The Committee on Finance of the House of Representatives has sent to
Dr. Ngozi Okonjo-Iweala, the Minister of Finance & Coordinating
Minister for the Economy, 50 questions they want her to show up and
answer.
In a letter signed by its chairman, Dr. Abdulmumin Jibrin inviting
the Minister to make a comprehensive presentation on the state of the
economy, the committee cited concerns that what the Minister
consistently tries to make Nigerians believe as the true situation is at
sharp variance with the reality on the ground.
It also said the invitation has become imperative because the
Committee has concluded that what senior officers of the executive
branch say to legislators in private regarding the sad situation of our
economy and the so called dwindling revenue base is different from
positions they express publicly.
Admitting that the Minister may lack the time to answer all its
questions in one sitting, as well as to avoid any element of surprise,
the committee sent the 50 written questions and observations to which
they seek answers and clarifications.
“You are to answer these questions and provide clarifications where
necessary in your submitted response to the Committee within two weeks,
after which the Committee will schedule an appearance for you to come
back and defend your presentation,” the letter said.
Below are the 50 questions:
House Committee on Finance
Questions for the HMF/CME on the State of the Economy
1. What should you consider as the major economic achievements of
this government in the 2013 fiscal year and why? In your explanation,
we will need facts and figures in demonstrating such achievements.
2. You have been credited with many announcements regarding
Nigeria's economy as one of the fastest growing economies in Africa. If
the economy is one of the fast growing economies, what is exactly
growing the economy? What role does government play in the said economic
growth, especially given that as high as 80 percent of the country's
total annual budget spending still goes into recurrent expenditure?
3. Since your arrival as minister of finance in 2011, you have
publicly announced the need to reduce the recurrent expenditure so that
more money would be made available to capital spending which is critical
to growing and diversifying the country's economy. How far has
government succeeded in making these necessary cuts; and where exactly
have these cuts been made in this effort to reduce recurrent
expenditure? In other words, based on real amount spent on capital
expenditure, how much reduction was made in 2011 against 2010, in 2012
against 2011 and in 2013 against 2012?
4. You are known to be celebrating a single-digit GDP growth. But
speaking recently at a breakfast dialogue with some members of the
organized private sector in Lagos, organized by the Nigerian Economic
Summit Group (NESG), you were quoted as saying: “We are growing, but not
creating enough jobs. That is a very big challenge…We need to grow
faster. I think it needs to grow at least 9 to 10 percent to drive job
growth the way we want.” Don't you agree that a good finance minister
managing an economy like ours should be celebrating a GDP growth as high
as 20 percent annually? Why is it that our economy cannot grow beyond a
single digit? How many jobs are being created as a result of these said
growths? In which sectors of the economy are these jobs created? If in
private sector, what contributions is government making to further
assist these private sector firms?
5. In the presence of Nigeria’s huge infrastructure deficit, why
is it that the country's debt-to-GDP at about 19 percent in 2012 remains
one of the lowest in the world when compared to nations already with
world-class infrastructure and industrial economies such as America’s
105 percent, Brazil’s 65.49 percent, India’s 67.60 percent, and South
Africa’s 40.9 percent?
6. Since facts don't lie, have you any disagreements with the
September 4, 2013 Global Competitiveness Report of the World Economic
Forum for 2013-2014, which ranked Nigeria 120th out of 148 countries
ranked in the Global Competitiveness Index, including being ranked far
behind some African countries such as Mauritius 45th, South Africa 53rd,
and Kenya 96th?
7. ''For the first time in Nigeria’s 53rd year history, we have
successfully privatized the electric power industry,’’ so said the
President at a recent meeting in London with some foreign investors. As
minister of finance should you agree that the recent privatization of
the country's power infrastructure is worth celebrating as a major
economic achievement in 2013, when in reality there is little or nothing
to show as an improvement in the country power supply? Also why our
rush to wholesale privatization of the power sector when countries like
South Africa, generating as high as 42,000MW still have their power
sector mostly in public hands?
8. What was your reaction to the November 12, 2013 statement
credited to the World Bank Country Director for Nigeria, Marie-Francoise
Marie-Nelly, who said that over 100 million Nigerians are today living
in absolute destitution, representing an unheard-of 8.33 percent of the
world’s total number of people living in destitution?
9. Nigerians are increasingly perplexed that these days nothing
happens without government borrowing. And for most Nigerians, it is
frightening how those managing the economy are just dragging us into
excessively unproductive debts. More worrisome is the fact that every
effort is being made to hide the details of the country's debt stock
from Nigerians. Where are the facts that the country's current high rate
of borrowing is productive, let alone have the ability to be repaid
without having to resort to more borrowings?
