Interview: Kemi Adeosun
What measures can be taken to help stabilise government revenues over the medium term?
KEMI ADEOSUN: Our perspective on lower global oil prices is that the situation presents an opportunity to re-strategise and take a close examination of how government money is allocated. In the past, we spent 90% of the budget on recurrent expenditures and only 10% on capital expenditure. This has led to an infrastructure deficit that in turn led to a situation in which, aside from perhaps the oil and telecoms sectors, the economy has been largely underperforming.
We plan to correct this at a time when revenues are under pressure, which means we must be disciplined with the funds we have. This requires diligent fiscal housekeeping and increasing revenues to make room for capital investments. We are doing this primarily through the budget, but also through public-private partnerships, so as to attract private capital.
Investing in infrastructure is key. If we can create a revenue base outside oil, we will be less exposed to the volatility of crude prices. We plan to do this by creating an enabling environment for the non-oil economy, which has significant potential in Nigeria. By boosting these segments of the economy we will reduce our reliance on oil for revenue.
How can the government widen the tax base?
ADEOSUN: The Federal Inland Revenue Service (FIRS) is doing a great job in this regard already. It is all about data and bringing people and companies into the formal sector. Firms that operate under the radar can easily avoid tax. The government is doing basic things to expedite this process, such as scanning all business cards we receive and sending them to FIRS. If a company comes looking for a payment from the government to implement a project, we check them before any money is released. At the beginning of the administration’s term, we found that some firms, such as fuel marketers, were receiving subsidies from the government but were not registered for tax. By increasing the flow of information and following up on such cases, we will quickly expand the tax base.
What role will international and domestic capital markets play when it comes to financing the federal government’s budget?
ADEOSUN: From the Ministry of Finance’s perspective, we want to tap into multilateral financial institutions, which tend to offer more favourable interest rates. For this past year’s budget, we did a 50-50 split between domestic and international creditors. In general, we would like to dip into the eurobond market, as Nigeria has been absent there for some time.
There is strong appetite for Nigeria in international capital markets, but foreign investors want to know their investments are safe and that they will get their returns. The number one issue for investors is quality governance, which the president has made a clear priority. A second important subject is implementing public financial management reforms, which will improve Nigeria’s competitiveness and ease of doing business. Tackling these issues will help the country realise its huge economic potential.
How would you assess the effectiveness of the Treasury Single Account (TSA)?
ADEOSUN: The main benefit of the TSA is to increase the visibility of how public money is spent and take greater control of the budget. In terms of project delivery, it has removed some of the rent-seeking that previously existed. Some individuals would sit on project money, place it in a bank and collect interest on it rather than paying the contractor, because there was no accountability or incentive to act more responsibly. The existence of the TSA is gradually eliminating these types of practices. With greater visibility of incoming revenue, we can hold departments and agencies accountable for the money they receive.
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