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Minister of Finance and Coordinating Minister of the economy, Wale Edun speaks with Seun Okinbaloye on Channels TV Politics Today, where he talked about minimum wage, monetary policy, and double taxation, among other issues. Olumide Olusegun brings excerpts
It is a year since President Bola Tinubu was sworn into office. As a man entrusted with a critical aspect of these administration’s objectives, can you briefly summarise what you would say has been your major achievement in your ministry since you took over as a Minister of Finance and the Coordinating Minister of the Economy?
Thank you very much. Thank you for having me for this very important conversation. I would say Mr President has in his first year achieved relative stability in the economy. He has put it on the track of growth and he has put together a package of intervention measures in agriculture in particular which need to be redoubled, they need to be re-emphasised and they need to be further extended to have the full effect. So on the one hand the macroeconomic measures that everybody knows were taken to save the economy basically and bring it back from the age of financial bankruptcy and in the foreign exchange markets from chaos and a market that was stalled and it was illiquid. There was not enough supply coming in and businesses were very frustrated. So clearly the initial measures taken by Mr President to stabilise the economy have led to an inflationary spike in terms of the cost of fuel and secondly in terms of the exchange rate. Also in terms of interest rates, the central bank defined it as its core mandate to fight inflation and the number one tool used for that is pushing up interest rates. In a nutshell, those were necessary actions but that led to a spike in the cost of living for the ordinary Nigerian as well as increased costs for businesses. However, those measures are beginning to bear fruit. At a time when interest rates are high which normally means that businesses are finding it hard to borrow and invest, the economy is growing. People are finding sources of funding, sources of equity including the government putting in its share of private-public sector funding for infrastructure in particular and that is helping to create jobs and grow the economy. On the other hand inflation, yes is high at 33.69 percent, and food inflation at 40.5 percent is worrisomely high but the fact is that inflation is coming down month on month. It’s down to about 2.3 percent month on month from nearly 3 percent so it is slowing and the yield is expected to reduce as we continue the dry season harvest and then we go into the wet season harvest. That is the place to focus on and a lot of emphasis is being placed on there to get agricultural output up to get prices down and that will be a big factor in bringing down inflation. But also to ameliorate the effect of the initial pain that high elevated indices like you said interest rates, exchange rate, and so forth would cause, there has been an intervention programme, and the first that is the most key is direct payment to Nigerians in all 75 million Nigerians effectively 15 million households was the programme that was laid out and what had happened is that it had to be reset. We all saw and we all know the experience. So the N75,000 immediate payment to Nigerian households so that they can go to the market and buy as an immediate emergency measure stalled at first and now it has been put on the track and is expected to yield dividends in terms of pushing out that help to Nigerians.
The inflation rate has soared; food inflation has gone so berserk now at a 40% exchange rate. Nothing seems to be looking good as far as the economic indicators are concerned. How do you explain all of that?
I think these measures, are a typical fallout from the measures that had to be taken. Higher interest rates to fight inflation and attract foreign currency which was successful. In terms of inflation as I said earlier it is coming down it’s expected and projected to come down over the next few months and as for the other indices, the important thing is that the economy is growing. It is very rare to have a situation where the authorities particularly the monetary authorities set as their target fighting inflation bringing down inflation and prices generally and at the same time have the economy growing. We do have that quarter by quarter compared to the first quarter. Last year’s growth is up to about 2.98 or virtually 3% per annum above population growth compared to about 2.3% this time last year. So you do have the economy going in the right direction and as I said earlier we just need to stay the course and in staying that course amelioration help must be given and is being given across the board. I have said what is going to help, that is going to be given to farmers help that’s going to be given to consumers there’s also help for small businesses for medium-scale businesses and there is going be on Mr President’s table shortly by Monday an economic stabilisation plan that deals with the factors that are affecting big industry big business so that they too can stabilize; begin investing again; grow the economy; create jobs and reduce poverty.
It is hard to convince Nigerians that you are indeed doing the right thing because their lives are becoming more and more difficult by the day. What would you say to the average person who has seen a dramatic decline in his or her purchasing power since this government took over one year ago?
