WELCOME ADDRESS BY THE PERMANENT SECRETARY AT THE INAUGURATION CEREMONY OF THE FEDERAL MINISTRY OF FINANCE - NIGERIA SUSTAINABLE FINANCE PRINCIPLES COMMITTEE ON 13TH MARCH, 2018 AT THE CONFERENCE ROOM OF THE HONOURABLE MINISTER OF FINANCE
It is my pleasure to welcome you to this august ceremony witnessing the inauguration of the Ministry of Finance’s Nigerian Finance Sustainable Principle Committee (NSFPC). Government and private business activities in the country are being re-designed to incorporate environmental, social and governance issues. In this connection, the Federal Ministry of Finance has continued to pursue and encourage business (public and private practices that create long-term shareholder/stakeholder values through the efficient management of the “spill-over” or “third-party” costs of business externalities. One of such efforts of the Ministry is the inauguration of today, (FMF-NSFPC).
2. The Ministry of Finance’s NSFPC will achieve the following:
i. Ensuring that the Ministry takes and retains the driver’s seat in the Nigerian Sustainability Finance Project.
ii. Creation and entrenchment of the sustainability orientation/mindset in the industry stakeholders
iii. De-mystification of the concept of sustainability finance by encouraging organizations that deal with the Ministry to ensure that their activities conform with the SMART (Sustainable, Meaningful, Adaptable, Responsible and Trustworthy) principles of sustainable finance.
3. Having been carefully selected to drive the Sustainability Finance Project, it is our expectation therefore, that you will give this assignment your best.
4. I urge you to diligently put your talents, time and treasure to this project. You are assured of the support and management as you strive to achieve your mandate.
RESPONSE BY THE CHAIRMAN OF NIGERIAN SUSTAINABILITY FINANCE PRINCIPLES COMMITTEE – MRS OLUBUNMI O. SIYANBOLA, DIRECTOR, HOME FINANCE
On behalf of my colleagues on the NSFPC, I wish to express profound gratitude to our indefatigable Honourable Minister of Finance for the various innovative initiatives that you have put in place to ensure an effective public service financial management in Nigeria. I wish to say that the newly inaugurated NSFPC is the building block of these laudable achievements. The role being played by our amiable Permanent Secretary is well supportive in providing the fertile ground for the emergence of the commendable initiatives of the Ministry.
2. The Nigerian Sustainability Finance Project places responsibilities on us to strive to facilitate, encourage and support activities which are economically, socially and environmentally friendly. I wish to affirm that your expectations of our Committee would be realised.
3. Never in recent history has the quality of life the world over been threatened by the daunting challenges of environmental degradation. There is no doubt that the aquaculture and crop and animal production have become endangered as a result of hydrocarbon emissions and spillages. The economic, health and social implications of these can only be appreciated by taking a look at the global quality of life indices, especially as they concern Sub-Saharan Africa.
4. These activities that have the potentials for human extinction have been traced to be engendered and sustained by negative human socio-economic activities. The critical challenge of contemporary government the world over, has consequently and understandably shifted from the pursuit of economic growth to principles and practices that strive to meet the needs of the present, without jeopardising the ability of future generations to meet their own needs.
5. We as the Committee members really appreciate the initiative of integrating the financial services sector in the fight to sustain our socio-economic environment and wish to assure you that we will sacrifice our talents, time and treasure for this laudable project as we strive to achieve our mandate.
The Debt Debate: Deconstructing the debt story Monday, October 9, 2017 By Kemi Adeosun
The Debt Debate: Deconstructing the debt story
Monday, October 9, 2017
National debt is an emotive issue as well as an economic one. The thought of saddling future generations with unserviceable debt, is not conscionable and certainly not part of the President Muhammadu Buhari-led-administration’s agenda. It is therefore, worthy of an intervention on my part to explain the history, the short-term strategy and the medium to long term outlook for our economy.
It bears repeating that anyone who thought that the Nigerian economy we inherited in 2015 was in need of minor adjustment was sadly deluded. Oil prices had plunged from a height of over US$120 to a low of US$28 per barrel yet, the country had foreign exchange reserves of US$28.34 billion (having declined by US$16 billion in the two years to June 2015 from a high of US$44.95 billion). Despite just 10% of the budget allocated to capital expenditure, debt had (in a period of unprecedented oil earnings), inexplicably risen from N7.9 trillion in June 2013 to N12.1 trillion in June 2015. Depending on the candour of the commentator, the outlook was at best, ‘challenging’ and at worst, ‘bleak’.
