The House of
Representatives finance committee walked out the minister of finance,
Ngozi Okonjo-Iweala, Thursday, after a brief but stormy session in which
lawmakers tasked the minister with 50 questions on the state of the
Nigerian economy.
Mrs. Okonjo-Iweala had earlier presented the budget proposals for
2014 to the Senate and the House of Representatives, before meeting the
house finance committee.
The minister said she was indisposed and only responded to her invitation out of respect for the legislature.
But when lawmakers offered to excuse her due to her health, but with a
condition she responds to 50 questions in writing within two weeks, the
minister backtracked choosing instead to answer the questions at the
meeting.
Exchanges between the minister and the committee chairman,
Abdulmumini Jibrin, quickly escalated with Mrs. Okonjo-Iweala accusing
the committee of being disrespectful.
“With all due respect, I will not tell your committee that I’m
feeling fine when I’m not. We have had good working relationship with
your committee; I thought we’ll be treated with courtesy, but the way
you’re starting is a bit disturbing,” the minister said.
Mr. Jibrin said the committee had ruled that she be allowed to go and respond to the questions.
“We don’t want any haphazard answers,” he said.
The minister insisted on being heard, but was asked to leave.
“I’m sorry Honourable Minister. You can only decide what happens in the Finance Ministry and not in the House,” Mr. Jibrin said.
Read the lawmakers’ 50 questions below:
House Committee on Finance
Questions for the HMF/CME on the State of the Economy
1. What should you consider as the major economic achievements of
this government in the 2013 fiscal year and why? In your explanation,
we will need facts and figures in demonstrating such achievements.
2. You have been credited with many announcements regarding
Nigeria’s economy as one of the fastest growing economies in Africa. If
the economy is one of the fast growing economies, what is exactly
growing the economy? What role does government play in the said economic
growth, especially given that as high as 80 percent of the country’s
total annual budget spending still goes into recurrent expenditure?
3. Since your arrival as minister of finance in 2011, you have
publicly announced the need to reduce the recurrent expenditure so that
more money would be made available to capital spending which is critical
to growing and diversifying the country’s economy. How far has
government succeeded in making these necessary cuts; and where exactly
have these cuts been made in this effort to reduce recurrent
expenditure? In other words, based on real amount spent on capital
expenditure, how much reduction was made in 2011 against 2010, in 2012
against 2011 and in 2013 against 2012?
4. You are known to be celebrating a single-digit GDP growth. But
speaking recently at a breakfast dialogue with some members of the
organized private sector in Lagos, organized by the Nigerian Economic
Summit Group (NESG), you were quoted as saying: “We are growing, but not
creating enough jobs. That is a very big challenge…We need to grow
faster. I think it needs to grow at least 9 to 10 percent to drive job
growth the way we want.” Don’t you agree that a good finance minister
managing an economy like ours should be celebrating a GDP growth as high
as 20 percent annually? Why is it that our economy cannot grow beyond a
single digit? How many jobs are being created as a result of these said
growths? In which sectors of the economy are these jobs created? If in
private sector, what contributions is government making to further
assist these private sector firms?
5. In the presence of Nigeria’s huge infrastructure deficit, why
is it that the country’s debt-to-GDP at about 19 percent in 2012 remains
one of the lowest in the world when compared to nations already with
world-class infrastructure and industrial economies such as America’s
105 percent, Brazil’s 65.49 percent, India’s 67.60 percent, and South
Africa’s 40.9 percent?
6. Since facts don’t lie, have you any disagreements with the
September 4, 2013 Global Competitiveness Report of the World Economic
Forum for 2013-2014, which ranked Nigeria 120th out of 148 countries
ranked in the Global Competitiveness Index, including being ranked far
behind some African countries such as Mauritius 45
th, South Africa 53
rd, and Kenya 96
th?
7. ”For the first time in Nigeria’s 53rd year history, we have
successfully privatized the electric power industry,’’ so said the
President at a recent meeting in London with some foreign investors. As
minister of finance should you agree that the recent privatization of
the country’s power infrastructure is worth celebrating as a major
economic achievement in 2013, when in reality there is little or nothing
to show as an improvement in the country power supply? Also why our
rush to wholesale privatization of the power sector when countries like
South Africa, generating as high as 42,000MW still have their power
sector mostly in public hands?
8. What was your reaction to the November 12, 2013 statement
credited to the World Bank Country Director for Nigeria, Marie-Francoise
Marie-Nelly, who said that over 100 million Nigerians are today living
in absolute destitution, representing an unheard-of 8.33 percent of the
world’s total number of people living in destitution?
