oluwashaddow:

6. Since facts don’t lie, have you any
disagreements with the September 4, 2013 Global
Competitiveness Report of the World Economic
Forum for 2013-2014, which ranked Nigeria 120th
out of 148 countries ranked in the Global
Competitiveness Index, including being ranked far
behind some African countries such as Mauritius
45th, South Africa 53rd, and Kenya 96th?

Dumb question! What facts? They should rather mention the criteria used in the report as a basis for their questions. Anyone can write report using whatever criteria that suits their purpose.

7. ”For the first time in Nigeria’s 53rd year
history, we have successfully privatized the
electric power industry,’’ so said the President at
a recent meeting in London with some foreign
investors. As minister of finance should you agree
that the recent privatization of the country’s
power infrastructure is worth celebrating as a
major economic achievement in 2013, when in
reality there is little or nothing to show as an
improvement in the country power supply? Also
why our rush to wholesale privatization of the
power sector when countries like South Africa,
generating as high as 42,000MW still have their
power sector mostly in public hands?

Rush to wholesale privatization? Another dumb question. Where were these dishonourables all these years? We started this process more than 10 years ago and that is a rush? We didn't fare well with government holding the major stake in the power sector. How else should the problem be resolved if not by privatization, selling to those who know the business and who can keep it alive. Is South Africa the same as Nigeria? Why not make example of the United States where provision of power is completely private sector driven?


14. Your references to the country’s economic
growth profile have always been based on Fitch,
Standard and Poor’s, and Moody’s ratings. Are
you aware that these same rating agencies are
being sued in New York (with case #
652410/2013) by two Bear Stearns hedge funds
for fraudulently assigning inflated ratings to
securities in the run-up to the 2008 financial
crisis? If you do, why do you insist on accepting
the rating as reliable.

Another dumb question. Those are the best three credit rating agencies in the world at present. The fact that they are being sued does not make them culpable until the courts deliver judgment on the suits. Besides, their services expose them to legal risk as this, so it is expected that some people or organizations will question the reliability of their reports. How else should we appraise our growth potentials? Do the honourables have better alternatives?


19. Who determines the investment objective and
who establishes the risk parameter for the NSIA’s
portfolio? In providing answer to this question, it
is also important to understand and explain why
NSIA recently hired a Swiss national as its chief
portfolio investor? Answering this question is
important since it should help us to know who
determines the maximum draw-down that the
government would be comfortable with in
extremely negative market environments.

Simply request and read the charter establishing the SWF and the agency administering it. That is when they would have done their oversight functions. Lazy question!

oluwashaddow:
24. You will agree that inasmuch as the interest
rate regime is critical to the real sector borrowing
decisions, most principal factor in making
borrowing decisions is the business’s expected
rate of return on investing borrowed money? The
question, without efforts to protect local
businesses from their foreign counterparts, the
high cost of doing business in Nigeria, puts them
at such a disadvantaged position that it makes
no economic sense borrowing to invest in their
local businesses, why should we expect private
sector firms to be investing in the economy?

This question should be for the CBN governor and not the minister. The cost of borrowing is directly impacted by interest rates and inflation which the CBN manages autonomously without recourse to the Finance Minister.


26. Do you agree that the Excess Crude Account
as being operated by government is illegal and
unconstitutional, especially given how it has been
managed?

Dumb question? Why should her opinion matter on this? Is she the AGF or the Supreme Court? Ask the attorney general of the federation of the legality of the ECA. Not the Finance Minister.

30. Do you believe in the fight against corruption?
If you do why has EFCC not been proper funded?
Without properly funding the commission, how
should it be expected to carry out its duties
effectively?

Ridiculous question! They should also ask themselves. Don't they review and pass every budget?

X-factoria:


Hey bro, your argument is one sided. You were spot on on the risk of external debt being unfavourable movement in exchange rates. However, when you hinted on the crowding out effect of government local borrowing, you trivialized or refused to succinctly consider the argument against the government resorting to raising funds locally. The thing is, the economy would be worse off if the government crowds out other local debtors to the detriment of the private sector. By crowding out, I mean the government competing directly with local businessmen for loans. In normal climes, government poses the least credit risk because it is a continuum, so banks would be more inclined to lend to government (even at cheaper rates) than to private businesses and individuals. The resultant effect of this would be gradual collapse of the real sector - businesses would be crippled, national productivity would reduce, unemployment will worsen and we would be in a recession before you know it.

So when you weigh the pros and cons of seeking external financing through debt, the country is better off with external debt despite the exchange rate risk which can be managed (the CBN applies a portion of the external reserve to cushion the effect of unfavourable exchange rate movement).

oluwashaddow:
47. What is the Minister’s take on the apparent
stagnation of the economy as there seems to be
very little job creation and growth in small
businesses. Even though the Minister has read
out growth figures before it is not telling on the
average man on the street.

Economy is stagnated and yet grows an average of 6 - 7% in last five years? What study did they carry out to conclude that there is stagnation in the economy? Very funny that they reached an unintelligent conclusion on the economy and job creation and want the minister to provide reasons for their conclusion. Questions on the economics of government policies and job creation would be best addressed by the CBN governor whose monetary policies have the greatest impact on the small to medium scale enterprises. Ask Sanusi Lamido abeg!


48. Would the Minister say that the various
Government initiatives at job creation have not
lived up to expectation as they affect only a very
small part of the population?

Why would she say that the initiatives are not working? Is it the honourables' expectation that government initiatives on job creation would solve all unemployment problem at once? They even admitted that a small part of the population benefits from them.

