Zainab Shamsuna Ahmed is the minister of finance, budget and national planning of Nigeria, Africa's largest economy. Lately, she has had to help her country navigate the global economic crisis triggered by the fallouts from the COVID-19 pandemic and the war in Ukraine. In this interview with Africa Renewal's Kingsley Ighobor, Ms. Ahmed says effective fiscal measures are helping Nigeria weather the storms. She also discusses how the African Continental Free Trade Area will boost businesses in Africa, and has a special message for young women. These are excerpts.
As finance minister of Nigeria, what are your reflections managing Africa's largest economy?
Well, it's been tough managing the economy, as well as managing home life, because I have a family and try to stay responsive to my family.
These are challenging times, however, for any minister of finance in a developing country. As you know, the world is facing multiple challenges. We were able to weather the COVID-19 pandemic, but it affected our economy. The pandemic crashed the price of crude oil due to the breakdown in global supply chains, which drove us into a recession.
In response, we designed the Economic Sustainability Plan that helped us quickly exit the recession within two quarters. We also reviewed our national budget and finance acts, which enabled us to amend a number of fiscal laws, realize more revenues and stabilize our economy.
Consequently, we started reporting positive growth and had seven consecutive quotas of economic expansion, but then the Russia-Ukraine war happened.
Fortunately, we are able to sustain positive macroeconomic indicators and continue growing the economy. We're still feeling the impact of inflation, however, because it is trending upward.
Like in most countries, food prices are rising and hurting our people. We're working to see how we can minimize the impact of inflation and continue to stabilize our economy, so that we don't regress on the microeconomic front.
Following the pandemic and the lockdowns, some 27 million Nigerians fell into poverty. Have you been able to help them recover?
What was unique about that situation was that the people that fell further into poverty were urban poor, a phenomenon we didn't have before. We designed economic sustainability interventions, including cash transfers to the poor and, importantly, support to micro, small and medium enterprises. We gave out payroll support so small businesses could retain their employees. We also provided soft, low-cost loans to businesses to help them reinvest, grow and maintain jobs.
We created a public works programme that enabled us to employ a large number of youth in public work projects, such as road and housing construction. We also developed a programme that helped farmers sustain their crop production.
The AfCFTA will open a bigger market for businesses in Africa... We have an opportunity for industries to manufacture products that can be exported within regions, enabling us to earn foreign exchange. It will help us improve trade practices and remain competitive.
Regarding domestic resource mobilization, the belief is that Nigeria can and needs to do more. Do you have strategies for accomplishing this?
Yes, we can do a lot more. Our revenue-to-GDP, which was 8 per cent of GDP in 2019, slipped to 6 per cent during COVID-19 because we lost revenues from oil and non-oil sectors due to trade stagnation.
We created the Strategic Revenue Growth Initiative (SRGI). This is a suite of initiatives designed to enhance our capacity, identify new revenue streams, expand our revenue base and block revenue leakages. The SRGI has been quite successful. We have been systematically working to achieve key targets.
We returned our budget cycle to January through December, which is important because even though the federal budget is small compared to the size of the economy, it acts as a determining factor for some of the decisions that the business sector and states take.
We introduced the annual Finance Act to support the implementation of our annual budgets and increased the VAT [value-added tax]. We also introduced new taxes and were able to block a number of leakages. In addition, we reduced taxes for micro, small and medium enterprises.
Today, small businesses are paying zero company income tax. We also reduced medium-sized businesses taxes from 30 per cent to 20 per cent--tax relief that will enable them to retain revenue and reinvest.
Between 1999 and 2021, local and federal government borrowings jumped from $3.5 trillion to $1.9 trillion. You reportedly said that at $1.9 trillion, the cost of debt servicing has surpassed government revenue of $1.6 trillion. How does Nigeria get out of this debt trap?
We get out of it by growing revenues. At 24 per cent of GDP, Nigeria's debt is still sustainable. For a country the size of Nigeria, the Bretton Woods institutions say you can borrow up to 50 per cent of GDP. We're at 24 per cent, but we have a revenue problem. The oil and gas revenues are grossly underperforming because of the low production of crude oil.
But the price of oil is rising in the global market.
Even though the price of crude oil in the international market is high, we're not getting the benefit because our volumes of production are low.
What have we done? There's a lot of effort by the security agencies [to secure production facilities], and the numbers are picking up. We're hopeful that by the end of the year, we will be able to get back to the 1.6 million barrels per day that are projected in our budget.
At the same time, we have a debt management strategy we are strictly following, ensuring that our debts are within sustainable limits. We also know that the debt mix between domestic and foreign should be 65-35, and we are below those thresholds.
We designed the Economic Sustainability Plan that helped us quickly exit the recession within two quarters. We also reviewed our national budget and finance acts, which enabled us to amend a number of fiscal laws, realize more revenues and stabilize our economy.
Is our debt disturbing?
Yes. In a situation where debt is taking most of the revenues, it's a struggle to maintain credit levels because we need to meet our debt servicing obligations. Our projection is to continue to cope through 2022 and 2023.
But we also service the government; we have to pay salaries and pensions and fund government agencies, and we still have to invest in infrastructure. So it's been difficult, but we've been able to cope well enough to the extent that the economy continues to post positive growth.
Are there measures to halt the slide in the value of the naira? It's moved rapidly from 500 to 700 naira to a dollar within a short space of time.
The Central Bank of Nigeria (CBN) is working very hard on it. Their target is to gradually bridge the gap between the non-official market and the official market rates.
But why do we have this situation?
We have this stress on the economy and on the naira because our foreign exchange demand outstrips supply. Our major earner of foreign exchange is oil and gas, and because our production levels are low, proceeds from oil tricking in are at very low levels. We have an economy where large businesses need foreign exchange to run trade. So it is a demand and supply situation.
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What are we doing? We are improving other sectors of the economy that will earn us more foreign exchange. We are beginning to see export proceeds ticking off in the non-oil sector.
My message to our daughters, sisters and granddaughters is: You can do it. You can have a good family life. You can succeed in any field that you choose to play in. There are no limitations to what a woman can do. You can be as good as the next man.
In the past three quarters, we've seen movement from about $200 million to $950 million. The CBN provided incentives that allowed this to happen.
The Nigerian Export Promotion Council also provided incentives. The Ministry of Industry, Trade and Investment, working with the African Continental Free Trade Area (AfCFTA) to support productive activities, is enabling us to manufacture products for export.
That actually relates to my next question, which is how the AfCFTA might support economic diversification.
The AfCFTA will open a bigger market for businesses in Africa. Of course, the Nigerian market is the largest market.
We have an opportunity for industries to manufacture products that can be exported within regions, enabling us to earn foreign exchange. It will help us improve trade practices and remain competitive.
It is already helping Nigerian entrepreneurs to strengthen partnerships with counterpart business owners in other countries, which is necessary for success.
What message would you like to send to young women in Africa who may look up to you as a role model?
My message to our daughters, sisters and granddaughters is: You can do it. You can have a good family life. You can succeed in any field that you choose to play in. There are no limitations to what a woman can do. You can be as good as the next man.
