Inflation Target Unrealistic, Says Minister
From Kunle Aderinokun in Abuja
Finance Minister, Dr. (Mrs.) Ngozi Okonjo-Iweala, yesterday said the projection by the Federal Government to achieve a single digit inflation this fiscal year has become unrealistic.
Making this declaration yesterday in Abuja at a ministerial press briefing, Okonjo-Iweala said the government has become aware that the plan on inflation rate has become too ambitious. She added that next year would be a more realistic target date for the plan.
"Our initial intention before was to have below double digit but we do not want to be too ambitious. We said that we will go from the double digit to the single digit. We thought if we go by 11 per cent or 10 per cent, we would be going down to the single digit next year."
She lamented that the current inflation rate of 17.8 per cent continued to be a problem to the nation's economy. She attributed the high rate "mainly to the current high level of oil price on the international market as well as other cost-push factors."
She said what the government is doing now is to contend with the oil price and grow the productive base of the economy to drive down inflation rate.
"It's a very important thing we are focusing on, both on the monetary policy side and the fiscal and the need to develop our productive base," the minister added.
Also, she said high interest rate is also a key macro-economic challenge.
On the consolidation programme for the banking industry, Okonjo-Iweala said the decision of the Central Bank of Nigeria (CBN) to increase the capital base to N25 billion from N2 billion , "may be a bitter pill for some but it is, in the final analysis, a sound one which will strengthen the industry and the economy in the long-run."
According to her, "the consolidation will for one, make available funds for investment in the real sector of the economy. The current situation where the banks provide little or no capital for investment is not in the nation's interest because without the factories running, there can be no jobs to take our teeming youths off the streets.
"To that extent, the strength of the banks has fundamental implications for the health of the economy as a whole. This is one of the many reasons why the new policy is fundamentally a good one, which deserves the support of all Nigerians to make it a success."
The minister also said the 13 insurance companies, which had their licenses revoked for failing to meet the categorized upward review of the capital base in the industry, can re-apply under the new rules and guidelines to be worked out. She disclosed that a total of 111 insurance companies re-capitalised under different categories of capitalization.
The capital base of different categories of insurance businesses are: Life Insurance Business -not less than N150 million; General Insurance Business- not less than N200 million; Corporate Insurance Business-not less than N350 million and; Re-Insurance Business- not less than N350 million.
She said the recapitalization has strengthened the capital base of the insurance industry and restored confidence in their operations. "With the new steps to be proposed, the insurance industry will be the pride of all Nigerians," she added.
Okonjo-Iweala also revealed that the Nigeria Customs Service (NCS) collected a total of N76.18 billion from between January and June 2004. She added that during the same period, there were 310 seizures of goods valued at N382 million.
She also told state governors calling for the sharing of excess proceeds from the sale of crude to forget about it as the account which has grown to N307 billion will not be touched until next year.
She said the proportion of the excess crude proceeds to be distributed would be determined after the conclusion of the on-going consultation with the states, which will culminate in a stakeholders workshop in September this year.
She further explained that such proportion would only be included in the 2005 budget.
The minister's declaration came barely three days after the Governor of Imo state, Chief Achike Udenwa, canvassed immediate sharing of 50 per cent of the money.
Udenwa on his way to Katsina for the turbanning ceremony of the Speaker of the House of Representatives, Alhaji Aminu Bello Masari, urged the Federal Government to immediately share the money as Federal Government's unilateral decision to save the excess crude price proceed was tyrannical.
Okonjo-Iweala explained that "consultations are going on between the Federal and State Governments on the best way to manage these funds from excess crude in a sustainable way that will enhance the interest of the Nigerian people.
Specifically, the dialogue will determine the proportion of the funds that will be saved for what purpose and set out criteria under which it can be spent. A key concern would be to set aside a proportion to cushion the economy from the negative of oil price volatility as well as financing of infrastructural projects."
"At the end of the day, the results of these consultations and negotiations will be captured in the Fiscal Responsibility Bill and presented to the National Assembly for debate and hopefully, passage.
"The good news is that the governors have demonstrated a commendable spirit of partnership on the issue and there is every indication that with them and other stakeholders, we will produce positive results," she said.
She maintained that one of the key measures to improve discipline in the fiscal process and boost revenues is the oil price based fiscal rule.
According to her, "the oil price based fiscal rule simply means saving excess crude above the budgeted price of US $25 per barrel."
On the Running Operational Review (ROR) of COJA 8th All Africa Games, she said "we found out that in terms of the way books were kept , the management of the finances and a look into some of the contracting, there was quite a bit left to be desired." She therefore added that "we have handed the report to the Due Process and it's looking into some of the contracting issues."
She explained that the ROR is a new instrument developed by the Ministry to ensure efficiency of government expenditure and curb waste.
Okonjo-Iweala also said an Anti-Corruption Unit has been set up at the Ministry of Finance to stamp out corruption.
She explained that, "from time to time, we receive complaints about some staff of the ministry extorting money from members of the public before rendering services that are part of their official schedule.
"This kind of conduct is needless to say, against the letter and the spirit of the on-going anti-corruption drive of the Federal Government and we are determined to stamp it out. This explains the motivation behind setting up the Anti-Corruption Unit," she added.
She said the unit will be manned by a consortium of non-governmental organizations (NGOs). According to her, "through the phone numbers, victims of this kind of reprehensible conduct can report incidents of bribery or extortion and other corrupt practices. Full confidentiality is guaranteed."
She gave the phone numbers as: 09-6715964, 0803-615-0400.
At yesterday's briefing were the Minister of State for Finance, Mrs. Nenadi Usman and heads of parastatals and agencies under the ministry including the Senior Special Assistant to the President on Due Process and Price Monitoring, Dr. (Mrs.) Oby Ezekwesili; Accountant General of the Federation, Mr. Kayode Naiyeju; Director-General Debt Management Office (DMO), Dr. Mukhtar Mansur; Director-General, Budget, Mr. Olabode Agusto; Director-General, Securities and Exchange Commission (SEC), Mallam Suleyman Ndanusa; Chairperson, Federal Inland revenue Service, Ms Ifueko Omoigui; Comptroller General of the Nigeria Customs Service(NCS), Mr. Jacob Buba; Chairperson, Investment and Securities Tribunal (IST), Dr. (Mrs.) Nnenna Orji and; Executive Director, Nigeria Deposit Insurance Corporation (NDIC), Hajia F. B Ibrahim.
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