Nigeria’s former Coordinating Minister for the Economy and Minister of Finance yesterday said that the immediate past government lacked the political will to accumulate enough savings, explaining why the Africa’s largest economy is in a very difficult financial position today.
She was speaking during one of the sessions on “Low income developing countries: Conference on sustainable economic development in a challenging global environment” at the ongoing Spring meetings of the World Bank of International Monetary Fund (IMF) in Washington.
She said during her first tenure as the finance minister in 2004, the then Obasanjo government was able to accumulate as much as $22 billion as buffers but lamented that by her second coming in 2011, the buffers were already depleted and then government under which she served could not muscle enough will to pull savings that ought have shielded the country from present current economic shocks.
She said, “…we tried it in Nigeria, we put in an oil price based fiscal rule in 2004 and it worked very well.
“We saved $22 billion because the political will to do it was there. And when the 2008 /2009 crisis came, we were able to draw on those on those savings precisely to issue about a 5 percent fiscal stimulus to the economy and we never had to come to the bank or the fund.
“This time around and this is the key thing, you need not have the instrument but you also need the political will. In my second time as a finance minister, from 2011 to 2015, we had the instrument, we had the means, we had done it before, but zero political will,” she said.
“And we were not able to save when we should have, when the oil price was above $100 or more, we didn’t save, so we didn’t keep aside the money that would helped us now during this period and that is why you find that Nigeria is now in the situation that it in, along with so many other countries.”
Okonjo-Iweala said it would be critical for not only Nigeria but African governments need to create a mechanism that would allow them make needed changes in the way they manage resources during periods of accelerated growth, so that during the long term, resources would be available to resist any shock, which she said must come.
She wondered why the multilateral institutions like the World Bank and IMF have not been able to craft needed advise for African policy makers to be able to put up necessary framework to drive resilience on the continent and in such a way that it is also not subject to political manipulations.
“Let me tell you this, it is not in the interest of present politicians especially in societies where there are no social constructs and have different ethnic groups who may be in power at different times and their job is to maximize the income for their group at that particular time to save. They are not interested in it, they want to spend all that income at that time for their group and for themselves.
“And the question I have, coming from a multilateral institution is that why is that we have not been able to give these countries time after time that kind of advise about those kinds of mechanisms.
“After all Chile has done it, it was one of the first to say, okay, we have a product and then we know that in boom times we have savings so that in droughts we can continue to put those savings into development and growth during the bad times.
“So we need to devise mechanisms not just that re good technically but find a way to either embed them in the constitution or find a way to separate them from the political manipulation so that these countries can survive over time.
Okonjo-Iweala is of the view that “to build resilience, African countries need tools, mechanisms and it is doable and we need to interrogate ourselves why we have not done it.”
She raised concerns that not only in Nigeria, African is going to decelerate in growth if urgent steps are not taken. She recommended diversification and manufacturing that would create jobs for young people, tackle inequality and especially drive resilience and put the continent on a steady path of growth.
She emphasised the need to try to restructure the kind of growth that is being produced on the continent and stop exporting jobs but to create jobs and eliminate inequality.
“I do not believe that we can resilience except if we can encourage manufacturing even on the growth we consume, services, entertainment industry, agriculture.
“I think these are the kinds of questions that policy makers need help with that we struggle with on a daily basis and that is what we are going to answer to get resilience.
“If we don’t get these mechanisms, we politicize them, find ways to transform the base of the economy and create jobs including in manufacturing, I believe we are going to go into this looming deceleration that is being talked about.
She advised that another step in building resilience and creating equality is for the continent to ensure that the subsidies are going to the right things and there is room to change the subsidy regimes and to channel them to programmes that do more for the poor.