Okonjo-Iweala’s Hard Truths for Economic Sustainability

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James Emejo sums up the recent visit of the Director General, World Trade Organisation, Dr.Ngozi Okonjo-Iweala, and writes that more than ever, Nigeria must intensify efforts to diversify its economy away from fossil fuels to other non-oil revenue sources, remove obstacles to international trade, and embrace e-commerce among others, if it must escape the imminent economic disruption that will emanate from the global transition to renewable energy. By and large, the WTO DG’s intervention is expected to further boost confidence of foreign investors in the economy

Apparently, the visit of the WTO DG was more than a thank-you-trip to Nigeria, following her successful election to spearhead the affairs of the organisation.

Okonjo-Iweala became the first African to occupy the iconic Switzerland-based, 159-member countries institution, promising to introduce critical reforms to reposition WTO.

Her visit to Nigeria, had been basically to express appreciation to Nigerians in general and the federal government, especially President Muhammadu Buhari, for nominating as well as backing her candidacy to the top position.

Done with the show of appreciation, Okonjo-Iweala, a former Minister of Finance and Coordinating Minister for the Economy under former President Goodluck Jonathan, declared her concerns for the Nigeria’s monolithic economy in view of the imminent headwinds in no distant time.

If anything, her worries and recommendations should be taken seriously given her pedigree as former Managing Director at the World Bank as well as having taken up strategic roles in other multilateral institutions.

In effect, the WTO boss is one that understands the strengths and weaknesses of the Nigerian economy including its politics and leadership challenges – and acknowledges the country’s current precarious macroeconomic conditions.

It was really important to drive home the urgency of the situation, given that the government may be carried away by recent increase in oil price and deter critical reforms being currently undertaken to reset the economy.

Many Nigerians still could not imagine a future without oil as currently being propagated by experts, but this is increasingly becoming a stark reality – that in no distant future, Nigeria’s oil will no longer earn sufficient revenues for the country as other nations transit from oil to other renewable energy sources.

With the country’s rising unemployment rate currently at 33.3 per cent and increasing poverty and inflation rates, amidst rising population at over 200 million people, couple with diminishing local productivity and insecurity, the picture of an imminent economic crisis is gradually becoming a reality unless these concerns are addressed.

During her engagement with the Ministers of Industry, Trade and Investment, Okonjo-Iweala, particularly expressed worry that the country only accounted for only about 0.33 per cent of global trade and that agriculture could also boost Nigeria’s share of African trade, currently at about 19 per cent.

Aware of the dangers, which the on-going global transitioning to renewable energy sources posed to Nigeria, Okonjo-Iweala had further emphasised the urgent need for the country to focus on adding value to agricultural products to boost export potentials and reposition the economy.

She also stressed the need for quality improvement and better products packaging.

According to her, “We are an oil and gas-based economy which has sustained us for some time, and still, may be for a couple of decades more.

“But the world is moving away from fossil fuel. Before we know it everywhere will be electric cars. So, not only because of trade, but it’s existential for us as a country that we begin to think what we have.”

Further lamenting that Nigeria currently ranks 103 out 167 counties in terms logistics, she pointed out that this remains a critical area to improve if the country must take advantage of trade under the African Continental Free Trade Area Agreement (AfCFTA).

The WTO DG also expressed concerns that Micro Small and Medium Enterprises (MSMEs) and women-owned businesses had been relegated in the country’s export drive even though they remained crucial in actualising the transitioning the country from an oil and gas-based economy to one that relies on other sectors and sources of growth.

According to her, lowering obstacle to businesses of all sizes especially women-owned companies to participate in international trade will help build back a better economy for everyone in the aftermath of the COVID-19 pandemic.

She said while trade could help improve economic outcomes of women by creating more and better jobs, raising wages and lowering costs, business that engage in cross border trade tends to employ more women.

She added that supporting trade for MSMEs particularly women entrepreneurs was meaningful adding that MSMEs constitute major backbone of the Nigerian economy, accounting for over 76 per cent of jobs and nearly 50 per cent of GDP.

