All eyes on Okonjo-Iweala as Nigeria steps into uncertain future

Dr Ngozi Okonjo-Iweala, 57, though of medium height, stands tall among President Goodluck Jonathan’s 42 ministers. Smart and courageous, her role as Minister of Finance and Coordinating Minister for the Economy, raises her to the status of ‘super minister,’ reminiscent of the super permsec of the erstwhile military era, making her the envy of the […]

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The former World Bank Managing Director is conscious of her focus. Confessing that President Goodluck Jonathan brought her to help “rein things in,” Okonjo-Iweala apparently occupies the driver’s seat in a rough and bumpy ride which government hopes will lead to transformation. All memoranda that border on the economy is routed to the presidency through the Economic Management Team, making it near-impossible for other ministers to directly raise issues about their ministry with President Jonathan.

“First, they have to discuss their memo(s) with the Coordinating Minister, who decides whether they’re worthy of being presented at FEC. At those meetings, she actually sets the tone of discussions, because she has the task of explaining the relevance of projects to the overall objective of the economy,” Sunday Trust, learnt at the weekend.

With this kind of assignment comes overlapping roles that keep her too busy for comfort, causing some ministers and agencies under the Ministry of Finance, to complain about delays in approvals and the general slow pace of work. The exceptions, Sunday Trust learnt, are the Ministers of Petroleum, Aviation, and of course, the Attorney-General of the Federation. Enquiries for an explanation to this complaint were rebuffed at the finance minister’s office.

However, this burden she carries is only symbolic. The greater burden is traced to the 2012 budget, which takes Nigeria to the crossroads.  Under the projected Medium Term Expenditure Framework, 2012-2014 Bill, which is before the National Assembly, there will be no provision for oil subsidy in the 2012 budget.  Though members of the National Assembly are divided on this matter, the implications include the privatization of the power sector, removal of subsidy on petrol, devaluation of the naira, the creation of the Sovereign Wealth Fund, and clinical control of government spending. President Jonathan does not seem to think outside this framework, hence the desperate campaign to sell the bitter pill to the Nigerian public.

In the last six months, the removal of subsidy on oil sounded like music to the ears of Nigerians. The major advantage of the subsidy removal is that it would make available funds for the provision of infrastructure, job creation, among others. In the 2012 budget presented by President Goodluck Jonathan before the National Assembly last week, it was clear that the country has arrived at the make-or-break point of ‘no return.’ A march forward into the impending era may be tough, it could lead to disaster.

Just as the Minister of Finance, Dr Ngozi Okonjo Iweala, said last week that the president has not given in to the removal of oil subsidy as he is still consulting on it, the Minister of Information, Mr Labaran Maku, has also said that the nation’s economy cannot perform except subsidy is removed on petroleum.

While speaking at the first anniversary of National Mirror newspaper in Abuja last Wednesday, he said the Federal Government had spent N1.3 trillion to subsidize petroleum in 2011 alone.  ‘’How can you transform a nation in this kind of situation? Those who are considering setting up the refineries could not do so and investors are not ready to invest in the oil industry. If we cannot take the situation to reposition our country, we should be ready to face the consequence, and we will be doing great damage to the future of our children,” Maku said.

The minister added that for 53 years, the country had been exporting crude oil. He said government had decided to look back and review the situation to see if it has been of benefit to the people and this, he said, was why the Federal Government has decided it was time to open the sector for transformation.

Maku said deregulation has worked well in all the sectors that the Federal Government has tried it in the last 15 years. He observed that deregulation was a success story in the aviation, banking and telecommunications sectors, where jobs had been created for millions of people. He stated that if the country’s economy must improve and flourish, people must be ready to make sacrifice: “If we must grow the economy, we must offer alternatives that may look difficult today but will be of benefit to us in future,” he said.

However, Associate Professor Adefioye Onaolapo of the Department of Economics, University of Jos, doubts the positive outcome which Okonjo-Iweala has predicted would be the benefit of these tough measures. For instance, on the removal of oil subsidy, Professor Onaolapo said, “If the government is sincere, the entire populace will benefit.  That is, if they channel the money for development purpose, but in Nigeria, it is not such because the more you look, the less you see. Corrupt leaders will take away everything and we will lose. When we put more burdens on ourselves, the cost of things will increase and that will depress production and, of course, when there is no production, workers will be laid off and we will start to import thereby depending on the western countries. The western countries are doing this to protect their interest, they don’t care about us.”

The economist made recourse to the erstwhile military administration, remarking that: “In 1986, when Babangida was in government, there was this International Monetary Fund (IMF) conditionality, which was heavily debated on at the initial stage. Of course, the government said they will not embrace it, but they went through the back door to embrace the policy. Some of the policies bordered on privatization, deregulation and subsidy removal, moving from socialism to capitalism. Now, we have privatised these sectors and they have not been able to work properly. Once the subsidy is removed, there will be inflation, the cost of production, transportation and even the budget will increase. Then, people will demand more goods and since we don’t have it, we will be forced to import. As long as there is pressure on the foreign exchange reserve, we will be forced to devalue our currency.”

