Nigeria seeks to improve the ease of doing business

Guardian Nigeria

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00:00United Minister of State for Finance Doris Zokaneta says Africa's most populous country

00:06is making progress in its economic reform program. She joins CNBC Africa's Editor-in-Chief

00:11Godfrey Matizwa from the winelands of South Africa, Stellenbosch. Over to you, Godfrey.

00:17Thank you. Thank you. Thank you, David. Indeed, the Minister joins me from Stellenbosch where for

00:21the past couple of days, Africa's largest bank has been hosting investors from abroad as well

00:27as from within the African continent. We're talking policymakers. We're also talking fund

00:32managers from the region and discussing how to direct investment onto the African continent. So

00:37the Minister has been a part of this and she's been telling a story about Nigeria. Minister,

00:42thank you for your time. I wanted to know what message you delivered to the meeting today.

00:49Thank you, Godfrey. It's a beautiful day here in Cape Town. Very happy to be here to

00:56join Voices and collaborate with other policymakers and capital market specialists

01:05here in Cape Town. For us in Nigeria, we were doing a lot. We've done a lot of people. You've

01:12seen the fiscal reforms that we've done. The first thing that the President did when he took over

01:19power was to embark on the removal of the petroleum subsidy and as well as embark on

01:26the unification of the FX subsidies. We had multiple exchange rates. Now we have one exchange

01:33rate and now we know actually what the true value of the currency is and we now know what the real

01:39official rates for the Nigerian Naira is. Both subsidies were actually costing Nigeria about 5%

01:48of GDP and with this reform, we see that 5% now coming back into our budget and no longer a

01:58deficit or a leak from our revenue. So those two are quite very instrumental. Initially, what we

02:06saw when the reform started was a huge inflation. We saw the market volatility was unparalleled.

02:15Inflation hit an all-time high of about 34.2 but with the strong resilience of the monetary

02:25authority as well as support from the fiscal authority, inflation has come down significantly

02:3124.48 although we have the pass-through coming from the rebasing of the economy of the GDP.

02:40But generally, things are much better. FX has also stabilized. Now we have one single rate

02:46and now we can trade FX centrally using an electronic platform unlike the over-the-counter

02:52trading that we used to do. So the economy is stabilized. Food prices have come down. Food

02:56price was a major bite for the citizens. Now food price has come down. Nigeria is gradually turning

03:06the corner and we're seeing improvement in all the ratios. Sure. Minister, so I wanted to follow

03:13up on a couple of issues. One, obviously, on that growth picture that you spoke about and

03:17the benign inflation environment that you're saying is now coming to the fore. But before

03:21going there, I wanted to ask you, in your estimation and according to government planning,

03:26are you making the progress that you hoped to be making at this stage in the reform process?

03:33Yes, we are. Yes, we're on target. And I think we've actually achieved

03:41stability faster than we even expected it. You need to know that this is a major structural

03:46reform. It's very difficult for countries, especially large economies like Africa,

03:51with a huge population, almost 250 million people, to embark on such kind of reforms. And within one

03:58year, come out of it and see a stability in the economy. Normally, these sort of reforms are

04:03usually, you know, championed by the IMF, when it's also tied to maybe some kind of support from

04:12maybe budget support or some kind of financing support. But this is the first country that's

04:17going to do this sort of reform without any external force. This is an internal reform

04:23that we felt was necessary, and was pivoted for growth to happen in Nigeria. Now, the beautiful

04:29thing about, you know, starting or having a president who is bold and who is reform minded is

04:37when he starts with the first reform, and the major reform, biting the bullet, and taking

04:44such kind of bold decisions that previous administrations and other presidents worldwide

04:49are scared to take, it then gives the impetus for other parastatals, other sectors of the economy to

04:55align. So we're now seeing a host of reforms coming through. We see the tax reform coming

05:00through with the tax reform bill. We've seen the SEC, their capital market reform coming through,

05:05the insurance markets is also going to go through that. We saw the banking reform with the