Addressing women exporters, who made presentations on their efforts to access international markets, she said, “In Nigeria, this reservoir is deep: only about half of the women are part of the work force and most are in the informal sector.

“Wages of men are 30 to 40 per cent higher than for women in the formal sector.

So there’s a missed opportunity for all Nigerians and for the country in not tapping the reservoir of talents we have in our women.

“The evidence shows that women empowerment is not about moral imperative only, it is good economics and it’s smart economics.”

She said trade could help improve economic outcomes of women by creating more and better jobs, raising wages and lowering costs, pointing out that businesses that engage in cross border trade tend to employ more women.

While noting that women are not well represented in the export space, she said exports have a powerful impact on the employment of women.

She said the WTO will work with Nigeria to enhance the quality and packing of non-oil export products to boost their accessibility to the international markets as well as in other critical areas of the economy.

She said: “This means we must step up our action on the economy. We must strive to do better and harder in several ways. The reason we are concerned about that is our youth. Majority of our population are young people who are looking for jobs.”

Okonjo-Iweala believed trade could be instrumental to job creation and economic growth with value addition to products and good logistics to deliver trade.

The WTO DG’s visit further provided insights on some areas of trade tensions between that the European Union and Nigeria.

The former had filed complaints to the EU about some the CBN’s trade restriction policy before the organisation, particularly with respect to protecting the dairy industry.

But, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, had defended the apex bank’s trade stance, adding that it is meant mainly to help protect local industries from unfavourable competition as well as create jobs for Nigerians.

He said with the country’s high unemployment rate, it became inevitable to create job opportunities and provide an enabling environment for the unemployed youths to live a gainful life going forward.

Okonjo-Iweala, however, recommended the use of the WTO trade remedies instrument, which she believed could help Nigeria and the EU address some of the contentious issues with respect to trade.

She said: “I want to say that the WTO has what we call trade remedies which can help us without banning things to be able to protect our industries against dumping and cheap imports if we use those remedies.

“I understand Nigeria is trying to establish a trade remedies authority and I want to strongly support that so we can use those remedies as a tool to help our industries to grow.”

Okonjo-Iweala further emphasised the need for Nigeria to seize advantage of the opportunities presented by the COVID-19 pandemic to reset the pharmaceutical industry in the country, urging the government to provide them with favourable environment to thrive.

The WTO DG, particularly commended Emefiele for his efforts in assisting to produce a private sector-led initiative that raised significant funding towards addressing the impact of the COVID-19 pandemic in the country.

She said the pandemic had now “opened our eyes to see that we need to start doing something about the pharmaceutical industry in Nigeria.”

She stressed the need for the country to establish a strong pharmaceutical industry to cope with future challenges as well as create an enabling environment for them to thrive.

According to her, Africa imports over 90 per cent of the pharmaceuticals it uses.

She said: “With the population of the AfCFTA with a market of 1.3 billion people which Nigeria is the largest with over 200 million people. I think there’s room.

“We should ask ourselves the question you raised governor. Why is it that the pharmaceutical companies that opened here struggled and closed?

“What are we doing to make sure this doesn’t happen and what are we doing to make see that our own domestic manufacturers or pharmaceuticals have the appropriate environment they need?”

She said: “We have now seen what happens. If you have this pandemic and you don’t have some ability to provide, you have to wait.

“I want to say that we have what it takes in this country particularly in our young people to do the necessary which is to look forward to how we are going to create jobs and move this economy in the direction they will support our youths in the future.”

Essentially, Emefiele had explained that the CBN’s policy to restrict foreign exchange to dairy companies, which refused to align with it backward integration programme was “done for the good of Nigeria and Nigerians.”

Emefiele’s clarification followed concerns raised by the WTO DG, that the European Union had filed complaints about some the CBN’s trade restriction policy before the organisation, particularly, on the use of devaluation of balance of payments agreement with respect to trying to protect the dairy industry.

The CBN governor further explained that the decision of dairy imports was however not taken unilaterally by the apex bank, pointing out that about six major industry players unanimously agreed to take action against those opposed to the backward integration plan to boost job creation for Nigerians.

