SHAWWAL 8, 1429 A.H.
FRIDAY OCTOBER 6 2008
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The new road map to economic reforms (II)
By Dr. Shamsudeen Usman
Hon. Minister of finance
It is important to acknowledge the growing confidence in the Nigerian capital market arising from the recent reforms undertaken by Nigeria, including the banking sector consolidation and the repayment of the London and Paris Clubs debts. This has led to a substantial portfolio investment inflow into the Nigerian capital market. In 2000, the foreign portfolio investment inflow into the market stood at N51.1 billion compared with N1.0 billion in 1999. Since then the market has witnessed a tremendous increase in the inflow of funds from overseas, with a record high of N375.9 billion in 2005 and N117.2 billion in 2006. In this regard, it is very important to continue with measures that will strengthen and sustain confidence in the market. It is equally important to provide safeguards that will minimize the risk of the kind of meltdowns that have happened in the capital markets of some emerging market countries and the markets of some more developed countries. Such strengthening will be assisted by the following measures:
a) the plan to broaden and deepen the market by, among others, the use of more instruments. In this regard the SEC will work closely with the DMO in the development of the bond market and its greater use by the Federal, States and Local Governments, as well as by corporates.
b) Developing stronger mechanisms to check insider dealings and other forms of market abuse
c) Creating greater public awareness and utilization, of the capital market, especially the Abuja Commodities and Securities Exchange and
d) The SEC will to liaise with other key stakeholders to try to reduce further the cost of doing business in the Nigerian capital market
4.1 The main focus of Ministerial intervention for the IST is to assist it to access sources of funding other than annual grants through the Federal Government Budget. This is in recognition of the great potential for the IST in resolving disputes within the capital market and, therefore, enhancing investor and other stakeholders confidence in, and development of the market.
4.2 Another area of attention already broached upon is the effort that we will make to encourage the greater use of the capital market by the Federal, States and Local Governments for long-term projects financing. This avenue has a number of key advantages, including:
• helping to expand the depth and breadth of the market
• achieving greater transparency in public spending
• reducing avenues for the flouting of limits set for borrowing by the State and Local Governments from the money market and
• being less inflationary
5. Insurance Sector Reform
Urgent steps are being taken to sort out the mess that was created, as a result of the mishandling of the recapitalization and consolidation programme for the Nigerian insurance industry. In the next few weeks details will be released of the companies in the industry that have met successfully the requirements of the recapitalization and consolidation programme. Details of the reorganization of NAICOM and other far reaching reforms to do with the industry are being worked on with the newly-appointed Commissioner for Insurance (NAICOM) and will be released in the next few weeks.
6. Economic Management Team (EMT)
You are probably aware that the EMT has been reconstituted by Mr. President with the following membership
1. Minister of Finance -Chairman
2. Minister of National Planning -Vice Chairman
3. Minister of State, Finance -Member
4. Minister of State, Petroleum -Member
5. Honorary Strategic Adviser to the President on Energy - Member
6. Economic Adviser to the President -Member
7. Deputy Governor (Economic Policy, CBN) -Member
8. Special Assistant to the President (Power) -Member
9. Special Assistant to the President (Petroleum) -Member
10. Chairman FIRS -Member
11. Director of Research & Statistics (CBN)-Member Technical Support
1. Group Managing Director, NNPC
2. Director-General, DMO
3. Accountant –General of the Federation
The President has also approved that the membership of the EMT be boosted by the inclusion of the private sector. I am therefore happy to announce the inclusion of the Nigeria Economic Summit Group and the Nigerian Economic Society in the EMT. The EMT is being refocused into essentially a think tank, as the President does not want himself, or anybody else, dabbling into the day-to-day management of the MDAs. An immediate assignment of the EMT is to take the President’s 7-point Agenda and turn it into a specific, measurable, actionable and time bound programme, which will be sold to all the key stakeholders in the Nigerian Project. This will be pursued, working with other key stakeholders in the cntext of the Vision20.20.20 which, ultimately, after appropriate consultation, participation and buy-in by all the relevant stakeholders will become Nigeria’s, rather than Umar Musa Yar’adua’s, Programme.
