EXECUTIVE SUMMARY OF THE PRESENTATION MADE TO CAPTAINS OF INDUSTRY AND OTHER STAKEHOLDERS ON 9TH APRIL 2016 BY THE HONOURABLE MINISTER OF FINANCE OF THE FEDERAL GOVERNMENT OF NIGERIA,
We have spent many years - too many years - tinkering at the edges of our institutions, our infrastructure and our economy. The mistakes and misjudgments of the last 40 years have set our clocks back by decades.
Without dwelling too much on what we have inherited, the present administration has ushered in a new economic and political vision for Nigeria which has already begun to yield benefits.
We have a framework for our future, one where each Nigerian has a part they can - and must - play so that ALL Nigerians can thrive. This framework for the future will tackle our problems through three critical and inter-dependent aims;
Diversification of our Economy
Fiscal discipline (plugging the leakages) must be approached simultaneously on three legs;
This administration has a strong focus on transparency and an increase in government openness. We will remain solid in our anti-corruption drive and continue in our commitment towards a streamlined administration.
We will guard against wastage and leakages within the system, strengthening institutions weakened over the years through corruption, inefficiency and in some cases simple negligence. We have lacked sufficient and adequate systems for monitoring how funds are being utilized nor did we embed the controls to arrest the leakages. Therefore, along with the transformative capital investment we are undertaking, we will concurrently develop the much needed systems and controls for monitoring, tracking and ultimately optimizing the investments we intend to make.
In the last year, we have begun our offensive against the cancer of corruption. As part of our fiscal housekeeping, we have introduced programmes designed to audit and rationalize personnel related expenditure, which accounts for over 40% of total government expenditure, reduce overheads, increase expenditure efficiency, and consolidate extra-budgetary revenues.
Financial discipline will be our watchword as we shape the future of our economy:
•Discipline in tackling corruption
•Discipline in what we spend
•Discipline in accountability
•Discipline in measuring performance
•Discipline in collection of government dues
Some of the key initiatives we have commenced include:
Tailored MDA Revenue Strategy
•Detailed identification and strategic mapping of revenue sources being undertaken by agency.
•We are targeting independent revenue generation of N1.5trillion in 2016.
•Incentive measures (e.g. cost of collection) to be implemented where appropriate
Improving Tax Collection
•Our approach is focused on improving the efficiency of tax collections and broadening the tax base.
•President Muhammadu Buhari appointed a new FIRS Chairman, Tunde Fowler, who has a remarkable track record as the CEO of the Lagos State Board of Internal Revenue.
•We are using technology to enhance collection, linking up databases from diverse government agencies, auto debits of VAT from corporate entities and government contractors and the rollout of Biometric Verification Number (BVN) across bank account holders.
•To date 363,000 new taxpayers have been added.
•We have also ensured that FIRS staff receive increased incentive pay for delivery on targets.
Enabling Customs Collections
•We are investing over NGN 20 billion in equipment upgrades and capacity enhancement to boost the efficiency of customs collections.
•We are also implementing a performance based staff incentive scheme, in line with that in place within the FIRS.
•An electronic platform has been developed to improve service delivery and the efficiency of ports clearance and collection of customs duties.
Treasury Single Account (TSA) Implementation / Strengthening of Controls
•The implementation of the TSA has improved visibility, afforded greater accountability for revenue generated by government ministries, departments and agencies, and enhanced government treasury management.
•TSA will also facilitate enforcement of remittance requirements in line with the Fiscal Responsibility Act.
•The Integrated Personnel and Payroll Information System (IPPIS) is our centralised payment and payroll system.
•Enrolment of civil servants onto IPPIS has been accelerated with the use of the BVN. 402 MDAs with a total staff count of 295,271 were on the system as at March 31st 2016. Full enrolment of remaining staff to be completed in 2016.
•23,000 fraudulent entries have been identified in recent months, representing NGN 5 billion in monthly payroll savings.
•We have also launched an unprecedented audit programme under the Presidential Initiative on Continuous Audit (PICA), which was approved by the Federal Executive Council in March, pending a bill being passed into law, to facilitate periodic audits of MDAs, particularly in respect of payroll.
•The Efficiency Unit was established in November last year with a mandate to review and rationalise the overhead expenditure of the FGN.
•Significant reduction in overhead costs is expected, including on Travel where over NGN 4 billion in annual savings is projected.
•Authorities have begun pursuing those who are thought to have misappropriated public funds
•A pragmatic approach is being taken from an economic perspective, the primary objective being to fully recover looted funds so they can be directed towards productive use to the benefit of the economy.
