FG: Nigeria Has Enough External Reserves to Withstand Global Recession

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, yesterday admitted that although the projected global economic recession for 2023 appeared inevitable, with about $34 billion in the nation’s foreign reserves, the projected headwinds shouldn’t pose much threat to Nigeria.

The comment by the minister came on same day that the Senate directed her to liaise with the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, and submit details of President Muhammadu Buhari’s N23. 7 trillion Ways and Means request, within three days, for scrutiny.

Speaking during an interview with Arise News Channel at the ongoing World Economic Forum (WEF) in Davos, Ahmed, also stated that the government was considering a gradual phasing out of petrol subsidy payments from April, instead of removing it in one fell swoop in June.

Ahmed further posited that she wasn’t feeling ‘betrayed’ by the refusal of President Muhammadu Buhari to remove subsidy payments, having stuck out her neck on the issue for years without much success.

“It is quite likely that there will be a global recession. From the reports we’ve seen from the World Bank and the International Monetary Fund (IMF) and other forecasts, there will be a global recession. How it will affect the globe, of course will be different from sub-region to sub-region. But clearly there’s going to be a decline in growth on a general basis,” she projected.

She explained that even China was predicted to see a reduction in growth, partly because of the sustained economic impact of the COVID-19 pandemic.

“We have seen the resurgence of COVID-19 in some developed economies, especially China, but also the effect of the Russia Ukraine war that is having a global impact.

“The quantitative easing that is implemented by central banks across the world also contributes to high cost of interest, resulting in high inflation rate, which means people’s spending power is weakened as a result. So there are all indications that there will be a global recession,” she noted.

On the question of how Nigeria intends to weather the coming headwinds and whether Nigeria has enough foreign reserves like it did around 2008, when it had reserves of over $60 billion, Ahmed noted that at $34 billion, it was enough to sustain imports for six months.

“It is true we had higher reserves during the first global recession. Our reserves are now at $34 billion. So that is still a healthy level. It means we’re able to meet at least six months of imports and other expenses into the country.

“It means we can withstand another global shock if we’re able to carry through a coordinated response between the monetary, fiscal as well as trade authorities. We have learned a lot from the experience that we went through during the COVID. And it showed that when we plan as one, we can actually withstand the shocks,” she explained.

According to her, the last recession in Nigeria was short-lived because of the coordinated response, which had not just government, but also private sector contributing to the efforts, including scaling back on some categories of government spending.

She maintained that Buhari has done well in terms of infrastructural growth even as the non-oil sector outperformed the cash cow, crude oil by a wide margin, a testimony to the efforts of the current administration to diversify the economy.

“Well, I will say that if you look at the numbers, the performance of the 2022 budget, you will see that oil and gas sector contribution was about 35 per cent, while the non oil sector had the largest contribution, but not only that, the non-oil sector contribution outperformed the budget by a very large proportion.

“ For example, company income tax outperformed the budget by 158 per cent. So there’s some foundational measures that have been taken that have enabled non-oil sector revenue to grow on a consistent basis and not just by a little bit but quite significantly.

“And secondly, the oil sector’s contribution that was minimal in 2022 is looking good to pick up in 2023. The measures that the government has taken, a combined effort of security and intelligence agencies work have resulted in improved production from the oil and gas sector.

“And it looks like it will continue as well. Most of the fields that were previously not producing at the levels that they were supposed to produce can now produce at maximum capacity. And also, the oil price of the international market is still at a very reasonably high level.

“And we’re doing a lot to encourage investments in gas so there’ll be new and additional incremental streams that will come also from the gas sector, so we should be able to meet this.

“Then, also we introduced some new excise duties as some taxes, the full effect of which we will see in in 2023,” she said.

But Ahmed admitted that Nigeria must rev up its revenue collection efforts in relation to debt, saying the government had embarked on borrowing to pay petrol subsidy.

“We have to improve on our revenue so that that revenue-to-debt service ratio improves. Again, we have had to borrow to be able to invest in our infrastructure. When this administration started, we had an infrastructure stock of about 22 per cent. We’ve been able to move that to 35 per cent.

“These are investments that are required to grow the economy on a sustainable basis. Also, we’ve been faced with two recessions. And we took expansionary stand to spend our way out of recession, because you cannot just contemplate what will happen,” she posited.

On fuel subsidy removal, the minister said this year, it would be advisable to remove fuel subsidy, rather than waiting for June to withdraw payments which would hurt Nigerians.

