To clear the backlog of crippling debts owed contractors, the federal government is working to issue promissory notes to contractors to clear a preponderance of domestic debts.
Speaking at the 14th Daily Trust dialogue with the theme Beyond Recession in Abuja on Thursday, the Minister of Finance, Mrs Kemi Adeosun disclosed that the federal government was working with the CBN on the issue.
“When we clear the backlog then we start afresh. So when you get a government contract, you should be sure when you are going to get paid. You can’t just be incurring debt and not take any responsibility for it” she said.
Adeosun revealed that from now on, “if you get a government contract, these are your payment terms. And that will also give us lower pricing” indicating that government will renegotiate contract terms to favour reasonable reduced pricing for contracts.
The finance minister stated that “we have discovered that because people feel that there is a risk that they may not be paid, they load the price of the contract. We are also trying to ensure compliance with the Fiscal Responsibility Act.”
Another issue which the finance minister deliberated on was the budgeting processes of powerful revenue generating agencies which are not captured in the national budget.
Adeosun lamented that these agencies are still outside of government and their size of revenue is actually more than the federal budget.
“So in other words, there is a parallel budget sitting outside the budget. The CBN, NDIC, NNPC. They sit outside the budget and we need to bring them in. So they also become more accountable and so we are working on that.”
The National Assembly she said has given the support of ensuring that these agencies submit their budgets and will not be able to pay anything other than salaries.
These agencies Adeosun noted “were set up to be revenue generating for the government but they have become revenue generating for themselves. We need that money to come back into the central budget.”
Regarding the controversial government borrowing, Adeosun stated that “the truth is that we have no choice. If you are waiting for the oil price to recover, the prognosis is that it’s not going to go back to 110 dollars per barrel any time soon. So to get the economy growing, we have no choice but to look for low cost funds and put that infrastructure in place because it is the infrastructure that will unlock the economy.”
In his presentation Mr Atedo Peterside, Chairman of Stanbic IBTC noted that he has observed this administration’s “reluctance to completely beak from the past and embrace completely economic reforms, even when our present predicament clearly warrants same”.
According to him, “if we don’t act now, or act quickly, we will find our economy needlessly mired in a hopeless situation where the citizenry might not witness an increase in income per capita, that is living standards, from six to eight years.
Peterside noted that “the search for economic policy direction must end now because we are facing an economic crisis. A crisis is an inflation point where multiple outcomes become possible. When you superimpose our demanding political calendar which requires presidential elections, in a little over two years, it becomes clear that 2017 represent the last full calendar year that this administration has within which it must embrace measured economic reform.”
If this administration expects to still attain many of the palatable economic outcomes, Atedo Peterside maintained that “it is no use arguing over who or what caused the recession or the high inflation of 18.5 percent that we are currently facing. It is far better to focus on what we need to do to get us out of this sorry state.”
What appears to be still missing he said “is a bold, holistic and audacious effort to harmonize fiscal, monetary, exchange rate, trade and macro prudential policies in a bold and concerted manner. Very few people want to take on the big gorilla in the room. They prefer to strut around the fringes or work in silos, whilst almost accepting that a 0.1 percent target is an achievement that we should celebrate because it means we have come out of recession. That is why the impact of the government economic team is not being felt.”
The corollary of this he argued is that, “may people are simply minding their business because they fear for their jobs. They are not interested in battling their colleagues, whose actions are negating the most positive outcomes that the government owes electorates.”
Atedo Peterside cautioned the government that “the public is yearning for transformative economic changes.”
To those who will criticize him for saying that the federal government’s economic policy direction remains unclear, Peterside responded to them by saying that “the most significant economic reform embrace so far by the federal government came about rather reluctantly. That is by the federal government hanging on to an untenable situation until it disentangled itself, or got overpowered by internal contradictions. We saw this in petrol process and naira devaluation.”
