Zainab Ahmed. the Minister of Finance, Budget and National Planning has admitted that even though the projected global economic recession for 2023 appeared inevitable, with about $34 billion in the nation’s foreign reserves, the projected headwinds shouldn’t pose much threat to Nigeria.
The comment by the minister came on the same day that the Senate directed her to liaise with the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, and submit details of President Muhammadu Buhari’s N23. 7 trillion Ways and Means request, within three days, for scrutiny.
Speaking at the ongoing World Economic Forum (WEF) in Davos, Ahmed, also stated that the government was considering a gradual phasing out of petrol subsidy payments from April, instead of removing it in one fell swoop in June.
Ahmed further posited that she wasn’t feeling ‘betrayed’ by the refusal of President Muhammadu Buhari to remove subsidy payments, having stuck out her neck on the issue for years without much success.
“It is quite likely that there will be a global recession. From the reports we’ve seen from the World Bank and the International Monetary Fund (IMF) and other forecasts, there will be a global recession. How it will affect the globe, of course, will be different from sub-region to sub-region. But clearly, there’s going to be a decline in growth on a general basis,” she projected.
She explained that even China was predicted to see a reduction in growth, partly because of the sustained economic impact of the COVID-19 pandemic.
“We have seen the resurgence of COVID-19 in some developed economies, especially China, but also the effect of the Russia-Ukraine war that is having a global impact.
“The quantitative easing that is implemented by central banks across the world also contributes to high cost of interest, resulting in high inflation rate, which means people’s spending power is weakened as a result. So there are all indications that there will be a global recession,” she noted.
On the question of how Nigeria intends to weather the coming headwinds and whether Nigeria has enough foreign reserves like it did around 2008 when it had reserves of over $60 billion, Ahmed noted that at $34 billion, it was enough to sustain imports for six months.
“It is true we had higher reserves during the first global recession. Our reserves are now at $34 billion. So that is still a healthy level. It means we’re able to meet at least six months of imports and other expenses into the country.
“It means we can withstand another global shock if we’re able to carry through a coordinated response between the monetary, fiscal as well as trade authorities. We have learned a lot from the experience that we went through during the COVID. And it showed that when we plan as one, we can actually withstand the shocks,” she explained.
According to her, the last recession in Nigeria was short-lived because of the coordinated response, which had not just the government, but also the private sector contributing to the efforts, including scaling back on some categories of government spending.
She maintained that Buhari has done well in terms of infrastructural growth even as the non-oil sector outperformed the cash cow, crude oil by a wide margin, a testimony to the efforts of the current administration to diversify the economy.
“Well, I will say that if you look at the numbers, the performance of the 2022 budget, you will see that the oil and gas sector contribution was about 35%, while the non-oil sector had the largest contribution, but not only that, the non-oil sector contribution outperformed the budget by a very large proportion.
“For example, company income tax outperformed the budget by 158%. So there are some foundational measures that have been taken that have enabled non-oil sector revenue to grow on a consistent basis and not just by a little bit but quite significantly.
“Secondly, the oil sector’s contribution that was minimal in 2022 is looking good to pick up in 2023. The measures that the government has taken, and a combined effort of security and intelligence agencies’ work have resulted in improved production from the oil and gas sector.
“And it looks like it will continue as well. Most of the fields that were previously not producing at the levels that they were supposed to produce can now produce at maximum capacity. And also, the oil price in the international market is still at a very reasonably high level.
“And we’re doing a lot to encourage investments in gas so there’ll be new and additional incremental streams that will come also from the gas sector, so we should be able to meet this.
“Then, also we introduced some new excise duties as some taxes, the full effect of which we will see in 2023,” she said.