05:11recapitalization of banks to, you know, increase the stability of the financial market. So we're

05:16going to see a whole lot of reforms. Then the second thing that the president focused on

05:21after, you know, setting the ground with the reforms was to open the market and ask for more

05:27foreign direct investments to come in. And so on the back of that, we see we're also improving on

05:33our ease of doing business. That is all the agencies, all the parastatals of government are

05:38all aligned to improve the outlook for investors who are coming in, even for local investors who

05:44want to participate. Now we're removing the bottlenecks and then we're now asking for more

05:50participation, more private-public partnerships. We are for the first time seeing a public-private

05:56partnership that we're building a road, a major road coming into infrastructural space to deepen

06:03the market. We're seeing, we're beginning to trade infrastructure assets on the equity market with

06:09the launch of the Nigerian real estate investment fund. And then we're seeing for the first time

06:16a mortgage, a 20-25 year mortgage, a long-term mortgage being floated by the federal government

06:24supported by the pension funds. We're seeing pension assets going into long-term funding,

06:29which didn't used to be there. And we are hopeful that this is, you know, the early stages. This is

06:36the first, you know, the initial stages for more of such long-term capitals to come into, you know,

06:42driving growth either through government investments or into the capital market, through capital market

06:48investment, I'm sorry, private asset investment. So we're really hopeful. I think it's a beautiful

06:53time. And if this reform didn't happen, we didn't see the stability in the market. And, you know,

06:59while we were doing the FX reform and we were doing all of this reform, the central bank

07:03met the outstanding debt obligations. So that's also increased investor confidence that, okay,

07:07you know what, the market is stable. We have some resilience in the market. We did the banking

07:13recapitalization. We've been worried. We wondered if the capital market was able to, it was easily

07:18about 7 trillion Naira of new capital to be raised in the stock market. And that's happened.

07:27That shows that resilience. That shows that there is some kind of inherent liquidity in the market,

07:34which is probably not really being captured. Maybe, you know, if when we finally formalize

07:40the economy and we bring in all of those hidden economies, we can actually tell the true size

07:47of the economy. So I think it's a good sport. Indeed. Indeed. And you have answered the next

07:54question because I was going to ask what's next in terms of that reform agenda. You have touched

07:58on some of the issues, but for the rest of the year, you speak of the stabilization on the

08:01inflation front and the economy stabilizing. I wanted to know whether you are looking at

08:06upgrading your growth numbers for 2025, as well as the inflation numbers for 2025. Where are you at?

08:14Yeah. So when we did the medium-term expenditure framework, we actually estimated that inflation

08:23was going to be at about 15% end of year. Now it's 24, 24, almost 25% is coming down. So we're

08:30seeing a deceleration in inflation. With central bank is still continuing with their tightening.

08:36Now we've also seen a stability in the monetary policy rate. It's not good. I mean, they're not

08:43increasing. It was every quarter they were increasing rates to stem inflation. And we're

08:48seeing that that policy actually is working. Now they've stopped. Now they're watching the economy

08:54to see how well we do. And then our growth number was about 4.5%. And now it's about 3.48%.

09:03We think we can achieve some significant mileage, some growth. We can leverage on

09:10what we have. It's a very expansionary budget. 55 trillion is a lot. But again, in dollar terms,

09:21it's not so much. We're given the size of the economy or the size of the population.

09:25When that spending comes in with more stimulation going into driving growth, that's definitely going

09:32to drive GDP growth. So we're very optimistic. And we're also very mindful that the expansionary

09:39budget does not also stimulate additional inflation. So the effort is to target the

09:46spending into priority sectors and have some kind of metrics to monitor and to measure the impact

09:55of the expansionary budget in the economy and manage all of that and ensure that we get the

10:02good outcome that we're looking for. Indeed. Minister, we wish you well. Nigeria does well.

10:08Africa does well. Thank you very much indeed. That's the Minister of State for Finance in

10:15Nigeria, Doris Uzoka-Anite, joining us live from Cape Town.

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