What She Said – Ngozi Okonjo-Iweala by The Numbers

A couple of days ago, the Finance Minister and ‘Co-ordinating Minister for the Economy’, Dr. Ngozi Okonjo-Iweala gave an interview to Vanguard Newspapers where she spoke about a number of issues concerning the Nigerian economy. 

She also gave some insight into how she’s managing the Nigerian economy specifically on the issue of debt. Now, they say ‘words are the currency of fools’ because you cannot spend words especially those uttered by a government official. But even more importantly, words spoken have the annoying effect of meaning something completely different in practice. 

So perhaps a useful exercise will be to convert the words of the Minister into numbers so we can get a better idea of what she’s talking about yes? 

Let’s start off with what I think is the main quote from the interview below

I will be the last person and the President will also be the last person to subscribe to a situation in which we would pile up debts. We watch those indicators like a hawk. Mr President is very clear on this issue. As you well know, we have some ratios that we monitor with regard to GDP.

The norm internationally is that it should not exceed 60% of GDP. In Nigeria, we have adopted 30% out of that because we want to be really careful. Right now our debt to GDP ratio is about 20%, well below the 30% ratio we have set for ourselves.                             

Now the above sounds very nice and good doesnt it? In fact if not that we want to be really picky, we should just leave this statement as it is and pray for the Minister’s success as we like to do in Nigeria. 


If you google ‘Nigeria GDP’, you get a figure of $193.67bn. For the purpose of simplicity let’s round this figure up to $200bn (what’s $7bn between friends?). 

At the beginning of that interview the Minister mentioned that Nigeria’s economy is expected to grow by 7% per annum for the next couple of years. For the uninitiated, GDP is simply the total of everything, tangible and intangible, that is produced in Nigeria in a year. So this assumes that all told, everyone producing something in Nigeria will increase their output by 7% per year.

Let us assume that we grow at 7% for the next 3 years (including 2012), we will have the following GDP figures

2012 – $214bn

2013 – $229bn

2014 – $245bn

Now even though the govt has set a target of 30% of GDP for borrowing, the figure is currently around the 20% mark. Let us assume that borrowing is a constant 21% of GDP over these 3 years. The debt figures will thus look like the following

2012 – $45bn

2013 – $48bn

2014 – $51bn

That is to say, purely on account of the economy growing by itself, the govt will be able to borrow an extra $6bn to spend over these 3 years. Now given that the ‘target’ is 30%, your guess is as good as mine as to where the actual numbers will end up. So if the govt were to hit this 30% target in 2014, the debt will be $23bn higher than above i.e. $74bn. Perish the thought.

Note that the govt is not going to ignore this ‘opportunity’ to borrow presented by the growing economy. Indeed in that same interview, you will notice the Minister alluding to the fact that the recent $8bn borrowing for pipeline projects is part of ‘meeting this target’.

On to the next, if you believe that an economy can grow, then you must also believe that it can contract. These cycles are part of life especially for economies prone to shocks like ours. 

So what happens if after reaching $51bn of debt in 2014, the Nigerian economy suffers a shock in 2015 leading to say a 3% drop in GDP? We will then have a GDP of $238bn. Now imagine that after this happens, the Nigerian govt doesnt borrow a single penny more so the debt remains at $51bn. Without doing anything at all, the ratio that the Minister is ‘watching like a hawk’, will climb to 22%. 

This leads us to ask why exactly is Nigeria borrowing based on GDP in the ‘good’ times? Several countries, Denmark being a good example, have it written in their constitutions to balance their budgets while their economy is growing. They might not hit this target but at least their politicians are not sitting around dreaming up new vanity projects to spend money on when the economy is growing.

We also know that our hawkish Minister turns into a dove when it comes to cutting spending given that she could only muster a 1% cut in spending every year over the next 3 years. Say we spend 10% of the debt on servicing every year, we will move from $4.5bn to $5.1bn over 3 years in the scenario. This becomes an even bigger burden not just when the economy contracts but if the growth rate slows down. 


And so the moral of this story is that ‘watching the debt like a hawk’ does not mean anything at all. Even if you close your eyes, the debt will continue to increase at this rate. But watching cannot possibly reduce it. If you only believe in words, you might be fixated on 21% and not notice that over 3 years the same 21% has increased by $6bn as in our example above.

A lot of countries have adopted this strategy and ended up disasters. Moreso, when the govt inevitably hits its ‘target’ of 30%, there is nothing to stop it from increasing it to 50%, afterall this is still below the ‘world class’ level of 60%.

We dont need the Minister to ‘watch’ our debt grow for us. We can see that from where we are sitting. What we need is a commitment to restraint by way of an explicit commitment to a balanced budget while the economy is growing. If and when the economy stutters, then we can borrow in order to meet our commitments.  

Now that would be impressive wont it? Or do you know any other way of reducing your debts other than living within your means?








