A former Central Bank of Nigeria Deputy Governor and 2019 Presidential candidate of the Young Progressive Party, Prof. Kingsley Chiedu Moghalu, in this interview on Arise Television, spoke about factors that have continued to obstruct the country’s growth. Hamid Ayodeji brings the excerpts:
What is your agenda for the ministers that were recently sworn-in?
My view is that poverty is the overriding reality in our country today. Our economy is the biggest problem we are facing which generates several other problems including security problems. President Buhari, while inaugurating his ministers did indicate his awareness of this problem. He talked a lot about poverty and so there is need for the ministers to address the needs of the citizens. The question is, beyond that rhetorical is the cabinet the type that can actually address the economy effectively? I would say it is a good thing he has done by giving the ministers a mandate. So, that indicates a performance management approach this time around and we would like to see how this works in practice. I would give the ministers a month and evaluate if they are up to the job.
What is your comment on the Minister of Budget, Finance and National Planning being merged and now under the leadership of one person and also what do you think of the appointment of Otunba Adeniyi Adebayo as the Minister of Industry Trade and Investment?
First of all, I find the merger of National Planning and Finance in this new cabinet very curious and I would like to be more informed as a Nigerian citizen about the rationale behind. However, I know that in the history of Nigeria those two ministries have tended to be independent because National planning is supposed to be the driver of economic planning and management whereas finance is more operational. If the two are merged the independence of thinking that should go into national planning may be a bit lost in the operational dominance of the finance ministry; thus I am not sure it is a very good idea but we have to test it and then see.
Certainly, the results of our economic management over the last four years leave a lot to be desired. If you are to judge the result of our political leadership, I always focus on the competence of the highest level of political leadership due to the fact that it determines if the nation is going to have an economy that is doing well. On the question of Otunba Adebayo, as a former governor of Ekiti State I think he did well, thus I do not think there is a problem with him being the Minister of Trade and Industry. But like I said, overall there is a problem with this cabinet, it is a very political cabinet; investors were expecting an injection of strong technocrats alongside politicians which was not the case.
So, I am not sure how confident investors would be towards the economy as it is presently constituted. This cabinet seems like it is facing the past rather than the future. Also, President Buhari has re- appointed himself as the Minister of Petroleum which I feel is a big mistake. He should have appointed himself as the Minster of Science and Technology because that is where our emphasis should be going as a nation interested in developing its economy. But, he continues this focus on petroleum and extractive minerals which has taken us nowhere.
In your piece in the Guardian of London, you mentioned reasons why African countries have fallen behind, can you go over that again?
The reason Africa is poor is because it is not so much a productive continent and Nigeria supposedly as the biggest economy of Africa, we worship the gods of small things. One of the biggest small gods we worship is the god of oil. Looking at what is called the Atlas of economic complexity, how complex are different products occurring in nature in terms of what you can do with those products by turning them into value added goods, oil is at the bottom, but many people do not recognise this. In addition to this, we export crude natural resources and import refined products, which is why we are poor. The only thing that can save Nigeria is skills, human capital that would enable it to drive innovation constantly in order to drive the invention of things that sees to the need of the citizens. We have to focus on innovation, science and our ambition are very low. I am amused when the minister says we would be manufacturing pencils in two years.
We should know that the future would be controlled by Google and alphabets, artificial intelligence; sadly, we are not focusing on these things. We need to create an economy out of these innovations so that we can meet our needs. It is not by stopping forex, rather what we are generating internally that can be exported to the rest of the world and you see the president controlling the petroleum industry. The age of petroleum is going, in the next 10 years developed countries would no longer be using hydrocarbon fuels for their transportation and automobiles, instead they would use electricity, solar power, and hydrogen, while we are still focused on the past. That means we would be left behind if we are not cautious. Seventy per cent of the population of the country are youths and they are not represented in the current cabinet. So, how can the many things that concern them be addressed and the economy made better for our 200 million people? So, I have my concerns when it comes to the quality of the cabinet, I do not think it is something that can liberate us, but like I said, let us see how they perform within the next two months.
I think the concentration on oil is something that goes beyond the cabinet. Recently, you saw defence the Chairman of FIRS, Mr. Babatunde Fowler gave when he was questioned about why the revenue of tax reduced. He said it was because of the fall in oil prices. Do you think his defence was strong enough or do you think this is another case where we are looking at the wrong issues and not providing any solution?
The defence is this, the small god we worship has not been very healthy for some time which is the point I have been making that as long as this country continues to rely on petroleum revenue as its major source of fiscal revenue, we are going to be beating around the bush. What we need to do is to reform our taxation system and massively expand the number of people that pay tax in this country. We need to bring in people from the informal economy which is 65 per cent of Nigeria’s GDP, but we know that most of them do not pay tax. For the past three years, I have proposed that we follow the mobile phone ownership track and we would find every citizen and do a tax audit whether they are working or trading.
I am not advocating that we raise taxes rather I am advocating that we increase the number of people paying tax in the country rather than worshiping the small god which is oil. We need to be productive using innovation to export what we now manufacture, with value added in Nigeria which would bring in forex into the country and you would not need forex restriction which has never worked. The evidence is very clear that poverty is still very high in this country, inflation is still high, GDP per capital is low and the only way we can break this circle is to move away from oil, thinking, we need to move to innovations, skills, and move to producing value added things. We need fiscal reforms and abolish petroleum subsidy. But the political will is obviously not there, but we spend trillions of naira yearly subsidising petroleum instead of investing in our security, schools and hospitals, thus we are doing the wrong things.
You were the Deputy Governor of CBN in charge of financial stability. Recently there have been two major developments regarding monetary policy. First, the five year monetary policy plan that was unveiled by the Governor in which he emphasised financial inclusion, financial stability, diversification and also recapitalisation of the banks which he did not put to figure. What is your assessment of that five-year plan as well as the Monetary Policy Committee decision at its last meeting?
The monetary policy of the central bank is largely reactive because of the failure of fiscal policy in Nigeria. Even when we had a brilliant Finance Minister, Ngozi Okonjo-Iweala, there were a lot of political factors that still affected how much could have been done in the fiscal space. I know she planned a gradual reduction in how much of our budget is spent on recurrent expenditure, but at the end of the day, we have not seen a decrease since that government left office, and that is because the politics of rent seeking is what is driving the economy.
So, the CBN in some of its monetary policy decisions reacts to those issues. We need to address the structural reforms that are necessary, such as infrastructure, it makes the cost of money expensive. The recurrent expenditure that is dominating the spending of the federal government creates inflation, and when there is inflation the CBN must respond by tightening money supply, which is why the central bank cannot save Nigeria’s economy despite the fact that this government seems to believe that the CBN is the beginning and end of economic management. As long as the structural issues have not been addressed the central bank would keep reacting.