At the 2024 Access Corporate Forum held in Lagos, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, made a significant declaration regarding the federal government’s fiscal management approach. He announced that the federal government had ceased relying on the controversial “Ways and Means” financing mechanism, a form of borrowing from the Central Bank of Nigeria (CBN) that involves printing money to cover the government’s deficit.
Edun’s statement at the forum, themed “Nigeria’s Economic Rebirth: Hopes and Implications,” disclosed that the federal government is now focused on managing its debt obligations without resorting to Ways and Means.
He explained, “We have exited Ways and Means. What does that mean? It means that the government, when it has to pay domestic debt service or foreign debt service, does not go to the central bank to debit the consolidated revenue fund of the government, which means just printing the money.”
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This announcement marks a departure from a practice that had been heavily criticized by economists and financial experts. Under former President Muhammadu Buhari’s administration, the government borrowed over N22 trillion from the CBN through Ways and Means, compounding inflationary pressure and impacting Nigeria’s macroeconomic stability.
Edun’s claim signals that the current administration, under President Bola Tinubu, aims to exercise greater fiscal responsibility by ending this controversial practice. The minister also noted that the government is putting in place a “world-class treasury and liability management system” to ensure better financial management.
This decision is framed as part of a broader effort to revamp Nigeria’s financial management system. However, while this move is being touted as a sign of fiscal discipline, it is notable that the government’s borrowing continues through other channels, raising questions about the sustainability of Nigeria’s debt profile.
The current administration continues to borrow both domestically and externally to finance critical infrastructure and budget deficits. Recent moves underscore the government’s continued dependence on loans, despite its claim to fiscal reform.
Nigeria is in discussions with several international lenders, including the African Development Bank (AfDB) and other financial institutions, to secure more loans for infrastructure projects, which raises concerns about the long-term sustainability of this borrowing spree.
Against this backdrop, Professor of Capital Market, Professor Uche Uwaleke, who was also at the forum, said the right instruments were not being deployed in the country’s debt market. He pointed out that the Sukkuk bond for infrastructure development constituted less than two percent of the federal government’s debt structure.
“If you look at the borrowings that have been done overtime, in my view, the right instruments have not been used in borrowing in the domestic market,” he said.
“When we borrow from the market, it is important that we use more of infrastructure bonds instruments because that is when we can be sure that the proceeds are tied to projects. My recommendation here is that we should choose to use more of infrastructure bonds.”
However, Edun expressed confidence that President Tinubu’s economic reforms were beginning to show positive results, citing evidence of improving macroeconomic stability, such as stable exchange rates, increasing government revenues, and positive trade balances.
The finance minister outlined key elements of the government’s economic stabilization plan, including the mobilization of 360,000 farmers to cultivate 360,000 hectares of land to produce essential crops like maize, wheat, and cassava. This agricultural push, according to Edun, is designed to make Nigeria self-sufficient in food production and reduce dependency on imports. While such initiatives are laudable, they require significant funding, much of which may come from further borrowing.
He also noted the government’s plan to simplify the tax system, reducing the number of taxes businesses must pay to a single digit, and exempting foods, pharmaceuticals, and health products from VAT, are designed to boost investment and ease economic pressure on the private sector.
Corporate Leaders Weigh In
During the forum, prominent business figures like Aliko Dangote and Roosevelt Ogbonna also voiced their views on Nigeria’s economic trajectory. Dangote, the President of Dangote Group, stressed the importance of supporting local manufacturing as a more effective strategy than seeking foreign investments abroad. He argued that creating an enabling environment for domestic businesses is key to attracting foreign capital.
“What attracts foreign investment is domestic investment. No domestic investments, no foreign investments! So, we have to make sure that we support our domestic investors,” Dangote said.
He also pointed out a glaring issue with Nigeria’s import reliance, noting that even simple products like biscuits were being imported from China, thereby creating jobs abroad while contributing to poverty at home.
Mr. Bismarck Rewane, Managing Director of Financial Derivatives Company Limited (FDC), and co-lead speaker at the forum, offered a sobering assessment of Nigeria’s power sector, urging the federal government to write off the existing debts of Distribution Companies (DISCOs) and pursue reforms that could enhance electricity supply. Rewane emphasized that sustained investments in telecoms infrastructure and power are essential to driving economic growth.
He warned that without such investments, Nigeria would face significant setbacks.
“If Airtel, Glo, and MTN shut down their systems, there will be no e-transactions in the financial and aviation sectors; no INEC’s elections, no BVAS and people will riot immediately,” Rewane remarked.
He also projected that Nigeria’s economy would grow to $400 billion by 2026, up from its current size of $368 billion, but stressed that growth should be the government’s top priority.
“Revenue is necessary but not sufficient. Growth is both necessary and more sufficient,” he said.
Other key business figures at the event raised concerns about policy implementation and its impact on business growth. Dr. Chinyere Almona, Director General of the Lagos Chamber of Commerce and Industry (LCCI), highlighted the plight of small and medium-sized enterprises (SMEs), arguing that government policies often stifle business rather than support it.
“Sometimes the policies are great, but their implementations are zero,” Almona said.
Similarly, Mr. Segun Ajayi-Kadir, Director General of the Manufacturers Association of Nigeria (MAN), criticized the government for its inconsistent support of the manufacturing sector. He noted that the sector was operating at less than 50 percent of its installed capacity due to inadequate government policies and the unresolved issue of foreign exchange (FX) forward contracts with the CBN.