Adeosun: We are investing in key infrastructure
Reducing the Federal Government’s very high recurrent expenditure in order to increase investment in infrastructure is the key to Nigeria’s future economic progress and the Buhari administration has been concentrating its efforts in that direction, Minister of Finance Mrs. Kemi Adeosun said in Abuja yesterday. Speaking at the 14th Daily Trust Annual Dialogue, she said […]
Reducing the Federal Government’s very high recurrent expenditure in order to increase investment in infrastructure is the key to Nigeria’s future economic progress and the Buhari administration has been concentrating its efforts in that direction, Minister of Finance Mrs. Kemi Adeosun said in Abuja yesterday. Speaking at the 14th Daily Trust Annual Dialogue, she said the government’s plan to borrow money to develop infrastructure is the surest way to invest for future generations going by the present economic predicament the country is facing. She said when the Lagos to Calabar and Lagos to Kaduna rail lines are built, many states along the routes will prosper. Nigerian roads do not last long due to the heavy loads on them arising from the absence of railroads, the minister said.
Adeosun said future generations would benefit more from the government’s borrowing plans as against the insinuation that the borrowing will enslave the future generations. Adeosun said no country in the world built its railway systems through private sector, adding that government is the one that builds railways and later concessions them to the private sector to run. She said, “The Federation Account Allocation Committee needs N700bn to satisfy the three tiers of government’s payroll and overhead costs. Last month FAAC shared only N310bn out of which the Federal Government got about N140bn but it needs N330bn for its payroll and overhead costs alone. So, when we start having the debate whether we should borrow or not, I don’t think it is an argument. You have no choice. If you are waiting for oil prices to recover, the prognosis is that it is not going back to $110 per barrel soon.”
The minister said, “From 2010 through to 2015 our reserves (savings) were $42bn but by 2015 it had gone down to $29.8bn. Our debt had risen from $5.24bn to $10.94bn. Our GDP was growing in the wrong direction.” She said despite having some of the highest oil prices that we have ever had in this country, “we had high income, high debt, our savings were depleting and our economy was not growing. That tells you that your public spending is ineffective because for a developing economy if you have high income, you are borrowing and you are spending your savings, your economy should be growing but if you look at our GDP, it was actually declining.”
“What were we spending the money on? That is really the issue. When we came into office 90 per cent of government expenditure was recurrent (wages, salaries, travels, paper, stationery, welfare) and only 10 per cent was on capital (road, rail, power, airports). It is capital that actually grows and enables growth of an economy. The infrastructure was not what we were spending the money on.”
“In Nigeria, a country where we love to talk, telecoms would have grown anyway. In fact, it grew without government input. Which other industries were growing? Very few. Banking was growing, manufacturing and real estate were not really growing, and in agriculture we were importing everything. We were exporting crude oil which is interesting but not a recommended economic model. So, that was the problem of our economy. We were really not growing the economy and planning for the future but the Gross Domestic Product (GDP) numbers were good and the whole world was clapping but we were heading for disaster. The warning signs were there but we missed them.”
Mrs. Adeosun said the Federal Government’s requirements every month for salaries, statutory transfers and overheads are N210bn, and another N120 billion just to service inherited debt. “So, every month I need N330bn. To get the economy growing we have no choice but to look for low cost funds to put back infrastructure in place because it is the infrastructure that will unlock the economy. We are talking about putting the roads, rails, airports, ports in order and sorting out power. Those are the things that will get our economy growing. From everywhere in the country there is so much potential.” The Buhari administration “is determined no matter what it costs to put the infrastructure in place because that is what will unlock this economy and create jobs for our young people.”
She said, “In 2015 when we came in, we had spent N19bn for the whole year on roads but I was in a state government that in one year we spent N40bn. N19bn for the whole federation on roads. Yet we spent N64bn on travel, we spent N30bn on welfare. Welfare by the way is food, for workers.”
“When I got into office, one of the first things I was asked to approve was some food. I calculated how many were attending the meeting and it came to N15, 000 per head. What kind of food are we eating at work for N15, 000? They said it was for FAAC, so I said any commissioner who says he will not attend FAAC meeting if he wasn’t fed and was not going to collect his allocation should go back to his governor and tell him we are not feeding anymore.”
She also said, “It was obvious the price of oil was going to fall but we missed the signs. Now the US is pumping 9.4m barrels per day. They used to buy most of our oil but they stopped buying our oil completely so we switched to China. We should have seen the signs that it was going to crash. Maybe we could have started economizing, reduce our payroll, become more efficient. If we had done that when oil price was $110/barrel we won’t be in recession today. If we had done it when it was $80, we won’t be in recession today but unfortunately we didn’t start to do it until oil price collapsed down to $30 and that is the most difficult time to do it.”
Mrs Adeosun also said Nigerians should better start talking about corruption. She said, “People don’t like the subject but it has an impact on where we are today. Now we are going to the World Bank and asking for $1bn but in Nigeria, just one human being was alleged to have stolen $3.5bn. We do have to talk about corruption. The reality of what we found on ground was that some people were just looting the treasury.”