” she said, adding: “I don’t think we should panic every time IMF speaks. I think we need to be confident around what we are doing and where we are going. I remain extremely confident, as I said, around Nigeria. IMF has given their projections which is we may continue into negative territory and I am not sure what we have seen suggests that. ”
On what was inherited from the immediate past administration, Mrs. Adeosun said: “I inherited very little by way of reserves.
“I inherited significant debt, contractor debt. Cash calls of $5 billion dollars outstanding to the oil companies.
“I mentioned the cash calls of $5 billion dollars outstanding to the oil companies. I equally mentioned the fact that many of the contractors even though we have paid them N107 billion” find it very difficult to work because they are owed and some of them have not been paid since 2012.
“Their claims are over N390 billion. So, I didn’t inherit reserves that are positive; I inherited reserves that tend to be more negative than positive because the economy is actually in very good hands and we are doing absolutely our best to get through this difficult period and I explained how we are doing that; we have been extremely disciplined around our spending.
“We are investing in essential infrastructure; we have released N74 billion to Works in two months compared to N19 billion for the whole of last year. We are doing everything possible to avert and to manage the situation which we didn’t create, unfortunately, but which we inherited and we as a nation we must all get out of.”
On the loans the government has taken to fund the budget, Mrs. Adeosun described them as more of local loans.
“We have been borrowing largely from the domestic market because we needed to get the exchange rate sorted out to enable us borrow from the international market,: she said, adding:
“The international borrowings will begin to come in quarter three; that is always our projection. We would take initial money from Nigeria as we sorted things out and we go on the road to borrow internationally.”
Adeosun said: “The projected rate of implementation of the budget I found that difficult question to answer simply because there are quite a few moving part in terms of our revenue and many of our revenues will come in Quarter Three.
On areas of priority, she said: “I think we have been fairly consistent that we needed to invest in infrastructure and in our releases we have tried to prioritise those areas and also to work with seasonality.
”For example, Works Ministry needs to have their money during the dry season because during the rainy season work stops and we are trying to time the releases to ensure maximum impact.”
On the 2017 budget, “I believe the minister of Budget and Planning has started working on putting that document together and I am very sure in good time for us to go back to the calendar that we like, which is the December calendar.
”The releases are fully cash backed. We have stopped the practice of releasing or approving releases that are not cash backed. We have changed that process, we now start from the position how much cash do we have and then we release appropriately.”
On the exchange rate, Mrs Adeosun said: “We predicated the budget on N197 and the rate is now N280 per dollar.
On social intervention, she said: “The question about the interest of Nigerians, I think it is a very good one. Job creation and reserves. One of the things that I mentioned that we have done is release this money for the first time for the social intervention programmes.
”We have released N15 billion of capital and we put in N5 billion this month for recurrent and so that recurrent will continue to increase as they roll out the implementation of things like the duty calls, the agriculture extension workers and the other job creation initiatives.
“Also beyond that, the police. One of the upside from the cleaning we have done on the pay roll was that the police were able to recruit 10,000 new officers but there is no impact on their salaries because we have cleaned up those who have or who shouldn’t have been there and so they can now create 10,000 new jobs. So, there is quite a bit of job creation activity going on as a result of some of the interventions we have done.”
On what the government inherited, the minister said: “I think at a time like this blaming who was responsible doesn’t actually take us anywhere but I will tell you what I inherited. I inherited very little by way of reserves.
“I inherited significant debt, contractor debt. Cash calls of $5 billion dollars outstanding to the oil companies. I mentioned the cash calls of $5 billion dollars outstanding to the oil companies.
“I equally mentioned the fact that many of the contractors even though we have paid them N107 billion find it very difficult to work because they are owed and some of them have not been paid since 2012. Their claims are over N390 billion.
The international borrowings will begin to come in Q3 that is always our projections we would take initial money from Nigeria as we sorted things out and we go on the road to borrow internationally.”
If you look at what is happening in the petroleum sector. Before subsidy we were subsidising around 45 million litres of fuel a day. Now without subsidy, usage has dropped to 26 million litres; so what does that tell you? All the smuggling that was going out of the country based on the subsidy that we were providing have stopped; those are real savings to the economy, which we are now redirecting into the essential infrastructure that will get this economy going.”