'How We Got IMF to Accept Our Home-grown Plan'
Something hitherto unheard of in the international financial world was done by Nigeria. It was not one of those negative things we, unfortunately, have come to be known for but this time around, it was very positive. Before Nigeria did and even till now, no other country has even contemplated trying a similar thing. Nigeria developed a home-grown economic plan which has been accepted by multilateral institutions, including the International Monetary Fund (IMF) and the World Bank. In fact, the IMF is even monitoring it now to see whether the country would keep its words. The Minister of Finance, Dr. (Mrs) Ngozi Okonjo-Iweala who spoke to select newsmen at the just concluded Annual Meetings of the World Bank Group/IMF in Washington DC, United States, gave an insight into how this was achieved. She also spoke on some major issues concerning the Nigerian economy and the country's plan to achieve the goals of the United Nations Millennium Development Goals (MDGs) as well as her frustrations. But she expressed optimism that the reform programme is on course and it is the right thing for Nigeria to do if we are to avoid making the mistake of the past. Samuel Famakinwa and Ayodele Aminu were there. Excerpts
Nigeria seems very far away from achieving the Millennium Development Goals (MDGs). Could you give us some insight as to why we should be optimistic?
Well, it is true that we have a long way to go like many African countries in achieving the Millennium Development Goals. You know that by 2015, so many things are supposed to be delivered like halving poverty. The idea was that from 1990 to 2015, everybody in the world was supposed to commit to cut poverty rate in half which means that if our poverty rate is 70 per cent people living on a dollar a day or less, we will have to cut that to 35 per cent and we have only ten years left. Now, we figured that in order to be able to make some movement on this issue, we need to grow at better than 5 per cent. We estimated in NEEDS that we actually have to grow by 6-7 per cent per annum for the next ten years to see an appreciable drop in poverty. We said, well, this year, in terms of our programme, let us start the year of the programme with a modest rate of 5 per cent and then building up to 6-7 per cent starting from 2005. And the indications we are getting at half year from the data is that we should be able to hit the 5 per cent mark. We are very hopeful, you know we have macro-economic stability now; we have some sectors of the manufacturing that are beginning to look up. Other sectors are still down but we have new investments coming in. I think that there is hope of creating more employment in certain sectors. And in agriculture, as you know, we have been doing rather well. The estimate is still about 7 per cent growth rate and this is the sector we really need very good performance if we are to do well overall. I think we have got the beginning, but is it going to be easy? The answer is no. We have to keep working very hard. We still have enormous challenges before us. One of the biggest challenges is infrastructure because we have an infrastructure deficit that is difficult. We said at this meeting, it is one of the things we have succeeded in doing along with some other developing countries to make it clear that if we are to achieve the MDGs, there has to be very significant investment in infrastructure. And we made that point in the Development Committee, we made that point in the Caucus of African Ministers, everywhere we could, in the infrastructure seminar we made that point. If we are to achieve the MDGs, we really have to invest in power, in water, in roads, because all these are helpful to improve health and education, are they not? As well as investing in health and education itself. Infrastructure is also critical to improving agriculture. So, there is this renewed focus and I think that what is making us a bit optimistic is that one, last year we gave all these sectors I have mentioned as the top priority of the 2004 budget and 65 per cent of the budget went to them. This coming 2005 budget, we are also trying to do the same thing and to direct quite a bit of the excess crude revenue that will be spent towards infrastructure. So ground for optimism? Well, we are doing the best we can. I think it would be difficult with all the investments to still make the goals exactly, but what we can do is that we can register some considerable progress towards these goals.
The IMF had actually advised that we don't spend excess crude revenue and if we are to spend it at all, it should be geared towards education. Now a decision has been taken to divide it into two and all tiers of government would share a part of it. If we are to record considerable progress, do you think this is the best approach? Or what happens if the price of crude should fall below budgeted figure?
That is why we have said that we should save 50 per cent permanently and I think it is really a big achievement on the part of the President to have agreed to this and to be able to persuade the governors and others to come along. What he has achieved there should not be underestimated. If we are able to save 50 per cent from all tiers of government and have it held in the account, it means that it will help us cushion that volatility. You know, you don't want to put too much and you don't want to put too little. So this is like a balanced approach. Originally, 25 per cent was being considered but then there was this thought that would this be enough? What does it mean and what is the macroeconomic impact of spending 75 per cent? You know it would be very expansionary, it will make the economy hit up, it will make inflation go up and it might even affect the exchange rate and so on. I think this 50-50 is a good balance and would provide sufficient cushion. If we save 50 (per cent) this year, we can save another 50 (per cent) next year, that would be a good thing.