10. Is prudence in our borrowing simply
reduction in borrowing or simply constructive borrowing with government
putting necessary measures in place to ensure that domestic debt profile
is properly supervised and utilized by curbing corruption?
11. From Debt Management Office (DMO) 2012
Annual Report, the total public debt outstanding between 2008 and 2012
for external stock rose from $3.72bn to $6.53bn, while domestic stock
rose from $17.68bn to $41.97bn. The total debt service the same period
saw the percentage of external debt service drastically reduced from
11.46 per cent to 5.96 per cent while the percentage of domestic debt
servicing grew from 88.54 per cent in 2008 to 94.04 per cent in 2012,
drastically increasing the cost of the total debt service since the cost
of domestic borrowing is atrociously higher than the cost of external
borrowing. How could your debt sustainability analysis rationalize this
without seeing some narrow interests being the overriding reason? Could
this be the explanation why commercial banks in the country are
declaring unheard-of three digit profits and the high Foreign Portfolio
Investment and low Foreign Direct Investment?
12. It's an established fact that the
willingness and ability to borrow do not automatically translate into
economic growth. If you agree with this fact, how productive are the
country's recent borrowings?
13. Why should our internal debts continue to
represent more than two-thirds of Nigeria's external debt profile, when
the cost of servicing domestic debts is ridiculously far more expensive
than servicing external debts? Why should government continue to borrow
internally when in so doing results in insufficient funds, skyrockets
the cost of borrowing and above all, crowds out the real sector from the
money market? Shouldn't the high cost of domestic borrowing override
whatever are the assumed benefits? Since both London Interbank Offer
Rates (LIBOR) and the US Treasury Bonds rates offer far better interest
rates for sovereign borrowings, why have we continued not to take
advantage of cheaper interest rates?
14. Your references to the country's economic
growth profile have always been based on Fitch, Standard and Poor's, and
Moody’s ratings. Are you aware that these same rating agencies are
being sued in New York (with case # 652410/2013) by two Bear Stearns
hedge funds for fraudulently assigning inflated ratings to securities in
the run-up to the 2008 financial crisis? If you do, why do you insist
on accepting the rating as reliable.
15. How much exactly has been the amount of
money lost in government revenue as a result of import duty waivers in
2011, 2012 and 2013? Provide the names and beneficiaries and
justification for same. In your opinion as the minister of finance who
oversees the economy, what are the implications to the country's
economy? What efforts have you have made to stop this waiver policy,
which is distorting the economy? Our non oil income has dropped in 2013.
A case where increased tariffs on various items effectively reduced
importation to zero in some sectors. However, those items now find their
way into Nigeria through our borders. Does it make any sense to
increase these tariffs when we have such porous borders? As an example,
officially, Togo imported more rice this year than Nigeria.
16. It was reported that the FIRS is to engage
foreign consultants for tax collection in 2014. Could the Minister
clarify this position and what Nigeria stands to gain? Have the FIRS not
been working effectively?
17. Do you really believe that Nigeria needs a
'Sovereign Wealth Fund' at this critical juncture of budgetary
deficits, and having to be borrowing extensively in an effort to address
government revenue gaps? Shouldn't the presence of Nigerian Sovereign
Investment Authority (NSIA) simply mean spreading
government's scarce resources thinly? Why will you insist that no matter
what we still need to operate a sovereign wealth fund? Sincerely
speaking, how sustainable are the objectives of Nigeria's Sovereign
Wealth Fund, particularly in the long-term?
18. You should agree that a lot of Nigerians
are interested in the link between NSIA and the government. Since there
is no doubt that Nigerian Sovereign Investment Authority is an agent of
government — or is it not? The question is: How should we think about
the management structure in so far as major decisions are concerned?
Where is the line between NSIA, as a commercially minded entity, and the
government, especially given government's policy of having no business
doing business? If, for example, government does not get involved in
specific investments, then, who appoints the external managers involved
in managing some parts of the NSIA funds?
19. Who determines the investment objective
and who establishes the risk parameter for the NSIA's portfolio? In
providing answer to this question, it is also important to understand
and explain why NSIA recently hired a Swiss national as its chief
portfolio investor? Answering this question is important since it should
help us to know who determines the maximum draw-down that the
government would be comfortable with in extremely negative market
environments.