18 thoughts on “What She Said – Ngozi Okonjo-Iweala by The Numbers

  1. So what’s your point now? It’s easier for you to sit in your closet and churn out all these to the applause of the gullible and less-informed. Keep it up. My candid advise to you, Get a life and get a good job, it’ll do you a world of good and at least you’ll be able to contribut more than the above crap to your country’s development.

  2. Who are you sef?! what’s your standing or pedigree or experience or qualification? As if you can even handle a portfolio of councillor for finance in a local government area.

  3. Oladele, I have a good life and a very good job at the moment actually. So try another one.Since you are not among the gullible that this article was intended for, what's your beef?

  4. haha…saw this silly link on twitter. I can tell it, another El rufai muppet. Folks that feel ruling Nigeria is their birthright. hehehe. Perhaps they are tired of writing columns on Thisday. Keep desipating your time. futility!


  5. It is would neither be bad nor dangerous to borrow if the money money will be used for development. But if this government -as is usually the case- use the money to pay salaries and prepare for the next round of rigging, well it does not matter what the gullible and “ungullible” post on twitter or anywhere else for that matter. Back to the earlier responses, its really unintellectual to abuse people who have a different opinion from yours, if you disagree, simply state your case or hold your peace

  6. Having a good laugh at the comments. This is an ideological argument. Debt in itself is not bad as long as its kept within acceptable limits…its the quality of the spending that’s the problem. What I don’t agree with is these constant attacks on Dr Iweala. She’s trying to do a job in an extremely difficult political environment…and remember she’s been there for less than a year. How on earth is she meant to single handedly cut spending by more than 1%? I’m sure you know its a lot more complicated than that. One way to do that for example would be to fire tons of people from the over bloated civil service. She does not have the power to do that……While I applaud the increasing attempts to engage the government, I believe we should do this with some sense of practicality.

  7. I am Dr Iweala's fan…maybe not her biggest fan but I am convinced she is one of the better people in that cabinet.For example I wont waste my time writing an article to someone like the Youth Minister. It is precisely because I think there's a chance she might read it that I wrote it. One of the issues here is that this govt as presently structured simply does not have the mechanism in place to spend money properly.For example, if it wants to spend $1bn on a road, it simply cannot do it except the President and the Minister will go and be standing there everyday watching what is going on. So I am not too excited when I hear they want to spend money because doing that will be tantamount to hoping against hope.I am happy for them to deliver serious structural reforms that can make our economy more vibrant and competitive in the long term instead of throwing money at every problem and then setting up committees later to determine how the money dissapeared. As for cutting spending, well if she doesnt do it now, she will be forced to do it later. There really is no getting round that one.More importantly, there is no painless way to give someone a nivaquine injection. She should get on with it.Just like we understand her dilemma now, we will understand it then if she is forced to act.

  8. Apparently, to some people, government and government ministers are the originators and final arbiters of what is right, error-proof, and unquestionable. And anyone who questions their (government) judgement is a worse problem to the economy than the wasteful and corrupt people who are running the country aground. In the eyes of the conquered maladjusted minds who can’t see anything wrong in whatever wrong thing that the government does, critics like Feyi are now suddenly the biggest problems of the country rather than the gargantuan corruption and wasteful government that has left Dr. Iweala struggling to explain many of the decisions of the government whose economic policies she is coordinating.

    Feyi, just one suggestion for you though. Please consider criticising Northerners in a very stereotypical way…and…. soon and very soon…you will become very popular among your current critics. :))

  9. There is probably nothing wrong with Dr Iweala, but she can not see beyond the vision of her Principal and there is not much to be said for Dr Jonathan in the area of vision. I am sure that in the next few years Dr Iweala will realize that serving in this cabinet is a waste of time

  10. Your analysis simply turn issues on its head! Take a look at the projects that would be financed with this loan. They are people oriented! It comes with 3% interest! The minister of finance is striving to instil fiscal discipline in this government. My brother, this is a gradual process. Things will take time to shape up. Dr. IWeala is just an individual in the midst of entrenched vested interests.

  11. Feyi, You no talk lie jare! All this borrowing versus GDP doesnt get my goat or chicken. At the moment, I might not say we should balance our budget as a target (we’re just not there yet), but we should certainly be benchmarking borrowing to budget only and at a reducing rate. That may eventually require changes such as more PPP type structures in the creation of infrastructure projects, but I’d rather have that than have a Greece-type situation in which we slash the civil service by 20%-30%, raise taxes exponentially, cut pensions, reduce salaries and give up our fiscal sovereignity. Aboro ni won so fun omoluabi…….

  12. Out of interest, is Nigeria using prior year/current year/forecast year GDP or some sort of average to determine Debt/GDP borrowing?

    Are we adjusting GDP to reflect peak oil prices (ie normalised GDP)?

    If we are just borrowing willy nilly then we may be storing problems for the future.

  13. Seyi, the entrenched vested interests will not allow Dr Iweala's effort to work, that if she is not part of the entrenched vested interest

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