7. Another key objective is the pursuit of the establishment of a strategic Oil Revenue Reserve Fund aimed at reducing the volatility of government revenues and expenditure and encourage saving for the rainy day. Efforts will be made to develop an appropriate framework and work with all other key stakeholders to get the necessary legislation passed.
8. Efforts are on also, to see to the signing by Mr. President of the Fiscal Responsibility Bill, recently passed by the National Assembly. This is being delayed by the need for Mr. President to undertake some necessary consultation with the States Governors. The President, in consulting the States Governors, will urge them to endeavour to get their State Assemblies pass similar legislation, so as to prevent the kind of scandals that are being revealed by the EFCC’s investigation of some of the retired State Governors. Such a passage will greatly enhance overall fiscal responsibility in the federation and enhance the management of the economy.
9. We will also, working with other relevant stakeholders such as the RMAFC, and the other tiers of government, embark on a major overhaul of the monthly revenue allocation mechanism. It is obvious that the current arrangement is flawed in many respects. It has bred a lot of suspicion among the federating units. What should be a highly technical problem and fairly easy to resolve has been highly politicized. We plan to demonstrate greater transparency in the way the accounts are kept and reported. There will also be greater consultation and confidence building among not only the three tiers of government, but also with the RMAFC. We hope to turn the process, using IT and other technical support, from a political jamboree to a very efficient, transparent and timeous process that all the key stakeholders will have great confidence and trust in.
10. In the area of relationship with multilateral and other international organizations, we continue to thrive to ensure outcomes that are in the best interest of Nigeria. More specifically,
• An IMF delegation is, infact, currently in the country on the fourth and final evaluation of the country’s implementation of its own reform programme, under the Policy Support Instrument (PSI). It is envisaged that the fourth review of the PSI will go fairly well.
• We are working closely also with other countries especially those in the African Consultative Group of the IMF, to ensure that developing countries generally and African countries in particular have greater voice, voting power and role to play in the affairs of the IMF.
• We also plan to enter into a more constructive engagements with other development partners, such as the World Bank, African Development Bank, Afreximbank, Islamic Development Bank, etc, in order to pursue projects, on behalf of the Federal and State governments geared towards poverty elimination, improving literacy, reducing child mortality and other similar socio-economic objectives.
11. While efforts will be made to improve tax collection, even more urgent attention will be paid to plugging a number of sources of revenue leakages that seem to have become of recent, a great source of corruption, especially the large number of waivers and exemptions that were granted, especially over the last three years. The issue has raised such great concern, moreover, that the President, Alhaji Umar Musa Yar’adua has directed that the issuance of any waivers or exemptions from the payment of any taxes, duties or other tariffs be suspended. The granting of any such new waivers is therefore suspended, with effect from today until further notice. Furthermore the President has approved the appointment of credible accounting firms to audit all the waivers and exemptions issued so far, to ascertain their validity and the extent to which the beneficiaries of such waivers and exemptions are complying with the terms of the waivers. All individuals, companies or any other organizations that are the beneficiaries of these exemptions and waivers are therefore expected to respond promptly to the public announcement that will soon be made by the appointed accounting firms.
12. I will like to conclude this press briefing by reiterating the readiness of the Federal Ministry of Finance to continue to provide prompt, efficient and effective service to our numerous stakeholders, namely the MDAs under the Federal Government, the National Assembly, the Judiciary, the State and Local Governments, the multilateral institutions and other international organizations and the wider Nigerian public.
13. We also give you our commitment that we will continue to do so in the spirit of service, humility, transparency, accountability and cooperation as amply demonstrated by Mr. President, Alhaji Umar Musa Yar’adua.
14. It is precisely in that spirit that the Minister of State and I hereby make public our assets declaration as submitted to the Code of Conduct Bureau prior to our confirmation as Ministers of the Federal Republic.
* This is a text of the Speech by the Hon. Minister of Finance, Dr. Shamsudeen Usman at his inaugural Press Conference in Abuja on August 23, 2007