9. Nigerians are increasingly perplexed that these days nothing
happens without government borrowing. And for most Nigerians, it is
frightening how those managing the economy are just dragging us into
excessively unproductive debts. More worrisome is the fact that every
effort is being made to hide the details of the country’s debt stock
from Nigerians. Where are the facts that the country’s current high rate
of borrowing is productive, let alone have the ability to be repaid
without having to resort to more borrowings?
10. Is prudence in our borrowing simply reduction in borrowing or
simply constructive borrowing with government putting necessary measures
in place to ensure that domestic debt profile is properly supervised
and utilized by curbing corruption?
11. From Debt Management Office (DMO) 2012 Annual Report, the total
public debt outstanding between 2008 and 2012 for external stock rose
from $3.72bn to $6.53bn, while domestic stock rose from $17.68bn to
$41.97bn. The total debt service the same period saw the percentage of
external debt service drastically reduced from 11.46 per cent to 5.96
per cent while the percentage of domestic debt servicing grew from 88.54
per cent in 2008 to 94.04 per cent in 2012, drastically increasing the
cost of the total debt service since the cost of domestic borrowing is
atrociously higher than the cost of external borrowing. How could your
debt sustainability analysis rationalize this without seeing some narrow
interests being the overriding reason? Could this be the explanation
why commercial banks in the country are declaring unheard-of three digit
profits and the high Foreign Portfolio Investment and low Foreign
Direct Investment?
12.It’s an established fact that the willingness and ability to
borrow do not automatically translate into economic growth. If you agree
with this fact, how productive are the country’s recent borrowings?
13. Why should our internal debts continue to represent more than
two-thirds of Nigeria’s external debt profile, when the cost of
servicing domestic debts is ridiculously far more expensive than
servicing external debts? Why should government continue to borrow
internally when in so doing results in insufficient funds, skyrockets
the cost of borrowing and above all, crowds out the real sector from the
money market? Shouldn’t the high cost of domestic borrowing override
whatever are the assumed benefits? Since both London Interbank Offer
Rates (LIBOR) and the US Treasury Bonds rates offer far better interest
rates for sovereign borrowings, why have we continued not to take
advantage of cheaper interest rates?
14. Your references to the country’s economic growth profile have
always been based on Fitch, Standard and Poor’s, and Moody’s ratings.
Are you aware that these same rating agencies are being sued in New York
(with case # 652410/2013) by two Bear Stearns hedge funds for
fraudulently assigning inflated ratings to securities in the run-up to
the 2008 financial crisis? If you do, why do you insist on accepting the
rating as reliable.
15. How much exactly has been the amount of money lost in government
revenue as a result of import duty waivers in 2011, 2012 and 2013?
Provide the names and beneficiaries and justification for same. In your
opinion as the minister of finance who oversees the economy, what are
the implications to the country’s economy? What efforts have you have
made to stop this waiver policy, which is distorting the economy? Our
non oil income has dropped in 2013. A case where increased tariffs on
various items effectively reduced importation to zero in some sectors.
However, those items now find their way into Nigeria through our
borders. Does it make any sense to increase these tariffs when we have
such porous borders? As an example, officially, Togo imported more rice
this year than Nigeria.
16. It was reported that the FIRS is to engage foreign consultants
for tax collection in 2014. Could the Minister clarify this position and
what Nigeria stands to gain? Have the FIRS not been working
effectively.
17. Do you really believe that Nigeria needs a ‘Sovereign Wealth
Fund’ at this critical juncture of budgetary deficits, and having to be
borrowing extensively in an effort to address government revenue gaps?
Shouldn’t the presence of Nigerian Sovereign Investment Authority (NSIA)
simply mean spreading government’s scarce resources thinly? Why will
you insist that no matter what we still need to operate a sovereign
wealth fund? Sincerely speaking, how sustainable are the objectives of
Nigeria’s Sovereign Wealth Fund, particularly in the long-term?
18. You should agree that a lot of Nigerians are interested in the
link between NSIA and the government. Since there is no doubt that
Nigerian Sovereign Investment Authority is an agent of government — or
is it not? The question is: How should we think about the management
structure in so far as major decisions are concerned? Where is the line
between NSIA, as a commercially minded entity, and the government,
especially given government’s policy of having no business doing
business? If, for example, government does not get involved in specific
investments, then, who appoints the external managers involved in
managing some parts of the NSIA funds?
19. Who determines the investment objective and who establishes the
risk parameter for the NSIA’s portfolio? In providing answer to this
question, it is also important to understand and explain why NSIA
recently hired a Swiss national as its chief portfolio investor?
