Nigeria's Finance Minister Denies Government Borrowing, Aims to Boost Economy

Wale Edun, Nigeria's Finance Minister, has denied that the government is borrowing from the Central Bank of Nigeria (CBN). Instead, Edun stated that the fiscal authority is complementing the CBN's efforts to stabilize the economy by issuing N8 trillion in government securities, such as treasury bills and treasury certificates, to attract foreign investment.

The Finance Minister emphasized the collaborative nature of the efforts between the CBN and the fiscal authorities to address economic challenges, including inflation control and forex stabilization. He also highlighted plans to increase government revenue through improved tax administration and collection, rather than raising tax rates, with the aim of reducing borrowing and focusing more on domestic resource mobilization.

Edun aims to reduce liquidity in the system by "pinning down" the Ways and Means facility to deal with the problem of excess money. This is part of a joint effort with the CBN to bring down inflation, stabilize the exchange rate, and reduce interest rates to make borrowing more affordable for investors.

The Finance Minister stated that Nigeria's tax-to-GDP ratio is too low, even lower than the African region average. To address this, reforms are underway to streamline the number of taxes, deploy technology, and implement policies that would double tax revenue in the next three years.

Edun also plans to boost food production by supporting agro-clusters with the help of the African Development Bank (AfDB). He met with the leadership of Olam Agri in Nigeria to discuss the company's role in helping Nigeria achieve food security. Olam Agri's Managing Director, Anil Nair, reaffirmed the company's commitment to driving food security through investments in productivity, out-grower programs, research and development, and integrating smallholder farmers.

Why this matters: Nigeria's economy has been facing significant challenges, including high inflation, currency depreciation, and low government revenue. The Finance Minister's plans to address these issues through collaborative efforts with the CBN, tax reforms, and boosting food production are crucial steps towards stabilizing and growing the economy. The success of these initiatives could have far-reaching implications for the country's economic future and the well-being of its citizens.

The issuance of N8 trillion in treasury bills is seen as a significant step towards reinforcing Nigeria's economic resilience amidst global economic uncertainties. Edun also announced that the government has commenced the process of repatriating foreign-denominated assets into the formal financial sector to increase intermediate and long-term foreign exchange supply, which will take effect in the second quarter of 2024. Additionally, the government plans to begin local issuance of foreign-denominated federal government bonds in early Q2 2024.

Key Takeaways

• Finance Minister denies govt borrowing from CBN, says issuing N8tn in securities
• Collaborative efforts with CBN to control inflation, stabilize forex, reduce interest rates
• Reforms underway to streamline taxes, deploy tech, double tax revenue in 3 years
• Plans to boost food production with AfDB support, Olam Agri partnership
• Govt to repatriate foreign-denominated assets, issue local foreign-denominated bonds