EDITORIAL: The Okonjo-Iweala Years As Finance Minister

imageWITH less than two weeks to the end of the Goodluck Jonathan Presidency, Dr. Ngozi Okonjo-Iweala, the Finance Minister and Coordinating Minister for the Economy, is desperately re-casting herself as a “reformer.” When she is not blaming state governors for fiscal abuse, she is writing memos to statutory agencies railing about abuse of waivers and exemptions or offering unsolicited advice to the President-elect, Muhammadu Buhari. But no matter how hard she tries, she will forever share the blame for the country’s present economic predicament with her principal, President Jonathan.

Finance is the most vital ministry in any government. Its business touches on every other ministry, its fingerprints all over every minister’s policies and its influence reaching the inner recesses of departments and agencies. Globally, some finance ministers have been widely credited with spearheading key macroeconomic reforms that helped turn the economies of their countries around and also leading anti-corruption drives.

Appointed in July 2011, Okonjo-Iweala’s job description goes beyond ensuring that systems are in place for the efficient monitoring and reporting of all government transactions. She also doubles as the co-coordinator for the economy based on her assumed glittering credentials as a celebrated minister for about three years (July 2003 to October 2005) during the Olusegun Obasanjo administration and as the Managing Director of the World Bank between October 2007 and July 2011. Both locally and internationally, nothing but a sterling performance was expected.

But four years on, how did our super minister fare in government? Any assessment must recognise how the minister met the economy, her vision and plan for reforms and what she is leaving behind. “Policy actions must focus on keeping the exchange rate flexible and market-based in order to help spur diversification; curbing the fiscal deficit and keeping an eye on debt increases, especially in domestic debt; and managing the bank recapitalisation exercise with the utmost transparency and fairness,” she had said in 2010.

And during her Senate screening, she insisted that the main problems in the economy of the country had to do with creating jobs, saying that “we have unemployment rate of about 14 to 16 per cent, but very large under-employment.” At a 2012 roadshow in London, she had this to say about debt: “I will be the last person and President Jonathan will also be the last person to subscribe to a situation in which we would pile up debts.” She had also argued that “higher fiscal deficits financed by selling domestic bonds could crowd out private investment.”

And what is the scorecard now? Okonjo-Iweala’s four years in government has left the economy rudderless and government finances gasping. Steelier performance in job creation sets good governments apart from mediocre ones. According to the National Bureau of Statistics, Nigeria’s unemployment rate averaged 14.6 per cent from 2006, 21.1 in 2010, reaching an all-time high of 23.9 per cent in December 2011. The National Population Commission says the NBS figures “clearly illustrated the deep challenges in Nigeria’s labour market, where the nation’s rapid economic growth has not translated into effective job creation.” With the old method, the NBS new methodology would have put the rate at 24.3 per cent for the fourth quarter of 2014.

Evidence of poor management is also obvious in the borrowing binge of N473 billion in the first quarter of this year to meet recurrent needs when total planned borrowing for the year is N882 billion in a proposed budget of N4.3 trillion and the ongoing crippling fuel scarcity. She insists that “despite the economic challenges the country is facing, the Jonathan administration is leaving some solid economic legacies for the incoming Buhari government.” She has also continued to assert that this government “has diversified the economy.” But we assert that on certain critical issues vital to sustainable economic growth, her claims are becoming a sick joke.

Jonathan is leaving behind no major signature infrastructure or radical reforms that can fundamentally transform the economy from its dependence on oil and gas to a multi-export one. There has been no fundamental structural reform and going by her own admission at an Atlantic Council/Thomson Reuters event in 2014, “Some 70 per cent of government revenues come from taxes on the oil and gas sector, and oil and gas make up more than 90 per cent of exports…”

No one expected Okonjo-Iweala to hold a magic wand, but not many bargained that the country’s economy will hit the floor and leave its finances bleeding on her watch. In the key areas of financial prudence, budgeting, recurrent-to-capital spending ratio, public debt, employment generation, book-keeping and privatisation, the economic team has been sub-par.

Not wanting to rock the boat, she caved in easily to the fecklessness and venality of Nigeria’s politicians. If not, Okonjo-Iweala will have to explain how as coordinator, the team could not in four years initiate any concrete action to promote new refineries or privatise the four state-owned moribund ones. Instead, the former World Bank managing director oversees a system of paying spurious subsidies for refined imported petroleum products. For a nation that produces 2.3 million barrels of crude per day, this is disgraceful. In spite of all her gratuitous claims at international fora, reforms have gone undone; roads and electricity remain unavailable, recurrent expenditure still unchecked and national debts ballooning.

We have not seen any expertise in budgeting either, instead, the process has become one huge mess, with votes bizarrely allotted, year after year, for kitchen equipment, cutlery and painting of gates by some departments. The fraud-prone service wide vote has also ballooned, reaching over N490.58 billion in 2014 in a budget of N4.64 trillion.

We were never convinced she was equipped to fix those problems. Charles Soludo, a former Central Bank of Nigeria governor, estimates that the treasury has lost about N30 trillion in avoidable leakages over the past years. It is even disingenuous to ascribe to her credit for the Excess Crude Account and reserves that climbed up to about $65 billion even when crude prices had declined and for Nigeria’s exiting a debt trap of over $30 billion by 2007. The kudos rightly belongs to Obasanjo. That explains why in her second coming and under a different government, the reserves have plummeted to less than $30 billion, the ECA to $3.1 billion, while current total debt, local and foreign, jumped to $63.5 billion, with the Federal Government’s share of domestic debt at $43.18bn. The much vaunted creation of a Sovereign Wealth Fund, now at a paltry $1.55 billion, is ridiculous when compared to what other oil-rich countries like Algeria with $77.2 billion, have piled up. The development of non-oil revenue that would have effectively minimised risks to debt sustainability has been run-of-the-mill at best.

Like Lamido Sanusi, who insists that on Jonathan’s and Okonjo-Iweala’s watch, over $20 billion oil revenues have not been accounted for, Soludo asserted in February that “gross mismanagement has denied the country of some $60 billion” that should have come to our reserves.

Impervious to constructive criticism, her stock-in-trade is to blame others for failures. We believe that rather than blame everyone else for the economic mess, Okonjo-Iweala should do a self-assessment and ask why, under her, N603 billion was lost to waivers, exemptions and concessions in the nine months to September 2014, compared to a total of N276.94 billion in the eight years to 2012. Rather than take a hard look at abuse, she characteristically reacted with impetuous arrogance and obfuscations when this newspaper warned against the continued misuse of the fiscal incentives. Now that she is on her way out, she is reported to have queried the Nigerian Investment Promotion Council for abuse of waivers. The waiver scandal that is still dogging the Jonathan government even as it winds down is poisonous to Okonjo-Iweala’s reputation. Her ambivalence in the face of the 2012 fuel subsidy scam has also been painful.

The minister’s performance has been substandard, her legacy doubtful. She will be judged by among other things, the failure of this government to refine petroleum locally, preferring to canvass only removal of subsidy; by the record-smashing profligacy of a government that has depleted the ECA to $3.1 billion and other special funds at a time of booming oil trade; by the failure to see through the privatisation of refineries and other downstream oil and gas assets – no single new refinery has been built and the existing ones are operating at about 10 per cent capacity; by failure to reduce recurrent spending in favour of capital; by the terrible mess at the Lagos ports and failure to reform the corrupt Nigerian Customs Service, a Finance Ministry parastatal. Her job creation policy has been such a notable failure.

With an eye for a red carpet reception by the international community, we can only wish her the best in her future endeavours.


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