Answering this question is important since it should help us to know who
determines the maximum draw-down that the government would be
comfortable with in extremely negative market environments.
20. What should be your explanations for awarding MasterCard a
multimillion dollar National Identity Smart Cards, when there are
indigenous ICT companies that not only have what it takes but would have
done it cheaper and create local jobs at the same time?
21. Have you taken into considerations how foreign company could use
such information available to it to invade the privacy of Nigerians?
22. What are reasons for SURE-P to give preference to Chevrolet cars
for SURE-P taxis, when it is known that not only are such cars very
expensive to maintain compared with Asian and European cars, but also
are also not fuel efficient and not durable on our roads?
23. Honorable Minister of Finance, you will agree that SURE-P is very
important to the people of this country, taking into cognizance that it
is the only thing they stand to gain from the increase on petroleum
product pump prices almost 2 years ago. Who is in charge of the
management of SURE-P and who takes responsibility for its successes and
failures?
24. You will agree that inasmuch as the interest rate regime is
critical to the real sector borrowing decisions, most principal factor
in making borrowing decisions is the business’s expected rate of return
on investing borrowed money? The question, without efforts to protect
local businesses from their foreign counterparts, the high cost of doing
business in Nigeria, puts them at such a disadvantaged position that it
makes no economic sense borrowing to invest in their local businesses,
why should we expect private sector firms to be investing in the
economy?
25. You are quoted as saying, ” Very soon, the US would become a net
exporter of oil…So, it would be disingenuous for anyone to say that just
because the price of oil has hovered at around $100 per barrel, it
cannot crash…Lest we forget, as recently as 2008, oil prices crashed
from a peak of $147 per barrel to $35 per barrel ina space of months
triggered by the global financial crisis. Is the minority leader saying
he has forgotten that?” This forces one to wonder from which source
should the US become that net exporter of oil, given that the US daily
oil consumption was 18.7 million barrels with (10.6 million of which was
imported daily) in 2012? Or, should it be from the shale oil which the
International Energy Agency (IEA) demonstrates to be at two million
barrels daily? In other words, given the IEA global oil price
trajectory, can’t we agree that “There are many constraints on supply
keeping pace with demand’’ which means that within this decade, oil
prices should always hover around $125 per barrel? Answering this
question will help us understand why you insist on benchmarking the oil
price for the 2014 appropriation at below $79 per barrel? In answering
this question, would you also agree that as the global economy shifts
from West to Asia, so will the appetite for global oil consumption shift
from the West to Asia?
As crude oil continues to sell at $100-$110, how low will production
have to fall for us to record a net loss or at what production level can
we break even at a 2013 benchmark of $79.
26. Do you agree that the Excess Crude Account as being operated by
government is illegal and unconstitutional, especially given how it has
been managed?
27. Can you explain with clarity how the ECA is being operated? Also
provide a statement of account of the ECA from 2011 to 2013? Also how
much have we made in excess of the benchmark price from January 2013
till date.
28. If there is nothing like Excess Crude Account, would you have
been demanding lower oil price benchmark for the budget, especially when
the executive arm of government around world is known for demanding
more money from lawmakers in order to be able to meet government
spending obligations, particularly capital spending. Why is the reverse
the case in Nigeria only, notably since 2011?
29. With respect to the Excess crude account and our Sovereign wealth
fund again, there have been allegations and counter allegations on its
legality. Assuming, for the sake of the committee’s enlightenment, the
FGN alone saved its own excess in its ECA/SWF (which is about 52% of the
Federation account) and the states and LGs get their funds in full
compliance with the constitution, what would be the effect on the
economy?
30. Do you believe in the fight against corruption? If you do why has
EFCC not been proper funded? Without properly funding the commission,
how should it be expected to carry out its duties effectively?
31. Can you confirm with figures if we have met our cumulative
revenue projections for 2011, 2012, 2013, and if we have, how and if we
have not, why? Also provide backup performance information under the
various revenue generating agencies—NNPC (Oil and Gas), DPR, FIRS,
Customs, Independent Revenue and other anticipated and unanticipated
revenues e.g. privatization and sales of government properties etc.
32. As Minister of Finance, are you familiar and comfortable with all
the present business arrangements of the NNPC? Why were these business
arrangements excluded from the MTEF which used to be the practice?
Provide all the present business arrangements, the parties involved, the
share of each party, and justifications for such.
33. Provide details of government stake in NLNG. All categories of
revenue under the NLNG and total amount generated so far and evidence of
remittances.
