John Nwabueze is a tax advisor and practicing in the State of Michigan, United States of America. He is also the Director General of the Philip Asiodu Economic Initiative. Nwabueze was in the country recently and Raheem Akingbolu caught up with him in Abuja for this interview
How would you assess the state of the Nigerian economy visavis what we have now and in the past?
Oil has for a long time played a significant role in Nigerian economy. Looking at the state of the economy now as compared to the past, one has to consider the effect of the decline in oil price on the economy. All previous administrations since after the civil war ran an oil revenue based economy which is a mono-economy. It’s difficult to see an economy of any nation grow just based on one source of income. My sense is that President Buhari was unlucky to have arrived Aso Villa in austere times of oil revenue decline. As oil prices dropped, so did Nigeria’s foreign reserves. The dynamics will not entirely allow a favorable climate for the current administration to execute their programs successfully. Previous administrations including the last, former President Jonathan, all enjoyed substantial revenue from oil sales. That in my thinking makes a lazy government comfortable. I say lazy in the sense that a resourceful government should be creative enough to diversify the economy and rely less on oil.
The Niger Delta issue also makes a bad situation worse for the current administration. In addition to low oil prices, Nigeria’s oil production has also reduced immensely due to the attacks by the Niger Delta militants. This further compounds the problem of reduced revenue to the federal government. Some people may attribute current recession in Nigeria to drop in oil price. I believe the recession to be the result of a combination of factors.
To answer your question, yes the economy is presently in recession, but Nigeria’s economy had been sliding into recession in the later part of Jonathan’s presidency. The situation wasn’t pronounced because it was election season and politicians had emptied their vaults putting a lot of money in circulation funding campaign activities. But when election campaign activities ended, Nigerians realized there was not much money in circulation, and as a result cost of goods went up, supplies stayed steady, but the Forex market took the most hit.
The economy is currently going through a difficult patch called a recession. How best do you think government can help to rescue it?
Work on pulling back Nigerian economy from recession will require outstanding leadership and commitment, both qualities the president has shown. If you remember, back in 2008, the US, President Obama met recession when he first took office and confronted it head on and was successful, likewise, president Buhari met economy in recession and my understanding is that he is confronting it head on. Reliable sources confirm that the president has in place requisite plans to pull Nigeria out of the woods. Recovery from recession takes time. Perhaps, Nigerians should be patient with this administration and support Buhari to succeed. We need Buhari to succeed for the sake of Nigeria and the good of our children and our grandchildren.
It may take a little longer than a couple of painful years, but if Buhari and his economic team makes the right decisions, there will be good news before the end of Buhari’s current term. Having said that, I also think that this administration deserves all the help they can get. Governance is all involving. For the government to succeed, the government has a strategic role in the private sector, just as the private sector has an important part in the public sector.
As Nigerians, we have a duty to support a subsisting administration to succeed. No contribution or sacrifice is too great or too small. Back in December 2015, Philip Asiodu Economic Initiative, a nonprofit organization of which I am the Director General, held a Roundtable session to discuss oil subsidy and budget restructuring; it was our contribution in support of the government. We assembled distinguished and experienced economists, and technocrats that included Chief Philip Asiodu, Malam Ahmed Joda, Dr. ShamshuddeenUsman, WazirinAdamu M. Fika, Ambassador Joe Keshi, Prof. Michael Kwaneshie, Mahmud Yayale Ahmed, Prof. Mike Obadan, Prof. AkpanEkpo, Dr. EdugieAbebe, Prof OluAjakiye, Dr. SuleymanNdanusa, Prof Sarah Anyanwu, and Engr. EbeleOkeke to deliberate on issues that at the time elicited serious concerns in Nigeria given their implications. The roundtable’s conclusion was submitted in a memo to President Buhari as our contribution to the then debate on oil subsidy removal. The findings in the memo helped shaped the discourse and ultimately Buhari’s decision on the issue of oil subsidy removal.
With the unstable price of oil at the international market and rising case of an attack on oil pipelines, don’t you think the government should devise a new means of shoring up revenue to address economic challenges?
Yes, I agree that the Buhari administration should devise new ways of raising the profile of income of the government. As a tax advisor and practicing tax consultant in the United States for many years I understand that most developed and developing economies do not rely on oil revenue. US government, for instance, relies on tax revenue to run the government. No one in the US talks about oil revenue, as a result, no state funds is seen as free money. State funds are general funds contributed by all citizens by way of taxation. Internally generated revenue is critical in running any government. Corruption is a problem in Nigeria because an average Nigerian sees the oil revenue as free money to be shared by people in government or with access to the state. That to me is the underlying issue that Nigeria has faced over the years. If every Nigerian pays their fair share of taxes, there will be this sense of responsibility to apply public funds to developing the country. And so I commend the steps so far taken by the Buhari administration to shore up taxation. But I tell you much should be done in developing taxation and tax administration in Nigeria. For instance, federal and states tax agencies are presently functioning on an outdated model of taxation policies. Even so, no formal tax administration agency exists in the local governments. The Nigerian tax system needs to be reformed to bring it to internationally accepted standards.
