Economic Confidential, February, 2009

ESSAY

Reviewing the Impact of FAAC in 2008

By Remi Babalola

We may not be able to describe this out-going year 2008 as a page-turner, but it certainly has kept Federation Account Allocation Committee engaged and actively involved in shaping the Nigerian Economic history.

While we have all been through some challenging times especially with dwindling oil prices and our budget, there have been many more satisfying accomplishments along the way. I want to express my personal and heartfelt thanks to all of you, for maintaining your balance, your sense of humour in some instances, your fortitude and most of all your humanity throughout the challenges of the year. I am proud to be one of the many characters in this our unfolding story. Again looking back to my opening speech at our January meeting, I remember this comment: There is no reason why this year can't have a perfectly fabulous ending.�And, in fact, we have realized that promise.

I don't think there has ever been a year when this committee has shown greater resolve and resiliency even with a backdrop of diminished resources in a state with economic challenges. We all know about that resolution reached by this committee this year’s power sector intervention that involved all the tiers of government. It has been a true testament to dedication and commitment to our mission and goals. In spite of the various developmental challenges at your various levels of governance, you continued to reach new heights, explored new opportunities and presented interesting learning opportunities through healthy debates at our meetings. I am more encouraged and reassured with our sub-national government than I was at the beginning of the year.

I am delighted to chair FAAC, a committee of a fine group of Nigerian financial leaders. I have enjoyed the camaraderie and sense of purpose which we all shared at committee meetings. The vision for the establishment of this committee is one of lasting influence, and I can’t think of a better association to be with barely two weeks before the end of the year 2008, knowing that the rocky road to 2009 is full of potholes but we will weather the storm.

A wrap-up on the Economy     

As we do the year end wrap-up and attempt a peek ahead we cannot but talk economics. It is not for nothing that they call economics ‘the dismal science and no one wants to hear dismal stuff at this happy time of year, but the bottom line is that we have a challenging time ahead and we must be courageous to come out a better structured economy. With strong economies going into recession and the whole global economy falling into lower growth, decoupling Nigerian economy from the global space is a non-starter.  Deepening global downturn, shrinking capital flows and tightening credit conditions will task our fiscal ingenuity in 2009. We need to be realistic, pragmatic and futuristic about our policy effectiveness. The risks to the economic outlook are real.

Major decisions during the year

Now going away from the dismal science it would be pertinent to rehash the few landmark decisions reached this year by this committee. We succeeded in resolving all outstanding issues emanating from Paris Club debt exit payments. This committee advised the Presidency on the need for the continuation of financing of subsidies, if we must subsidize, through deductions from gross revenue on crude oil sales and that all subsidy releases be certified by Independent Auditors. We also resolved and implemented the holding of FAAC meetings not later than the 16th of every month to facilitate prompt payment of salaries and immediate fund utilization nationwide. The decision to discontinue debiting beneficiaries with bank charges by the NCS and FIRS was also made in the year.

On matters outstanding as at date

The resumed sitting of the Technical Committee on Fiscal Practices could not commence as earlier announced due to the challenges we were faced with in ensuring that the 2009 Federal Draft budget is presented to the National Assembly and the Eid-el-Kabir public holidays. It is my hope we will start in earnest as we resume next year.

On the issue of the transfer of rural electrification projects by States we resolved at the last meeting that the Director-General of the Debt Management Office will present a position paper on the way forward in today’s meeting to the committee at plenary.

Concerning the indebtedness of the Federal Government on contributions for the hosting of the NACOFED and the Post-Mortem sub-committee, I promised this august body in our previous meeting that as soon as the Supplementary budget was signed into law the funds would be remitted. I am happy to inform you all that the Federal Government has cleared all outstanding obligations against it as at today in this regard.

Concluding Remarks

Let me conclude my remarks by commenting that I am very proud of the work accomplished this year by the committee and the various sub-committees. This committee is fast becoming a more inviting place for dialogue for various economic problems plaguing our polity. The mutual respect and appreciation for the views of each other is growing every month and we are breaking ground in dialogues in this committee, through our courageous conversations, that has certainly heightened our collective consciousness. Our work here in this committee is an important one and we must keep with it.

Given all of this, I think we are ending the year with our economy in good hands and we should all be upbeat about the future. We have all heard of a leading car manufacturer of a developing country that exported its first car to the US . The car was nothing sophisticated, just a cheap subcompact that could have easily been called four-wheels and an ashtray. But it was a big moment for the country and its exporter felt proud. Unfortunately, the product failed. Most thought the little car looked lousy and savvy buyers were reluctant to spend serious money on a family car that came from a place where only second-rate products were made. The car had to be withdrawn from the US market. This disaster led to a major debate among the country’s citizens. Many argued that if the company could not make good cars after 25 years of trying, there was no future for it. They argued that the company should have stuck to its original business of making simple textile machinery. After all, the country’s biggest export item was silk. Others disagreed. They argued that no country had got anywhere without developing serious industries like automobile production. They just needed more time to make cars that appealed to everyone. That year was 1958 and the country was, in fact, Japan. The company was Toyota. The rest is history.

This is a story of hope to tell us that no matter where we are today, our tomorrow can be better if we take the painstaking steps required in building capacity. This requires sacrificing certain short-term gains for the sake of raising long-term productivity, and thus higher standards of living.

Remi Babalola, Finance Minister of State and Chairman of the Federation Accounts Allocation Committee (FAAC), presented this speech during the Committee's meeting on December 12, 2008.