So what do we spend on infrastructure if the 50 per cent is going to be permanent and like you have said, it is being saved to cushion the effect of any volatility?
If you save $4 billion in excess crude total by the end of the year, you are saying we are going to save $2 billion permanently and then $2 billion would be put by all tiers of government into other investments most of which will be infrastructure. I think almost everybody, even the governors have agreed on that. So there is that quite a bit of money to put in.
Should we be talking of any savings at all in a developing country that has financing gaps, that has all the things it needs lots of money to do. There are quite a number of projects in the country now that are not being financed because lack of money. We are talking of development projects and not payment of salaries. Should we not be spending this money on development and not even leaving it to the governors to decide what it goes into or are you telling them what to spend it on?
First of all, on the issue of the governors, nobody told them what to spend it on. They have the full right. They themselves are the ones saying it at the meeting that it will be good, if they harmonised with the Federal Government and since we were also thinking along the same way, we had a very good meeting of minds and the governor of Ebonyi State articulated it best. He said look, can we work together so that Nigerians can really see the impact of this money that have been saved. Are there projects we can work together on like roads. For example, if the Federal Government is building a federal road in a place and there are some states who have roads that could be adjoining it, they could be building the state road at the same time so that it would hit the main highway and unblock this people from the state and when the people come they would see the impact. There would be a state road, there would be a federal road and there could even be a rural road. And they will see a total package, instead of the federal government building here and then a state is building a road leading somewhere else. So the idea of let's come together and try to see whether there is a specific project we can cooperate to do is an excellent one and the President made it very clear that he is not prescribing what anyone should spend on but the federal government has decided to put its money in these areas and if the governors were to choose to do that, we could have a very good package which is what they were saying they would like to do. Maybe not all what they have to themselves, but some of it anyway. Secondly, on the issue there are so many needs now, why should you save? Yes, be sure that people would put that as a legitimate question. But the issue is, do you consume all now that you have without a thought for what might happen in the future? Is this not the pattern of behaviour that we have always had in the country that has left us where we are now? That people don't even think five years down the road, they don't even think two years. The Chinese thinks 50 years down the road and that is why they are where they are now and we are nowhere. They think 50 years down the road! Because they think of what would happen ten years from now and you see, if you talk to a Chinese leader as I have had the privilege of doing, I was completely blown away. It was not about them, it was about the future and do you see how they waited 99 years to get Hong Kong back? If it were in Nigeria, they will say 99 years, please. And the British thought they had forgotten. 99 years, that is the way the Chinese think. We have to develop some of that thinking, even five years. You can not say that five years from now, oil price will still be $50, it could be $10, and it could be $15. If it falls, what are you going to do? Isn't it good that there is a president who is willing to do that and leave that as a hallmark? He is not saying let us spend everything during my tenure to give me glory but he is saying, let's think to the future like every sensible country. So, that is my answer to you, that I have no guarantee that next year, oil price will be $50. What if it is $20 and we have spent everything now on some big projects which we can not even complete and you find that when it is $20, you can not even pay salaries, would they not abuse us? What is the point of having a new team that will go and repeat everything like in the past? What is our value added if we just keep repeating what we did in the past? You don't need me to do that. You don't need me. I don't have to come here to repeat all the mistakes that were made before. You don't need any of the team members.
Would you then have any justification to go to anybody whether it is World Bank or IMF, or any lender or donor at all to say give us some money when we have some money kept away somewhere?