34. Why do you always prefer a lower benchmark which leaves
government with wider deficits and your attitude of no qualms with
domestic borrowings at excessively high interest rates to balance
deficit as against our position of increasing benchmark to reduce
deficit which consequently reduces domestic borrowing, that frees up
funds for the real sector of the economy, thereby bringing down the
interest rate, increased private sector investments and creating jobs.
35. What is the total amount expended by certain statutory agencies
of government without appropriation for 2011, 2012, and 2013? Also
provide aggregate appropriated expenditure for the same period. As the
Coordinating Minister of the Economy, do you feel comfortable with
allegations that almost equal amount of our yearly aggregate expenditure
is being spent without appropriation, yet we are crying that the
country is running short of revenue?
36. Between May 7 and 9, 2014, it is expected that Nigeria will be
hosting World Economic Forum on Africa. Who will finance this event and
why? In concrete terms, what are the expected tangible benefits to the
country in return to justify hosting such expensive event that will
require lots of money for logistics, accommodations, security,
especially given that South Africa that recently hosted the event has
nothing to show for it.
37. If you should for any reason say it will attract foreign
investors, the question, then becomes, what kind of foreign investors
are we talking about here because as we all know, no serious foreign
investor needs to attend such a forum in Nigeria in order to recognize
that our country should have been one of the world’s favored investment
destinations had our perennial infrastructure deficit been addressed
head-on?
38. Most of the developing economies like China, India, and Brazil
that the world is today celebrating as economic success wouldn’t have
become this successful without adopting multi-year development plans.
Why after knowing that their successes are as a result of carefully
designed multi-year economic planning, we are yet to adopt such a
multi-year development model? In other words, why wouldn’t you agree
that Nigeria too needs that in order to move faster and more sustainably
in its quest for industrialization and economic diversification and job
creation for millions of the country’s unemployed young men and women?
39. As the Coordinating Minister of the Economy, can you precisely
clarify how much is AMCON’s debt exposure and what will its defaulting
mean to the country’s economy?
40. Why are we using the 10 to 15 years moving average to arrive at
your 2014 proposed benchmark as against the traditional 5 to 10 years
moving average we have always used? Is it because using the 5 -10 year
average will not give you the benchmark price you desire?
41. This time last year you informed this committee that our
external reserve position was about $48 billion and the balance on our
excess crude account was about $9 billion. You also said that the plan
was to grow these balances to about $50 billion and $10 billion
respectively. However we are hearing that the balances have dropped to
$43 billion and $3 billion respectively. And you are saying all is well?
42. Crude oil projections for 2013 were 2.53 million barrels per day
while actual figures as supplied by the NNPC/DPR/MTEF have averaged
about 2.3 million barrels per day giving a shortfall of about 9%. Could
this alone have caused such a drastic reduction in our reserves and
savings positions?
43. Is any money missing from our anticipated revenue from the NNPC
in particular and oil industry in general. If there is, how much? If
not, how come such issues emanate from high offices in the executive arm
of Government?
44. Referring to the pre-shipment inspection of exports act of 1996
and the Federal ministry of Finance export guidelines. If any good (oil,
gas or non oil) is exported from Nigeria the exporter is compelled to
repatriate these proceeds through the domiciliary account of a Nigerian
bank. What has been the effectiveness of these laws? Is there full
compliance.
45. If there has not been compliance, would it not make it difficult
for us to build up our foreign reserves? Could we not say that the main
thrust of the CBN letter was that our foreign reserves are not growing
even though there has been a consistent high selling price of crude due
to the fact that huge funds are not being repatriated at all or are
repatriated through the black market?
46. Could we say that the issue is not so much that money is missing
(which is yet to be determined) but that proceeds that should have found
their way back to the Nigerian economy have grown wings or they fly in
through the black market, allowing oil industry players have a field day
making spreads of up to N7 per dollar in some cases.
47. What is the Minister’s take on the apparent stagnation of the
economy as there seems to be very little job creation and growth in
small businesses. Even though the Minister has read out growth figures
before it is not telling on the average man on the street.
48. Would the Minister say that the various Government initiatives at
job creation have not lived up to expectation as they affect only a
very small part of the population?
49. Wouldn’t the Minister think that the private sector should be the
main driver of job and wealth creation through natural growth of
business and start ups being financed by the banking industry?
50. If so, what does the Minister think it would do for the local
banking industry if this same pre-shipment inspection law and your own
export guidelines are enforced to the letter. The oil industry in
Nigeria is worth about $50 billion per annum. If even $10 billion of
this passes through our local banks wouldn’t that give the economy a
boost with banks now able to fund longer term and bigger projects?