Buhari Should Hire a Chief Economic Adviser, If He’s Serious about the Economy



Just one month into the second term of President Muhammadu Buhari, issues in the economy are once again on the front burners. A former managing director of Asset Management Corporation of Nigeria (AMCON) and Managing Partner, Alpha African Advisory, Mr. Mustafa Chike-Obi, takes a critical look at the economy, highlights its challenges and proffers solutions. Specifically, Chike-Obi faulted the Economic Recovery and Growth Plan (ERGP), the economic blueprint of the government. The economy, according to him, is not the priority of the president. He speaks with Kunle Aderinokun and Bamidele Famoofo

What have you been doing since you left as AMCON managing director?

Well, as you know, l work for a financial advisory company called Alpha Africa Advisory. We try to raise money for bigger World Bank projects in Nigeria. We have found it very difficult to raise money in the last few years because many of the foreign companies don’t find Nigeria a very attractive destination for investment. And that is the truth. When you ask them why, they mention a number of things. They mention policy inconsistency, managed foreign exchange regime, security and the fact that Nigerians are getting poorer and so the disposable stable income is not available.

So, part of my mission in the last few years include my support for an alternative government in the person of Atiku Abubakar. I realize we have to address so many issues and this government does not seem to be committed enough to address those issues and they seem more interested in congratulating themselves on how well they have done. Anybody that looks objectively at Nigeria economically in the last four years cannot say we have done well. So, that is what l have been doing. As you know l was the economic adviser to the Atiku Campaign, and now that the campaign part of the election is over and we are in the legal arena, I’m now focusing on the economics and my business here as a financial analyst.

What are the things the government has not been doing well?

I always say, unfortunately, a modern economy is very complicated. It is not something for amateurs to dabble into. What you do in one place affects another place. So, we need to sit down to figure out what are our economic objectives, and that comes from the president. President should say what my vision of the economy is and then hire people to help him achieve that ambition. I have not heard articulated any coherent economic vision by the president. I hear things like: I want foreign exchange stability. That is not an economic vision. Foreign exchange stability is just a tool to an economic vision. I have not heard any single coherent economic vision coming out of this government.

And I think that is a problem because once you have a vision, then it is easy. You get people who buy into that vision and those who are competent to accomplish that vision, then it will not be difficult to execute. But once you don’t have a vision, people would do their own thing. CBN may do things that make sense to CBN, ministry of budget and planning may do things that make sense to them while Trade and Investment will anything that makes sense to them. But some of those things that make sense individually may not fit into a coherent plan.

So, a tight fiscal policy would clash with a loose monetary policy and also a tight monetary policy may clash with a loose fiscal policy. All those things can be assembled and the only person who can assemble them is the president. But the president, l’m tired of saying this, does not have a chief economic adviser. Mr. Dipeolu, as competent as he may be, is the chief economic adviser to the Vice President. His title is deputy chief economic adviser to the president because that is the way the presidency works. How can an economy be such a priority and he does not have a chief economic adviser who coordinates your vision? I think of all positions he should focus on this time around, he must hire a chief economic adviser that coordinates all economic matters.

Somebody he trusts, somebody the nation trusts, somebody that the international community can trust. To me that is more important than the appointment of a chief of staff. Let’s get a vision together so that what the CBN Governor, Budget and Planning and Trade and Investment do all fit into that vision as coordinated by the Chief Economic Adviser who speaks for the president on economic matters. I think that is a priority. So, that is one thing that has been done wrong by this administration and this cannot be blamed on the PDP. It is entirely the fault of the president. Once we have that vision, we can make projections. l know what l want.

I want double-digit growth, tripling of our productivity, and five to six million jobs a year created. That’s all l want. Other people can debate what they want, but that is what Mustafa Chike-Obi wants. Once I can convince others that is what we need to do and why, then anything fits into it. Then the next thing is to ask what monetary policy that would drive it? What’s the fiscal policy that would drive it? What’s the trade and investment policy that would drive it? What’s the plan that would drive it? Everything now fits in into the objectives. It is from that objective you will get your foreign exchange policy, your education policy, infrastructure policy. Once you state what you are aiming at, l think that is what we must be focused on. May be it is three or four years too late, but it is better late than never.

