Ruwase: FG Needs to Address Obstacles to Industrial Growth

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The President, Lagos Chamber of Commerce and Industry, Mr. Babatunde Ruwase, in this interview advises the federal government to implement the Economic Recovery and Growth Plan as well as remove all factors limiting the realisation of the set objectives of the plan. Solomon Elusoji and Hamid Ayodeji bring the excerpts:

How will you assess the performance of the economy in the first half of the year? 

The first six months of 2019 was a period of expectations; the carryover from 2018 and there were a lot of apprehension towards the end of last year because of the then forthcoming elections. Nobody was sure of what it would be like, although some of us who are used to the Nigerian environment would know that we have been through a lot of difficult times, we have learnt that eventually things would work. The worst time we have ever experienced was after the annulment of the 1993 June 12 election by General Ibrahim Babangida. That time in Lagos for about two weeks there was no movement, it seemed like the end for us but I believed Nigeria would always bounce back. Nigeria is a Nation that has been put together by God. We have so many things that are binding us together as a people. Unfortunately, the ruling class has not been as patriotic as the ordinary man. They use a lot of antics on the people; if it is not religion, it is ethnicity. Whatever we are getting as way of leadership is an aggregation of what we are as a people deserve. We were never like this, the average Nigerian in those days was a hardworking respectable person. However, after the civil war and the discovery of oil and the government taking charge of both the economy and administration, things changed. Governance should be about providing, maintaining and securing an enabling environment. The government is in charge of wealth, they decide what and the quantity of what goes to the people they are governing. This gives them the idea of a do or die idea attitude of getting into governance. Before you go into governance you should have something to offer. But now it is mostly those who want to make a lot of money that go into politics. For instance, if you are going into governance as a legislature, it is not your business to discussing about how you are going to establish roads and industries. What you are expected to do is to create laws that would enable the system to promote security and well-being of the people. If we keep doing the same thing and expecting different results, we would never experience a sustainable economic development.  Those who have been in power have come from regions that have the poorest of people. So, someone from the same region or tribe with you being in governance does not guaranty the well-being of people from that region. I believe political offices should be given based on merit. So, speaking like a business man, I am not disappointed because I am used to the Nigerian environment. I know that we are not used to having the budget early. For those of us in business, we work around it, instead of worrying about the federal government budget, we plan our business like the budget doesn’t exist and if it comes eventually, you take utilise it. If you think about it, how much does the budget benefit the ordinary citizen, most of it goes to meet the needs of the government or into debt service and very little goes into infrastructure development. Thus, I think we have not seen progress, nothing much has happened.  We still have insecurity issues and also that some of these things are being orchestrated because some people want to make a lot of money. 

Now that Nigeria has signed the African Continental Free Trade Area (AfCFTA), how do we position our economy to reap the benefits of the agreement?

Power. We are spending so much money on power generation even in our domestic life. The power sector has to be efficiently transformed. To be able to create an enabling and conducive environment, you need to have efficient power supply. There is need for standard infrastructure, transport system and good roads need to be provided and sustained. The railways are not functioning effectively; we have brought in Russians, Indians and Chinese to come fix it for us in the space of a decade. We need to solve issues that have been holding our industrial growth. From day one, we said it would be beneficial for us to sign the agreement because one in every five African is a Nigerian. We are a very large market; hence we are a perfect location for anybody. In sighting an industry; it is either by raw materials or market. When you are by the raw materials, it means you have a lot to produce, while if you are by the market you have a lot to sell. When you look at the Nigerian spirit, in terms of commerce we are vibrant. So what this agreement means for us is that we are not one leg into the African market anymore, now we have both our legs in. When it comes to finance, banking, we have the most developed banking system in Africa. Nigerian banks are spread all across Africa. It is only when there is a law that inhibits their movement from expanding further. In Ghana most of the banks there are Nigerian banks. They had to stop Nigerian banks from coming because they said they were dominating the space. Thus, we are ready to take advantage in that area. Industry is not the entire piece of our economy, although it is a major sector. Asides the AfCFTA, we need to fix our internal issues so we would be able to compete with other countries. Currently most of the items in the country are imported and it is not because our own Nigerian made goods are not up to standard, the issue is that our cost of production is very high, so we cannot compete with those that are importing into the country. In terms of intellectual capability, like Nollywood we are at the fore front in Africa. The problem in Africa is that governance and economy are in same basket. In other parts of the world, when the political leaders are meeting the businessmen meet either a day before or at a different time. Government should not be in charge of handling the business, what they need to do is create an enabling for the businessmen because government has its own bureaucratic behaviour. If you do not draw a line between economy and governance our economy would experience slow growth if any at all. So, the federal government signing the agreement is good. So, it is something we are going to gain a lot from because if other smaller African countries are not afraid, why should we be when we have the most to gain from the agreement. 

