VP Yemi Osinbajo
The Minister of Finance, Mrs Kemi Adeosun, on Friday outlined a 10-point fiscal roadmap to reset the Nigerian economy to a path of growth.
The Minister, who represented the Vice President, Yemi Osinbajo, at the annual dinner of the Lagos Business School, itemised fiscal policies and actions being rolled out to tackle the key barriers to growth.
Speaking at the session which was attended by industry leaders across key sectors of the economy including oil, banking and telecoms, Adeosun said “The Federal Government’s Fiscal Roadmap is addressing barriers to growth that will drive productivity, generate jobs and broaden wealth creating opportunities to achieve inclusive growth”.
She stated that the President Muhammadu Buhari administration is determined to convert Nigeria to a productive economy rather than one that is consumption driven. To do so, Government would tackle the infrastructure deficit to unlock productivity, improve business competitiveness and create employment.
She stated that Government would actively partner with the private sector to achieve this by use of a number of new funding platforms. These include the Road Trust Fund, which will develop potentially tollable roads, and the Family Homes Fund which is an ongoing PPP initiative for funding of affordable housing.
In addition Adeosun detailed a revision to the Tax provision that allows companies to receive tax relief for investment in roads on a collective basis.
She explained that the existing provision that enabled companies to claim relief for road projects had only been taken advantage of by two companies, Lafarge and Dangote Cement.
“This was because few companies were large enough to fund roads alone. The revision would now allow collective tax relief such that companies will be able to jointly fund roads, subject to approval by FIRS and the Ministry of Works, and share the tax credit. This would be particularly attractive to firms in clusters such as industrial estates, many of which are plagued by poor road conditions,” the minister stated.
She emphasised the role of infrastructure in creating inclusive growth, explaining the current barriers to growth in agriculture, solid minerals and manufacturing.
She stated that the drivers of inflation were structural and were being addressed through the focus on power, rail and road infrastructure.
The Minister also outlined measures planned to deal with the problem of hidden liabilities, which were affecting the banking sector and efforts to revive the economy.
She explained that the conversion from cash accounting to IPSAS (International Public Sector Accounting Standards) had unveiled unrecorded debts owed to contractors, oil marketers, exporters, electricity distribution companies and others.
These liabilities were estimated at N2.2 trillion and would be addressed with a 10-year Promissory Note Issuance programme in conjunction with the Central Bank of Nigeria.
“This measure would be subject to a rigorous audit process of all claims to ensure validity and mitigate against fraud and the impact of past corrupt practices,” Adeosun said.
Henceforth, the Minister said that measures would be put in place to prevent recurrence of such a problem by ensuring that contracts are managed in a manner that firms have assurance over when they would be paid.
She cited the fact that many contractors were owed as a reason that many of those recently paid by Government were slow in remobilising to site.
“Some contractors had not been paid in the past four years and in some cases the banks they were owing refused them access to the funds released, causing delays,” the minister said.
She explained further that those receiving the Promissory Notes would be expected to provide a material discount to government.
“The issuance was a solution to a long term problem that was a drag on economic activity,” she explained.
Adeosun concluded her remarks by assuring that, despite the current economic challenges facing the Nigerian economy, the outlook is positive due to the strong fundamentals of Nigeria and the ongoing reform programme.
She reiterated that Government is determined to create an enabling environment and put in place supportive policies to return to growth in 2017 including greater alignment of monetary and fiscal policies.
The 2017 Fiscal Roadmap detailed in the 10-point plan are:
1. Recognise inherited debt profile after a robust audit process: Introduce promissory note program to finance verified liabilities and Issue debt certificates to contractors, Ministries, Departments & Agencies (MDAs), and State Governments
2. Mobilise private capital to complement Government spending on infrastructure: Roads Trust Fund; Family Homes Fund and Extend infrastructure tax relief to a collective model to attract clusters of corporate entities
3. Strengthen fiscal/monetary handshake: Replace administrative measures on list of 41-items with fiscal measures to reduce demand pressure in parallel market; Encourage domestic food production through specific incentives e.g. accelerated depreciation on food manufacturing equipment and Zero (0%) duty on green houses; Planned revitalisation of refineries; and Increase Diaspora remittances via participation in the buyer support scheme for the Family Homes Fund
4. Incentivise exports: Restructure the Export Expansion Grant (EEG) to a tax credit system, and Rationalise tariffs and waivers in key export sectors
5. Encourage investment in specific sectors through fiscal incentives: Accelerated depreciation on equipment in strategic sectors e.g. food processing, mining and power, and Rationalise tariffs and waivers in priority sectors
6. Continue expansion of fiscal space through revenue enhancement and cost consolidation: Customs Single Window (being implemented through a Private Public Partnership (PPP) scheme); Template for non-allowable expenses for Government Agencies; Overhead cost control by the Efficiency Unit; and Continuous risk based audit by the Presidential Initiative on Continuous Audit
7. Improve fiscal discipline at Sub-National level: Extension of efficiency unit at Sub-National level; Fast track municipal bond issues to deepen the bond market; and Conversion to International Public Sector Accounting Standards by all State Governments.
8. Enable and accelerate Recoveries process: Whistle-blower scheme; Centralised database on recovered assets; Asset tracing; and Professional management of recovered assets
9. Rebalance debt portfolio to extend maturity and optimise debt service cost: Rebalance public debt portfolio with increased external borrowing (60:40 target); Extend maturity profile of public debt portfolio; Deploy long-term debt instruments including Infrastructure and Retail Bonds; and Maximise use of concessionary loans
10. Catalyse Micro, Small and Medium Enterprise (MSME) growth through specific measures to improve capacity and access to finance: Development Bank of Nigeria (US$1.3bn); Increase share of business awarded to MSMEs from Government contracts; Tax harmonisation and tax incentives; and Accelerated depreciation.
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