Members of the House of Representatives, on Monday, grilled the Minister of Finance, Mrs. Kemi Adeosun, and the Minister of Budget and National Planning, Senator Udoma Udo Udoma, on the free fall of the naira against the US dollar and the rising inflation in the country.
Lawmakers said the economy remained bleak and had not shown signs that the measures, the Federal Government claimed it had introduced to lead the country out of recession, were picking up.
Adeosun and Udoma had appeared before the House Joint Committees on Finance, Appropriation and Aid/Loans/Debt Management at the National Assembly in Abuja to defend projections in the 2017-2019 Medium Term Expenditure Framework and Fiscal Strategy Paper.
The 2017 budget of N7.29tn, which is already before the National Assembly, was worked out by the government based purely on the projections contained in the MTEF.
The budget, by the provisions of the Fiscal Responsibility Act, 2007, cannot be approved by the legislature until it has first debated and passed the MTEF.
When the ministers appeared before the committees, lawmakers raised several issues, including the “clear and huge disparity” between the official rate of the naira and the street or parallel market value.
For example, while the government’s pairing of the local currency against the USD for the 2017 budget is N305/USD, the street rate is “almost N500/USD.”
Lawmakers also noted that while inflation had already hit “18 per cent,” the government projected that inflation would be 15 per cent in 2017.
The Lead Chairman, Mr. Babangida Ibrahim, stated, “There is something that is fundamentally wrong with these projections and the huge gaps that we are seeing.
“There are even differences in the MTEF document you submitted to us at the National Assembly and the 2017 budget, which Mr. President laid before the National Assembly.
“There has to be a position where all of us can be on the same page in the efforts to rescue this economy out of recession.”
In addition, members demanded details on the government’s plan to borrow N2.32tn to finance the deficit in the budget, including the repayment conditions.
They also noted another “inconsistency” in the drop in revenues to be generated by the Nigeria Customs Service from N862bn in 2016 to N717bn this year when government said it was focusing more on non-oil revenue sources.
Among lawmakers, who grilled the ministers, were the Chairman, Committee on Banking/Currency, Mr. Chukwudi Jones-Onyereri; Chairman, Committee on Aid/Loans, Mr. Adeyinka Ajayi; Deputy Chairman, Committee on Appropriation, Mr. Chris Azubuogu; and Mrs. Aisha Dukku.
In her response, particularly on the crash of the naira, Adeosun blamed it on the greed of market speculators.
She claimed that there was deliberate buying and stocking of dollars to cause panic, when in the real sense, the naira should not have crashed more than N305.
She added that the factors responsible for the naira’s fate were “irrational and emotional” reactions, resulting in unnecessary hike.
“There is nothing to justify what is happening; this difference between the official and the black market rates has no fundamentals to support it.
“In reality, the naira should not be affected more than the N305,” the finance minister stated.
She expressed optimism that the exchange rate hike would crash, while those responsible for the stockpiling of the dollar would lick their wounds.
On his part, Udoma tried to douse tension and explained that the government projected that the inflation rate would be 15 per cent because the current 18 per cent rise was not realistic.
He attributed the present rising trend to “panic” in the system, fuelled by the forex crisis.
The minister argued that during the year, the exchange rate would stabilise in the region projected by the government (N305), which would in turn cut down inflation and keep it at 15 per cent.
“Our target is 15 per cent because that is what we believe it will be.
“The exchange rate is what is causing it now, but we will soon attain stability and inflation will be down naturally at the 15 per cent,” he told lawmakers.
Udoma did not, however, specify how exactly the government would stabilise the market aside from promising that everything was being done to achieve it.
The budget and planning minister also defended the slash in Customs’ revenues from N862bn to N717bn.
He explained that in 2016, the projection could not be met due to the unhealthy state of the economy.
Udoma informed lawmakers that the government felt it was wise to cut down to N717bn, which was considered more realistic to generate in 2017.
“We looked at the performance of the economy and we looked at what was realistic.
“Even the World Bank constantly reviews its figures and projections on Nigeria,” he added.
He believed that there were “positive sides” like the expected royalties from some operations in the oil sector, including the $1.5bn expected from stepping-in rights.
The minister also told House members that early licensing would rake in about $926m, while marginal oil licences would generate over $100m.
The Director-General of the Debt Management Office, Mr. Abraham Nwankwo, admitted that the government would indeed borrow N2.32tn to finance the deficit in the budget.
When asked to specify how the money to be borrowed would be spent, Nwankwo replied that it would be spent in the manner “spelt out by the government in the budget.”
He also claimed that the loan had a “friendly” repayment plan of up to 25 years with a moratorium of between 10 and 15 years.
Incidentally, both arms of the National Assembly have yet to consider President Muhammadu Buhari’s request to borrow $29.96bn.
The Senate had rejected the request on November 1, 2016, while the House has not tabled it since the request was laid before the National Assembly in October 2016.