That is a very legitimate question. There are two sides to it. One is, do you even need to go and borrow because you already have a lot of debt. And on the question, it is a very good question and we have been very careful to say that we shouldn't be borrowing anything but very concessional resources. Why? Because of this financing gap that we have. The other people are not going to (lend) us their money and then allow us to keep it somewhere. So it is better we keep our own money for a future day so that anybody working can even be guaranteed that they would earn a salary. And if they want to help us fill the financing gap, provided the money is very concessional, because right now, we are in no position to borrow any money that has high interest rate implication. That is what happened to us in the past. It wasn't so much that we borrowed money but we borrowed at such high interest rate at the time when interest rate was 12 -14 per cent. Remember those days in the 80's, which was when we rushed out and borrowed all that money and the interest rate is killing us. Now we have re-negotiated that with the bilateral agreements down to 5 per cent. But we are still living with the legacy of the past. So that's on the debt side. We are being very prudent. We have a very large financing gap. The World Bank itself as an objective observer has estimated we need to put a billion dollars a year in power for the next five or six years if we are to even reach the 10,000 megawatt of power generation. They have estimated that for roads, just to repair and maintain and rehabilitate our present road network, we need $700 million a year. I'm not talking of completing old road projects or building new ones; I'm just talking of rehabilitating the ones with all the potholes, just repairing. They've estimated that we need $650 million a year to achieve the education for all. Part of the objectives of the MDGs is that all children of primary school age should complete school, 100 per cent primary school completion by 2015 and all girls should be enrolled in school. Right now, the enrollment of girls is 77 per cent of the enrollment of boys in Nigeria. So there are fewer girls in school. We are not yet there and in some states, you have the reverse where boys are not in school. Like in some of the South-eastern states, because they want to go and trade and then they marry a Ph.D. when they finish, that is what they tell you. They say why should I go to school when I can marry a Ph.D.? And I don't know where that one came from. Well, and they can also buy. Anyway what am trying to say is that you know, there is a lot of money required, $650 million for that one, a billion for power, almost a billion for road, $700 million for repair but if you add building and completing new roads, it can get up to $1.5 billion and we can just go on and on. You can see, in the face of this kind of financing gap, if we have somebody who has very low concessional loan for us or credit, there is nothing so wrong. Why? Our problem is not loans from World Bank or multilaterals, they are only 10 per cent of our overall debt. We owe the IMF nothing. It's basically the World Bank, the ADB. The bulk of our loans are really Paris Club loans, 82 per cent. So we don't want that kind of lending or borrowing again. We just concentrate on taking few loans that are very low cost to help us. That is the justification.
We need to really commend you on your efforts at re-negotiating our debt structure. But quite a number of people are also asking that with your international clout, what have you been able to bring into Nigeria or what has that been able to get for Nigeria. Will anybody today say because Okonjo-Iweala is managing your economy, I am going to do this for Nigeria?
We have gotten so much out of my personal credibility. I can not talk about it because you can not go praising yourself.
Maybe you could just give us one or two examples?
I can not. You have to call people. There are just things that are happening for Nigeria that you would not even dream about I am sorry to say and at first I denied it but it became crystal clear. You saw it yesterday in the Paris Club meeting. They were coming to ask for more money, now that we have oil money, I just blew them away. I just said look we are trying to get debt reduction, how are you coming to ask. You can't, I gave them all these statistics of how it is that they should not even be considering that. I know that their members would be saying, they've earned more in oil money so pay us more, and I say you can't even think about it. And you know, they went away. And then he turned around and said something, he said just you stay there and keep managing the economy. And he said, I am going to allow you to do something that we have never allowed anybody else which is to arrange a special session of the Paris Club where I would address the members to explain. he said just tell them what you've told me. This is Jean-Pierre Jouyet, the head of the Paris Club. He said just tell them. Come and tell them. Present what you've done. You see I can not keep saying this but I don't want something centred around if not for Ngozi Okonjo-Iweala. Do you understand? I don't want articles to go that way. In our environment that kind of thing does not play well. People will now think that here I am trying to grab credit. I am not interested in that. We have a team, no one person can do it alone and it is the collective effort of the team and the President heads that team.