However, this administration set to work, with a vision, not just to return Nigeria to a stable economic footing, but to deliver a fundamental structural change to the economy that would reduce our exposure to crude oil. We approached this with a number of binding constraints that must be understood. One of these was that mass public sector retrenchments to create room for capital spending was not an option. Politically, it offended the principles of the All Progressive Congress (“APC”) and economically, it would worsen an already precarious economic situation and cause untold hardship. In light of this, an expansionary fiscal policy was adopted with an enlarged budget which would be funded in the short term, by borrowing.
As the economy recovered and returned to growth, borrowings would be systematically replaced by revenue, which is the fundamental missing piece in Nigeria’s economic jigsaw. This does not mean that we would ignore waste, which has been a core focus of our efforts. Through the implementation of the Efficiency Unit and enrolment of Ministries, Departments and Agencies (“MDAs”) on Integrated Payroll and Personnel Information System (“IPPIS”), we have successfully saved N206 billion in payroll costs using technology to drive the cleansing process, with the removal of 54,000 fraudulent or erroneous entries. This was attained without the negative social impact of retrenchment.
As we put our plans together, our economic modelling team correctly forecast that in the short term, there would be an acceleration in the accumulation of debt and an increase in debt servicing costs. However, this would be ameliorated, by correcting the low tax to Gross Domestic Product (GDP) ratio through revenue mobilisation, releasing funds to sustain investment in capital and repaying the debt. Mobilising revenue aggressively is not advisable, nor indeed possible, in a recessed economy but as Nigeria now reverts to growth, our revenue strategy will be accelerated. This is being complimented by a medium-term debt strategy that is focusing more on external borrowings to avoid crowding out the private sector. This would also reduce the cost of debt servicing and shift the balance of our debt portfolio from short term to longer term instruments.
The subject of inherited debt must also be drawn firmly into the mainstream of this discourse. Analysts will recall that in July 2017, Federal Executive Council (“FEC”), approved that N2.7 trillion of hidden liabilities would need to be addressed. These obligations include salaries, pensions, oil importation, energy bills and contractor payments, some of which date back to 2006. It is instructive to note that the recent Academic Staff Union of Universities (“ASUU”) strike, that crippled our tertiary institutions, is one of many examples of commitments made by previous administrations that were saddled on this team. ASUU’s dispute relates to an agreement reached with the Federal Government in 2013 (when oil prices fluctuated between US$102 and US$116 per barrel), which was not honoured. On a daily basis, previously undisclosed obligations are uncovered. The most recent of which relates to oil importation in 2014 and is currently being dimensioned - unpaid and secured by a hitherto undisclosed sovereign note. All of this, while declared public debt was increasing by N5 trillion in two years despite records highs in revenues (in relative terms) from oil sales.
This Administration believes that Nigerians have a right to the truth. The figures recently released by the Debt Management Office (“DMO”) and much debated indicates that while total public debt in Dollar terms has remained relatively stable since 2015, our debt, when denominated in Naira, has increased from N12.1 trillion to N19.6 trillion. However, this belies the impact of the recent devaluation of the Naira on the external obligations we inherited, which accounted for N1.63 trillion of this increase. Also, to be considered, is the effect of the compounding of debt service on the inherited domestic debt, which was largely short dated. The administration has always been transparent and the reward for transparency should not be consternation but rather, patient and informed analysis. Nigeria’s debt to GDP currently stands at 17.76% and compares favourably to all its peers.
This administration will continue to pursue a prudent debt strategy, tied to gross capital formation. This will be attained by driving capital expenditure in our ailing infrastructure which will in turn, unlock productivity and create the much-needed jobs. We accept that in the short term, there will be dislocations as our revenue efforts will by definition, lag both our expenditure and debt obligations, creating a fiscal deficit. This will be particularly pronounced in the preliminary years of pursuing this strategy however, the dislocation will be mitigated by the nation’s response to the revenue effort. No economy, anywhere in the world, can deliver sustainable long-term growth, without volatility if tax revenue is at 6% of GDP. This must be addressed. It is not optional and the true risk to future generations of Nigerian’s is that they grow up in an environment where tax avoidance or evasion is viewed as acceptable. We are already seeing some performance improvement in our non-oil revenues. Particularly, year to date performance of Customs Revenue, Value Added Tax (“VAT”) and Companies Income Tax (“CIT”), is 19% (N408.06 from N342.79 billion), 18% (N634.89 from N539.46 billion) and 11% (N838.45 from N757.40 billion) higher respectively, when compared to the same period in 2016. This does not mean that we have succeeded. Revenue remains considerably short of our ambitions and must be increased exponentially over the coming years but it is a sign that it can be done.
