- FG releases N350bn to reflate economy
Africa’s richest businessman and industrialist, Alhaji Aliko Dangote, Friday advised President Muhammadu Buhari to embark on the sale of state assets to shore up the nation’s cash and foreign exchange reserves, instead of seeking to borrow from the International Monetary Fund (IMF) as his government seek ways to turnaround the recession-hit economy.
The businessman’s advise to Buhari came moments before Nigeria’s credit rating was downgraded to B from B+ by S&P Global Ratings. Aliko told an online news portal, CNBC Africa, that the sale was an easier route to boosting the economy. “I think the real challenge for us is now for us to have the political will in terms of selling some assets.
“I think it’s an easier route than the IMF (International Monetary Fund or the World Bank to borrow money, because what you need to do is actually to beef up the reserves,” he told CNBC Africa.
He told CNBC that Nigeria, which rivals with South Africa to be the continent’s biggest economy, should have been diversified a long time ago. He lamented its over reliance on oil.
However, he was optimistic that Nigeria would exit recession in the fourth quarter of this year and said the country “had all the answers” to bounce back to health. He urged the government to sell assets in some of its joint ventures with the private sector in an open tender process.
He said that Africa Finance Corporation – a development finance institution established in 2007 – would fetch close to $800 million. He said policymakers should also look to sell 100 percent of the country’s stake in Nigeria LNG Limited, a natural resources firm.
“If I had challenges in my company, I would not hesitate to sell assets, to remain afloat, to get to the better times, because it doesn’t make any sense for me to keep any assets and then suffocate the whole organisation,” Dangote told CNBC.
On its part, S&P said in a report on the downgrade that, “Nigeria’s economy has weakened more than we expected owing to a marked contraction in oil production, a restrictive foreign exchange regime and delayed fiscal stimulus.”
Nigeria’s economy is set to contract on an annual basis in 2016 for the first time in 21 years, with its all-important oil industry suffering under weak global prices. The country’s gross domestic product (GDP) dropped by 2.06 percent in the second quarter of 2016, after falling 0.36 per cent in the previous three months.
President Buhari Thursday summoned a group of Businessmen, economists and policy makers to a meeting in Abuja and challenged them to think outside the box to find ways to get Nigeria out of the recession. Minister of Finance, Mrs. Kemi Adeosun, had yesterday said government would release N350 billion (about $1billion) to fund government projects instituted by ministries, departments and agencies (MDAs).
Dangote is worth $12.5 billion and is the richest man in Africa, according to Forbes. He is the owner Dangote Group, which bills itself as the biggest manufacturing conglomerate in West Africa and has interests in commodities.
In the meantime, moves to steer the country out of economic recession has received a boost with the decision of the Federal Government to pump the sum of N350 billion into the economy in the next few days as capital allocation to ministries, departments and agencies (MDAs).
The implementation of the N5,000 monthly stipend social intervention programme of the government is also billed to commence at the end of this month with the release of N60 billion.
Addressing journalists on these developments and government’s plan for the economy yesterday, the Minister of Finance, Mrs. Kemi Adeosun, said: “We are releasing another N350 billion. There will also be the funding of about N60 billion in the social intervention programme, and that is very important in terms of putting money into people’s pocket.”
The finance minister stated that when the N350 billion is released and cash backed in a few days from now, it will bring the total amount released by the Federal Government to N770 billion for capital projects from the N1.8 trillion budgeted in 2016.
According to the minister, “those are the programmes that we really cash backed. The N5,000 to some of the most poor and vulnerable, the home school feeding programme, which is very important. That will also generate some economic activity in a lot of our local governments with women and maybe men cooking for the children.
“And then the ‘Empower the Teacher Call’, that is the graduates that will be going into primary schools as teachers so they will begin to get salaries/stipends from the end of the month.
“So we will be cash-backing these programmes today as part of the N350 billion additional releases, which will take our total capital releases to date to N770 billion.”
Adeosun explained that key projects in power, housing, transport, aviation, water defence and agriculture will get the largest chunk of the disbursement, noting that the rationale behind giving priority to key projects was in line with Federal Government’s belief that “the quickest means to revive the economy entails re-directing expenditure to funding key infrastructure that will impact growth on the economy.”
The finance minister added that the administration was “working hard to redirect the economy from being a consumption economy to a productive economy”. She assured that “the government has what it takes to achieve the goal of getting the country out of recession.”
According to her, “we have a strategic plan that will take us out of this current recession. We are raising money. As you know, the Euro bond is on. We are about to appoint Advisers. We are about raising additional $1 billion.”
Adeosun added: “Two weeks ago, we approved the borrowing plan and that is very important, as we will be borrowing the cheapest money first. We have approved that plan from World Bank, from AfDB with interest rates as low as 1 per cent and tenor as long as 40 years. We are intervening in specific areas, which include agriculture, health, the railway project, and these are very key to what we are doing.”
Speaking on the life span of the recession, Adeosun said: “We don’t think it is going to be a long recession, considering some of the initiatives we have put in place, which will begin to bear fruits soon.”
Another of the government’s plan is to get out of the Joint Venture Companies (JVC) Cash Call burden.
According to her, “this month, for Federation Account Allocation Committee (FAAC) we only got N41 billion from oil and gas. We had to use N110 billion for funding of cash call. If we had that money, we could have pumped that money into the economy.
“We are working with the ministry of petroleum, with Nigerian National Petroleum Corporation (NNPC) to get out from cash call burden.
“Instead of taking money from the federation account for JVC, the plan is to allow those joint ventures to borrow money that they need rather than taking money from the federation account, and that will improve the money in circulation,” she said.
The minister also disclosed that the federal government was doing “a lot of work with the sub-national governments around the budget support plan. Many of them have not been paying salaries for months. We have now been able to support them with additional monies every month from the FAAC account, and many of them have now resumed paying salaries.
“We are monitoring them, because the loan facilities were conditional. We have sent the monitoring and evaluation committee out to go and check that they are actually doing what they undertook to do, and we are pleased to report that many are paying salaries and that will also have a huge effect on demand and help to get the economy moving.”
“We are confident that the plan we put together will work. It is a long term plan that will reposition the economy and make sure that we don’t go through this boom and burst cycles that are driven by the oil price.
“The economy has to be more resilient than that, so that we don’t find ourselves back to where we are.”
She assured Nigerians that government’s contingent plans will be effective in repositioning the economy to ensure the economy does not slip back into recession.
In addition, “any of the programmes of the immediate past administration found to be vital in addressing the challenge of the economy will be sustained by the present administration. The YouWin programme is one of such, which is currently being restructured.”
The Citizen with additional report from Nation
