Eben Joels is the Managing Partner at Stransact Accounting and Audit, an RSM correspondent firm in Nigeria. In this interview with Adedayo Adejobi, he assesses the 2024 budget, the inflationary pressure in the country, among other issues. Excerpts:
What’s your forecast for the rest of 2024 in terms of the economic outlook?
The economic outlook for 2024 is contingent on proactive economic policies and global dynamics. A comprehensive strategy addressing inflation, exchange rate and security challenges is crucial for steering the nation towards sustainable economic growth. Overall, I can say that the economy will be better this year, though not a total transformation but it will be better. The local economic environment will be better than in 2023, this is tied to the gradual phasing out of the current impact of petrol subsidy and FX reforms on the non-oil sector, and higher crude oil production relative to 2023 levels amid supportive oil prices. If the CBN can have a better grip on inflation and exchange rates, it will be positive for the economy. If inflation continues to trend downwards globally, then it will be good for the economy because it will reduce the extent to which imported inflation will affect local prices.
Some experts say the Nigerian economy will witness tighter fiscal policies and monetary policy restrictions. What are your expectations?
Expectations for tighter fiscal policies and monetary restrictions align with the need for stability. Balancing these policies to manage inflation while promoting economic growth will be crucial to the economy.
How do you see the risk to the inflation outlook?
Risks to the inflation outlook are significantly driven by various factors including global economic conditions, oil prices, and supply chain disruptions. Mitigating these risks demands a holistic approach, combining prudent fiscal measures with effective monetary policies.
How high will inflation be in Nigeria in 2024?
Prospects for 2024 are intertwined with resolving current challenges. Inflation projections rely on successfully implementing comprehensive economic reforms, managing external pressures, and fostering a conducive business environment. I do not see the country resolving all those challenges so I will go with the same level of inflation.
Where do you think Nigeria’s future economic growth will come from?
Nigeria’s future economic growth will come from its people. The skills of individuals will become the highest earners of forex in the next decade. Our growth will come from our ability to tap into the knowledge economy. Diversification, technological innovation, sustainable development initiatives, and investments in key sectors, such as agriculture, technology, and renewable energy will go a long way if the economy is to grow.
How do you resolve the anomaly of a tightening labour market during a recessionary period with high-interest rates?
Firstly, targeted fiscal policies that stimulate job creation and support businesses are crucial. Government initiatives such as infrastructure projects, incentives for hiring, and direct support to industries facing challenges can inject liquidity into the economy, encouraging businesses to maintain or expand their workforce. Additionally, programs that focus on upskilling the workforce to meet emerging demands can enhance labour market adaptability. Secondly, monetary measures should be carefully calibrated to strike a balance between inflation control and supporting economic recovery. While high interest rates are typically used to curb inflation, a delicate equilibrium must be maintained to avoid stifling economic activity. CBN may consider adopting subtle approaches, such as forward guidance, to provide clarity on the policy trajectory and instill confidence without causing undue restrictions on borrowing and investment.
Furthermore, fostering an environment conducive to entrepreneurship and innovation can be instrumental. Policies that reduce regulatory burdens, facilitate access to credit for small and medium enterprises (SMEs), and promote research and development can spur economic dynamism and create new job opportunities. Resolving this complex situation requires policymakers to walk on a delicate balance between monetary and fiscal measures. Striking the right equilibrium involves not only managing interest rates judiciously but also implementing targeted policies that directly address the structural challenges in the labor market.
Talking about big brands coming into Nigeria and FDI, how did you convince RSM International, one of the largest accounting networks in the world, to come to Nigeria through your firm Stransact? What exactly is your relationship with RSM?
According to the United Nations, the population of Nigeria could reach 730 million inhabitants in 2100. The country’s growing young population means that public infrastructure is stressed but this presents an opportunity for future economic growth under the right political environment. It was not difficult to let RSM see the importance of Nigeria if the network intends to deliver on its strategy to be a leading global accounting, tax, and consulting organisation globally. RSM has been around for over a century. They are the fifth-largest accounting firm in the USA, the world’s largest economy. RSM is also probably number 5 in Germany in terms of revenue after Ebener Stolz, Germany’s 6th largest firm joined our network. What is important for the network is the commitment of the member firms to certain values which we call the RSM DNA. Upon interaction with RSM 4 years ago, the network was convinced that Stransact is a firm that shares its DNA. We built our firm on values. Unleashing the human potential is why we exist. We are still improving our processes and methodologies and as soon as our internal quality attains the global standards set by RSM, we shall be rebranding as RSM in Nigeria.
Beyond banning the street sale of dollars, what else can we do to unify our exchange rate?
I believe CBN policy reforms are ongoing. It does not appear that CBN has applied all the fixes they intend. Do not forget that the events in the CBN itself have dampened the confidence of the global community, and have held us out further as a country with very poor governance. It is a sad thing for the country for a CBN governor to be accused of all the things the last CBN governor was accused of. I would like to stay naive and hope that he’s not guilty of such reckless actions, the impact of which is on all of us. It will take some time for the CBN itself to gain the confidence the world had in it as a trusted regulator. But more importantly, our foreign reserves which were depleted severely, need to start growing again. Remember that the last time we moved closest to a convergence between the parallel market and official market forex rates, our foreign reserves were at an all-time high. The amount we spent on importing petroleum and similar products was not what we have now. Hopefully, as we stop spending our forex earnings on importing petroleum, the Naira will gain significant mileage. However, I seriously fear that if those in charge of governance do not act quickly, our economy is at risk of being completely dollarised. We hope to see those days when global events that push the price of crude oil to very high levels, translate to a windfall for Nigeria rather than hardship for Nigerians as it is right now.
Some have said Nigeria’s debt may not be sustainable with almost 90 per cent of its revenue going for debt servicing. What is your take on this?
I do not share this view. Unfortunately, most of the debts we take are not used for the purposes for which they were meant. They are stolen by officeholders. If we plug the leakages, the infrastructure deficits we have are such that, if we channel our national debts to fix them, there will be a consequential quantum growth in our GDP that will make the borrowings more sustainable.
The World Bank has said 130 million Nigerians are facing multidimensional poverty. What is the way to reduce this number?
I saw a report recently that said there was a marginal reduction in the number of people in absolute poverty in Nigeria in the last 6 months. We cannot reduce poverty if people do not have jobs. In certain societies, jobs are as important as life itself. In Japanese society, a man’s right to work is as important as his right to life. These are societies with enough social cushion for those at risk of poverty. It will take us a while but we should do more about small businesses who are the largest employers everywhere in the world. Our small businesses here get aesthetic support from the government. We need to borrow a leaf from the US Small Business Administration (SBA). If there’s no actionable program to spur the growth of small businesses, the government, and big businesses by themselves cannot lift enough people out of poverty.