20. What should be your explanations for
awarding MasterCard a multimillion dollar National Identity Smart Cards,
when there are indigenous ICT companies that not only have what it
takes but would have done it cheaper and create local jobs at the same
time?
21. Have you taken into considerations how
foreign company could use such information available to it to invade the
privacy of Nigerians?
22. What are reasons for SURE-P to give
preference to Chevrolet cars for SURE-P taxis, when it is known that not
only are such cars very expensive to maintain compared with Asian and
European cars, but also are also not fuel efficient and not durable on
our roads?
23. Honorable Minister of Finance, you will
agree that SURE-P is very important to the people of this country,
taking into cognizance that it is the only thing they stand to gain from
the increase on petroleum product pump prices almost 2 years ago. Who
is in charge of the management of SURE-P and who takes responsibility
for its successes and failures?
24. You will agree that inasmuch as the
interest rate regime is critical to the real sector borrowing decisions,
most principal factor in making borrowing decisions is the business's
expected rate of return on investing borrowed money? The question,
without efforts to protect local businesses from their foreign
counterparts, the high cost of doing business in Nigeria, puts them at
such a disadvantaged position that it makes no economic sense borrowing
to invest in their local businesses, why should we expect private sector
firms to be investing in the economy?
25. You are quoted as saying, '' Very soon,
the US would become a net exporter of oil…So, it would be disingenuous
for anyone to say that just because the price of oil has hovered at
around $100 per barrel, it cannot crash…Lest we forget, as recently as
2008, oil prices crashed from a peak of $147 per barrel to $35 per
barrel ina space of months triggered by the global financial crisis. Is
the minority leader saying he has forgotten that?” This forces one to
wonder from which source should the US become that net exporter of oil,
given that the US daily oil consumption was 18.7 million barrels with
(10.6 million of which was imported daily) in 2012? Or, should it be
from the shale oil which the International Energy Agency (IEA)
demonstrates to be at two million barrels daily? In other words, given
the IEA global oil price trajectory, can’t we agree that “There are many
constraints on supply keeping pace with demand’’ which means that
within this decade, oil prices should always hover around $125 per
barrel? Answering this question will help us understand why you insist
on benchmarking the oil price for the 2014 appropriation at below $79
per barrel? In answering this question, would you also agree that as the
global economy shifts from West to Asia, so will the appetite for
global oil consumption shift from the West to Asia?
As crude oil continues to sell at $100-$110, how low will production
have to fall for us to record a net loss or at what production level can
we break even at a 2013 benchmark of $79.
26. Do you agree that the Excess Crude Account
as being operated by government is illegal and unconstitutional,
especially given how it has been managed?
27. Can you explain with clarity how the ECA
is being operated? Also provide a statement of account of the ECA from
2011 to 2013? Also how much have we made in excess of the benchmark
price from January 2013 till date.
28. If there is nothing like Excess Crude
Account, would you have been demanding lower oil price benchmark for the
budget, especially when the executive arm of government around world is
known for demanding more money from lawmakers in order to be able to
meet government spending obligations, particularly capital spending. Why
is the reverse the case in Nigeria only, notably since 2011?
29. With respect to the Excess crude account
and our Sovereign wealth fund again, there have been allegations and
counter allegations on its legality. Assuming, for the sake of the
committee’s enlightenment, the FGN alone saved its own excess in its
ECA/SWF (which is about 52% of the Federation account) and the states
and LGs get their funds in full compliance with the constitution, what
would be the effect on the economy?
30. Do you believe in the fight against
corruption? If you do why has EFCC not been proper funded? Without
properly funding the commission, how should it be expected to carry out
its duties effectively?
31. Can you confirm with figures if we have
met our cumulative revenue projections for 2011, 2012, 2013, and if we
have, how and if we have not, why? Also provide backup performance
information under the various revenue generating agencies—NNPC (Oil and
Gas), DPR, FIRS, Customs, Independent Revenue and other anticipated and
unanticipated revenues e.g. privatization and sales of government
properties etc.
32. As Minister of Finance, are you familiar
and comfortable with all the present business arrangements of the NNPC?
Why were these business arrangements excluded from the MTEF which used
to be the practice? Provide all the present business arrangements, the
parties involved, the share of each party, and justifications for such.
33. Provide details of government stake in
NLNG. All categories of revenue under the NLNG and total amount
generated so far and evidence of remittances.