IGNORING MASSIVE CORRUPTION IN BUDGET

By removing subsidy, government hopes to save over N1 trillion which will be channelled into the provision of infrastructure. However, Nigeria’s budget is laden with corruption and opponents of the removal of subsidy have advocated action against padded budgets to save funds. For instance, in the 2011 budget, scandalous provisions were made in the Ministry of Special Duties. The ministry budgeted N2 million each for the purchase of photocopying machines, while the upgrading of computers with necessary software and hardware was to cost N33 million.  Office furniture was to be procured for N9.7 million, while another item termed purchase of library books and equipment was estimated to cost N47 million. In the Ministry of Women Affairs also, there were items like purchase of teaching aid/instructional materials, which was to cost N406,323,875; field and camping equipment supplies were to cost N39,453,992, while office stationery/computer consumables were to cost N60,735.822.

Though the breakdown of the 2012 budget is not in circulation at the moment, such outrageous provisions may be contained in it. If the Ministry of Women Affairs would need N406 million for teaching and instructional materials, how much would the Ministry of Education need? What sort of computer software and hardware would the Ministry of Special Duties purchase for N33 million? Where are the library books that the Ministry of Special Duties purchased for N47 million? All these are separate from the inflated cost of capital expenditure that cost four times their normal rates. It is argued that instead of expecting to make savings for infrastructure from removing subsidy on petrol, which would create unbearable hardship among the majority of the population, government should look inward and clean up the budgetary provisions, moulded in corruption.  Former Head of State, General Muhammadu Buhari, re-echoed this last week when he said, “let them wipe out corruption and we will live happily ever after.”

DEVALUATION OF THE NAIRA

The slide of the naira against the dollar in the last six months belies the posture of Malam Sanusi Lamido Sanusi, the Governor of the Central Bank of Nigeria (CBN), who had faulted an earlier International Monetary Fund (IMF) suggestion that the currency should be devalued. Arguing that a country like Nigeria, which imports more than it exports, will be committing economic suicide by devaluing its currency, Malam Sanusi said the naira did not need any form of devaluation. However, since after the 2011 elections, under the guise of ‘pressure on the naira,’ the currency has been sunk further from N150 to a dollar to N160 to a dollar, with no clear effort to redeem it, giving the impression that it is a deliberate government policy.  Dr Jacob Otaha of the  Economics Department,   University of Jos, says even if there is no pronouncement that the currency has been devalued, removing subsidy is another scheme to devalue the currency.

He said, “Subsidy removal is another way of devaluing the naira, especially since Nigeria is an oil economy.  Anything that affects the oil affects our naira, affects our standard of living and affects our lives.  If our naira is strong, then it is to our advantage. Today, the pound sterling is the strongest currency even stronger than the euro, which is to the advantage of Britain. It means they can buy things cheap.  But when you say that the currency has value, it is to the advantage of Nigeria, we import less and export more, but we are not even exporting anything apart from oil. The economic reason for devaluation is when there is a lot of competition and the products you are selling have an elastic demand so that the moment you reduce the price by even one naira people rush to it. But we don’t have the power to fix the price of oil because it is done by OPEC, so why devalue the naira, by removing subsidy? All these people are IMF messengers.”

Incidentally, in the 2012 budget there was not clear reference to the alarming devaluation of the naira, a silent acceptance of the IMF argument that the naira should be allowed to stabilise on its own, based on whims and caprices of the market economy.

WHO IS DICTATING TO NIGERIA?

Dr Okonjo-Iweala is seen as a bridge between Nigeria and multinational financial organisations.   This raises the suspicion that, though these policies look indigenous, they may be an attempt to fashion the economy in line with the principles of the World Bank and the IMF. As it were, the World Bank has repented from recommending its policies to Third World countries, so says its Country Director in Nigeria, Marie Francoise Marie-Nelly, recently. According to the World Bank’s representative, what the bank does at the moment is to support locally-designed economic policies through funding and technical assistance. Sunday Trust learnt that there are some expatriates in the Ministry of Finance, but their functions in the ministry still remain unclear. The World Bank office in Abuja told us that it has not deployed any of its technical assistants to the ministry. The Finance Minister, also, recently said that countries are at liberty to accept or reject World Bank’s ideas about its economy, but experts argue that the removal of oil subsidy, the devaluation of the naira, the privatisation of government corporations and many of the neo-liberal policies of the current administration resemble those ideas international financial organisations always attempt to sell to Third World countries.