You have alleged that the government does not have any economic vision. What’s your take on the ERGP, which this government says is its own economic blueprint?

The ERGP is a document that was championed by a man that l have a lot of respect for, Senator Udoma Udo Udoma. We were at King’s College together. We are friends. He is a thorough professional and he meant well. But Udo Udoma is a lawyer, a very good lawyer. He has a fantastic law firm. And no matter how smart he is, he is in an area where he has to learn a lot. So, with all due respect to him, and this is not taking any shot at him, I think the document should have been prepared first of all by the chief economic adviser to the president. It should reflect the vision of the president.

I’m talking about vision, not execution. When it is prepared outside the vision of the president, it is necessarily in my opinion, guessing what the president wants and you are trying to work around it. So for example, everyone on the economic team believes that the president wants a naira as strong as possible, so they fashion all the theories around that. But that is not an economic policy. So when they say their aim is to have a GDP growth very modest, they are anchoring it to some implied foreign exchange rate, which will drive down the economy. But I’m saying let us convince the president that what matters is growth, employment and productivity. Once he agrees, we go back and say this is what applies. So, ERGP for me is deficient, not ambitious enough and it will not serve our purpose. And again, it is more like an execution of a document and not a vision.

What other things can the government do to grow the economy?

You must do many things. We must grow our GDP by double digit, we must be productive. Talking about productivity for example, the yield of rice in Nigeria is probably, depending on who you are talking to, is perhaps a third of the yield per hectare in Thailand, and yet we are competing in the same market. You can jump around talking about how much rice you are producing but you are producing at a very inefficient level. But l understand we cannot be productive immediately but we must get there. The third thing is that we must employ our people. Contrary to what people say the uneducated unemployed youth is less dangerous than the educated unemployed youth. The educated unemployed youth is the one that is organizing gangs to perpetrate crimes. The uneducated ones cannot organise that level of crime. So, a lot of the crimes we are seeing are led by frustrated graduates. So, we must find employment for our people, otherwise the money we spend on education especially tertiary education will be a waste. We don’t have much time to do it. Those are the things we must do. Once we agree, we need experts to make them happen.

How do you grow GDP double digit and increase productivity?

I will give you an example. I said this recently and everyone was laughing at me. I said we should not buy any tailored cloth from abroad. I picked tailoring for one reason. I didn’t pick tailoring because I want to ban clothes. I picked tailoring because it will employ a lot of people. It does not require a lot of capital, training, infrastructure. You just need a sewing machine and the ability to cut clothes and sew it according to pattern. It is something we can start with. Let’s import the fabrics because fabric production cost money. And when you look at clothes, sewing and cutting and the fabrics constitute over 50 per cent of the cost of the cloth.

It’s a way to start. We can decide we want to be the sewing capital of Africa. We can easily become that in the next three years. We can employ two million people in sewing easily, but we have to learn skills. After that I’m going to furniture making. Import the woods if you want. But the furniture that we use in this country, especially in government offices should be made in Nigeria. It does not require that much infrastructure. We can go from soft skills to harder ones. I’m not asking us to start making cars or computers in Nigeria. We can leave those for the Japanese. But we can compete with them in things like tailoring, carpentry etc. Then, we can go to shoe making. We will be able to employ our youths while we grow our GDP when we do that. And as we do it, we will be able to afford more electricity, roads etc. But we have to start somewhere.

Oil price hovers around $61 per barrel at the moment and analysts say they don’t see it climb much higher in the medium to long term, and Nigeria’s budget is benchmarked at $60 per barrel. Is this sustainable for the country?

Let me say something l never understood since l came to Nigeria. Why is the oil benchmark in the budget? What does it matter? I have never understood it. You do a budget based on what you need. And what do we need in this country? Let’s assume A, B, C and D and they come at a certain cost. Then you ask yourself, can l afford it? And you say, yes, l can afford it because you have some money left over. Right, you saved that money. The other way round, you say no l can’t afford it. Then you ask yourself, can l find a way to fund it? If yes, then you do it. But if you can’t, look for the things to cut away from the budget. That to me is how you do a budget.