34. Why do you always prefer a lower benchmark
which leaves government with wider deficits and your attitude of no
qualms with domestic borrowings at excessively high interest rates to
balance deficit as against our position of increasing benchmark to
reduce deficit which consequently reduces domestic borrowing, that frees
up funds for the real sector of the economy, thereby bringing down the
interest rate, increased private sector investments and creating jobs.
35. What is the total amount expended by
certain statutory agencies of government without appropriation for 2011,
2012, and 2013? Also provide aggregate appropriated expenditure for the
same period. As the Coordinating Minister of the Economy, do you feel
comfortable with allegations that almost equal amount of our yearly
aggregate expenditure is being spent without appropriation, yet we are
crying that the country is running short of revenue?
36. Between May 7 and 9, 2014, it is expected
that Nigeria will be hosting World Economic Forum on Africa. Who will
finance this event and why? In concrete terms, what are the expected
tangible benefits to the country in return to justify hosting such
expensive event that will require lots of money for logistics,
accommodations, security, especially given that South Africa that
recently hosted the event has nothing to show for it.
37. If you should for any reason say it will
attract foreign investors, the question, then becomes, what kind of
foreign investors are we talking about here because as we all know, no
serious foreign investor needs to attend such a forum in Nigeria in
order to recognize that our country should have been one of the world's
favored investment destinations had our perennial infrastructure deficit
been addressed head-on?
38. Most of the developing economies like
China, India, and Brazil that the world is today celebrating as economic
success wouldn't have become this successful without adopting
multi-year development plans. Why after knowing that their successes are
as a result of carefully designed multi-year economic planning, we are
yet to adopt such a multi-year development model? In other words, why
wouldn’t you agree that Nigeria too needs that in order to move faster
and more sustainably in its quest for industrialization and economic
diversification and job creation for millions of the country's
unemployed young men and women?
39. As the Coordinating Minister of the
Economy, can you precisely clarify how much is AMCON's debt
exposure and what will its defaulting mean to the country's economy?
40. Why are we using the 10 to 15 years moving
average to arrive at your 2014 proposed benchmark as against the
traditional 5 to 10 years moving average we have always used? Is it
because using the 5 -10 year average will not give you the benchmark
price you desire?
41. This time last year you informed this
committee that our external reserve position was about $48 billion and
the balance on our excess crude account was about $9 billion. You also
said that the plan was to grow these balances to about $50 billion and
$10 billion respectively. However we are hearing that the balances have
dropped to $43 billion and $3 billion respectively. And you are saying
all is well?
42. Crude oil projections for 2013 were 2.53
million barrels per day while actual figures as supplied by the
NNPC/DPR/MTEF have averaged about 2.3 million barrels per day giving a
shortfall of about 9%. Could this alone have caused such a drastic
reduction in our reserves and savings positions?
43. Is any money missing from our anticipated
revenue from the NNPC in particular and oil industry in general. If
there is, how much? If not, how come such issues emanate from high
offices in the executive arm of Government?
44. Referring to the pre-shipment inspection
of exports act of 1996 and the Federal ministry of Finance export
guidelines. If any good (oil, gas or non oil) is exported from Nigeria
the exporter is compelled to repatriate these proceeds through the
domiciliary account of a Nigerian bank. What has been the effectiveness
of these laws? Is there full compliance.
45. If there has not been compliance, would it
not make it difficult for us to build up our foreign reserves?
Could we not say that the main thrust of the CBN letter was that our
foreign reserves are not growing even though there has been a consistent
high selling price of crude due to the fact that huge funds are not
being repatriated at all or are repatriated through the black market?
46. Could we say that the issue is not so much
that money is missing (which is yet to be determined) but that proceeds
that should have found their way back to the Nigerian economy have
grown wings or they fly in through the black market, allowing oil
industry players have a field day making spreads of up to N7 per dollar
in some cases.
47. What is the Minister’s take on the
apparent stagnation of the economy as there seems to be very little job
creation and growth in small businesses. Even though the Minister has
read out growth figures before it is not telling on the average man on
the street.
48. Would the Minister say that the various
Government initiatives at job creation have not lived up to expectation
as they affect only a very small part of the population?
49. Wouldn’t the Minister think that the
private sector should be the main driver of job and wealth creation
through natural growth of business and start ups being financed by the
banking industry?
50. If so, what does the Minister think it
would do for the local banking industry if this same pre-shipment
inspection law and your own export guidelines are enforced to the
letter. The oil industry in Nigeria is worth about $50 billion per
annum. If even $10 billion of this passes through our local banks
wouldn’t that give the economy a boost with banks now able to fund
longer term and bigger projects?
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