But I can tell you that so many things, the new Country Assistance Strategy of the World Bank that they are looking at to support us, they are about to triple what they were giving us before. It is singularly based on this. The IMF, how do you think we got an agreement to have a Nigerian programme without an IMF programme. How on earth do you think we got there? Six months of convincing these people, talking in international fora, personal credibility and finally we've got something that no one has ever gotten and everybody is marvelling at it, even in Madavos meeting that Nigeria has managed to get this enhanced surveillance programme in which we have our own programme we are implementing and then the IMF is monitoring and recognizing it as a valid programme. I am not exaggerating when I say they are ready to fall off their chairs. You all know it, it has never been done before. And it is all that, putting your personal credibility on the line, trying to show them what we are doing and so on. I can go on and on. Remember that the President has also put his personal credibility and he has gone around and people respect him. But I can also see that my personal credibility among the financial world, people are just coming on because Ngozi Okonjo-Iweala is there, let us go and the finance minister is doing this. But in a way it is dangerous. You do not want this programme to be about one person. Now people might be saying, Ngozi Okonjo-Iweala, but I am not so stupid. If you give the impression that Nigeria's reform programme is centred around one person, that's not good for the country. So I spent my time making sure they realise that I am not the only person but that we have a team. It is solid, there would be people there. We have a country with perfectly capable people who will keep managing this programme because I am about the country, I am not about myself. I don't need the glory, I had it before and coming to this work is a labour of love. You have seen in this environment and where I was before. I don't need any of that. I have to make sure that they know that this is about the country and we've got a team. And we do have wonderful people, you know them, people who are working on the programme, many of them are slaving away day after day, working round the clock to deliver. So that was a trick question and am happy to say a few but I think you can get more. I also think you should know that it is nice to be recognised and I have used my personal credibility and my contacts.
We know this, that's why we asked you to come?
Laugh!!
IMF in the World Economic Outlook reviewed downward the GDP growth projections around the world especially because of the rising oil price and you are saying in our own case, we are looking at 5 per, are you doing any revision in that area or you think we are comfortable?
I think from the indications, you know we are also affected by the rising oil price positively and negatively because, we are importing part of our petroleum. I think in looking at the numbers, you can never say, but it looks like 5 per cent would be doable for us. It's not too much of an issue. And remember that the overall feeling here, whether they are reviewing numbers downward or forward is that world economy is experiencing the most robust growth inspite of the high oil prices. On one hand they are complaining, on the other hand everybody is saying good, look at the growth rate, they think that the growth has come to stay and the FEDs have begun to inch interest rate up in order to make sure that inflation does not rare its head and so on and the developing countries are growing very well. I hope you saw the chart, even Africa is growing and part of that is Nigeria, we are also growing and am talking of non-oil growth.
But the report also said that per capita income is also going down in Nigeria?
Per capital GDP in Nigeria? I have to look at the numbers to know what you are looking at. You know per capita GDP, over the years, you know our GDP has not grown. We are $310 per capita which is where we were in 1960. And at a point in time in the 80's we went to $868. I remember because we were at exactly the same per capita income as Thailand, then we just went down. So that is what is being reflected. We went down from there.
And we never came back
No we will come back by God's grace. It is true that our per capital has been going down because the economy has just been deteriorating. It has not grown enough to keep up with the population growth rate. So when you adjust GDP growth rate versus population growth rate, you will find out almost zero growth per capita or very little. So that's what you are seeing. What we now want to do is to, by growing at 5 per cent, we hope we would be able to see positive per capita growth. That's really what I am trying to say. Yes, those numbers are correct but we crashed after the mid 80's.
Nigeria is not on the HIPC initiative, so I could understand why you expressed a disappointment while speaking on behalf of the Africa Constituency 1. Could you share some of our frustrations on this issue?
