Nigeria Does Not Have a Debt Crisis: Former Finance Minister Ahmed

Jun.25 — Former Nigerian Finance Minister Zainab Shamsuna Ahmed discusses the potential of returning to her former post, the state of the Nigerian economy, and the effects of the U.S.-China trade war. She speaks on “Bloomberg Markets.”

Former is an interesting word here you only left your post two weeks ago so let’s try it let’s try and make a bit of news here have you had any conversations with president buhari about returning to the finance ministry and becoming finance minister once again no i have not i i have not done that the president is currently in the process of putting together a new

Cabinet i have not had a discussion with him about whether i’m coming back on the cabinet or not would you like to go back yes i would like to go back to the cabinet okay in the same role but in the same role that you in the same role would you do things differently i was there only for nine months i started a number of initiatives that i would love to have an

Opportunity to push the president has decided himself that he will continue the focus of the economic recovery and growth plan now his key commitments to the the population remains the same we’re just going to need to work faster and harder mazama the economy is growing according to bloomberg data 2.6 percent at an annual rate but unemployment is above 23 percent

And inflation is above 11 percent what policy direction would the incoming cabinet take that would be different to what they’ve already been doing we had a very clear and very explicit plan the economic recovery and group plan helped us to come out of a recession we’ve done a lot of the foundational work a lot of building blocks have been put together all we need

To do is to push further because the target of the pe are gp was a four year plan and we’re supposed to move the economy out of recession back on the part of growth which is succeeded in doing today we have attained up to eight quarters a consistent steady growth the economy is stable we have lowered the inflation rate from as high as 18 percent now to about eleven

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Point four percent the monetary authorities have been able to stabilize the currency the nigerian ira for about 1224 months now the naira has been consistently stable at 305 nara – to the us dollars so the indices are all on the right track and all we need to do is to push harder and push faster until we able to reach the growth and special of 7% for the nigerian

Economy part of the problem is that revenue consistently disappoints and more than half of what you take in goes to debt servicing how would you change those metrics quickly so that the government finances might stabilize so since i became minister of finance my preoccupation has been on how to increase revenue 2008 in closed revenue at an average of 55 percent

And that’s really very very tough because when you’re underperforming at that level it means you’re stressed in terms of trying to manage the budget so we have developed a strategic revenue growth initiative which we’ve started implementing an art i get is to increase the revenue to 65 percent minimum up by the year 2019 so that in the next three years were able

To attain eighty eighty-five percent of our revenue targets to follow up on what his question though and she makes a good point about the amount of revenue that goes on that i if you can’t do that is nigeria heading for a debt crisis we don’t have a debt crisis our debt is very much at a sustainable level today the nigerian debt as a december 2018 not today sorry

It’s about nineteen point five percent and that is very low compared to all our peers compared to all our peers all we have is a revenue problem and we have realized that that is a problem that we all have to collectively address we also are working on reducing our costs so that when we spend on capital the spending is more efficient and we save to apply the money

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To two other sectors what we have is a revenue problem and that’s what we’re trying to what we need to address one of the things that is always interesting about countries that produce a lot of crude is that the price of gasoline tends to be quite cheap and that’s definitely the case when it comes to nigeria so at the moment it’s capped at 40 cents 40 or liter

Isn’t it he said effective 40 cents i’m doing that dollars here aleta i pay what i pull up my car here i pay $3 56 and that’s quite a big gap you’re subsidizing the gasoline price in the country is that sustainable a kind of economically and be environmentally no it is not sustainable economically and environmentally and we also have in medium to long term plan

A plan to scale back on that but we also have a population that is very very poor a large number of poor populace and we cannot pull out the subsidy without providing alternatives so the president has directed for us to look at how to provide buffers before that action can be taken you’ve also proposed that though how do you reconcile both of those policies that

You would take away the subsidy for gas but add a value-added tax we are looking at adding value-added tax from 5% to 7.5% 5% is perhaps one of the low west v80 rates globally in the whole world and the increase we’re making is just 2.5% and the increase is not going to be done overnight we’re going to do a lot of consultations because in our country we require a

Change the law to be able to make that increase so the consultation process would be driven and undone within 2019 so hopefully by the by the next budget year 2020 the new increase will will take a will take effect we have just recently had to increase the minimum wage and one of the agreements we had with the labor was that there will be some marginal increase

On v 80 to enable us handle the incremental cost of increasing wages so what then will you do with the imf there is some concerns on the part of the imf with nigeria and policies and you may in fact lose the ability to issue euro bonds what do you see in your future for euro bonds we see a possibility of still doing another eurobond mucho but the decision we took

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For 2019 was that we were going to concentrate on raising debt locally which we have always done but also on raising longer-term lower cost loans through concessionary windows like from the world bank and other multilateral institutions can i ask you a question they were putting – a lot of our fantastic guests that have joined us here at bloomberg for the emerging

Market in frontiers forum that we’re holding and hosting here today has the nigerian economy felt the effects of the trade war between china and the united states and if so how well nigeria does feel the effect of this trade war because we can see also from the movement of our trade balance for example when the u.s. decided to adjust its interest rate we saw fdi is

Moving out of niger we lost as much as six billion naira around the third quarter of 2018 so we know we’re exposed and we know that we have to build fiscal buffers so that such externalities will not have a major impact on our on our economy certainly if this war continues it’s a major risk force we’re watching what is happening and we’ll continue to build fiscal

Buffers right now the official exchange rates muhammad is 306 naira per us dollar where do you see the us dollar going why do i see where do i see the naira going well the us dollar which would then have a run on impact on the naira well if the us dollar depreciates it will definitely affect the naira because a lot of our from currency transactions are dollar

Denominated it will affect the narrow

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Nigeria Does Not Have a Debt Crisis: Former Finance Minister Ahmed By Bloomberg Markets and Finance