This is a follow-up to my column of Monday April 26, 2016. This piece generated so much interest judging from the mails and text messages I got that I felt the need to release the second part of the write up. I must state here for the records that I welcome readers’ feedback and comments and have no problems with readers who disagree with me, for the simple reason that it is the beauty of freedom and democracy.

The whole essence of government is to make life better for the people. So governments all over the world are measured by how much impact they make on the life of the people. This effectiveness is measured by human development index (HDI). The indicators for HDI will include education (both quality and quantity), life expectancy, income per capita, poverty level, standard of living, unemployment rate, etc. According to the United Nations Development Programme (UNDP) figures, Nigeria ranked No 21 in Human Development Index in Africa and No 152 in the whole world by 2014. Countries are rated in these categories: High, Medium and Low. We, unfortunately are in the low category. Countries ahead of Nigeria include Libya, Botswana, Gabon, Cape Verde, Namibia, Equatorial Guinea, Republic of Congo, Zambia and Ghana who are either in the High or Medium Index. We share the low category with Swaziland, Tanzania, and Angola who are above us by some notches. The five African countries that made it to the High category are Mauritius, Seychelles, Algeria, Libya and Tunisia.

The quality of life people lead in any country is influenced by the economic resources and policies of the government of that country. Governments must, therefore, put in place such economic policies that will make life more meaningful for its populace.

When I talked of savings in my last intervention, I was referring to the actions of economic entities by the government, business or individuals in deciding what to do with disposable income at any point in time. There are obviously two choices: spend or keep. Some people may misconstrue spend to mean consume. Of course you would not be wrong if you thought that way, but that is not where it ends. What is very critical here is what you spend on. For a government, spending can go into different kinds of things from the profound to the profane. There is no problem with the profane once you have taken care of the profound. The argument therefore is that as a country, we should not be fixated with savings, as if that is the most important activity, in the face of worsening human development challenges. Checking through the indicators mentioned above, you will not see any measurement that refers to savings as one of the indicators of human development. Neither will you see numbers relating to how much the country has in foreign reserve and Sovereign Wealth Fund (SWF), even though we agree that they are very important in any country.

What we propose is that the country should start by agreeing how many months of import our foreign reserves need to cover, though we had also argued elsewhere that there should be concerted effort to push imports down with policies that will encourage local production. As a rule, it is expected that foreign reserves should cover three months of import. We may decide that we want to cover four to six months of import to have sufficient buffer. Of course there are countries like China and Saudi Arabia whose foreign reserves cover over 50 months of import. But they are the exception and not the rule. Once we have set the dollars aside as the required level of foreign reserve, whatever is left should be available for direct government intervention in the economy. The intervention for purposes of this analysis can start with a decision to stamp out import of petroleum products and export of crude. From what we know, it may cost up to $5 billion to build a refinery. It may go as high as $14 billion if it is a big integrated project like the one being built by Aliko Dangote in Lagos. It must be noted that the Dangote Refinery includes a 650,000 barrel per day refinery which means it is bigger in capacity than the four refineries the Nigerian National Petroleum Corporation (NNPC) owns in Port Harcourt, Warri and Kaduna which have a combined capacity of 445,000 barrels per day. In addition, it includes a fertiliser plant and a petrochemical complex. Dangote will produce 55.2million litres of gasoline which will cater for our daily domestic consumption of about 30 million litres and leave us with substantial quantity for export, in addition to polymers and fertiliser. While waiting for the completion of the project in the next two years, we understand from the Minister of State for Petroleum that we require about $700 million to bring the four refineries, whose average capacity utilisation for 2015 was around 5% to full production. My submission is that rather than say we don’t have the money, we should dip our hands in our savings account and take the money to fix those refineries once and for all. All things being equal, we should go a long way in being self-sufficient in local refining of products and begin to conserve the close to 40% of our foreign exchange allocation that presently goes into the import of petroleum products. We would also eradicate the logistic waste of exporting crude and importing refined products including double freight, storage costs, duplicated transportation costs to and fro the wharf, double loading and offloading expenses and double tariffs.

Most importantly, we would add an estimated 100,000 direct jobs and about 200,000 indirect jobs to the market and pull many more of our youths out of the unemployment line. Government will boost its revenue by collecting taxes from the refinery and the additional jobs that would have been created. Now let’s assume that we export 2 million barrels of crude per day (mbd), even though we are aware that our volumes have hovered around 1.8 mbd in the last few months.  With both Dangote and NNPC at full capacity, we still need additional refining capacity of 900,000 barrels per day to eliminate export of crude. We will need to spend another $9 billion to build another new refinery to wipe out crude export completely. You can estimate the economic impact in terms of foreign exchange, jobs and income to government.