Dr Otaha refers to the IMF and World Bank policies as death knells. He described it thus: “We call the World Bank and IMF international funeral homes because their policies are about sending countries to their early graves. When the IMF and World Bank were established in 1944 after the Second World War, their duty was far different from what we are seeing now. That was because most of the Third World nations were colonies then. They were not part of the agenda of these multinational organizations and by the time we got our independence and we could no longer sustain ourselves because of borrowing, they decided to change the tune of their functions to penalising instead of assisting countries. That is why all their loans and assistance have conditions attached to them. These conditionalities are inimical to the survival of the Third World economy, which includes privatization, commercialization and removal of fuel and fertilizer subsidy. Even education, not funding education, reducing public expenditure on health and education were all part of the World Bank policies.”

THE BATTLE AHEAD

An indication that Nigeria will be ushered into a turbulent 2012 is captured by a member of the House of Representatives, Aliyu Ibrahim Gebi (CPC, Bauchi). He said the House will not accept subsidy removal because that will not solve Nigeria’s problems. According to him, “We know what the problems are; the President knows what the problems are; the parliament knows what the problems are and we know how to solve these problems. We have a teeming population of unemployed youths; is it these things she is proposing that will bring these employments to these youths? Absolutely not! These are just theories that might work on paper but we have seen even the best economic policies in the world not working. So, why will we then take the same kind of economic models and bring them here and hope they will succeed. They cannot succeed! We must look inwards and develop our own economic policies and models that are tailor-made for our own needs.”

On its part, the Nigeria Labour Congress (NLC) said that the economic policies of President Goodluck Jonathan have long been discarded. Describing the policies as that of a prodigal system, NLC said the policies are only geared towards milking the Nigerian people, with those in power abdicating responsibilities and concentrating on profit making.

Acting General Secretary of the NLC, Comrade Owei Lakemfa, in a telephone interview with Sunday Trust, said that the “policies of the Jonathan administration are neo-liberal policies that, today, have led to the so-called financial crises of Europe and America, which are viewed as the standard by this country. These policies have also led to the Greek crisis and the austerity situation in some European countries. These policies are not workable; these are policies that have been discarded. There is nothing new or original in the policy direction of the Jonathan administration because they are simply copying the policies of the IMF and the World Bank. That is what they are doing.”

Speaking on fuel subsidy removal, Comrade Owei said “it has no positive drive behind it more than just adding the price of petrol while they import oil products. If you look at the argument of Jonathan’s administration in the last two or three weeks, they said they want to remove the subsidy on oil because they want to save N1.3 trillion to build railway, roads and they are going to invite Nigerians of integrity to manage the funds. They have not told us the number of barrels of crude oil that they sell. So, all that money that they say they are going to call Nigerians of integrity to manage are not there. All the policies of this government are to cripple the Nigerian people; they increased tariff on electricity, they are imposing tollgates, they are refusing to pay minimum wage, we are paying for everything, the government is doing nothing; we have not seen anything on ground.  The Jonathan administration consciously devalued the naira so that when they gather from fuel, they will have more naira to spend and in devaluing the naira, they devalue wages of the Nigerian people, they devalue the currency that is in the bank for people who are saving, they devalue the stock exchange, the devalue the lives of Nigerians. They say this budget is about reforms and job creation and in the entire budget as put down by Ngozi Okonjo-Iweala and her group, there is nothing concrete on how they want to create jobs.”

OKONJO-IWEALA DOESN’T GIVE UP

The Coordinating Minister for the Economy is not ready to give up, in spite of all the criticisms that have trailed the principles behind the 2012 budget. At a press conference last week, she declared that the budget will be able to streamline the activities of government, boost agriculture, provide jobs, provide infrastructure, reduce government spending, etc.

Okonjo-Iweala said, “we are going to restructure agencies with overlapping and duplicating functions. We are going to look at our Commissions and Committees and see whether some of them are still needed. We are thinking of restructuring the government. Due to some work by the tax force that is helping us on this issue of biometric exercise, from the Head of Service Office to the Police Pension Office, we have been able to bring down the amount paid to police pension from N1.5 billion to N500 million and we wish to continue because Mr President wants this done, and we hope to use this as a vigorous tool to bring down the recurrent expenditure.”

Emphasising the readiness of government to reduce waste, she added that, “government will find ways and means in a rational manner by reducing waste and duplication. That is the natural place to start and try to plug leakages. Biometric exercise alone brings down cost without hurting anybody. Before we take any drastic action, we will also look at how to streamline agencies so that we don’t duplicate work. When we finish with these two, we can move to other measures, if needed.

We don’t just look at retrenchment; we look at their quality of education, the training we give them and their skills to determine if we have the right kind of skills in the civil service to lead us to the next century. So, we are looking at the quality issue in the civil service as well. It is not that easy to cut personnel cost because you are talking of cutting salaries for workers and their dependents.”

At the press conference, she parried questions about subsidy removal, announcing that government was still consulting with Nigerians on it. However, the president does not give the impression that there is an ongoing negotiation. He speaks in a manner that portrays subsidy removal as a fait accompli. In less than a month from now, Nigeria will reach that inevitable crossroads.

Time will tell.