49. Wouldn’t the Minister think that the private
sector should be the main driver of job and
wealth creation through natural growth of
business and start ups being financed by the
banking industry?

Ask the CBN governor about wealth creation by small businesses and their financing. These honourables seem unable to draw the difference between the autonomous CBN and the Finance Ministry. SLS doesn't answer to NOI.

50. If so, what does the Minister think it would do
for the local banking industry if this same pre-
shipment inspection law and your own export
guidelines are enforced to the letter. The oil
industry in Nigeria is worth about $50 billion per
annum. If even $10 billion of this passes through
our local banks wouldn’t that give the economy a
boost with banks now able to fund longer term
and bigger projects?

Honourables, please ask the CBN governor.

4 Play:

There is no evidence of a crowding out effect in Nigeria. The best evidence will be a spike in the cost of credit, as reflected in bond yields, as the demand for credit by both Govt and the private sector overwhelms its supply. If loading up on foreign debt is better, no country with the choice of foreign or internal debt will plump for the latter. Nigeria is the only country I know that people argue with a straight face that it is unfortunate that their country has not piled up more external debt.

4 Play:

This is a glib comment. Our foreign reserves won't survive a run on the Naira. Where was the CBN as the Naira has gone from 60 Kobo to 160 Naira to a dollar? In the last 5 years alone, we have gone from 100 Naira to 160 Naira to a dollar and that is even with low external debt. With higher external debt as you recommend, things will definitely be a lot worse. The fact that we are not building up our external reserves considerably enough at a time of relatively high oil prices with the CBN having to use reserves to fight off a depreciation in the Naira clearly shows that we have less room to incur more external debt.

Doesn't the insistence that we borrow abroad imply that the economy is sound enough that foreign investors will readily lend us money at desirable rates? If it is so sound, then they should be giving the Govt a round of applause.

Kingspin: 50 questions indeed. Who even set it. Am just laughing are they not lawmakers of Federal Republic of Nigeria. I belt you they cnt stand the Minster. If the meeting had went on..the lawmakers response to any answer by the Minister would have been Yes Yes and Yes. Economic intelligent must count. I tell u they would run out of ideas and questions. Aboki's and their cow brains self. Set of people who were force to attend elementary school even till date. Pls inform me of any aboki in office that is intelligently doing well in Nigeria climate. Outline the word intelligent not looters. I laf in china.

Passing Shot:
Some of my favourites:

Why should our internal debts continue to represent more than two-thirds of Nigeria’s external debt profile, when the cost of servicing domestic debts is ridiculously far more expensive than servicing external debts? Why should government continue to borrow internally when in
so doing results in insufficient funds, skyrockets the cost of borrowing and above all, crowds out the real sector from the money market? Shouldn’t the high cost of domestic borrowing override whatever are the assumed benefits? Since both London Interbank Offer Rates (LIBOR) and the US Treasury Bonds rates offer far better interest rates for sovereign borrowings, why have we continued not to take advantage of cheaper interest rates?

4Play:


I find this interesting as it implies that external debt is superior to internal debt, that is to say, that it is better that the Nigerian Govt owes money denominated in foreign currency to foreign creditors than owe money denominated in Naira to domestic creditors.

The pitfalls of external debts should be obvious. It was external debt that birthed SAP and culminated in the erosion of living standards in the 80s which is unprecedented in the country's history. The main problem with external debt is the exchange rate risk as follows:
[b]
Supposing you borrow $10bn in 2007, assuming an exchange rate of N100 to $1, giving a debt of N1 trillion when converted to Naira. If exchange rates move against you, say it now takes N160 to buy $1, you suddenly have a debt of 1.6 trillion Naira. Many underestimate how exchange rates can deteriorate quickly.[/b]In the 70s to the 80s and I stand to be corrected, we went from 60 Kobo to $1 to in excess 2 Naira to $1 pretty rapidly, that would amount to a multiplication of the debt burden by more than a factor of 3. The funny thing is that the bigger your external debt burden, the quicker the deterioration in exchange rates because money has to leave the country to service the debt. Imagine what that does to the inflation rate and the living standards of Nigerians as much of what we consume is imported. High inflation brings about high interest rates which dampens the supply of credit to the private sector. The negative spiral is relentless and we have witnessed it before.

The high interest rates the Govt pays when it borrows in Naira is supposed to compensate for the higher rate of inflation in Nigeria but the flip side of high inflation is that the real value of Naira denominated debt is eroded over time than if the debt is denominated in a foreign currency. Remember that in the bond market, if the Govt borrows 100bn Naira for a term of 10 years at yields of 14% per year, it will merely pay the yield per year and redeem or pay back the 100bn Naira at expiration of the 10 year period. 100bn Naira in 2007 and at an inflation rate of 9% per year will mean that in the 10th year, the Govt will pay back the equivalent of 39bn Naira in 2017. In contrast to US dollars which erodes value at a slower rate, the redemption of Naira debt will be a lot cheaper than dollar debt.

So, it's actually likely that from issuance to maturity, an internal bond denominated in Naira is cheaper for the Nigerian Govt than an external bond denominated in US dollars for instance. Almost all sovereign debt crisis occurs in countries borrowing in currencies that they do not control - Greece, Portugal, Spain, Zimbabwe, Ireland, e.t.c.

External debt is good in the short term but incredibly dangerous in the long term. The talk about borrowing in Naira crowding out local borrowers assumes that there is strong domestic private sector demand. If there is such strong demand, then the economy is doing well and it undercuts the opposition's argument.

Listening to and reading policy debates in Nigeria, it's almost like the 80s never happened. Those who refuse to learn from history are bound to repeat it.