I would say that what we can look forward to in the weeks and even the months to come is an improvement in the situation. We can expect that food prices will come down food availability will increase that is the commitment and that is the focus of government. We particularly have and I in my role as a coordinating minister have a group that’s looking at the presidential panel on social investment programmes. Not only have we put in place a very robust and transparent system for paying people directly under the existing programme, but we are also now sitting together and looking at food availability and nutrition, and that involves not just obviously the Minister for Health and Social coordinating Minister for Social Welfare, Budget, and others. So we have a group that sits every week and focuses on providing additional food under these particular circumstances.
The one thing that is scary now is this food inflation and the skyrocketing price of commodities and the price of food and it is also concerning that it will continue to force Nigerians to reconsider a lot of things about how they live their lives and the quality of their lives. They are being told to tighten their belt in an already harsh economic condition. Are we facing a food security problem Minister?
The food security problem is a worldwide phenomenon. 30% of the world’s population to a greater or lesser extent is food insecure. We have our situation in Nigeria which we are focusing on and I think the issue here is that these areas that are critical to Nigerians are the provision of food, cheaper transport, and creation of jobs, and so on. Those are being focused on as I said special funding and intervention for agriculture and in terms of the growth when you look at the investment in infrastructure; what I will call the jump-starting of a massive infrastructure programme that is the way to the creation of jobs and they multiply effect on the economy to get the economy going again and it is a rarity as you are trying to fight inflation to get the economy growing but that is what is happening and the support that is coming is not just Nigerian businesses that are investing it is also the internationally there is support coming there is agreement generally that Nigeria is on the right track and that if we stay this course we will beat inflation we will get growth going up, even more, we will create jobs and people will find their lives easier.
President Bola Tinubu’s decision on the first day of assumption of office was the removal subsidy. Do you think with the benefit of hindsight that maybe this government could have had more concrete strategies and plans for fuel subsidy removal before the announcement of the single policy?
I think the fuel subsidy removal which was the first major policy of Mr President was necessary. It was overdue and it had placed the country in a fiscally unmanageable situation today. Although this is not what the average Nigerian sees, the revenue of the government, when you look at my role basically as the government treasurer as the coordinator of the economy, we have revamped and renewed government revenue. The procedures that we use now, mean that we are collecting virtually all that should be coming to the government from various agencies, revenue-earning departments, and parastatals and that is increasing and that includes major earnings in foreign exchange which were not being had before and so as a result of what’s been done on the revenue, the government is paving its way. Nigeria is no longer living on borrowed money, it’s no longer living on drawing from the ‘Ways and Means.’ When we have international debts, and obligations to international companies or banks, for instance, the shareholding in the African Development Bank, the shareholding payments to the Islamic Development Bank, hundreds of millions of dollars, we have made them on time, we have kept the reputation of the country intact and that is ongoing. We have paid down N7.3 trillion of outstanding, overdue ‘Ways and Means’ obligation that is overdraft at the central bank. So, the government has put in place a robust mechanism. Not just on revenue but expenditure to ensure that Nigerian’s money is spent visibly transparently and accountably. These measures are not easy to implement. Change management is always difficult but with the president’s political will and backing, we are pushing through these reforms.
A lot of people have criticised this government for towing the Bretton Woods institution’s burdensome policies which have been analysed as anti-people. Is there any commitment made to these institutions by this government in the face of the apparent hardship they are causing the Nigerian people?
