Adetilewa Adebajo

After strong headwinds, which pushed the economy into recession, it appears to be receiving a new lease of life, albeit with a fragile growth. In this interview with Kunle Aderinokun, CEO, The CFG Advisory Ltd, Adetilewa Adebajo, who, believes the economy would need a long period of time to recover and achieve tangible growth as well as stability also suggested ways by which the government could boost the flow  of foreign direct investment into the economy

Nigeria was 57 on October 1, which means the country has come a long way. What’s your assessment of the economy? 

First of all, in assessing the current state of Nigerian economy at 57, we have to take a look at a perspective that is pretty much more holistic. Nigeria gained independence in 1960. If you take a look at the countries that Nigeria gained independence with about the same time, the two countries that Nigeria was well ahead of, were countries like South Korea and Singapore, even Malaysia and Indonesia.

Those countries considered Nigeria as a model and it is clear that even the legendary Lee Kuan Yew, in his book, said  he came to Nigeria and stayed at the Federal Palace Hotel.  It was a marvel for him and he felt he wanted to emulate Nigeria.

When you take a look at these things and you put them into perspective about where we started and where we found ourselves, there is a lot of soul-searching that needs to go on and it goes beyond restructuring. There is a collective responsibility that we all have to take that we have not put this country or the economy of this country where it should be because the people that we are well ahead of at independence have gotten way ahead of us and I think it is a very important comparison.

But despite all these shortcomings that we are talking about, the Nigerian economy still remains the top economy in Africa and globally is ranked 23. So, there is a powerful resource base we have in this country that we have mismanaged. But despite this mismanagement, we are still  a top economy in Africa. You imagine if we are able to put our economy in order and generate 10,000MW of electricity, there is no reason why Nigeria should not be closing in on G-10 economy. So, clearly, we are not where we are supposed to be.

What have we done with our resources. That for me is the question that we need to ask and after 57 years of independence, we need to ask this question but if you look at the numbers, we are still number one in Africa, we are still 23 in the world. So the underlying problem is that the way our population had grown, we have not been able to cater for the growth of our population.

According to the data from NBS, the economy recorded 0.55 percent growth in the second quarter of this year, which indicated that Nigeria had technically exited recession. What do you think the economic managers could do to increase the growth, recover and stabilise?

 Whatever it is you say, you have to go back to history. I look at the 10 years growth pattern of inflation and GDP growth. Obviously, you know that there is a correlation between the low levels of inflation and high levels of growth and also correlation between inflation, which means that your growth will be quite low. I looked at Nigerian economy over a period of 10 years, which is from 2007 to 2017, and at each point in time, the highest we have ever got is 8.5 percent GDP. When we had 8.5 percent GDP, the rate of inflation was about 12, 13 percent. Historically, what it shows is that, in Nigeria, in order for us to have high growth rate in Nigeria, inflation rate must be relatively lower and the highest inflation rate that we achieved about this time was 13 per cent or so and we brought inflation down to single digit. But unfortunately, after the new government was elected in 2015, we saw a massive decline in GDP. Some policies came in and spike the inflation. So, unfortunately, this whole recession was self-inflicted in my own opinion. The monetary authority and fiscal authorities did not respond properly and the gap in-between when the president came in and appointing the ministers, there was no signal to the marketers as to the direction of the economy. That was a highly devastating period. Having said that, I think that clearly took the economy into recession. And the fact that they took out the subsidy, inflation spiked; it was not managed properly- for it to get to a situation whereby the effect was lingering over a period of time. It was just now, two years later, that we got it. That was a long lag. Two years for cost push inflation, which is an increase in the factors of production to take two years to go through the economic cycle is a management problem. You can feel the impact. It should be only one surge, then you control because it is only once you increase the price. But then, it starts to filter towards the cost of food, cost of transport. It goes through the economy because that is something that is very powerful. But you should expect a surge and be able to control it.

Earlier in the year, the government came up with a brilliant document Economic Recovery Growth Plan, ERGP, and we all agreed that that was the document which stated clearly that the government understood what was going on, understood the situation and understood what we needed to do to stimulate the economy and get the economy out of recession. I don’t have any problem with that document. I think it is well put together, well researched, understands the issue and properly document a roadmap to be able to come out of that.

In addition, I think credit has to go to the vice president on the directives of his boss. He went to the Niger Delta and he pacified and won their confidence. He negotiated a peace settlement with them and he kept to that and oil production was flowing. That abated the foreign exchange situation whereby foreign exchange went from N500/$ to N360/$. If the monetary authority then had listened to the JP Morgan advice as to what they should have done with currency, we wouldn’t have seen naira at N360/$ now. Naira then was about N190/$ or thereabout, we probably would have seen naira between N250/$ and N280/$. It did not need to come to N360/$. It is too much. That was also mismanaged. It wasn’t only the fact that the oil price was low, we were not also meeting our production target. That action by the vice president is what has stabilised the economy today. The income from oil production was steady and money was coming even at $50 per barrel. By the time production dropped to under 1,000,000 barrels, they you are in trouble. That is what has stabilised the economy. That was a brilliant move and that is why it is a political economy.

