The Managing Partner, SIAO, Mr. Ituah Ighodalo, in this interview speaks on how Nigeria can exit recessions as well as on other economic challenges facing the country. Ugo Aliogo brings the excerpt:
What economic interventions will you advise that the federal government to put in place to help the economy exit recession?
It is high time the federal government showed sincere commitment in the management of the economy. There are some fundamental things that need to be done to position Nigeria’s economy on the part of prosperity. The challenge with Nigeria is that productivity is very low and there is low private sector involvement in driving the economy, and too much government involvement. Until, we change certain policies there is very little the Central Bank of Nigeria (CBN) can do. CBN is not the government; it is a regulatory authority that deals with the management of money and the foreign exchange rates. But there are more fundamentals things needed to be done to restructure an economy, such as freeing it and allow it to produce. First, all of the laws of the land that makes a lot of our assets vested in the hands of the federal government have to be changed and this is the reason why people are calling for restructuring. By law, solid minerals belong to government, but they don’t have the capacity to produce those solid minerals. So we have a lot of solid minerals wasting because government is holding unto it and not developing it, so government should change that law. Anybody whether state or local government or private individual that wishes to develop any of our solid minerals let them come and develop it, and then pay taxes to the federal government, then free the economy.
The federal government should release their hold on oil and gas, and give it back to the states where the oil is being produced. For instance, in the United States of America, California State specialises in agriculture, Huston specialises in oil, Delaware does free trade, and New York does real estate. Every part of United States has different things they specialise in. The federal government of the United States of America doesn’t owe any of those resources.
The states and the individuals combine to owe those natural resources. That is how it is supposed to be done in Nigeria, at best 20 per cent taxes can be given to the federal government on a monthly basis. Nobody will come and invest in something they cannot control, so the federal government needs to restructure the economy. They need to ensure that we have stable energy. Regarding the issue of power, federal government doesn’t need to control things, they just need to issue the right laws, they need to free the electricity tariffs, any amount an investor wants to sell electricity he should sell it, anybody who is able to buy will buy. Then as you sell more and more, the prices will drop. It happened with telecommunications, so why is federal government afraid to do it with the power and petroleum sectors. Why does the federal government own refineries? They should sell all those refineries and let any individual who wants petroleum products go and refine. The federal government should instruct Shell, Mobil, and Chevron, that they cannot export crude oil, they should build a refinery, then refine the oil before you export. So if you doing crude oil, 50-60 per cent goes to refinery. You can sell your petroleum anywhere you want, but there must be value added to the Nigeria economy. The same thing goes for agriculture. For agriculture, government should open up the land and let people come and plant, then add value. How can we be a cocoa producing nation without chocolate processing factory? So federal government should make policies that will attract private capital into Nigeria, to allow people invest and develop our resources, and within the next 10-15years the economy of Nigeria will be transformed. Not just those, a lot of people have assets in Dubai, London, and US. A lot of those assets are wasting assets. The Presidency can discuss with the owners of these assets to sell some and invest the money in the Nigeria economy, to ensure that the foreign exchange is brought into the economy as private capital. Instead of it wasting and growing other economies. This is an incentive that government needs to create and if you do that, your foreign exchange will change very fast. We also make sure we are net exporters of the things we produce. If we produce power, we should export it, if we produce cocoa, add value to it and export it, if we produce groundnut add value to it and export it. These are the fundamental things we need to do to restructure our economy. Unless we have these policies, we are wasting our time. We should not import any food into Nigeria, if we cannot produce it, we shouldn’t eat and if we are going to eat it, let’s produce it. Why should we spend a lot of oil revenues to import food, when we have enough arable land? We should stop importing motor vehicles; we should bring the motor vehicles companies to Nigeria to produce motor vehicles here in Nigeria, like they did in Brazil, Germany, Singapore and China. The factories should be brought here; we have more than enough demand. We have 200 million people. Why are we using our money to finance factories in China, America, Japan and Germany? We can bring Mercedes Car Company to Nigeria and ask them to build a factory, then own 60 per cent of controlling stake in the company, employ Nigerians and produce the car in Nigeria. The same thing can apply to other brands. But we did bad economics and chased some vehicle manufacturing companies away, now we have factories laying in waste. So, if we get power right and we have policies that can attract capital and technology into Nigeria, then we will begin to