Generally, the view of Nigeria as well as I think developing countries in general is that the multilateral development banks, the so-called Bretton Woods institutions are not giving the support that these developing countries deserve. They are not giving this sufficient funding. They are not giving it cheap enough and they are not giving it in sufficient scale to assist in the development process but having said that, they do form a veritable source of relatively cheap financing. International Development Association either money is free. For about 40 years at maybe 1% or thereabouts. What Nigeria has done, is encouraging the support and commitment of those who can fund cheaply. In two weeks, the board of the World Bank will consider a $2.25 billion package for Nigeria. It’s virtually free or almost grant funding; very low interest rate funding and it is not being given on that conditionality. A large part of it about $1.5 billion of it, is what they call development policy operation. Essentially it is in recognition of what has been done to stabilise the Nigerian economy and get it back on the growth path and the funding will come virtually immediately. At least one-half of it will come virtually immediately after that board meeting. That is what we are looking forward to and that is what we are confident we will achieve and it just shows that we know how to use the multilateral development banks to our advantage. We don’t agree with everything they say. We don’t have to agree. well, they are agreeing with our homegrown policies for trying to get Nigeria moving again but in addition, we have learned especially when interest rates around the world were high, that we need to rely on our resources. The tax regime in Nigeria. It’s got a planning to reduce some taxes such as withholding tax which are lopsided but on some companies. Despite that we are looking to increase the amount of taxation that is outside there, that belongs to the government, that is to be collected but in addition, Nigerians have the capability not just to fund in Naira but to fund in foreign exchange. We have a large and successful diaspora. We just announced the other day that we are looking for a domestically issued US dollar bond where mainly Nigerians living abroad, working abroad and Nigerians even living in Nigeria but who have savings abroad, who have money in international banks abroad. We are putting before them the opportunity to come and support the effort of reviving and rebuilding the Nigerian economy through a historic bond issuance which is causing a lot of interest, and a lot of excitement. We think it will be successful and these are examples of the imminent, immediate funding in foreign exchange that will assist in stabilising the exchange rate, bringing down inflation, and helping us to get back on the growth path. I must emphasise though that having reeled off so many things that are being done which are very substantial and fundamental in correcting and making sure that the government has enough revenue and is efficient about its spending. The emphasis is on ramping up food production, dealing with food nutrition, and food insecurity, and helping small-scale businesses and nano enterprises through grant funding. That is being rolled out and it’s being done in a manner as I said before, a world-class standard where you identify biometrically the person that is the beneficiary and then you pay them through a digital process which you can easily reconcile. That is the emphasis to make sure that we ramp up that’s the speed and the scale of the help that is there. Even loans are 9% for medium-scale enterprises up to N1 million for the smaller enterprises and then for the larger enterprises, up to N1 billion funding at 9%, so that those manufacturing firms can invest, grow the economy, employ people, produce more goods that will help to bring down inflation and as I say for the largest enterprises, the economic management team of the president sat down over six or eight weeks now with the private sector, the Manufacturers Association, the Employers Association, the National Economic Summit group, the companies and then with the subnational, the governors. So the economic stabilisation plan which is going to be considered by Mr President and then his measures announced is one that all stakeholders have played a part in creating and we are sure it will be successful and we are talking about a six-month period in which to roll out these benefits and have them achieve the objectives and the aims of helping Nigerians; both consumers, both farmers and manufacturers.
Some will argue that some of the economic policies of this government haven’t worked out at least evidence showing that the livelihood of the average citizen says it all. Opposition figures are saying this government is just embarking on trial and error-economics. What do you have to say to them?
I would say that one of the most objective and impartial judges of economic policies is the rating agencies. In December last year, Moody moved Nigeria’s rating to a positive outlook. In this year early May, Fitch another international rating agency moved Nigeria’s rating to a positive outlook. These are third-party observers of what is going on. What I will always say is that it does take time to have the positive effects come through and I will emphasise, inflation is falling and expected to fall further. Emphasis is being placed on what can bring it down which is ramping up food production; providing fertilizer, providing seeds, and providing technical assistance to farmers, particularly the small-scale farmers who are the majority. Likewise, the government is also investing in infrastructure and it has the support of private sector investors as well. Also, very sophisticated financial markets are coming to the table, and institutional investors are putting their heads together to see how within the laws, guidelines, and regulations we have, they can use a portion of their long-term savings to provide affordable mortgages that will ignite construction in the housing sector. If you have a housing boom, you have an employment boom, these are the strategies and these are the areas in which the government is looking to rekindle the growth of the economy while knowing that certain measures that have been used to stabilise it still need to feed through.