It must be recalled, that the President Muhammadu Buhari-led-administration has expended more on capital projects than any previous one, despite tight fiscal conditions. Our focus on capital is important as it will underpin our medium and long term needs so the impact may not be immediately felt. But there are early and encouraging signs; major construction will resume on twenty-five roads across the key road networks/sections (A1-A4), which cuts across the 6 geopolitical zones, following the successful raising of over N100bn under the Sukuk debt issuance programme. Our capital releases to Power, Works & Housing in 2016, is estimated to have created 193,469 jobs, with 40,429 being direct jobs and 153,040 indirect jobs. The many thousands of staff of some of our major contractors, who had been furloughed since their last payment receipts in 2014, will attest to the impact of Government Policy. In agriculture, our policies on rice and fertiliser have seen the resurrection of many rice mills and blending plants and have created a new value chain in industries that were previously import driven with over 300,000 farmers fully engaged.
It must also be recalled that this administration is working harder on revenue generation than ever before. Blocking leakages, demanding efficiency and even breaching previous ‘no-go’ areas like tax compliance for our higher earners - there are no sacred cows. All these efforts are aimed at ensuring that Nigeria has an economy that distributes wealth and opportunity fairly among her citizens. This commitment to equity should equally provide assurance that we will never burden future generations with the responsibility for paying for past mistakes, rather, we will bequeath a vibrant and reformed economy. We are resolutely convinced, based on empirical data that our collective efforts will deliver a Nigeria that works for all Nigerians and in all global economic conditions.
Kemi Adeosun is the Honourable Minister of Finance
KEYNOTE ADDRESS BY THE HON. MINISTER OF FINANCE MRS. KEMI ADEOSUN AT THE INAUGURATION OF THE NIGERIAN SUSTAINABLE FINANCE PRINCIPLES COMMITTEE ON TUESDAY, 13TH MARCH, 2018 AT THE HONOURABLE MINISTER’S CONFERENCE ROOM FEDERAL MINISTRY OF FINANCE, ABUJA
It is my great pleasure to welcome you all to this auspicious occasion of the inauguration of the Nigerian Sustainable Finance Principle Committee (NSFPC).
2. The Nigerian Sustainable Finance Committee Principle (NSFPC) is a creation of the Financial Services Regulation Coordinating Committee (FSRCC) which focuses on the role of the financial services industry in facilitating economic prosperity, while ensuring environmental sustainability and social development. It seeks to ensure that financial services are rendered in such ways and manners that protect the environment from externalities that may eventually undermine social comfort and convenience.
3. Pursuant to the efforts of the present government of diversifying the economy with the aim of enhancing growth and global competitiveness it has become imperative to saddle this committee with the following mandates:
i. Stimulating a resilient, competitive and sustainable financial services;
ii. Improving corporate governance practices;
iii. Nurturing people-friendly environments in the drive towards job creation, empowerment and poverty reduction; and
iv. Ensuring that all financial services contribute to efforts aimed at reducing global warming and other forms of environmental degradation.
4. May I use this opportunity to inform you that the NSFP initiative, is predicated on the need to vigorously pursue economic prosperity and social development without compromising environmental protection, and it is built on the following five principles:
i. Environmental, Social and Governance Principle
ii. Collaborative Partnership and Capacity Building
iii. Financing of Priority Sectors of the Economy
iv. Human Rights, Women Economic Development, Job Creation and Financial Inclusion and
v. Reporting and Disclosure.
5. We must not fail to acknowledge the fact that Nigeria is endowed with abundant natural and human resources, which we can adequately and efficiently harnessed to strengthen our public finance. Consequently, I implore you to take innovative and pragmatic steps to facilitate, encourage and support activities which would impact the nation economically, environmentally and socially.
6. Let me assure you that there is a strong political will and commitment at the highest level of Government to reposition the Nigeria’s financial sector. I enjoin all Agencies operating within the financial sector to ensure that their services have the capacity to improve the integrity of the natural environment. We must all join hands with the government to build a resilient economy.
7. At this junction, I wish to reiterate my support and that of the Ministry to enable you deliver on your mandate. I hereby inaugurate the Committee.
All change!!! Nigeria is not an oil economy By Kemi Adeosun Monday, November 6, 2017
All change!!! Nigeria is not an oil economy
By Kemi Adeosun
Monday, November 6, 2017
Descriptions of Nigeria’s economy often include such phrases as ‘Africa’s largest oil producer’ and ‘the oil rich African nation’ but oil economies are typically characterised by low population densities and abundant oil resources. Saudi Arabia with 10 million barrels of oil per day and 30 million people, Kuwait with 2.7 million barrels of oil per day and 4 million people and Qatar with 1.5 million barrels of oil per day and 2.5 million people are typical of such. These economies pursued an economic model that was built around a large government dependent almost entirely on oil revenue for funding. Such economies could afford to have low or in some cases no domestic revenue mobilisation, in the form of taxes. Tax to Gross Domestic Product (GDP) ratios of less than 10% against the OECD average of 34.6% could be justified especially in the era of high oil prices.
