Edun: FG Has Exited Ways, Means Financing, Says Economic Reforms Bearing Fruit

•Tells manufacturers to keep dialoguing with CBN on unsettled FX forward contracts  

•MAN: Unsettled FX forwards behind losses being booked by big manufacturers   

•Dangote tells FG to support local manufacturing, investment  

•Rewane: FG should write off DISCOs’ indebtedness

Dike Onwuamaeze

Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, declared yesterday in Lagos that the federal government had exited funding of its financial responsibilities through Ways and Means.

Edun said the government was putting in place a world-class treasury and liability management system that would take Nigeria to where it should be in terms of financial management.

The minister spoke at the 2024 Access Corporate Forum, with the theme, “Nigeria’s Economic Rebirth: Hopes and Implications.”

He stated that evidence from data had shown that President Bola Tinubu’s economic reforms had started bearing fruit.

Managing Director of Access Bank Plc, Mr. Roosevelt Ogbonna, explained that the forum was meant to ensure that the public had a clear policy direction regarding the government and its plan for businesses by giving them insight into economic realities and opportunities.

President of Dangote Group, Alhaji Aliko Dangote, told the corporate forum that it was necessary for government to truly support local manufacturing, saying this is more effective than travelling abroad to beg for foreign investments.

Managing Director of Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, who was a co-lead speaker during the forum, advised the federal government to write off existing indebtedness of the Distribution Companies (DISCOs), sustain the power sector reforms, and seek cost effective electricity tariffs 

Edun said, “We have exited Ways and Means. What does that mean? It means that the government, when it has to pay domestic debt service or foreign debt service, does not go to the central bank to debit the consolidated revenue fund of the government, which means just printing the money.

“But more importantly, we are putting in place, with the backing and support of Mr. President, a world-class treasury and liability management system that will take this country to where it should be in terms of financial management.”

Commenting on the ongoing economic reforms being implemented by the federal government since May 29, 2023, Edu said, “The reforms, from evidence from the data and details that are available to us, are yielding fruits.” He stressed that “the economy is beginning to turn the corner, as we are all witnesses to the improved macroeconomic stability, such as stable exchange rates, improving government revenues, positive and increasing trade balances, current account balances and a total reconfiguration and revamping of government revenues”.

The minister declared that successful delivery of government’s economic stabilisation plan would reinforce the gains being recorded from the reform measures.

He said the plan included the mobilisation of 360,000 farmers to cultivate 360,000 hectares of land that would yield an estimated harvest of 1.4 million metric tonnes of maize, wheat, and cassava because “we must produce the food that we eat”.

He added that the government was providing support and relief to manufacturers through fiscal measures, and disclosed that the economic management team would be reconvened soon, as the government was preparing a document that would put together its economic plan.

According to him, the government aims to reduce the number of taxes businesses are paying to a single digit.

Edun stated, “The rationale is this: 90 per cent or so of the tax revenues that arrive in the government coffers comes from less than 10 taxes.

“There is an ongoing work to bring down the rate of corporate income tax as we are trying to encourage investments in order to grow the economy.

“There will be exemption from VAT for foods, pharmaceuticals, and health products, whereas taxes on luxury items will be adjusted upwards.”

Responding on the controversy trailing the refusal of the Central Bank of Nigeria (CBN) to honour its foreign exchange (FX) forward contract obligations to manufacturers, the coordinating minister of the economy advised Manufacturers Association of Nigeria (MAN) and Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) to keep dialoguing with the CBN for smooth resolution of the matter.

Edun said, “There is a related matter that MAN raised that has to do with backlog of unpaid transactions regarding the supply of FX.

“My colleague (Governor of CBN) in the management of monetary policy in a coordinated manner is unfortunately not here and he is the best person to reply on monetary policy matters.

“However, what I will say is that we understand that the central bank is the counterparty to that issue and whatever the issues are, dialogue and continued consultation is really the best answer.”

He also stated that consumer credit was coming to support purchase of manufactured products, which would be a boom for the manufacturing sector.

The minister added that in the nearest future, Nigerians would be provided with near single digit interest rate on 25-year mortgages to ignite the construction sector.

Dangote emphasised the need for government to truly support local manufacturing in the country. He said this was more effective than travelling abroad to beg for foreign investment.  

Dangote stated, “What attracts foreign investment is domestic investment. No domestic investments, no foreign investments!     So, we have to make sure that we support our domestic investors.

“I went to two places on Wednesday and I was a bit angry. I wanted to eat snacks and all the biscuits that I was given in these two different places were made in China, which is wrong.

“If we are consuming made in China biscuits, it means that we are actually creating jobs in China and creating poverty here.

“So we need to have proper support for domestic industries. We must give the SMEs all the support to survive against all these dumping.”

Rewane, a co-lead speaker at the forum, projected that Nigeria’s economy would hit $400 billion in 2026, from its current size of $368 billion, to become the second largest economy in Africa.

However, Rewane advised the government to cancel existing indebtedness of the DISCOs, sustain the power sector reforms, and strive for cost effective electricity tariffs.

He added that the pump price of petrol would go higher before coming down in 2026.

According to Rewane, “We (Nigeria) spent N3.5 trillion bailing out banks. We spent another trillion bailing out state governments. For God’s sake it is time to spend some money to bail out the DISCOs and have meters.

“This will enhance power supply, improve telecoms performance, the entire country grows and everyone is happy.”  

Rewane warned that Nigeria would be doomed if investments were not made in telecoms infrastructure. 

He said, “If Airtel, Glo and MTN shut down their systems, there will be no e-transactions in the financial and aviation sectors; no INEC’s elections, no BVAS and people will riot immediately.”

Rewane added that Nigeria was faced with a growth problem rather than revenue problem.

“You can collect all the revenues you can in the world, but it will get you nowhere,” he said, adding, “Revenue is necessary but not sufficient. Growth is both necessary and more sufficient.

“Growth is a function of investment and you must treat your investors well by not what you say but by what you do.”

In his own contribution during the corporate forum, Director General of MAN, Mr. Segun Ajayi-Kadir, pointed out that successive governments in the country had declared their intention to grow domestic production, but failed to show adequate interest in the growth of the manufacturing sector.   

Ajayi-Kadir said, “There is always intention to grow the sector, but at the end of the day, it is either lack of total commitment to put policy into action or that the sector is crowded out in terms of priorities.

‘So, the manufacturing sector in Nigeria has continued to perform at less than 50 per cent of its install capacity.” 

The MAN director-general added, “There is still the issue of the unsettled $2.4 billion FX Forwards contract that the CBN, for inexplicable reasons, is still holding. Most of our big industries are declaring losses and some of these losses are traceable to this issue of not honouring FX Forwards contracts.”

Similarly, Director General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, said the plight of the SMEs should keep the finance minister awake at night because some of the policies of the government were stifling businesses. “Sometimes the policies are great, but their implementations are zero,” Almona said.

Professor of Capital Market, Professor Uche Uwaleke, said right instruments were not being deployed in the country’s debt market.

Uwaleke pointed out that the Sukkuk bond for infrastructure development constituted less than two per cent of the federal government’s debt structure.

He explained, “If you look at the borrowings that have been done overtime, in my view, the right instruments have not been used in borrowing in the domestic market.

“When we borrow from the market, it is important that we use more of infrastructure bonds instruments because that is when we can be sure that the proceeds are tied to projects.

“My recommendation here is that we should choose to use more of infrastructure bonds.”