Nigerian policymakers have pledged to push through much-needed structural reforms, despite the likelihood of a backlash from vested interests.
Nigeria “will have drawn a line under the 2009 banking crisis” by the end of this month and will then be ready for the next phase of reforms, Central Bank of Nigeria governor Sanusi Lamido Sanusi said yesterday.
The last five problem banks will conclude their recapitalization by then, Sanusi told a meeting in Washington, at which Nigeria’s economic policymakers put on a public show of unity.
Economy and finance minister Ngozi Okonjo-Iweala saluted Sanusi’s role, and affirmed her determination to restructure public spending to raise investment as key to an ambitious growth-focused strategy.
Sanusi pointedly attacked press reports of policy divisions and personal spats between them and said that he was “extremely glad to have Ngozi in government”. He added: “We now have the right Nigerian to fix fiscal issues.”
Okonjo-Iweala has promised a fiscal assault on vested interests to match Sanusi’s campaign to clean up banks and enforce monetary discipline.
But the twin offensive will face a vicious backlash from “vested interests,” who have benefited hugely from Nigeria’s governance shortfalls, World Bank vice president for Africa Obiageli Ezekwesili told yesterday’s meeting.
“Vested interests will seek to poison the reforms,” she said. Nigeria needs better-informed journalists and more stakeholders feeding into the policy debate, creating “a coalition to back the reforms”.
The country’s potential is undoubted, “but we always talk about potential”, Ezekwesili, a former Nigerian minister, said.
Nigeria faces other challenges, Okonjo-Iweala said – notably from the global financial outlook, which Nigerians, fixated on domestic issues, too often ignore. With nearly a quarter of exports going to Europe, 38% to the US and 14% to India, “any global slowdown will impact on us.” But she added that the economy was more robust after 7% average growth in the last three years, and 7-8% forecast over the medium term.
One battleground will be Okonjo-Iweala’s fight to stimulate investment by restructuring state spending. Around 74% of the budget goes on current spending, which crowds out investment, she said.
Her goal is to raise capital spending to 32% of the total by 2015 – in a budget that is expanded by a bigger tax take. “We are going aggressively against corporations and others who don’t pay their taxes,” she added. The government is already in talks with tax dodgers over the payment of some 170 billion naira ($1.08 billion), she revealed.
The core reform team, which Sanusi said included agriculture minister Akinwunmi Adesina and communications minister Omobola Johnson, was working to create jobs by expanding underdeveloped value chains. Nigeria imports starch but is the world’s biggest cassava producer, Sanusi observed. Okonjo-Iweala agreed that “if we follow the value chain approach we can create 1.5 million jobs from cassava alone”.
Agriculture is a core focus. Farmers generate 42% of GDP but receive only 1.4% of bank credits, and “we are working to increase bank lending to agriculture” to 7.9% of total loans, Sanusi said. “We need to reverse the disconnect between the banks and the real economy”, in Nigeria, as well as in Europe and the US.