reverse our economy. In United Arab Emirates (UAE), the government designed the economy in such a way that private investors with capital can invest and develop the potential of the economy. Government does not owe much apart from Emirates Airline that they invested in and allowed private individuals to run it, aside from that it is private capital that developed Dubai. It is what we should do in Nigeria, whatever we produce; we should develop it and add value to it. It is not healthy for the growth of the economy that we are importing petroleum into Nigeria, just because we refuse to invest in refineries and allow corruption and politics to destroy our refineries. Then the CBN needs to manage the inflow and outflow of cash, capital, and investments and have good monetary policies that controls interest and exchange rates and makes it easy for people to save, invest and borrow money. The CBN will also continue regulating the banks, and ensure that the banks are vehicles for economic reforms, not just lending and money warehousing institutions that is trading on small margins. A bank is a vehicle to restructure an economy and a lot of our banks are not lending to the real sector, therefore the economy is not growing. These are the policies interventions that the CBN needs to do and not worry itself with these interventions it is doing. For this economy to get out of recession, President Buhari and his government have to do the right thinking and formulate the necessary policies. First, the federal government has to put a stop to food importation and begin to produce food in Nigeria. We should develop the agriculture sector.
Secondly, there is need to put a stop to importation of things we can produce in Nigeria. We have to get Nigeria to produce, when we produce, we will build the economy, create jobs and exit recession. The problem is that the jobs that we should be doing in Nigeria are being done by other people and we are importing finished goods. We are importing toothpicks; why can’t we produce toothpick? We are importing health, why can’t we build more hospitals and refurbish existing ones? We have natural tourism endowment such as the National Theatre that government can develop and turn it to a tourist site. Why should the movement of cattle be a major issue in 2021? Who drives cattle on the road anywhere else in the world except in Nigeria and some parts of Ghana? Cattle are transported by rail and vehicles. We don’t have herdsmen roaming the streets; those things were dead since 60s. We should focus on having ranches, and advanced agricultural processing facilities where we can produce beef for consumption. It should not be an issue in Nigeria today? Those herdsmen should be retrained; they should not be wasting their time moving cattle from one place to another because it is a cultural thing. These herdsmen should be in school so that their gifts and abilities can be developed. We need a total reorientation in Nigeria, we are hanging too much on the old cultural values, we can have cultural institutions to preserve our values and norms. So they become cultural educating institutions, not the ones that will set us back.
There is the view from some stakeholders that the CBN is overburdened, therefore much of the work of transforming the economy should also be shifted to fiscal authorities. Do you support the view?
It is only in Nigeria that the CBN is doing a lot of economic interventions. In England and US, the situation is different. The CBN is doing the work that the banks, Ministry of Finance, and intervention agencies should be doing. Therefore, the CBN should cut back, and fund those institutions so that those institutions can do what they need to do. The apex bank is doing too much and almost running the economy. Instead the CBN should inspire other institutions to run the economy, because they are going outside of their remit in my view. This happens because the institutions that are supposed to be doing what they are assigned to do have lost their remit.
The federal government wants to borrow from unclaimed dividends, dormant assets and pension funds to finance the budget and support revenue drive in the country. What is your reaction to this move?
There is no problem with borrowing; rather the question is what are you borrowing for? The question is if you borrow to consume how will you pay back? You must borrow to invest. If federal government is borrowing from whatever sources to pay salaries, it is a waste of time, but if they are borrowing to build industries, reposition the economy, build refineries and things that will create jobs, then they should borrow. The problem with Nigeria is that we are borrowing to pay interests and salaries and service debts. Therefore, there is no way the economy can grow. What drives an economy is production not consumption, we consume too much in Nigeria without equivalent production. So the government must move to production. I agree that is there is a lot of wasting assets in Nigeria, it should be sold, and the money should be used judiciously to invest in initiatives that will drive the economy, not to finance consumption. The federal government should also change the land laws and Certificate of Occupancy (C/O), so that it is easy to owe your certificate of occupancy. It is also easy to take your house to the bank and use it to borrow money and keep reflating the economy. So these are all things that the government should do and we will be fine. But if they borrow for consumption, they are wasting our time. If they borrow from unpaid dividends one day those dividends will be payable, they might be lucky in that sense, some of the people might have died or forgotten or not interested. Therefore, they can mop up that money and use it effectively.
