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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.