Can you explain the reasons for some businesses are leaving Nigeria? It appears there is fear now about in Nigerian economic climate.
When we look at the economic climate as we said, particularly for the larger scale businesses and I know you are talking about the multinationals’ foreign direct investment or foreign companies. One of the major drawbacks and impediments for them was that they did not have a liquid foreign exchange market. Now we have a willing buyer and willing seller foreign exchange market. It is elevated, maybe it is not at the levels we would like it to be but it’s when you get inflation down, that you can stabilise the exchange rate and even get it coming down similarly with interest rates and so that fight is on and it is an improved environment for them and big investors as a whole. When you look at the oil and gas sector, today as a result of recent measures on the fiscal side economic executive order signed by Mr president has improved the investment climate for gas which we have in abundance and which most people see as a transition fuel which you can still be invested in on the way to greener and cleaner and non-fossil fuels but at the same time, the investment climate for the deep offshore where huge investment amounts are needed and where the technology is particularly sophisticated and therefore you need the top companies in the world operating, the environment for them has been improved with a range of incentives and it is estimated that in the nearest future, those measures will unlock $7 billion of foreign direct investment in the oil and gas sector. When you talk about that sector, we are talking about the kind of areas in which there has been improvement and the companies will always come and go. Of course, we aim to not only keep them but to have them even more coming and investing. We are sure that with the environment that we put in place, they will come and as for the average manufacturing firm, there is a fiscal policy and tax reform committee that has worked hard to put in place a range of measures some of which are included in the economic stabilisation package that will be considered by Mr president and the presidential economic coordination council and therefore they are measures which will help business which is imminent as far as the timing of the introduction. So overall, we are in a difficult place but the direction of travel is up and is towards improvement and so every single day and month, we are looking at an improved situation economically for Nigeria.
In terms of foreign direct investment FBI, how much has this government been able to attract since assuming office and what are the prospects on how they would activate the Nigerian economy?
I think in terms of figures, I have just said that there are $7 billion as estimated is coming in from the oil sector with another major improvement in the economic environment, the national single window project which is an e-community and a trade facilitation platform that will revolutionise what goes on at the ports which will make them much more efficient and make them much more cost-effective and make us much more competitive in terms of our port operation is expected to unleash another couple of billion dollars in economic benefits and of course, Mr president has been on the platforms around the world. Most recently, he spoke at the World Economic Forum in Riyadh. These are all about marketing and everywhere he goes he meets businessmen, he has a trade and business forum to sell Nigeria to investors and the prospects are good. We are expecting trade missions, and groups of businessmen interested in investing from a couple of countries. Imminently one of the things that we need to do on our side is that when you are dealing with a private business, you need to have in place double taxation treaties, for example, investment promotion and protection treaties. So, we are tidying up our end, in terms of those very important agreements as far as private investment is concerned. So, the ball is in our court to a certain extent.
Nigeria’s largely suffered local production issues which makes us a consumption economy. We know our economy can’t survive on these forces and unproductive paths. Is there any direct effort to make Nigeria a production hub rather than a dumping ground?
Certainly, and that starts with infrastructure and like I said, the port infrastructure, the national single window, is a major and relatively complex project to implement, and it was launched by Mr President, thereby signaling and signifying the political will that is behind this project. Likewise, a major infrastructure, the Abuja Rail was just commissioned. All these facilitators of transport, and infrastructure, helped enormously in making it much more competitive and feasible to produce locally. And don’t forget, the elevated food prices and the relatively expensive imports as a result of what has happened with the exchange rate, they lay the ground and they do incentivise in a big way local production and we expect that as we stabilise the economy and hopefully bring down the interest rate, the domestic investors, the lookout businessmen will be the first to go and grab these newfound opportunities. Look at the opportunity by the policy in compressed natural gas in particular and renewable energy in general. The policy of the Nigerian government, as announced by Mr President in Council just a couple of weeks ago, is that there shall be no purchase by government of diesel or petrol or generators. They must be CNG powered, fuelled or they must be electric or in some cases solar powered, any combination of the above. That in itself is a major incentive for investors to come in and benefit from guaranteed patronage by the government. And of course, we must point out that there will be a two-thirds saving in terms of the cost of fuelling a car or bus with petrol, as opposed to CNG. We have already launched the CNG programme. The buses are coming in, some fully built up, mainly also semi knock-down parts. So you have assembly plants all over Nigeria producing these goods. And more importantly, you have the infrastructure for fuelling going up around the country, as well as workshops where people can retrofit, they can convert their petrol cars to CNG fuelled, probably a hybrid where if worse comes to worse, you still use petrol, but they will be able to go for the cheaper CNG fuelled vehicles. And of course, that should feed down to much more affordable public transport fares.