The move by the vice president was also a fantastic move and it won the confidence of the international community. The so-called windows that the Central Bank introduced NAFEX, bid and offer rate, open market system. All of a sudden, these portfolio investors started coming back into the market. So you are restoring confidence gradually, but the investors we need are the foreign direct investors.

The key limitation to all those people is that our ease of doing business in Nigeria was very low. So, nobody wants to come and get stuck with a governor in a court and get their money stuck because that kind of money coming in, you expect it to stay here for 10 years. That kind of money doesn’t come easily, it comes with confidence. So, those are the two possible steps taking by government and you have seen the results. FX has come down and all of a sudden, you are beginning to tighten  and inflation also is beginning to drop. The tightening we are seeing now, we are controlling inflation and we are now coming out of recession.

But having said that, my own analogy is the fact is that Nigeria was in intensive care and in a comma. Now with this growth, the eyes have opened, but still in intensive care. You cannot discharge Nigerian economy from intensive care to recovery room until we have at least 3 per cent growth in the economy and 3 per cent is the growth rate of the economy, which is what we talked about. The responsibility of every government is to make sure that its economy is growing faster than the rate of its population growth because if the economy is not growing faster,  which is what has happened to us, you cannot sustain your population growth. There are not enough schools, hospitals, social infrastructure for everybody. JAMB cannot take everybody in the University. So what has happened? Population has grown, but you have not put the infrastructure around it. So those are the two positive things that the government has done that you can see to begin to move this county into positive territory. But in order for them to sustain it, they still have the problem in financing the deficits because what they told us was that they wanted to spend their way out of recession and they wanted to fund it by going to raise money, which mean the economy went into deficits because they did not have enough revenue, they wanted to borrow and spend, increase capital expenditure, but unfortunately for the government, their current plan has not been on track and that is one of the key limitations.

And as you can see from the IMF Article IV Report that came out in March, government was not spending close to 66 percent of its revenue to service debt, clearly that is unsustainable. So, government needs to sort that out. I think finance minister is working on that. They are going on road shows to move some debts from naira to dollar to reduce some cost of interests they are paying on them. So, they have a programme in place, but in the interim the lack of stimulus from government spending into the economy would affect recovery. What that means is that our recovery is going to be slower over a period of time. So, you don’t expect recovery this year because we can’t grow at 3 per cent. It is after we start growing at 4 or 5 percent, then you can discharge, the economy is out of the wood.

So, it is when we start reaching 4, 5 per cent growth, then you can now say the economy is no longer in the hospital- that it has now fully recovered and can be discharged to go. That is where we are. So, they are on course to do it, but unfortunately, they only have one year to do it because the election is near.

 Do you think the policies government has churned out, aimed at taking the economy out of its challenges are sufficient? If not, what is amiss?

What I see amiss is the commitment and the will to get things done. I also take a look at all the infrastructure we have had in this country- the National Stadium in Abuja and in Lagos, look at the Ibadan-Lagos Expressway. When that expressway was opened, it was tolled and it took us less than an hour to drive from Lagos to Ibadan. Now, what have we done with that road after about 40 years? It is not that we are trying to expand that road but the population is growing, the economy is growing, but we are not putting up the infrastructure base to support this and benefit from it. What we have not done is that government has not privatised and let proper private sector take care of that and because right now, it is clear that the government does not have the money but you also need outside investment to develop your economy.

You take a look at what is going on in terms of policy. When Obasanjo came in 1999, why didn’t he fix the Lagos-Ibadan expressway? Look at all the money we have made between 1999 and now. At a time, oil was $100 a barrel, at a time the excess crude was closed to about $16 billion.

So, Nigeria has this lot of funds and has nothing to show for it. Over the last 17 years, most of your money has been going towards recurrent expenditure and over the years everything has deteriorated. And that is why we are where we are right now

When we talk about privatisation, people complained that the  state enterprises privatised were sold  to cronies of people in leadership, but let us also take a look at where we have been successful in this country. We have privatised the banks and the banks are working well because they are well regulated also; we have liberalised the cement industry. We produce cement and also have enough to export. There are many areas where we have achieved success. But we have not asked ourselves whether we can replicate this success in other sectors of the economy. When you take a look at policies and how it impacts government, it is really those issues you need to address.

 Oil is still the mainstay of the economy, but the economy could be diversified to other viable sectors. In your opinion, what are the policies that could enable Nigeria diversify the economy from oil? 

I am happy you have mentioned this and despite all these issues, we still have some areas that we have achieved success. I have mentioned one or two of them and you will find out that in a lot of areas, most companies have come up. The privatised sectors are still here doing their bids and pushing in this country and those are the ones you need to commend. Those, who are here, either the fast moving consumer goods companies that have continued to push, in spite of the subsisting policy framework.