Well, you know, in terms of the debt, there are some things we just have to line up. There are very strict rules. You know we have Paris Club debts and the HIPC deals with the multilateral debts. I hope you know that. That is one of the other reasons we should not get too excited that we are not HIPC because our multilateral debts is very low. That's not the problem we have. The HIPC is to do with poor countries that have a lot of debts from the IMF and the World Bank and are not in a good position to really repay. Since we are not in that position, we owe the debts to the bilaterals. But I think where it would have been useful to be recognised as having those HIPC characteristics is that then you are described as a poor country deserving of some kind of debt relief of some sort. So the frustration that I have is that, all the attention is to HIPC. And if you are a low income country with a lot of debts and you are not HIPC, nobody is really talking about you. Everybody is preoccupied with HIPC. How do we get money for topping up, how do we get grants so we can clear the debts of some completely and they make sure they never get any loans and they just get grants because they can never be in a position to repay? There are some countries you just have to recognise that their situation is so bad, they don't have any natural resources, they don't have anything and they don't have an educated population like Switzerland, they don't have the human resources, they don't have the physical resources. So there is increasing recognition that there are countries like that and they may need to be given just grants because if you give them loans, they don't have anything to repay with and you are wasting time. Attention is focused all on that and countries like us that are poor and have a heavy debt burden but we are not HIPC are getting forgotten. So that's my frustration and I keep raising it. One of the things we have achieved in this meeting is to raise it in every fora. With the African Ministers statement, it was left out. I don't know if you saw that. But when I came, I insisted that it be put back in and so it was put in so that when people read it, they will know. The same thing at the Development Committee when I chaired the thing last year, I raised it. This year, speaking for the Anglophone African countries, I raised it and I will keep raising it. You know am stubborn. It's just like this IMF programme, when I first raised the issue that we don't need an IMF programme and that we would do our own programme and we would structure it, we would make it transparent, it would be our own but it would be a good programme and the IMF could come and look, I could see the expressions on people's faces that day. The first time, six months ago, it was like she's crazy, something has gone wrong with her since she went back to Nigeria. You could just look around and see the other Finance Ministers and people within the Fund, but I kept on and kept on. The same thing with this, we would keep raising it so that people will know that there are some countries in a category that are poor or have heavy debt. So that's my frustrations and I will make sure it doesn't get neglected. The second frustration is to make sure that the Paris Club and all the creditors recognise that we are making very strong effort and that Nigerians are really trying to reform their economy, because it's Nigerians that are doing it, in a way that it will make it clear that we have changed from the ways of the past because the unfortunate thing you will find worldwide is that our reputation in the past is following us everywhere. People are so convinced of a corrupt Nigeria that it is not going anywhere. Didn't you see that title in a foreign newspaper sometimes ago, Reforming the Unreformable or the nearly Unreformable? That is why I went after them that what do you mean by nearly unreformable and of course THISDAY picked it up and published it right away. And when I talked to them I found out that they never sent any reporter to Nigeria and some just freelance fly-by-night sent them something which they didn't even vet and that was why they sent Robert Guest. This is when the media and all that freedom begin to frustrate you. When we are trying on that reform path to do all the things that the Paris Club would look at, then we want people to know about it and we must stay on the reform path not because it is for Paris Club but for us. It is really for us. That's the only way we are going to grow. If we keep doing all the things we are doing in the past, we would just be where we were in the past and we would be left further and further behind. But if we keep doing this reform, then we can even say to this Paris Club people, don't you see when they said we have come to you because the oil exporting countries, we think they should pay more, I was able to blow them away because I was able to show them that we are managing our money responsibly. We are very transparent and we would show you where the money is going and why we need it, therefore you can not come and tell us anything. In the past, when people could not account for money that came to us, then you could not speak up. You could not talk because if you can't account for the money you are getting, if people start suspecting that you are doing something with it, then you are on weak grounds. But when you are on strong grounds, you say look what's the problem? We earned this, this is where it is going, this is where you can come and inspect the books and see that it is there. And that is why it is very disingenuous for anyone in Nigeria to keep trying to plant that federal government spends excess crude money and all that. People just do things they don't even think what the impact is on the outside. Every single thing you do or say in Nigeria instantly is transmitted out here. And when people read, when someone writes a deliberately false and misleading headline, they forget that it is not just their little state or Nigeria that is reading it, but that they've actually gone on the Internet and planted the same thing and the whole world is reading federal government misspends excess crude. And when they read that they got the same impression that Nigeria is a country full of fraud, the federal government is still doing something it said it wouldn't do and we are never going near that country. Then the same Nigerians wonder when they want to try to apply for a visa somewhere and they are turned down. They don't put two and two together to make four. If you keep creating a false and bad image for your country, it would hit you one day personally. Do you know what we go through to get a visa from US Embassy? Don't you know it's because of all those things you keep printing? If it is true, print it but for God's sake if it is false, don't do it. That is where we are and I think if we continue on this path, we can talk to the Paris Club but it would be a long road. Getting something from the Paris Club has never been easy for any country. It would be a long road but I think we should stay on that road of steady implementation for our self and even the Paris Club, we can sell it to them that we are doing well and they might be able to do something with us.
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