The Federal Government has disclosed that it will set up a sinking fund in the 2013 budget to enable it to settle part of its domestic debt.
It also said it had started to champion a new approach to rapid economic development, which would be based largely on revenue generated from taxes paid by businesses operating profitably in the country.
Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, unveiled the government's intention to establish a sinking fund yesterday during a consultative meeting with members of the Organised Private Sector (OPS) and Civil Society Organisations (CSOs) on the 2013 budget.
She went further to decry the high interest rate regime in the country, stating that with the reforms that had taken place, commercial banks ought to be focused on supporting small and medium scale enterprises (SMEs).
Okonjo-Iweala, who expressed concern over the growing domestic debt, explained that funds from the proposed sinking fund would be used to redeem some of the government's bonds.
A total of N403 billion out of the N4.877 trillion 2012 Appropriation Act, has so far been released to ministries, departments and agencies (MDAs) of government, she said.
The finance minister added, "We are proposing opening a sinking fund, where we are going to take a chunk of our money and put in the fund. We are going to take money from there and retire one or two of the bonds.
"We are not going to just keep on refinancing our debt. The budget (2013) is going to be tight. We are going to use money upfront, with Mr. President's permission to pay our debt.
"Our domestic debt is worrying. Our problem is not external debt; our external debt is very low at two per cent of Gross Domestic Product (GDP). But we really need to slow down the rate of domestic borrowing.
"The interest rate at which the Federal Government and states are raising debt at the moment is too high. We are raising debt at 15 per cent because we need the money to finance our expenditure and finance capital.
"Since I came on board, we have been trying to decelerate the rate of accumulation of domestic debt, but because since expenditure was raised in the past three or four years, we cannot just bring it down overnight. So what we can do is to bring down the trajectory and that we have done sharply."
Okonjo-Iweala noted that for the 2011 budget, the Federal Government had borrowed N852 billion and brought the figure down to N744 billion in the 2012 budget and intends to reduce domestic debt in the 2013 budget.
"What we are aiming at is to bring it down to about N500 billion in the medium term as we already have about N5.9 trillion of domestic debt," she said.
Commenting on the activities of commercial banks, she stressed the need for the banking sector regulators to make the financial institutions reduce their interest rates.
"We really need to look at our banking sector again. I think the interest rates being charged by banks in this economy are too high. There is no way businesses can survive with this kind of approach and I am wondering what is behind these rates, because the banks are now well capitalised.
"Our banks now have one of the best capital adequacy ratios in the world and non-performing loans are below five per cent, thanks to the work that was done by the Central Bank of Nigeria. So, what is the issue?
"How do we get these banks to be developmental in their approach so that they can support SMEs? We are going to look into that because I think that interest rates in the economy are too high," she added.
Okonjo-Iweala urged members of the OPS and civil society groups to continue to speak against the rising domestic debt, both in states and at the federal level.
"If there is anybody who will be allergic to accumulation of debt, it is me. When I left, domestic debt was about $12 billion, but by the time I came back, I found it at $44 billion. You all should have lamented this when you saw it happening," Okonjo-Iweala stated.
Earlier in his presentation, the Director-General, Budget Office of the Federation, Dr. Bright Okogu, put the total number of ongoing projects in the country at 6,300, saying that a total of N7 trillion was required to complete the projects.
Also in his remark, the Director-General, Nigerian Economic Summit Group (NESG), Mr. Frank Nweke, alleged that there had been "blatant stealing going on in government," observing that it would continue to affect government's fiscal policies.
He added: "How can we achieve a reduction in the fiscal deficit? How can we achieve any qualitative investment with what is going on in government today? It is well known!"
Also yesterday, the Minister of Trade and Investment, Mr. Olusegun Aganga, disclosed that the government had adopted a novel approach to rapid economic development, which would be based largely on revenue generated from taxes.
Aganga, who said this in Lagos at the maiden edition of the quarterly luncheon with business leaders, explained that the current regime where the country relies on export of raw materials as the major source of revenue has never elevated any nation from poverty and Nigeria will not be the exception.
"The most effective way to fast-track the much-desired transformation is for business leaders to see themselves as game changers in the creation of value through investment in industry, so that most of the nation's income will come from taxes paid from successful businesses championed by business leaders," Aganga said.
The minister said the Federal Government was seeking a paradigm change from a country that exports raw materials and job opportunities to one that adds value to its raw materials and creates jobs for teeming Nigerians.
Highlighting some steps being taken by the government to support the private sector towards the goal of industrialising the country, Aganga noted that for the first time, the ministry was linking industries where there is competitive and comparative advantage to innovation and skills development.
"We have the aspiration to be in the top 10 globally in some of these sectors and we have already started with cement," he said.
"We will back this up with the right incentives and policies and make concerted efforts to remove barriers to enhanced productivity," he added.
The minister charged business leaders to strive to address the missing link between requisite resources and sustainable economic growth and development.
Citing the example of the evolution of the South Korean economy, Aganga said that the country does not have crude oil or gas resources but noted that it has one of the largest conglomerates of petrochemical industries in the world.
Aganga called for the emulation of the steps taken by South Korea to transform its economy, which he said involved nurturing new industries supported by government incentives, until they grew strong enough to withstand international competition.
Setting the stage for private sector discussions at the event, the Chairman of Skye Bank Plc, Mr. Olatunde Ayeni, called for growth, reforms and change as the remedies for stunted growth in the nation's economy.
Ayeni also noted that security, dearth of requisite skills, high cost of doing business were issues that needed to be addressed to kick off the much-needed industrialisation of Nigeria.
Critiquing Ayeni's views on the most essential steps to be taken to drive industrialisation in the country, Editor of THISDAY Newspapers Ijeoma Nwogwugwu noted that perhaps the need for capital to flow from segments of the economy where there is a surplus to segments where there is deficit may be the fastest way to kick off and drive industrial revolution in Nigeria.
"The role of the banks must be properly captured within this drive for investment by encouraging them to lend at lower rates of interest.
"The problem is that the banks have become too risk averse and the central bank has to do a lot of tinkering with the monetary policy rate to lower interest rates," she said.