But when you talk about the whole thing, let us embrace a policy. At a point, we had a major assembly plant here. We had import substitution strategy, which was on course. How do we get back on course in terms of automotive? What incentives are we giving to those who are there? Or why is Toyota not assembling in Nigeria? Why has Peugeot stopped assembling in Nigeria? Why is Volkswagen not assembling in Nigeria? These are important things you need to look at. But when you focus your economy on trading, you go to China and bring in one spare part, that is not an economy. Even China did not create its economy that way. BMW makes the X3 in China also, Audi makes cars in China, Volkswagen makes cars in China. For each of these countries, if you want to come to their markets, they will tell you come and manufacture your vehicles in our country and for each plant you are setting up, you are setting up with a local company. That local company also is using your technology to develop local brands, which they are selling in conjunction with you. The same thing goes with airplane. Then you will talk about the steel plant.

We are successful with cement; there are huge  tonnes of the product  all over the country, but I wonder why we are still importing cement. It is the same thing. You have to create more Dangotes that will drive this process or decide to take the Korean model that powers Daewoo, Hyundai, Samsung, all the leading industries, and move into shipping and that is what they have done.

Look at what has happened with Samsung, now a dominant leader in electronics. All the screens for iPhones and also Samsung phones, Samsung makes them. Hyundai, Kia motors are now affordable cars for us in Nigeria and they are competing in terms of quality with the Japanese. It wasn’t always that way when they started in the 70s. With investment and everything, they have done it. Where are the concerted investments and the entrepreneurs? Who is going to drive it? Take a look at the agriculture sector, for instance, where is the policy? If Toyota cannot invest in this country, then there is a problem because if Toyota is doing cars in Nigeria, it can see it in Nigeria and across ECOWAS because of the economic trade zone that we have here. So, assembling or manufacturing in Nigeria means that you are assembling not only for Nigeria but for the whole ECOWAS market. So, what policies have our people put in place to say Nigerian president speaking to the Japanese president, and the minister says we want you to come here, these are the incentives we will give to you.

Look at agriculture- yes we are making progress in rice- there are two companies that are committed to the development of agriculture in Nigeria, Flour Mills  of Nigeria and Olam. Between Flour Mills of Nigeria and Olam, they have been consistent. Olam has put in closed to $5billion in this economy.

Olam invested $150 million in Nasarawa. So, what we are saying is that for you to bridge that gap, you need ten plants like that of Olam across Nigeria. The cost of that is $1.5billion and how much does government spent yearly on agriculture? More than that ! Our import bill is $6billion. So, if in one year, you spent $1.5billion, encourage all these companies, give them 10,000 square metres of land across the country, they will come in with the right incentives and they will start to produce on a large scale and it will reduce. But, where is that policy?


You have highlighted some of the things the government could do to encourage and increase investment in agriculture. Could you please propose ways by which FDI-driving institutions like NIPC and others could accelerate the attraction of investment to the Nigeria?

 That comes with business orientation. The entire institutional framework that we need is already in place. Our laws are even one of the best laws in terms of attracting foreign investors. We have very good laws, but what you have to understand is that if you are asking  people to bring their money here and you have to keep them here for a very long time, they have to be concerned about instability. A stable policy and democracy have helped, but if you do not have that business environment culture, that is where the problem comes in. There is a state governor, who signed a contract and reneged on the contract a year later because it doesn’t favour him and eventually, he will fight with his people and they will want to break law because they think they are law unto themselves. We don’t respect contracts in this country. When you go to court, you are in court for four, five years. Who wants all that? You don’t respect your own laws, the same governor that signed it will change it in two years’ time not to talk of when that governor leaves and another one comes in. So, when we do not respect simple things like that, the sort of money we are looking for cannot come because the sort of money we are looking is the money that is committed.

For Korea and the rest, their countries were built  with American money. Foreign direct investment, technology exchanges, all those Korean companies had alliances with bigger companies like the GE. Look at GE that has been in Nigeria, trying to set up in Nigeria for many years. They remained committed, because when I met with the CEO of GE when he came to Nigeria, he said GE is not going to concede Africa to China. His country is committed to Africa and that is why they have continued to push ahead. Despite the difficulties, we know that we have to take a long-term view of this market, but not everybody is ready to do that. He did that because he was successful, even before he became the CEO of GE. He met good people, who were facilitating transactions for him across Africa, especially Nigeria and did good business in Nigeria. He had a good experience of Nigeria and when he became CEO, he was committed to Nigeria. So, he came with a good experience and we encouraged. So we need to get more companies like that to be committed. The companies you have here who are committed are the oil and gas companies or the fast moving consumer goods companies, but we need more and we need  different types of investment.

We need to start thinking about how we can focus on local production. Flour Mills, BUA and Dangote have sugar refineries in the port. The combined capacities of those refineries are more than what we need in Nigeria. So, the opportunity is for the ECOWAS region. We need to start thinking about our productive capacities not only for our markets because we are big. We should be going into large-scale production because we have a market across West Africa that can absorb our production. So, we are not thinking at that level. Those three refineries are at the port and are being fed by imported raw sugar. Why can’t we have another policy that will give lands for cultivation of sugar and things like that ? Land is not our problem and so, put 100,000 hectares of land into cultivation. There are many places you can go, even South Africa, Cuba and Zimbabwe. There are many companies that have competence. Let them come and develop commercial sugar for us, your refineries are there.