So, l don’t see how the oil benchmark price comes into it. Rather than use the oil benchmark, you can call up today the Chicago Mercantile Exchange and they can give you a price that we can sell our daily oil production every three months because there is a forward price for oil. If we want to sell 500million barrels in the next12 months we can have a fixed price. As you make the money, you deliver to pay. If we actually want to use the benchmark, we should not be guessing as we can use the forward price benchmark in the market. Why are we guessing? If you give me 20minutes to call all the oil traders they will give the price of oil for the next five years. We should hedge every year forward for us to have certainty. If the price goes up or down we win. All we are doing is locking the price each year and having certainty rather than dealing with fluctuations.

What ‘s your position on the foreign exchange regime. Are you proposing a further devaluation of the naira?

I didn’t say the naira should be devalued. Let me clarify what I’m saying. I said once we can establish the three things l have proposed i.e. growing the economy by double digit as soon as possible. It won’t happen tomorrow, but we must get there. If we agree to employ five to six million a year and become more productive, the rest are just tools. Interest rate becomes a tool. Exchange rate becomes a tool. Any intelligent economist will tell you the way to go about these things once the president tells him those are the three things he wants. This should include a policy on foreign exchange, investment etc. For example, something as simple as anybody from the G-20 countries coming to Nigeria does not need a visa. But they will tell you we must reciprocate. Well, if a Policeman with a gun slaps you, you don’t reciprocate because he would shoot you and you would die.

You may find other ways of dealing with him. You take the slap and go and complain somewhere but you don’t reciprocate. So, when America says you don’t come here without visa, reciprocation is stupid. We need America, America does not need us. But there are other ways to deal with America. Allow America to come to Nigeria. When he comes to the Airport, we would welcome him and he will spend his dollars here. We should allow them to come with no visa as they are not interested in staying in our country. So, what I’m saying is that policies should come out of the vision of the President and not the other way round. I will tell you that when Sanusi Lamido Sanusi was CBN Governor, he had a policy. It’s a one word policy-Stability. He wanted financial system stability because there was a crisis. He wanted foreign exchange stability, interest rate stability, and inflation stability. That was his vision and he did those beautifully. However, after Sanusi had achieved stability he should have moved on to growth, but he didn’t, he stayed in stability.

What will you have done differently if you were the CBN governor?

I have said it several times. I said it to Jonathan, Okonjo-Iweala and even to the Buhari government that the only thing that will save Nigeria economically is a double-digit growth. So, anything that is not supporting a double-digit growth, l would not do. And everything that supports a double-digit growth, I would do.

What will support double digit growth?

Lower interest rates and a weak currency will support double-digit growth. Currency can either be strong, appropriate or weak. I’m for the weak currency. I want foreign goods to be so expensive that the middle class cannot afford it. When I was growing up breakfast was ogi and akara. Now it is sausage and bacon. It’s nice. I like sausage and bacon. But does it develop Nigeria? No. Champagne was unheard of when growing up and everything we did to develop Nigeria was in that period. Now to attend a party in Lagos without champagne is almost like a failure. So, we will all have to make sacrifices to get to the goal but the goal has to be defined, which is my problem. Right now we have been appreciating our currency every year. It is not just stable but appreciating. A stable currency will adjust by inflation every year.

You know why it has to adjust by inflation? It’s because if this cup of tea costs one dollar today, it means it costs N360. So, my inflation is 10 per cent, this cup of tea, as example, from now will cost N396 due to increase of 10 percent. But a cup of tea in America is still a dollar because you have no inflation. So that N396 should be equal to the dollar, but if it is not, then l won’t buy your tea at N396. I would take N360 of my money to buy a dollar and use the dollar to buy tea and save myself N36. So, what happens to the man that is making tea in Nigeria? By the third year his tea should be at N500 per cup but the American tea is costing N360. Then people will smuggle American tea atN360 and sell atN380 and make a profit. Meanwhile, this man is trying to employ people and sell his tea at N500. He can’t survive and that is the problem. But if price of tea is adjusted by inflation he can sustain his business. That’s why all our businesses in Nigeria that started well, after the fifth year; they are out of business because of competition from foreign businesses. But an industry like banking that is not battling any foreign competition can stand in the face of rising inflation. The target then should be to reduce inflation by efficiencies. This comes from expertise and volume.

