I Don't Want To Predict When Recession Will End — Finance Minister

Minister of Finance, Mrs. Kemi Adeosun

The Minister of Finance, Mrs. Kemi Adeosun, has said that she cannot predict when the nation will get out of the current economic recession.

The Punch report continues:

She, however, said that some of the efforts of the government to reflate the economy had started yielding results.

The minister, who spoke in an interview in Abuja, stated, “I don’t want to predict when we will get out of recession. Let me tell you that we will get into growth and that’s how you get out of recession, because of the stimulus that we are providing.

“And it may take longer than we would like, but we will definitely get out of it. We are already seeing some positive signs in agriculture and solid minerals, with what we are trying to do with other sectors, I am very sure we will get out of it soon.”

The Governor of Central Bank of Nigeria, Mr. Godwin Emefiele, had last week stated that the country would start getting out of recession by the fourth quarter of the year.

He had said, “We are already in the valley, the only direction is to go up the hill and the government is doing everything possible to ensure that we move up the hill. I am optimistic that based on the actions being taken by the monetary and fiscal authorities, the fourth quarter results will show evidence that we have started to move out of recession.

“The worst is over. The Nigerian economy is on the path of recovery and growth. So, please if you are a bystander or sideliner, you are losing; join the train now before it leaves the station.”

To facilitate the recovery of the economy from recession, Adeosun said about ₦770bn had been channelled into the economy for various capital projects this year, adding that the monitoring team in the Ministry of Budget and Planning was putting contractors on their toes to ensure that they delivered the projects.

Investors interested in Nigeria

The minister explained that despite the recession, lots of foreign investors were still interested in coming to invest in Nigeria.

As a demonstration of their interest in the country, she said the US$1bn Eurobond being floated by the country had received a lot of commitments from investors, adding that the funds would start coming in before the end of the year.

Adeosun added that the report of the committee set up last month to review the national tax policy would be ready this week

No final decision on asset sales

She also said that the Federal Government had yet to take a final decision on which of the country’s national assets it would dispose of to finance the 2016 budget.

The position of the minister is against the widely held belief that the government has concluded plans to dispose of some important national assets such as the Nigerian Liquefied Natural Gas, the Nigerian National Petroleum Corporation and the refineries.

The planned sale of the assets is being opposed by the organized labour, civil society organizations, industry stakeholders, professional bodies and financial analysts.

But Adeosun said while the government was mindful of the feelings of Nigerians, it was currently faced with serious financial challenge, which had made it imperative to raise funds from other sources.

She said the government recognized the fact that funding could be raised through borrowing, but lamented that this was not the best option now owing to the huge infrastructural deficit in the country.

The minister added that the type of financial resources needed to fund critical projects that would unlock the economic potential of the country could not be raised from borrowing, hence the need to dispose of what she described as underutilized national assets.

She said, “I think there are a number of assets that are being considered and I don’t think we have said this one or that one. There are some unused assets that are just lying idle, which people have come and suggested that ‘these things you are not using, can we lease them from you for money?’

“Hence, when they lease them from us, the taxes are still going to come to us. So, there are some things the government is sitting on, we don’t have money to do it, it makes sense for me to unlock those things. So, they bring money into the economy at these difficult times so that we can move forward.

“We have not got to the stage of saying it’s this asset, or that. But it’s more of the conversation around should we just keep on borrowing or shall we know that things are a lot more difficult than we envisaged and turn on to an alternative strategy, which is looking at some of the underutilized assets and releasing them.”

She added, “We think that the infrastructure challenges that we face are so serious and the kind of money that we need, we can’t borrow. When you have an accumulated deficit, you need to look for the money that will sustain what you are doing for the next three to four years.

“That is what we are doing, having more of a strategic approach so that over time, we will borrow less, and which of course is good.”

When asked what type of sale arrangement the government was considering for the national assets, the minister said this depended on the asset classes.

She said, “It depends on which one. There are some assets which you can lease and others you may need to divest from. The investor will also have to look at the risks and the pricing. Some assets just make sense to just leave them and there are some, which you may just sell but still hold on to the majority stake.

“So, it makes sense and you can sell to the Nigerian people and list on the Nigerian Stock Exchange. So, there are different kinds of sales.”

Lending rate reduction

When asked if she was disappointed that the Monetary Policy Committee of the Central Bank of Nigeria did not reduce the benchmark lending rate to make domestic borrowing attractive as suggested by her, the minister said the government would explore other cheaper sources of funds, particularly from international institutions.

She said, “We are looking at a range of options and one of the biggest issues for us was the cost of borrowing. Of course, the government is the biggest borrower. So, what we have said from the beginning was that we will look for cheaper funds to bring down our cost of borrowing.

“Currently, it is cheaper to borrow internationally than to borrow locally. So, we are working with the Debt Management Office to try and refinance some of the existing local debts into external to get lower interest rates and to structure them over the medium term.

“That will reduce our cost of debt servicing and increase the amount of money available for capital projects, which is really our focus.”

₦500bn new housing fund

In a bid to stimulate activities and return the economy to the path of growth, Adeosun said a mass housing scheme that would make Nigerians become homeowners under a mortgage arrangement would commence in the next three to four weeks.

She said under the initiative known as the ‘Family Home Fund’, the sum of ₦500bn had been earmarked to create mortgages for affordable houses for Nigerians, starting with the construction of 100,000 houses annually from next year.

According to her, the housing fund is expected to increase from ₦500bn to ₦1tn to make it possible for the government, through the private sector, to deliver about 400,000 houses annually through mortgages.

The mortgage, according to her, will be created at a single digit interest rate of 9.99 per cent payable in 20 years, with homeowners making an initial deposit of 10 per cent.

She said the low and middle-income earners would benefit more from the scheme as about 70 per cent of the houses would be given out for between ₦2.5m and ₦4.5m depending on the type.

Adeosun said, “We have done a lot of work around how we can bring down the cost. The tag is ₦2.5m and it is a house you can move into. So, we are bringing down the cost.

“These are affordable houses for Nigerians; the scheme is going to be linked with the BVN. One house per person; so, you cannot buy the house and rent it to somebody else.”