Nigerian Bank Nigeria World Bank – Country Should Watch Its Domestic Debt

Source: Daily Trust, 29 December, 2009

What is your take on the rising debt profile of Nigeria after the exit from the previous external debt which you helped to achieve?
Let me say this. Your current minister of finance was in the Debt Management Office when Nigeria negotiated its debt. So he knows how far the country can go in borrowing. I know he wouldn’t want Nigeria to revert to the situation it was before. But I am confident that he knows how far the country goes in borrowing. I know he wouldn’t want Nigeria to go back to the situation that it was before.

Mansur Muhtar knows the deal because he worked on the debt deal with me. I think as of now it’s ok. We have to watch it, but he knows what he is doing. He is looking at soft loans and all that. I am more worried about internal debt. We have to be very careful that we do not pile up domestic debts. We have to watch the bonds we are floating. We have to watch our records with so many commercial banks. Internal debt as a percentage of GDP, I think is rising. I don’t have the records here now. Our total debt to GDP ratio should not be more than 20 per cent.

But some politicians would prefer that Nigeria borrow to executive developmental projects…

But the way I am reading politicians is that they seem to be against more borrowing. So they are on the right path. It doesn’t mean that the country should not borrow at all but that Nigeria should be more prudent. As I said we set limit. We have the DMO law. Don’t we? We have the Fiscal Responsibility law. People should look back at these laws.

But the country’s debt profile is in the region of $4 billion….
I think $4billion is still reasonable. Remember we had $30 billion. And it was not just that it was $30billion. The debt was contracted on a very hard terms. We should watch ourselves not to go into that kind of debt again. As I said I know that the finance minister who was the head of DMO is watching it.

How would you compare the Obasanjo and Yar’adua economic policies?

You know once you are out of government you don’t make those kind of comparisms. You let the people who are running the place run it. So I am not going to do that. All I can tell you is that I am a strong believer in the Nigerian economy and its ability to do well. One of those things that are going for us is that we have element for development. So we just need to harness those elements and try to make the place run properly. I am not going to do that. Let other people do.

The Excess Crude Account was created by the Obasanjo government of which you were a minister. Are you concerned about the way it is being depleted?

I am not going to answer that. You know all these questions! I can only say this: I think that the fiscal rule which we established must be kept. That is, we have to do our budget based on the price of oil that is below the prevailing price, which I think they budgeted at $57 dollar a barrel now, which I thinks is below the prevailing price. There are so many suggestions on how you can manage the extra for the good of a country.

Some people have suggested sovereign wealth fund and that we invest some of the money for future generation, which I think is not a bad idea. Some people have suggested that we use some of it since we have so many needs, which I think is not a bad idea either. But you know it’s been very good for us that we have a strong reserves because when the global financial crisis hit, we were able to draw from it to buttress our spending.

If we had not done that, we wouldn’t have had the money to spend when we got into real difficulty during the crisis. What of if we had not put the money in place. People have forgotten that there was a period that we were unable to pay salaries. I think we need to think ahead for our economy of tomorrow. We need to think of how we are going to create jobs. There are so many of our graduates walking the streets without jobs.

I want attention to be given to a very strong economy so that young people can get jobs. Not just in our typical activities but also in the service sector. We need to create jobs to make these young people productive. I used to say that what we need to do is to work with them and those who are creative so that they can help ten others to get jobs. The topmost thing on top of my heart is the unemployment situation. That is the way I am thinking.

What is your idea on how the government can solve the lingering fuel crisis?

The government is trying to deregulate. We need to pursue policies that are very transparent. We need to ensure more supply in the economy so that we don’t have a monopoly situation. We need to open it up so that there are many sources of supplies and competition and eventually the prices will come down. Then for those, the poorer people in the society, we need to have a scheme to target them so that they can get the support.

Do you think the government is really committed to deregulation? Do you think it has the nerves to do it? Earlier, it said the policy will kick off in November which was later put on hold.

Well I don’t know about that. You know it is tough when you are trying to run a government. The problems we have in Nigeria all have solution. They are all soluble and not insoluble. We can solve them one by one but you know some of these things take time.

If invited, would you be ready to serve under the Yar’adua government?
No comment.

What do you make of the El-Rufai saga, given the fact that you worked together?

I love my economic team dearly. And I always love them dearly because we worked as a team. I think it is left for Nigeria to judge. We tried our best. We have also given other people a chance. We can also support others who are trying to achieve result. I believe in Nigeria very strongly. I just want us to be on that steady path for some time.

Nigerian Bank Nigeria World Bank