Equally important is that the fact that government must recognise that when the citizens pay taxes, they have the right to expect development. The idea that a governor, minister or for that matter, a chairperson of a local government upon execution of a project expects the masses to praise and applaud them is absurd. It makes you wonder if they consider state funds as their personal funds and that they must be doing Nigerians a favour using state funds to develop the country. Their mentality is wrongheaded and shows skewed slave master mentality. These leaders should realize that government funds should be used to improve the country and not to be stolen by them or misappropriated. The interesting thing in all of these is that the masses feed into their leaders’ mindset which is a big shame.
There has been a clamour for economic diversifications, with what we have on ground now; are there visible structural frameworks to make it a reality?
Well, it’s hard to say. Over the years Nigeria has suffered a gross deficit of infrastructure, unimproved and outright lack of infrastructure and necessary structural frameworks required for economic development. Diversification is a good idea. The question is diversifying into what and how? For successful diversification to take place there should be a clear plan for transforming the economy and opportunities from diversifying the economy. There has been this talk about agriculture and mining. Those are excellent and good ideas, but these are long term and may take a very long time to show results. How does diversification benefit Nigerians? I must say jobs availability of course. What the country needs now are jobs. Jobs availability is the magic that will make a lot of difference in this economy. This administration I understand is trying its best to implement social programs that will pay some people money and perhaps train others. The fact is that there are many Nigerians that are physically able, unemployed and roaming the streets. These people need to be engaged. Not engaging them may make them susceptible to crime resulting in security problems. Every year, our tertiary institutions, the Universities, Colleges of Technology, and Colleges of Education add to the job market graduates in record numbers. Also, some Nigerians that studied abroad return to join the ever growing unemployment market as well. Now don’t forget the secondary school graduates also. So you see that’s a huge problem that requires an extreme solution. I am advocating a jobs act similar to the Obama Jobs Act in the US. I advise President Buhari to develop a comprehensive job program package bill for the National Assembly that will serve as a framework for putting Nigerians to work.
The program should contain short term and long term solutions for job creation. The act of national assembly is required to carry the job creation program through successive administrations. US President Obama did it as part of the response to the US recession. The Italian Prime Minister followed the model, and it worked for Italy. I believe it will work for Buhari. I am sure that his administration will benefit from a successfully packaged jobs program that will create a huge number of jobs for Nigerians. A job act program if properly put together may well be the hallmark of Buhari legacy. Also, let me commend Tony Elumelu for his good work in establishing an entrepreneurial program that serves Nigeria and parts of Africa. I understand Africa is his focus, but at least he is helping solve the problem of unemployment in Nigeria even if in small numbers. I would like to advise other successful Nigerians in the mold of the Dangotes, Jim Ovias, Otedolas, and others to join in Elumelu example. Now these types of programs are what I referred to earlier when I talked about private sector role in governance. The goal should be jobs, jobs, jobs. Also, the government should encourage SMEDAN to join in developing entrepreneur development programs.
The exchange rate market appears to defy any reasonable solution that would guarantee attraction from foreign investors.
If I am correct and I hope I am wrong, it’s only in Nigeria that there exists street market trading on foreign currency popularly known as a parallel market. Just about all developing and developed nations restrict foreign exchange business activities to legal financial institutions such as the Central Bank, commercial banks, and government licensed Bureau De Change. But in Nigeria, we have this decades’ old acceptable street market trading of foreign currency in the open as if no laws are regulating FOREX transaction. Now, how do you expect the exchange of foreign currency to have appropriately determined rates when all you need to do is drive up in your vehicle and pronto FOREX transaction is started and concluded, no paperwork required. I understand that lately, Buhari administration has begun to do something about it. That’s good news; let’s hope the government is steadfast in cleaning up the Forex business environment.
Do you think the government is doing enough to create an enabling environment for investors?
I believe the government is doing their best to encourage investors. But right now Nigeria is a hard sell to investors. Essential amenities such as power and necessary infrastructures are not there. If the government succeeds in giving Nigerians at least twenty hours out of twenty-four hours in a day electricity supply, that will go a long way to encourage investors. For years, businesses in Nigeria have taken to generating their power supply because of shameful power situation. Companies spend a fortune generating their electricity, and that cuts into the bottom line, a situation that may adversely affect investment decisions.
What should be done to make the economy work?
Steps to saving the economy from ongoing recession must include a comprehensive and well thought through jobs program especially in this time of recession. The federal government should consider raising the minimum wage to put more money in people’s pocket. Cost of living is on the rise with a corresponding lower standard of living. The government may need to spend its way out of the recession. I support the $29 billion loan the government is requesting approval from National Assembly. The money will help government prosecute the administration’s economic programs. I hope that Buhari’s government stays on track in pursuing their economic programs. There should be sustained emphasis in funding infrastructural development such as roads, bridges, and water resources. The government should raise investment in power, agriculture and education. Also, lets even for a moment consider that over the years, many policy positions has been issued and adopted by successive governments. And so government should pay more attention to the implementation of policies, and monitoring and oversight of Ministries, Departments and Agencies to ensure tasks completion, and more importantly hold people accountable for assigned responsibilities. Delivery of justice when laws are broken and financial crimes committed must be in timely fashion. On corruption, the government should think about jailing people that evade paying taxes and should include corrupt politicians and civil servants who steal government money. When convicted of theft of public funds, convicted individual must be prosecuted for evasion of payment of taxes on the stolen money. Prosecution of evasion of payment of taxes on stolen state funds is a standard deterrent procedure in developed and most developing countries.