For over three decades, Nigeria pursued this model. But things are changing, with the election of President Muhammadu Buhari in 2015, who was propelled into office under the mantra of ‘change’. That clamour for change, in the areas of governance, security and economy, coincided with the collapse of global oil prices and a consequent huge deficit in government revenues. These circumstances provided the ingredients for an overhaul of the entire economic model. The first and rather numbing conclusion of that exercise was that Nigeria is not actually an ‘oil economy’. With just 2 million barrels of oil per day and over 180 million people, simple mathematics tells us that 90 Nigerians share a barrel of oil compared to 3 Saudis, 1.44 Kuwaitis and 1.69 Qataris. With oil at just 10% of GDP, Nigeria simply does not fit into the mould of the traditional oil economies.
Interestingly, even nations who did legitimately fit into this narrow mould of high oil revenues and low populations, are abandoning what is now considered to be a flawed model. Thus, the imperative for Nigeria was even more urgent. Nigeria recalibrated its target peer group from the oil economies to the ‘oil plus’ economies such as Mexico and Egypt. This new peer group have diversified economies and tax to GDP ratios of 20% and 16%, respectively, compared to Nigeria’s 6%. Consequently, the change mantra had to be urgently applied to revenue mobilisation.
Analysis of the data suggests that revenue mobilisation is potentially the master key to unlocking Nigeria’s huge growth potential by funding its ailing infrastructure including roads, power and rail. A cursory look at the effective tax rates paid by the huge multinational and local operators, as well as the data on illicit financial flows, indicates a pattern of systematic tax evasion at all levels. Recent statistics released by the Federal Ministry of Finance showed that Nigeria has just 14 million active tax payers from an economically active base of 70 million. Over 95% of these are salary earners in the formal sector, just 241 persons paid personal income taxes of N20m (US$65,573.77) in 2016. Taxing the high networth and Nigeria’s huge community of entrepreneurs constitutes a critical but yet attainable target. The statistics for corporate tax payment shows the debilitating effects of base erosion and profit shifting as well as abuse of an overly generous tax incentive and duty waiver system. The historical government apathy towards revenue mobilisation is one of the effects of the mistaken identity that saw Nigeria perceive itself as an oil economy. This Administration is determined to correct this identity crisis and all its concomitant effects.
In that spirit, we launched an ongoing and well received, tax amnesty, ‘The Voluntary Asset and Income Declaration Scheme’ (VAIDS) is affording a 9-month window for Nigerian tax payer’s, both corporate and individual, to regularise their tax status in exchange for a guarantee of no interest, penalties, tax investigation or further audit. This amnesty follows successful initiatives in a number of countries, where tax evasion is a problem, such as Indonesia, Argentina, South Africa and India. It has been programmed to end just as the Automatic Exchange of Information, which will provide Nigerian tax authorities with unprecedented levels of information on offshore assets, becomes effective.
The initial signs suggest that Nigerians are responding positively to the new revenue narrative. Despite the emergence from a recession, tax revenues are showing early signs of growth. VAT shows 18.97% year on year improvement. Over 800,000 companies, including some Government contractors, that have never paid taxes have already been identified and are being audited. This is an unprecedented initiative that entails cooperation between Federal and State Governments. The Federal Ministry of Finance has also commenced a database project that combines data from the various arms of government including bank records, property and company ownership, and customs records to create accurate profiles of those liable to pay taxes. The Ministry has also placed one of the world’s premier private investigation agencies on retainership to trace overseas assets.
Changing the Nigerian economic psyche is not an easy task. By its nature, tax mobilisation risks the popularity of any Government, but the present Administration understands that the short term lure of political expediency must give way to the long term best interests of Africa’s largest economy. Her energetic, young and growing population are deserving of the chance to experience a truly transformed, sustainable and growing economy.
Kemi Adeosun is Nigeria’s Minister of Finance
- Positioning Nigeria for a prosperous future Monday, October 30, 2017 By Kemi Adeosun
- ADDRESS DELIVERED BY THE HONOURABLE MINISTER OF FINANCE, MRS. KEMI ADEOSUN, AT THE COMMISSIONING OF THE AFRICAN DEVELOPMENT BANK NIGERIA COUNTRY DEPARTMENT BUILDING, ABUJA NIGERIA THURSDAY, 18th JANUARY, 2018
- Tax underpayment: FG reviews data of 130,000 high net worth persons, companies – Adeosun
- FG APPROVES HIGHER INTEREST RATE ON UNPAID TAXES