Naira devaluation will bring surplus balance of payment -Expert

Do you think the recent devaluation of Nigeria’s currency is a good development?
People may think devaluation is a negative phenomenon in an economy. Devaluation is a reduction of the fixed rate by which one country’s currency is exchanged for other currencies. It portends good for our economy because it is going to correct balance of payment deficit. This implies that a country is spending more money to import than it received from exports. With this devaluation, importation will not be attractive anymore. People will be more attracted to export products out of this country. The eventual effect is that over the years, the country will start balancing its deficit. This means that we are going to be having more inflow of foreign currencies than outflow through importation. It is a macro-economic method to increase the export and discourage importation. It will reduce pressure on the foreign exchange over the years. For now the effect may not be found but in the next few months, more people will be talking about exportation than importation. This will lead to a surplus balance of payment.  

What is medium term expenditure framework and what importance does it have for a successful budget planning?
Medium term expenditure framework is a macro-economic framework that indicates fiscal targets in the mid-term. It is called medium term because it is of a short period of between two and three years. It is a basis for annual budget planning. Its goal is to set out underlining assumptions for the projections and provide evaluation analyses of previous budgets to have an overview of consolidated debts and expenditure. It is provided in section 11 in Fiscal Responsibility Act of 2007. Section 18 of that Act makes it the basis for the preparation of the budget. It is a mechanism to bring a fiscal balance of what the economy looks like in the short term.
Can corruption allow the successful implementation of the medium term expenditure framework of 2015 to 2017?
Yes corruption can allow the implementation because medium term expenditure framework is a plan in the medium term. That plan must be on the table for the government to know what they need to do. With this plan, the government can prioritise what its budget will look like based on funds available. Hitherto government makes projections of what it needs to do based on assumptions. But in this one the debt profile of the government is considered. Granted we talk about corruption, but we must have certain frameworks in place to have a document to work with. Even if corruption comes, it is going to be manageable just as the finance ministry has been managing in the past few years.
What is your comment on losses being incurred by the country in terms of revenue?
Nigeria is actually losing a lot of revenue. We have a drop of about 42 per cent in our productions and that amounts to about 14 million dollars per day. From this analysis the country is invariably heading towards fiscal deficit. There is also competition in the world’s oil market. Nigeria will be heading towards fiscal deficit if we do not increase our revenue drive. We know that the internally generated revenue of this country keeps going down and we don’t understand why. Tax remission as well as other sources of revenue is going down.

What is your take on Nigeria’s economy being solely dependent on oil?
Many governments in the past have tried to diversify the nation’s economy by investing in agriculture, solid minerals, and tourism among others. But we are yet to have any inroads. Our economy is still 90 per cent dependent on oil. If anything happens to the oil price to the extent that it goes down to half of what it is today, Nigeria is going to have a whole lot of budget deficit. This will affect the nation’s capital expenditure. Under this scenario we may have to be borrowing from the international community. That is again an indication that the economy is going down. The earlier our government decides which other sectors to look into apart from oil, the better for all of us. Whether we call it a medium term or development programme, the earlier we identify the sectors to diversify the economy the better for this country. That is also the reason why we have the sovereign wealth funds. The excess crude account is there so that if anything happens we can always fall back on something. It is very important that we keep building the excess crude account and our sovereign wealth funds and foreign reserves for us to have a fall back. But in a situation where it continues dropping and it lasts for a long time, the excess crude account and the sovereign wealth fund will be depleted. The option then is to start raising bonds and borrowing.

The federal government is trying to peg the oil price for 2015 budget at 78 dollars per barrel. What impact will it have on Nigeria’s economy?
You know that the price of oil has come down as low as 79 dollars per barrel. So it is just an imaginary difference with the pegged price. If we are to spend say 2 trillion and we are going to source it from a particular source, and this revenue becomes depleted to the extent that it cannot fund our expenditure, we shall find ourselves in deficit. If the benchmark of 78 dollars is pegged, we have to cross our hands and hope that the price of oil does not drop anymore. In that situation, we will still coast well. Our excess crude account will not be growing as it used to be, but the economy will still be okay if it remains at 78 dollars per barrel.
People call for the diversification of the economy. How realistic is this?
Which areas of diversification can the nation embark on? Countries that are doing very well, what are their major sources of revenue? In Nigeria the next revenue after oil is taxes. How many Nigerians pay taxes? Some multi-billion naira worth of companies in Nigeria do not pay taxes. Those that pay do not pay up to 10 per cent of what they are supposed to pay. Apart from income earners who pay as they earn, many others do not pay at all. Revenue generation bodies in this country are not generating much, and even when they generate they do not remit the actual amount. That is where corruption comes in. If everybody pays taxes and the actual sum is remitted, Nigeria will still be comfortable but that is not the case. In the area of agriculture, before now we used to be major exporters of palm oil, cocoa, ground nut among others. Today those products are no longer being exported because of attention diversion. Even if they are exported, they are of minimal quantities. I know that the current minister of agriculture is building a whole lot of capacity in this regard. But we have not still seen the impact of this that will culminate into export promotion and revenue generation. We also have countries like the United Arab Emirate and Dubai that have oil. But they have carved a niche for themselves in tourism. Everybody in the world wants to go there because of tourism. If a visitor comes to Nigeria and demands to know where he or she could spend their holiday, nobody knows because we do not have such revenue generation areas. You also know that Nigeria is blessed with a lot of solid minerals. They are still untapped. I recall that sometime in the past, the government tried to empower the solid minerals ministry in this regard but we are yet to see the effects.
What is your take on Nigerians that invest abroad?
There are many reasons for capital flight. It is unfortunate that we allow various sectors of the economy to be dominated by foreigners. When these foreigners generate money from our country, they send it back home. Many Nigerians invest in businesses outside the country because of corruption. If you have genuine money, you will invest in this country. Much of the money on capital flight is ill-gotten and the investors do not want anybody to see how much they have. Otherwise if you are doing a genuine business you should be able to invest more in Nigeria. It is here that the EFCC needs to do a lot of work to track this trend. The EFCC is doing its best except that the same issues of corruption have not been able to bring some people to book.

What is your message to Nigerians as it regards the implementation of the framework?
Nigerians are passionate about our economy. Corruption is the bane of our economy. We will not because of corruption avoid our medium economic expenditure framework. We have to monitor this framework to ensure that it works. This is to ensure that various economic sectors move according to the framework. Nigerians should be very hopeful and prayerful to ensure that our leaders lead us well so that the economy will be robust. This will be in the interest of everybody.