How about power? I am told it costs an average of about $1 million to generate 1 megawatt of electricity. So if we decide to add 5,000 megawatts of power to our grid, we will set aside another $5 billion. The direct multiplier effect would be felt in the transmission and distribution sub sectors of the power business. Government could decide to take all the risks to jump start production and manufacturing. And this can happen in two years. We will not only be putting a whole lot of people back to work but will have most of our industries begin to produce up to installed capacity as we reduce their cost of production. Those small and medium scale industries who are unable to compete because of high energy cost can now go back to work. We will have thousands of our youth employed in the power industry directly, while hundreds of thousands will indirectly get jobs either from the industries we had given energy or the new ones that will start off, but also indirectly from those same companies as contractors, vendors and suppliers. In a few years, we may also decide to add another 5000 megawatts at another $5 billion to extend power to more of our citizens. We can create some 2 million direct and indirect jobs from just using our money differently in 2-4 years. If we saved the same money, we will earn interest periodically and I can bet you that the interest is going to be abysmally below the inflation rate, meaning that we will earn negative returns on the savings.

We can replicate the same in our transport sector by earmarking another $5 billion for rail and same amount for roads. We will rehabilitate a lot of the roads and rail systems and build new ones, with its resultant effect on job creation and income generation. Recall that in the post-colonial era, the Nigerian Railway Corporation used to be one of the largest employers of labour in the country. They became so large that they had to take a chunk of Ebutte Metta in Lagos and name it “Railway Compound”. That vast estate exists up till this day even without an efficiently functional rail line. An efficient or even not so efficient rail line connecting most of our major towns and villages will serve additional purpose of helping our farmers evacuate their produce to the townships to earn reasonable returns to their labour.

Of course, we will make money from there as it won’t be a free service. London Underground and several other services in different parts of the world are profitable and there is absolutely no reason why ours should be different. Road construction is the job of government at different levels. We are not unaware of some attempts to outsource that to the private sector, sometimes, under PPP programmes. But we are also aware that the model which was hitherto celebrated in Lagos, collapsed a few years ago and the government had to buy back the project from the company that was handling it. So, governments at all levels must assume their responsibility of building roads for the populace. Virtually all the 193,000 kilometres of roads in the country require one form of maintenance or the other. It is estimated that we require close to $3 billion to fix these roads.  If we earmark $5 billion for road rehabilitation and construction of new ones, we would go a long way in converting the craters that have become the lot of most of our roads, particularly in the southern part of the country to modern roads, creating access to a lot of our villages and towns and reducing the carnage on our high ways.

Healthcare delivery is another area that needs a lot of our money. By refurbishing our specialist and general hospitals and equipping them properly, we would reduce medical tourism abroad to the barest minimum. Having done that, one would expect that we would charge appropriately for services, as it would still be a lot cheaper than travelling abroad for medical care. Nigeria is said to have spent $1.3 billion on medical tourism to India in 2014. If you add this number to other countries like the US, UK and Germany, you would be talking of a figure in excess of $2 billion in one year. In addition to conserving huge foreign exchange, we will create decent jobs for many of our health care professionals and other ancillary staff and reduce the brain drain that has been the lot of this industry. We may choose to start with one specialist hospital per state and gradually extend to others.

Education is another industry that has suffered a lot of neglect. The reaction of our elite is to send their children abroad for qualitative education. The bill for school fees abroad is in the neighbourhood of $2 billion annually. We can save money by modernising our educational system in addition to giving the future generation the quality of education that can guarantee and safeguard our tomorrow. Money should be spent by upgrading the quality of our schools as well as upgrading the quality of teachers and teaching across board.

Recently, there has been a lot of focus on diversifying our economy in view of the drop in oil prices and resultant effect on government revenue. One area that has received a lot of attention is agriculture. We must decide to work out a way for government to support farmers even if it involves subsidy. If the US government still subsidises agriculture up to this day, I see no reason why we cannot. The subsidy can come in different forms. Fertiliser can be one, farm implements can be another. Land and buildings can attract subsidy and government may choose to handle storage and primary products processing. Government may also choose to set up marketing boards to buy up produce like it was done in the olden days. Those marketing boards would then arrange storage of excess capacity for onward delivery to the market in times of scarcity.

From all the analyses, there is no doubt that we have critical need to use over $20 billion to improve infrastructure and the quality of life of our people and make them more productive and competitive for the future. In fact, the Global Competitiveness Index has it that inadequate infrastructure is the biggest single impediment to doing business in Nigeria in 2015. We may choose to save the $20 billion in an account with JP Morgan Chase and earn some paltry interest of about $200 million after one year of remaining idle in the bank at a generous interest rate of 1% per annum . And to think that the money remained idle is to deceive oneself. That same money will be lent to some people, probably Nigerian banks under a Eurobond facility or a Tier 2 Capital raise issue at a “conservative” rate of 10% p.a. You will ask why the big gap and you would be told about country risk, Fitch and S and P ratings and how someone else from Somalia is waiting in the wings to take the same money at 15% per annum. These rates are exclusive of fees which are normally slammed on the borrower on the principal, most times not less than 1% flat. So we end up denying ourselves the much needed funds to build our infrastructure and at the same time, making others richer at our expense.

Did I hear someone talk about saving for the rainy day? Well, I have news for you. The rain is here already and it is not just raining, it is pouring.