“Where there is not enough revenue for government to buy the refined petroleum products, we have had to borrow to buy the petroleum products. So, if we take that out, that’s about N3.25 trillion. That is a significant relief, that we don’t incur any more than that number that we projected for in 2023.

She also pushed back on the question of whether she felt disappointed by the non-removal of subsidy despite all her efforts, stressing that it was a collective decision to retain the payments.

“Betrayed? No, It was a decision that was taken as a collective, recognising the fact that due to the lingering impact of the COVID-19 pandemic, and also heightened inflation, that removal of the first subsidy at that time will have increased more burden on the citizen.

“The president does not want to contemplate a situation where measures are taken that are further going to burden the citizens. So, the decision was to extend the period from June 2022 to 18 months, beginning from January 2022.

“So in June 2023, we should be able to exit. The good thing is, we hear a consistent message that everybody is saying this thing needs to go. It is not serving the majority of Nigeria’s.

“What will be safer is for the current administration to maybe at the beginning of the second quarter to start removing the fuel subsidy, because it’s more expedient if you remove it gradually, than to wait and move it all in one big swoop.

“So the idea for us in the budget, is that the subsidy costs should not exceed that N3.23 trillion. So whether it’s done completely 100 per cent by June or by July, or whatever, it’s a process,” she said.

Senate Gives Finance Minister, Three Days Ultimatum to Submit N23.7trn Ways and Means Details

Meanwhile, the Senate has directed Ahmed to liaise with Emefiele and submit details of Buhari’s N23. 7 trillion Ways and Means request, within three days, for scrutiny.

Buhari had in December last year’s urged the Senate to approve the Ways and Means restructuring.

The red chamber, upon receiving the Presidential request, had set up an adhoc Committee chaired by the Senate Leader, Ibrahim Gobir, to carry out necessary legislative actions on it.

The panel then sent out invitations to the Finance Minister, the CBN Governor and other heads of federal ministries, departments and agencies that had direct connection with the fiscal document.

However, at the resumption of plenary after the New Year recess on Tuesday, Gobir informed his colleagues that the adhoc panel had not been able to sit because details of the Ways and Means Advances had not been provided by the executive arm of government.

The Chamber therefore ordered the Minister of Finance and the CBN Governor, to within three days, supply required information on the request to the ad hoc panel.

The red chamber warned that in view of presidential and National Assembly elections coming up next month, it would adjourn plenary this week or latest by Tuesday next week for practical participation in campaigns.

Senate’s warning followed request made by Gobir for additional three days .

Gobir who rose through Order 40 of the Senate Standing rules under personal explanation, told the Senate that series of attempts made by the Committee from 28th December, 2022 to Tuesday, 17th January, 2023, to meet the Finance Minister and CBN Governor for the required details proved abortive.

He said: “As a special committee for urgent and thorough assignment, we hit the ground running immediately after composition on 28th of December last year.

“For required details on the N22.7trillion Ways and Means Restructuring, six vital questions were raised, five for the CBN governor and one for the Finance Minister, but their trips abroad, prevented us from asking them the questions.

“Now that they are around, we request the Senate to give us additional three days for thorough work on the assignment and submission of report,” he said.

Obviously angry with Gobir’s submissions, the President of the Senate Ahmad Lawan, in his response said the Ways and Means request from the president, was a very serious issue that must not be taken with levity by all those concerned .

He said the Senate was ready to approve the request after thorough scrutiny which could only be done if required details were provided by relevant officials from the executive arm of government.

Lawan said, “We must have necessary information for passage of the N22.7 trillion request and time is not on our side in the Senate now in view of coming general elections.

“If there is need for the Senate to sit up to Friday this week for thorough consideration and passage of the request, it will be done.

“However, the affected officials from the executive must also expedite action on provision of required information as regards documents authorising approval and disbursement of the monies totalling N22.7trillion,” he said.

Meanwhile, the Senate has said it would adjourn plenary next week to enable lawmakers to embark on rigorous campaigns in their various constituencies in preparation for the forthcoming National Assembly elections.

The Senate President stated this during plenary in Abuja.

He said the break would enable lawmakers contesting for various offices during the 2023 general election to interact with their constituents and canvass for their votes.

He, however, said the Senate may possibly close this week if it was able to deal with urgent issues requiring its attention so that it would not have to sit next week.