How does insecurity in the country affect the economy?

Let me tell you something. Kidnapping before now was higher, and then it came down. Now it is going back up. Emigration was high before and later people started coming back home. Now they are going back again. The common denominator in those cycles is the economy. If your economy is doing well, the crime rate will drop, kidnapping will drop, and people will start coming back home. And that is why l said we need to have a coherent policy. You can choose to fight corruption and ignore the economy, but by ignoring the economy, you have created insecurity and crime. Now if he attacks security, the economy will get worse.

The budget for Police in New York is about $10billion a year which is half our budget. Security is not cheap. You can say all you want, but police are not getting paid. If you see where they live, it is squalor. Soldiers are saying they are not getting fed. It is easy to say let us treat security, but there is no money. And the only way countries get money is by growing there GDP. That is why l keep coming back to that. If we grow our GDP, we would solve a lot of these problems coming from lack of growth.

What’s your take about the nation’s tax regime?

I think the tax rate is too high, but enforcement is too low. Enforcement comes from two things; people feeling that they should pay because they are getting something from government. So there is a moral side of taxation. The other side is doing things that forces people to pay taxes. On the rates side, they are too high and on the enforcement side, too low.

How do we improve enforcement?

Like l said again, revenue mobilisation is a big deal in Nigeria today. It is a big challenge in the budget. I would propose the creation of ministry of revenue mobilisation.  I think it is that important. And, we should coordinate all the states because some overtax.  Lagos State overtaxes, but the people have no choice. But l can bet that in the next 20 years businesses will start moving from Lagos to friendlier states.  If the other states build infrastructure Lagos state will be empty in the next 20 years unless they make changes in their tax rates. For instance, if we make the inner waterways usable and build ports across states and make the roads motor able, Lagos will be empty.

Did you face any challenges that hindered you in any way  as CEO of AMCON?

Well, l defined the role of AMCON very narrowly. I didn’t see AMCON as that big institution in my head. It had a very narrow job. Buy the Non-performing loans; recapitalise the banks in other to avoid a banking crisis. Do your best to recover as much of the loans as you can. What you can’t recover, the bank will pay in the long run. That was the narrow definition and I stuck to it. And l must say that there were some interference from the National Assembly initially. But part of it was their fault and mine. I did not educate them enough about what AMCON was doing, but as we got to know each other better, we got along very well and in the end the National Assembly was very helpful to our cause.  They passed the AMCON Amendments Act very fast and they did a very good job.  The National Assembly was very helpful and the Judiciary was extremely helpful. The Federal High Court who had jurisdiction over AMCON cases gave us everything we wanted. They gave us Judges to seal AMCON cases. It was wonderful. The biggest problem we had was probably from the Executive.  We are also members of the Executive. There was a lot of attempts to encroach on what we were doing at AMCON even though they were not supposed to.  I remember the Auditor General wanting to audit AMCON while the law says he cannot audit it. The law says they can approve the auditor and look at the result of the audit, but never to audit AMCON by themselves. I don’t want to pick names, but there are a number of executive agencies that were problematic. But in the end we worked it out because President Goodluck Jonathan was a very strong supporter of AMCON. Whenever things get to his hearing he made the right calls. He always went on the side of the law as far as l knew with AMCON. The other thing that I have always talked about is debtor not wanting to pay. That is a natural thing, and l don’t think that is peculiar to Nigeria. Our recovery rate was higher than other AMCONs in the world. So, the Nigerian debtor was not as terrible as people said they would be. Those who could pay paid, while those who could not pay but had the possibility of paying were accommodated under restructuring. But some people just could not pay because they didn’t have the money as 90 per cent of the problems was bad business- crude oil price falling, exchange rate falling, having debt in dollars while revenue is in naira. All of those things. There were some frauds but very small.  So, I tried hard not to blacklist many of them. I tried to work with them because they are employing people and l thought employment was the most important thing that we need. We kept most of the businesses alive because we thought there was a chance they would stay in business.