Will Nigeria's New Finance Minister Manage It's Huge Domestic Debt?

The much talked about transformation of Nigeria by President Goodluck Jonathan and his team may not take shape in the immediate future as his Minister of Finance who is also the Coordinating Minister of the Economy Dr. Ngozi Okonjo-Iweala said yesterday that she is “not a magician” to turn the economy around quickly. She spoke at a press briefing in Abuja.

There was a lot of hype and expectations when the former Managing Director of the World Bank was included in the President’s cabinet with the hope that she would bring in the magic wand she used in negotiating Nigeria out of the debt trap in 2006 to help grow the economy.

Okonjo-Iweala was however clear yesterday that it would take some time to transform the economy. She said, “I don’t have a magic wand. There is no one person that transforms (the economy). We can’t resolve the problem overnight. It would take time to tackle the problems. We would tackle the problem one by one and paying attention to the debt situation,” she said.

While expressing concern over the rising domestic debt profile of the country which currently stands at $31 billion, she said the $8.7 billion foreign debt is healthy and within the threshold of international borrowing which is 20 percent of the GDP. “We need to look at our domestic borrowing, we need to be prudent, we need to start reducing our borrowing. External debt is extremely low. We need to be cautious about domestic debt,” the minister said.

In her presentation titled “Transforming Nigeria. Creating Jobs: A Short to Medium Term Agenda,” Okonjo-Iweala said the key areas of focus include macroeconomic reforms and stability; structural reforms; investment climate reforms; complete legacy reforms and modernize public sector; fighting corruption; and investment in key sectoral priorities.

She said the government will focus attention on security; infrastructure; agriculture; manufacturing; housing and construction; entertainment and industry; education and health. She said fiscal deficit has been rising and the transformation is targeting 3 percent starting from 2012, away from 3.51 percent in 2011.

She also said recurrent expenditure which gulps 73.4 percent of the total annual budget is “unacceptably high” when compared with other countries and there is a need to reduce it to 70 percent by 2015.mThe capital budget which is currently at 25 percent of the annual budget would be increased by 5 percent by 2015.

On the petroleum subsidy’s removal, the minister said while there was broad agreement on phasing out fuel subsidies, no timeframe has been set for it. “There has been a lot of debate on fuel subsidies and we have all resolved that removing it is a good direction to go on. You have to leave it to us to decide when it is prudent to do so,” she said.

She also said the country’s budget process needs to change. “We need to change the budget process in this country. We can’t bring a budget and then have reservations that go back and forth. The executive has its responsibility and I hope the lawmakers will also take responsibility. We want to focus on 2012 budget to correct some of these problems. By 2013 we will have a much saner budget process,” she said.

She said Nigeria needs to diversify away from reliance on oil, reduce public spending, boost job creation and finish failing infrastructure projects and focus on priority areas. She said Nigerians talk too much and “we are not very good at implementation in Nigeria. We need to change. Nigerians are expecting so much from us and we must deliver to them.”

“We need to work harder. We need to maintain macro-economic stability. We need to manage our fiscal system in a more prudent manner. We can start with recurrent expenditure,” she said.