Will the real Okonjo-Iweala please rise up?

Nigeria’s Coordinating Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala has championed fiscal reforms as a way of boosting macroeconomic stability and growth since she returned in 2011.

However, unlike in her first term when she was steadfast in taking on vested interests and moving Nigeria on to a sounder fiscal position, her pledge this time around to consolidate government spending and move towards capital expenditure, build fiscal buffers against an oil price shock and pull off major reforms at the ports, falls short and unfulfilled.

In 2012, the finance ministry rolled out series of reforms aimed at sanitizing Nigerian ports notorious for corruption and a customs service often with an incentive to slow down the clearance of goods rather than speed them up. A plethora of government agencies were sacked form the ports, while 24 hour port operations was introduced. It seemed to work for a while; cargo dwell time fell from an average of 20 days to under 7 days.

Now, however, clearing time have doubled to about 12 days from around the 5-6 days it took in March or April, while a new destination inspection scheme, championed by the customs service threatens to unravel most of the gains according to major manufacturers who spoke with BusinessDay.

The Medium Term Expenditure Framework (MTEF) 2014-16 proposed by the finance ministry also shows a major shift towards recurrent expenditure away from capital votes, a reversal of the gains made in the 2013 budget. According to the finance ministry in an August 2012 release, “recurrent expenditure will decline from 71.47 percent in 2012 to 68.66 percent in 2013 and continue to decline in the medium-term. Within the same period, capital expenditure is expected to rise from 28.53 percent in 2012 to 31.34 percent in 2013 and will continue in like manner in the medium-term.” However in the current MTEF, recurrent expenditure has increased to 74 per cent, while capital expenditure has fallen below 2013 levels to 26 per cent. The county’s fiscal buffers also continue to evaporate.

The oil savings in the Excess Crude Account (ECA) part of earlier reforms introduced by Okonjo-Iweala (in her first stint) is down 60 percent to $3.6 billion in November from $9.2 billion in January, 2013. The account held $20 billion in 2007.

The Nigeria Sovereign Investment Authority (NSIA), the newly set up sovereign wealth fund, is also stuck at $1 billion as at November, with no new transfers to the fund by the federal government after two years. The finance ministry had earlier said the FG will begin to transfer its share of the ECA to the SWF, but that has failed to materialize.

While all tiers of government, including the powerful state governors are complicit in the decline of the windfall oil savings (ECA), and the stalling of the growth of the SWF, the onus ultimately lies with the FG and Finance Ministry to cut off the money sharing party.

Nigeria relies on crude exports for about 95 percent of its foreign-currency earnings and about 80 percent of government revenue. Its low fiscal buffers (ECA and SWF balance of $4.6 billion in November) are equivalent to a mere 1.7 percent of GDP, compared to a fiscal savings median of 65 percent of GDP among major oil exporting countries.

In the World Bank’s latest ease of doing business ranking, Nigeria fell 9 places to rank 147 from 138 last year. For Okonjo-Iweala, the stakes couldn’t be higher going into 2014. Confronting vested interests opposed to reforms will mean restoring her credibility gap and moving the reform process along.