Concerning the Lagos Free Trade Zone, how can we maximise the region to enhance commerce and industry?

The challenge is that the average person doesn’t even know that it is there. They don’t even know what it is all about. So when foreigners come in, I tell them we have a free trade zone where you can set up an industry. Everything is there. The power issue that we are talking of is guaranteed. You can produce your goods and take them out without paying duty. But anything that comes inland is what will attract duty. So we need to actually make it very popular – let people know that we have such a facility where you go into and the power challenge is out of your way. All you need to do is to come and produce goods and export if you want to. So we need to bring it more to the consciousness of our people and by extension, to the world. It is something that we need to work hard on to maximise. And it will provide employment and facilitate the transfer of technical know-how to our people; whatever is happening there has a way of being replicated in other areas. So, it is something that we should work on and make popular.


Is the LCCI in support of increasing the Value Added Tax (VAT) from the current five per cent to a higher figure?


The level of tax compliance in Nigeria today is less than six per cent, compared to our Gross Domestic Product (GDP), which is very low. That means there are lots of people outside the net, why don’t we try and bring more people into the net before we start looking at the VAT? Already, the average person takes care of so many things he could have benefited as a citizen. You have to find your way to work, drive your car on very bad roads; people say fuel is subsidised, but we shouldn’t encourage that. One should be able to travel with public transport, should be able to do a budget and calculate how much goes into public transport. But you can’t do that here, because the more you stay in traffic – even if you have a car of your own – the more fuel you burn. The more you go on a very bad road, the more times you go and see your mechanic and panel beater, the more time you waste, your health and all that. So first, let us see how we can take tax compliance to about ten per cent or beyond, which means you will bring more people into the net, because if you look at the GDP, we are only collecting about six per cent of the GDP as tax. This means there is a lot of leakages and a lot of avoidance. So I think we should work on that before looking at raising VAT. And if it’s going to be done at all, it should be on luxury goods. VAT is the most equitable way of tax collection, because you only pay when you spend, so the more you spend, the more you pay. It is like an involuntary tax compliance. If you buy anything, it is added; so you can’t struggle. But I think we should work more and Federal Inland Revenue Service is doing that, by bringing in more people into the net. 


You’ve identified the country’s deficit in infrastructure as one of the challenges. Don’t you think we should adopt more of public-private partnership?

Undoubtedly, the government can never have enough money to address this deficit shortage. So the private have to come in. But in bringing in the private sector, you have to win their confidence. Undoubtedly, there is a lot of money in private hands in Nigeria, because of our history. A lot of money is in private hands, so we should do things that would encourage them to actually deploy this wealth meaningfully to the benefit of all. That’s one thing we have to do, we can’t run away from it. When you look at how much we’ve made from oil, from whatever, and when you look at the infrastructure you have on ground, you don’t need to be told that a lot of it is in private hands. Government must be very clear. If you go by what we have in the power sector, it is also discouraging. After somebody has brought his money and you have ground rules, you must live by it. They said government has 40 percent of the Discos, but a lot of pressure is being put on the Discos as if the government is not a part owner of the Discos. We shouldn’t do that. That discourages private capital inflow. 

Also the people must be ready to pay. If you look at the roads, there is no way the government can have enough money to fix the roads. So what does it mean? When you ask a man to put down his money, there should be a mechanism where he will collect his money back. So, some of those roads have to be tolled; when a road is tolled, people are certain to demand for certain level of delivery. You can’t have a tolled road and it breaks down completely, people will refuse to pay. So you have to bring in all those things and government must respect its own side of the agreement. I was looking at the blue line. You have a project, it becomes bankable and then you leave it for the private sector to look for finance. The federal government is also doing Sukuk, which is a model in that direction where government took money specifically to do those projects. But where we failed with that is that I would have expected users of those roads to pay for those roads, because where do you get money to service the loan that you are taking? Because, after sometime the roads would go bad and then you will have to pay interest to those who have provided the funds, before redemption. And when redemption comes, are you going to force them to roll over? So, it is better for us to actually pay and be on a road where you can predict when you go in, the time you go out and your car will not be damaged. So, it is something that we have to look at, but the government also has to live by the rules as laid down. That will encourage more people.  But undoubtedly we need to access those things that are in private hands by way of investment.

