Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, has said that introducing the controversial windfall tax in the banking industry was aimed at redistributing unearned income.
He said the levy was not peculiar to Nigeria alone adding that it’s “done everywhere else in the world where you have, especially the energy sector as well as banking”.
The minister gave the clarification when he recently appeared on AIT’s Moneyline programme.
He said, “Where you have unearned income, where you have a section of the society or an industry or a set of companies that earn money through no dint of hard work of their own.
“The society deserves a chance to share some of that and it’s just redistribution of that. So I think that takes care of the issue of the windfall levy.”
Edun also stated that the recent decision to raise the maximum borrowing percentage in the Ways and Means from five to 10 per cent does not imply that the federal government tends to rely on the Central Bank of Nigeria (CBN) financing.
He said the government had rather used market instruments to manage its debts.
The minister said, “We have not gone to the central bank to say, please lend the government money to pay its debt, to pay its salaries. That’s Ways and Means. We have not gone. We have used market instruments to pay down what we owed, and that is a very, very germane aspect of having a strong economy.
He described the approval by the National Assembly, as a fail-safe measure.
The minister said, “Sometimes it just gives that extra flexibility so that if a payment needs to be made and there’s a mistiming, there’s a gap between the time at which the revenue will come in and the expenses needed, you can just draw down briefly.
“So, the aim is to keep within the letter of the law, I think that’s the main point.”
He also said the welfare of Nigerians remained a key priority for the current administration, particularly ensuring food availability and affordability.
Edun said, “There is a concerted effort to ensure that we have homegrown food available. In the short term, apart from what is being distributed from reserves, there is a window that has been opened for importation because the commitment of Mr President is to drive down those prices now and make food available now.”
He assured that the measure will not undermine local farmers, as importation will only be permitted after exhausting local supplies.
He said, “So, one of the conditions for this importation will be that everything available locally in the markets or with the millers and so forth has been taken up. We will have auditors that will check that.”
He said these interventions seek to reduce inflation, stabilise exchange rates, and lower interest rates, thereby creating a conducive environment for investment and job creation.
According to him, “With the kind of food production programme we have, inflation will come down as prices come down. When inflation comes down, the exchange rate will stabilise. Interest rates will come down and the economy will have a chance.
“People will have a chance at reasonable rates to invest in various sectors of the economy, increase productivity, grow the economy and create jobs which is the key to reducing poverty.”
The minister also commented on the government’s cash transfer programme to support the poorest and most vulnerable citizens.
He said the programme currently reaches about 4.3 million people, with plans to increase this number rapidly.
He said, “Right now it’s about 4.3 million. But the last million was in the last few weeks. And when I say we’re ramping at a rate of 1 million per month, which is an ongoing process.”
He projected that the programme could potentially scale to assist one million people per week or every two weeks, depending on technological capabilities.
On funding for economic initiatives, Edun said, “This particular money, $800 million, is under a World Bank programme. But it’s under an International Development Association (IDA) programme, and that money is for 40 years at one percent. So, if you say it is borrowing, well it is, but it is the softest and the cheapest and the most affordable form you can get. The rest will come from the Nigerian federal budget.”
He further explained that to bolster production and tackle inflation, the government had introduced several funding schemes for various enterprise sizes.
He said nano enterprises will receive grants of N50,000, while small and medium enterprises can access N1 million funding at 9 per cent per annum. Larger medium-sized enterprises are eligible for up to N1 billion in financing at the same interest rate.
He stated that import waivers and fiscal measures are being implemented to reduce costs for large companies, including eliminating withholding tax for the manufacturing sector and small businesses.
He also spoke on the coordination of fiscal and monetary policies highlighting how the Ministry of Finance and the Debt Management Office have assisted the Central Bank of Nigeria (CBN) in managing inflation.
According to him, “The government, through the Ministry of Finance and the Debt Management Office, took on the challenge of paying higher interest rates on our domestic debt so that we could help the central bank, one, achieve its inflation target, but more importantly, attract foreign flows into the country, which has helped the central bank to pay down virtually all of its outstanding foreign obligations.”
Edun also comments on the issue of the N570 billion recently released to state governments, stating that it was a reimbursement under the COVID financing protocol.
He said, “This refers to a reimbursement that they received around December, from December last year onwards and it was a reimbursement under the COVID financing protocol but the point is that the states have received more money. They have received more money. We have to do our research.”