There is plan by the federal government to give N5, 000 to every Nigeria as part of the administration’s commitment to take millions Nigerians out of poverty in the next two years. What do you make of it?
It’s alright, however, it depends on what the people wants to use the N5, 000 for. What can you do with N5, 000? You can only eat with it; you cannot buy a machine with it. Again, federal government is being unrealistic. If you give money to a man and it is not enough for what he wants to use it for, you have wasted his time. So they should be giving people minimum of N50, 000 to N100, 000 knowing what they want to do with it. Instead of giving 24 million people N5, 000, while don’t you give N50, 000 or N100, 000 each to 1 million people, so that those 1 million persons will use the money to create jobs for other two or three persons. So if you give a woman a N100, 000, she buys a grinding machine, small iron and other things, which she can use to produce goods or services and generate income to feed her children, send them to schools and create employment opportunities. There is no way that this kind of money reflates the economy, it is like social welfare programmes that brings an economy down and doesn’t raise it. As a country, we don’t get value from social welfare programmes because we don’t think out well. Globally, social welfare programme is not a permanent initiative. It is a temporary thing for somebody who is out of work in the hope that within a few months, he will get work and continue with his life. We have turned social welfare into an electioneering tool for people and we keep them permanently in poverty. It is just a waste of time; it is a situation where government creates opportunity for spending money on imported commodities. So we are wasting resources in that aspect. We don’t have statistics and information. We don’t know how many people will be taken out of the welfare system over a period of time and we are just giving people money and make them consumption driven. Instead of being production driven. We need to rethink social welfare, plan it with information and statistics. We need to know what the benefits of every naira spent will be in our economy. There is happy money and feel good money, but you find out that eventually, you have to keep printing these monies and spending it, and this causes inflation without real production, so we should think it through properly.
How can we encourage retail investors in the stock market?
Firstly, we need to stabilise the stock exchange market which they have tried very hard. We need to make sure that the fundamental that makes a company strong are available. Stock exchange strives when the economy is growing. Elon Musk started his company 20years ago with one car, he built a factory after he sold the car, he made a profit and built another car, sold it and made a profit and his company continued to grow. When his company is growing like that his stock price will continue to rise. But when the fundamentals are not there, and the company is not really growing and what they are doing is paper book and account entries, pretending as if there is value, it will crash. So what we need to do is to deepen the economy, strengthen those companies, publicise and make knowledge available to the average Nigerian. It is only a few people that have knowledge about the stock market. A lot of Nigerians are ignorant about the stock market because they are not well informed, they don’t trust it and the market fails from time to time, so they keep away. We have millions of Nigerians not investing in the stock market. Money that is not inside the banking system in any economy is a waste of money; it is like drying up the economy. But when the money is in the bank, someone can borrow such monies to create employment. To bring back interests into our stock market, we need publicity, strong and well run companies, and ease of doing of doing businesses for companies. We were getting it right 10years before the stock market crashed. Then market women, tailors and artisans were buying stocks and the market was booming because she was publicising it. The mistake then was that there were double entry books, and the fundamentals of the strong companies were not there. So you take a company to the market today, within three, four days, you say the value has tripled, there were cases of people putting in their monies and the value was not there, it was just paper entry. Even the banking consolidation was paper entry, there was no real value and eventually everything came crashing down. So one of the things that we need in this economy is truth. One of the problems with Nigeria is that there is too much corruption and lies, therefore the fundamentals are not there. But if we can tell the truth and publicise the market, have strong companies and make it easy for them to join the market and open up everything, the market will begin to grow.