•As of 31st March, 2016, over NGN 75 billion in cash had been recovered since commencement of the recovery process. In addition to cash recovered, real estate and other physical assets are in custody.
Resetting the economy; Investing appropriately
We are introducing sound policies and robust systems that will benefit the micro, small and medium enterprises. These enterprises currently employ approximately 84% of Nigeria’s workers and contribute about 50% of our GDP. We are a nation of entrepreneurs, and our entrepreneurs need reliable infrastructure, skilled employees, and transparent systems and regulation that support them as they grow.
Herein lies the diversity that is our future. A diversified economy that will deliver in agriculture, mining, housing, small scale industries, etc. To support these, we must invest.
Today this level of investment will come from borrowing. However, we must safeguard this borrowing, ensuring that our level of recurrent expenditure and existing leakages are firmly addressed. We must be careful in our borrowing and prudent in utilization.
We need to re-set our thinking and embrace the benefits of private capital. These go far beyond much-needed investment and include high standards of governance, commercial agility and innovation.
We must mobilise government and private capital, and create a system that enables targeted expenditure, based on the nation’s priorities. This expenditure will be efficient and impactful, focused on creating wealth for the majority.
Our strategy for growth
Late adopters often have the benefit of seeing what has worked and what has not worked elsewhere. We are committed to a countercyclical budget expenditure model. This has been a success in other nations, offsetting the risk of recession and creating an economy which is not based on either fragile consumer spending or over-reliance on a single commodity. Our economic strategy is based on four pillars:
•Stimulate economic growth to achieve a real GDP growth of 4.2% in 2017
•Reduce the cost of governance and Strengthen institutions to combat corruption and extract efficiencies in public service
•Increase government expenditure on infrastructure
•Fund the budget deficit and negative trade balance cost effectively
Targeted outcomes include
•Substantial increase in gross capital formation
•Acceleration of GDP growth
•Infrastructure development to unlock economic growth
•Diversification of the economy and growth of the non-oil sector
•Improvement in the overall business environment
•Improvement in key socio-economic indicators
•Job and Wealth creation
This administration is committed to disciplined expansion to catalyse economic reform. We are implementing Fiscal policies designed to achieve Nigeria’s growth and development objectives while extracting efficiencies to ensure long-term viability of public finances. The 2016 budget is based on these principles and it is planned in the medium term to stimulate the economy and fast-track diversification. We have a solid case for investment.
Nigeria is by far the largest economy in Africa with a Nominal GDP of USD 493 billion, with South Africa second with USD 317 billion according to IMF statistics for 2015. Nigeria’s large economy is fundamentally more resilient than other African oil producing peers, supported by its diverse non-oil economy. Oil now accounts for only 10% of the total economic output, with Agriculture 23%, Trade 17%, Manufacturing 10% contributing 50% of the economic output.
The 2016 budget marks a strategic shift. We expect to borrow NGN 1.8 trillion which will be structured to achieve cost effectiveness and acceptable debt sustainability ratios. We intend to raise USD 4-5 billion of this amount from multiple external sources, including multilateral agencies and export credit agencies, and the balance in the domestic market.
We intend to continue the shift from oil to non-oil revenue sources. We have increased Capital spending to 30% of expenditure, aimed at removing key historical constraints to higher growth. Our economic stimulus plan is being achieved within the constraints of the fiscal rule; Federal Government of Nigeria deficit capped at 3% of GDP in line with the fiscal responsibility law. We intend to achieve a deficit of 2.2% in 2016.
This is an Investment for growth. We want, and need to invest in our greatest asset: our young, dynamic and ambitious population.
The Nigeria upside is in our growing consuming class which offers even more opportunity within our trade and consumer sectors to propel growth.
Underpinning our strategy is the need for us as a government to revisit historical decisions that are no longer in the best interests of the economy.
Failure to invest is no longer an option.
Failure to account for our spending is no longer an option.
Failure to drive inclusive growth is no longer acceptable.
We must be Disciplined, we must Invest in and Diversify our economy.
In conclusion, we will revisit our blueprint for jobs, for growth and for sustainable institutions.
We must collectively adopt a blueprint that equips the future generations to be creative and dynamic, that allows us to articulate a vision of a Nigeria, with a strong educational foundation; rich in depth of knowledge with a breadth of skills, expansive infrastructure capable of servicing the needs of a nation of 150 million plus Nigerians as they ply their trade, crisscrossing the nation and with a robust and self-evolving healthcare system.
Specifically, we will implement a blueprint that expands our labour force, engaging more Nigerians in sustainable jobs or entrepreneurship, one that leverages our vast endowment of resources, unlocking the potential inherent in our diversity.