Those reforms included a pledge to consolidate Government spending and move towards capital expenditure, build fiscal buffers against an oil price shock and attempts at major reforms at the ports.
However, as the credibility gap grows between the finance ministry’s pronouncements and the reality of a rollback of each of the reforms by vested interests, investors are suddenly wondering where the Okonjo – Iweala of 2003 – 2006 (who took on then president Obasanjo- an ex military general – and eventually resigned when politics overshadowed her attempts at reforms), is.
In 2012, the finance ministry rolled out a series of reforms aimed at sanitising Nigerian ports notorious for corruption and a customs service often with an incentive to slow down the clearance of goods, rather than speed them up.
A plethora of Government agencies where sacked form the ports, while 24 hour port operations was introduced. It seemed to work for a while; cargo dwell time fell from an average of 20 days to under seven days.
Now a new destination inspection scheme, championed by the customs service threatens to unravel most of the gains and has gotten major manufacturers worried.
“Around March or April it took 5 – 6 days to clear our goods, now our clearing times have doubled and it is going to get worse,” the CEO of a major FMCG manufacturer with extensive operations across the country, told BusinessDay.
“The customs may make it unimaginable. We foresee mass interventions at every level with this new scheme and a doubling of agencies we have contact with before our goods are cleared.”
The Medium Term Expenditure Framework (MTEF) 2014-16 proposed by the finance ministry also shows a major shift towards recurrent expenditure, away from capital votes, a reversal of the gains made in the 2013 budget.
According to the Finance Ministry in an August 2012 release, “recurrent expenditure will decline from 71.47 percent in 2012 to 68.66 percent in 2013 and continue to decline in the medium-term. Within the same period, capital expenditure is expected to rise from 28.53 percent in 2012 to 31.34 percent in 2013 and will continue in like manner in the medium-term.”
Now however in the current MTEF, recurrent expenditure has increased to 74 per cent, while capital expenditure has been fallen below 2013 levels to 26 per cent.
Meanwhile the county’s fiscal buffers continue to evaporate.
The oil savings in the Excess Crude Account (ECA) part of earlier reforms introduced by Okonjo-Iweala (in her first stint) is down 60 percent to $3.6 billion in November, from $9.2 billion in January, 2013. The account held $20 billion in 2007.
The newly set up Sovereign Wealth Fund (SWF) is also stuck at $1 billion as at November, with no new transfers to the fund by the Federal Government ,after two years.
The finance ministry had earlier said the FG would begin to transfer its share of the ECA to the SWF.
“The Nigerian federal government plans to step up contributions toward year’s-end and is targeting $5 billion for the wealth fund in the medium-term,” Okonjo-Iweala said on July 2.
While all tiers of government, including the powerful state governors are complicit in the decline of the windfall oil savings (ECA), and the stalling of the growth of the SWF, the onus ultimately lies with the FG and Finance Ministry to cut off the money sharing party.
Nigeria relies on crude exports for about 95 percent of its foreign-currency earnings and about 80 percent of government revenue.
Its low fiscal buffers (ECA and SWF balance of $4.6 billion in November) are equivalent to a mere 1.7 percent of GDP, compared to a fiscal savings median of 65 percent of GDP among major oil exporting countries.
In the World Bank’s latest ease of doing business ranking, Nigeria fell 9 places to rank 147 from 138 last year.
For Okonjo-Iweala the stakes couldn’t be higher going into 2014. Confronting vested interests opposed to reforms will mean restoring her credibility gap and moving the reform process along.
By: PATRICK ATUANYA.
Culled from Business Day Online.
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