- Says no disharmony between fiscal, monetary authorities
- Flexible exchange rate boosts investors’ confidence — Emefiele
Nigeria is set to have repatriated to the country taxes illegally taken out by multinational companies operating in the country.
The Federal Government had announced in August that multinational companies in the country had failed to remit over a trillion dollars in taxes which is what prompted the government to put in place a Multi-lateral Competence Agreement (MCA) and the Exchange of Country by Country Report (ECCR) so as to have a better grip on its tax laws and prevent any further tax evasion by multinational companies.
Speaking on Sunday, in Washington, at the end of the World Bank/IMF meetings, Finance Minister, Mrs Kemi Adeosun, who had a joint press conference with the governor of Central Bank of Nigeria, Mr Godwin Emefiele, said the Nigerian team to the meetings was able to reach agreements with the UK’s Dept for International Development, the US Treasury Department and others would reverse the trend of legitimate taxes flowing out of the country.
Her words, “We have reached some high level agreement on a number of initiatives which we believe will bring significant repatriation of money into the Nigerian economy, particularly money that has flown out as a result of tax evasion. I will brief Mr President with the specifics and will be providing more details later to the public when I have Mr President’s approval.”
Mrs Adeosun also said that an agreement had been reached with the World Bank Group and other multilateral agencies to find solutions to the funding challenges of the power sector in Nigeria.
She said, “An agreement was reached to host a workshop on assessing solutions to the financial challenges in the power sector in Nigeria. The workshop is expected to bring together all critical stakeholders including the Ministry of Power, NNPC, NBET, NERC, generation companies, distribution companies, CBN, banks and other key players in the sector.”
The Minister, who used the occasion to speak of efforts by the government to revamp the economy, said the team held a meeting with the IFC, the private sector investing window of the World Bank Group, to stimulate the economy.
She said, “Though IFC has significant investment in Nigeria, it is limited to a number of sectors. They significantly want to scale up and we’ve agreed with them. Two things, one is that we’ll host a road show to showcase Nigerian indigenous companies that could be eligible for IFC inward investment and we’ve agreed with them also that we should try to develop a pipeline of products rather than waiting for IFC to look for companies, the Ministry of Finance should take a proactive role in showcasing some of our eligible companies for IFC which we believe will crowd in more private sector investment and the jobs and growth that we need.”
The Minister also spoke about the support of the World Bank Group as well as other development partners in the establishment of the Development Bank of Nigeria. According to her, “The Development Bank will serve as a conduit for intervention for small and medium sized enterprises (SMEs) as part of our effort to achieve inclusive growth.”
Speaking on the economic outlook presented by both the World Bank and the IMF, Adeosun said, “The outlook was that the global economy and growth prospects will remain subdued. This outlook has some implications for us Africa generally and particularly in Nigeria specifically. There is therefore the need to apply a full combination of monetary, fiscal and structural tools to ensure that we are able to return to growth.
“We had a validation of our economic strategy, that is, our strategy to transform Nigeria from a consumption-driven to an investment-driven module. And whilst in the short-term, there has been some pain and dislocation, the long-term outlook for Nigeria remains confident. One of our key objectives at the meetings was to see how Nigeria could better take advantage of our relationships with multilateral agencies and with our friends and supporters in the ministry of finance and the treasury department of the various countries.”
On why the government is taking foreign loans, the minister said, “The Eurobond issue is an issue of pricing, not volume, but on the top of that and back to the issue that I talked on interest rates, we are going to look at how we can refinance some of our existing naira debt into the international market, to take advantage of the fact that there are negative interest rates in a lot of markets, and we think we can significantly lower our cost of funds.
“We think that is also important, working closely with the CBN, because it takes pressure off the domestic market. We would be borrowing less in the domestic market and then bringing in some much needed foreign exchange. We have spoken to a number of lenders because the markets are really very attractive right now. With the macroeconomics framework that we have put together and that we would continue to refine, we think we have a very credible story and we should be able to refinance some naira debts at very attractive interest rate, which of course will create more fiscal space for us to spend more on capital. We would spend less on interest and more on capital.”
The Minister said there was no disharmony between the Ministry of Finance and the CBN.
She explained that while the Ministry handled the fiscal aspect which is long term, the CBN’s focus is monetary, which is short term, so there would be times that there would be differences but the two are poised to get good results for the country.