Should we be worried about the trend whereby Chinese companies bring in their workers into the country?

The thing about economics is, it doesn’t respect emotions or sentiments. He who pays the piper, dictates the tune. When these agreements are being entered into, we need to know what the details are. You know that the Chinese model, which I prefer because if we have been running that model so many years ago, maybe we won’t find ourselves in this situation – when the Chinese say they are giving you a loan, there will be a counterpart contribution, maybe 10 per cent, which is why some of their projects have not taken off. When you go into the details of those agreements, there must be certain provisions. It could be that they are going to deliver a particular infrastructure to you. That’s why I said I like their model. So the question of people taking all the money, like in the past, whereby we borrow and people don’t deliver projects and the money disappears, that question is no more relevant. So I don’t know what sort of agreements they have with the Chinese. But if that is happening, it is the failure on the part of our people. Because if they say they are going to deliver a particular project and the price has been fixed on it, I’m sure everything would have gone into it. But also you find out that some of these claims may not be exactly be true because those sites I see, I see black people there. Yes, there will be a supervisor who is Chinese, but on those roads they are constructing, I see black people there; they may not be Nigerians, because you also find that they bring people from neighbouring countries. And when we talk of this thing, it is also about the mentality here. If they tell you that somebody is a good tiler, he is likely to be from Benin; is that the Chinese problem? It is because we don’t have the manpower. If he’s a good mechanic, maybe from Ghana; if you are looking for a cook, you go to Benin Republic. So we have to ask ourselves, do we have the skills? Gone are those days, while we were growing up, when we had trade and vocational schools. If today you write JAMB, you have all the schools, polytechnics, but how many people go to vocational schools? And these are the sort of people you will need to deploy for these sorts of projects. So if individuals are employing from Benin, from Ghana, then the problem is in us. 

So whether they are bringing in their people is something that is left to the regulators to look at. I wouldn’t sit here and say it is not good for us. What about Togolese that we are bringing in, the tilers, the builders? If you go to those sites, the black people you will see, maybe the majority of them are from neighbouring countries. So we need to work on that as a people. So I wouldn’t blame the Chinese. I would blame those who signed the agreements, who have the details; I don’t have the details. But I can tell you that empirically, what we have in our lives says that we go across borders to get labour.

What do you think President Buhari can do to fast track economic growth in the next four years?

We have very beautiful papers that have been written in the past. And we have the Economic Recovery and Growth Plan (ERGP) that has been propagated by this government. They should try and implement it and remove all the roadblocks that are limiting the realisation of its set objectives. And if they stop playing too much of politics as we saw in the past where the executive and legislature were at each other’s throats, if they can do less of that, or totally eliminate it, maybe we can realise our set objectives. We already have a working paper, let them live by it. And government should enable private sector to drive the economy. 

The CBN recently announced some measures to encourage lending to MSMEs, what is your take on that? 

It’s not the first time we are having that. But you find that there is always this road block between getting it and having it. That’s why probably the CBN, for the anchor borrower’s programme went directly to the farmers. The experience has been that if the government creates a fund, they will ask the commercial banks to guarantee those who access the credit. And the banks have always been shying away from it; they would rather want the fund to be domiciled with them as bankers and they now disburse to their customers. But what the CBN will say is that people should apply, either to the Bank of Agriculture or Bank of Industry, and then ask your bank to guarantee. Banks rarely give that guarantee. So that would deprive the beneficiary of accessing those funds. These are things that we have to overcome. We know what has been inhibiting the small and medium size businesses in accessing those funds. So can we address those factors? This is not the first time the CBN would be taking steps to encourage banks to lend, the problem is access to those funds. The roadblocks are what we should work at and remove. The CBN should try and work at de-risking; they shouldn’t ask the commercial banks to do it.