Since the removal of the subsidy on petrol, one will imagine the price will be determined by market forces, but it appears the federal government is manually controlling the price, and experts are saying the government is still paying some kind of subsidy on petrol. Can you explain and tell Nigerians transparently, and truthfully on that issue, because our import bills are different from what the federal government is saying?
Essentially, on May 29, 2023, Mr President removed fuel subsidy in his famous words, ‘Petroleum subsidy is gone’. That is an ongoing situation. The fuel price is determined by dynamics. The exchange rate plays a part. Domestic production of petroleum plays a part because the higher you have production of crude, and it goes up. Mr.President mentioned about 1.2 million barrels per day. It is now 1.7 and going up. And of course, that is the initial immediate source of foreign exchange. So to the extent that the fuel is imported, that means that the more supply of foreign exchange we have, of course, the lower the price, and therefore the foreign exchange impact of fuel is lessened. It is a combination also of pivoting away from petroleum imports by the time we are now focusing much more on CNG. So it is an ongoing conversation and process of ensuring that fuel subsidy is eliminated from the Nigerian economy. That is what Mr. President’s intent is, and that is what is being worked towards. And as I say, we do have reason to be optimistic. Difficult as it is, those particular difficult areas now are what is being focused on. Including, I have said, fuel pricing, to get down transport costs, and even to put purchasing power back in the hands of Nigerians. And the fight against inflation is a fight for all, because inflation destroys not just the value of savings and the value of investments, but it also hurts the whole fabric of society. That is why the Central Bank, as an independent controller of monetary policy, is emphasising it. Nonetheless, the commitment to ease those pains is a very robust one, and it is going to keep having beneficial results as we go down the road. Nigeria is on the right path.
You a part of that negotiation and Labour is saying that they will go on a nationwide strike from tomorrow (Monday). Why is it so difficult for the federal government to come to terms with labour’s demands?
I think in a democracy, a very important process is the wage negotiation process, the right of unions to get together and to bargain collectively. That process is enshrined in law. It’s ongoing. It’s an arduous process. It is a complex and difficult one. But with goodwill on all sides, we will come to a landing that benefits all Nigerians. It is difficult because whilst the worker deserves his wage, and given what’s going on, they deserve a change. In fact, by law, every five years, and maybe we shouldn’t have to wait five years every time to set a new wage scale. The fact is that by law, it is a minimum wage. So it is a wage. You are not setting a wage for federal government workers, for example. In a federation, you are setting a minimum figure that states, local governments, the private sector, and small businesses must pay. To the extent they have the requisite number of workers, they can still be small-scale businesses, they would have to pay for that. And it is a fixed figure, not a scale. So there are elements of how we have set the minimum wage in the past, particularly what they call the consequential adjustments. Given what labour is asking for today, would be unaffordable across the board. And as I say, we have to focus not on the wealthiest payer. We have to focus on the fact that once it’s enshrined in law, everybody who falls into the category of having to pay the minimum wage must pay it. And so, therefore, the affordability has to be taken into account. We probably have to also take into account the fact that there are other ways of profiting and supporting the cost of living of workers other than that particular wage scale. It is an ongoing conversation. I don’t want to in any way prejudice the talks that are going on, except to say that with goodwill on all sides, we will reach a point that is beneficial to Nigerians and also allows the economy to function to the benefit of all.