She said, “When you are doing expansion, you need low interest rate and that is the general economics. What I said was that the Monetary Policy Committee is independent, they know what they are seeing on the monetary supply side. So, do I still need lower interest rate now, yes! And for as long as I am running a deficit financing, I need. But does that mean that they should lower interest rate at once, no. There was never a call on my part that they should lower interest rate. They asked me what I want and I said I need lower interest rates. Remember that I am borrowing externally and internally, so one of the things that we have always said is that we need to come out of the Naira and borrow internationally because it is now very low. Many countries have even negative interest rate. So that is an opportunity for us. Just because the MPC finds itself in a situation where they are looking at their indicators like inflation and money supply among others, they make their decisions based on that and that is always respected. I don’t see a disharmony. I am not a member of the committee and I don’t see what they do. We are all working together with one objective, which is to get the economy growing.
There would be times of dislocation in any economy but overtime these will working together in harmony on a number of fronts.”
Emefiele speaking along that line said, “There is no disharmony, we are all poised to see to it that we actually achieve growth in the Nigerian economy. If you read my vision statement just about three days after I assumed office, one of the core issues that I raised at that conference was that we would try to pursue a low interest rate regime.
“We feel that when people are able to access loans at low interest rates, it helps improve growth, reduce unemployment, boost industrial capacity and the rest. Of course, I’m trying to say it is something that eventually we would have to look at, but based on the numbers that the Monetary Policy Committee saw – based on the data that was available – the MPC felt we can pursue growth through another angle. It has nothing to do with disharmony. We are all working together and I believe that in due course, we would achieve the growth that we badly desire for the country.”
Speaking about the flexible exchange rate, Emefiele said the module had increased investors’ interest in the country. He, however, promised that the apex bank would keep fine tuning it to give the best to Nigerians.
He said, “I have not seen one person that has criticised the document. But what we only have to talk about is fine-tuning few aspects of it, in terms of the implementation of the content of that document. That is why I said we would from time to time, continue to look at it. As we are looking at it, I repeat, we would see how we would continue to fine tune it, to the extent that whatever we are putting in place would be such that would benefit Nigerians, improve their lives as well as the country. How do we make it possible for them to get foreign exchange for them to run their factories so that prices can be moderated at the level that the purchasing power of our people don’t look totally eroded. Those are some of the engagements and I am pretty much optimistic that as we continue those engagements, they would yield results.”
Adeosun also said, “We met with the World Bank Country Team as a group and one of the discussions was that there is an unacceptably low level of disbursement of funds to Nigerian projects. Indeed, the rate is 13 per cent at the moment, which is unacceptably low.
“We agreed on a number of measures to reverse this which includes reviewing the process of originating projects, project design and implementation issues to understand why certain projects are performing at a low rate. We will consider restructuring, reallocating or even cancelling irredeemable project components, strengthen our implementation capacity including our capacity for monitoring and evaluation; we will hold monthly meetings from now with the World Bank Group and there will be regular briefing of FEC and the NEC on the performance of Nigeria’s portfolios.”
She added that some of the projects are state government projects “and it is very important to bring to the attention of the governors failing World Bank projects in their states so that we can actually access this money which of course is consessional money and is aligning to our development goal. We believe it is unacceptable that Nigeria should be drawing down on such a low rate, especially at a time like this when we really need these investments. This exercise will not be limited to the World Bank but will be extended to all our multilateral partner relationships.”
She added, “We agreed to work on the $500m irrigation project covering the Bakalori River and Adija River, an irrigation scheme which has been delayed due to the non release of counterpart funding of $400m. We were able to agree and confirm that the Ministry of Water Resources has now made that payment out of the capital releases that it has received and therefore will be able to initiate the project which is part of our agricultural agenda and will significantly increase our capacity to do all-year-round farming.
“We also agreed on the step for the take of the 500m dollar no-phased reconstruction projects.
Agreement was also reached on the final steps on the take off of Development Bank of Nigeria which has been stalled due to a number of issues. We have resolved the issues and recruitment process will now be finalised and management team put in place. This will release 1.3billion dollars which is aimed at supporting our SMEs. As you all know, SMEs are part of the engine that we expect will bring growth back to our economy.
The Minister assured that the fiscal and monetary authorities would collaborate to bail the country out of the current economic challenges. “The outlook that was presented at this meeting was that the global economy and growth prospects will remain subdued. This outlook has some implications for us Africa generally and particularly in Nigeria specifically. There is therefore the need to apply a full combination of monetary, fiscal and structural tools to ensure that we are able to return to growth.”