He said: “We do know one way or the other, people may have said a few things about the way we have conducted our trade but I think it’s important for me to say that some of those things have been done to also help protect our own industries.

“We need to give a chance for our local industries to create jobs and employment.

The unemployment rate in Nigeria, I dare say is very high. Our youthful population of people of the age of about 18 to 40 is almost close to about 60 per cent of the population. You can use that to your advantage and you could also use that to your detriment.”

He said: “The fact that we need to create jobs for this set of people, we need to create an enabling environment for this set of people to live a gainful life means that we have a responsibility to do so and in doing so, we will need the support of institutions like yourself (WTO);to work with us.”

Emefiele, however, said even though the CBN may have faltered in some aspect of policy interventions, it believed these could be rectified by working closely with the WTO.

According to him, “We may have faltered in few areas, I am not going to deny that, we will be willing to engage with you (WTO) in areas where we have concerns. And if those concerns are addressed, I want to assure you madam DG that we will work with you.

“Nigeria is open to business-in any part of the world and we will like to work with you.”

On the policy action in the dairy sector, the CBN governor said: “We called a meeting about six years ago when I resumed. I said look, Nigeria has dairy potentials by the cattles and the rest of them; let’s see what can be done. Nothing was done. We called dairy companies.

“Two years ago, we started again, we said listen, we are going to start a programme where we are going to place FX restrictions to those who want to import dairy into Nigeria. Six of them came on board- Friesland and a few of them.

“And at a meeting next door there, what did they say? They said, governor, you have been putting us under pressure to invest locally in dairy industry- what do you do to those who are not doing anything about it?

“At that meeting we took a decision that those who are not embracing our own backward integration programme in the dairy industry should be restricted.”

Emefiele said, “It was not my decision, it was a decision taken. Before you (Okonjo-Iweala) were probably born or before I was born, Friesland Campina has been importing milk into Nigeria, how come for over 60 years nothing has been done by this company to backward integrate and begin to produce dairy in Nigeria.

“Does that mean Nigeria does not have the potential? The answer is no. So that’s why we in the monetary and fiscal authority must put everybody’s feet on fire so that the right things are done for the good of Nigeria and Nigerians.”

However, analysts have reacted to the several interventions of the WTO boss, expressing hope that her recommendations with be heeded by relevant authorities in the overall interest of the economy.

Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, told THISDAY that her visit had brought confidence for investors and trade allies.

According to him, “The visit of Dr. Ngozi Okonjo-Iweala’s to Nigeria is a plus for us, it is a confirmation of her commitment, support and allegiance to her country.

“Her coming also brings confidence from investors and trade allies. She has given us insight on what and where to channel our efforts towards economic growth. Areas like Empowerment of MSMEs and Women in Export business and other businesses.”

Ekechukwu added: “Her visit will also be a boost and motivation to women aspiring for high goals and positions. We need to leverage her lofty position in business to business and country to country relationships.

“The visiting of Dr Ngozi Okonjo-Iweala’s to Nigeria is a plus for us, it is a confirmation of her commitment, support and allegiance to her country.”

President, Capital Market Academics of Nigeria, Prof. Uche Uwaleke, her visit will positively impact economic management.

He said: “I commend Dr. Ngozi Okonjo-Iweala for deeming it fit to visit her country shortly after her emergence as the WTO DG, which was chiefly to thank the President and Nigerians for their tremendous support without which it would have been pretty difficult for her to get elected.

“Her visit can equally be seen in the light of the popular saying that charity begins at home. The country is going through economic challenges including trade deficits and forex illiquidity that require the advice of WTO which she came to offer.

“Her meetings with the CBN Governor and the Finance Minister promise to bring about positive changes in the management of the nation’s economy.”

On his part, Associate Professor of Agricultural Economics at University of Port Harcourt, Anthony Onoja, said Okonjo-Iweala’s visit is “multi-pronged and a very timely one.”

He said, while it is obvious that she needed to appreciate the President and Nigerian people for the support they gave her during her bid for the WTO job, the visit will offer Nigerian government an ample opportunity to benefit from her wealth of experience on how to successfully actualize the Nigerian Economic Sustainability Plan (NESP).

He said: “One of the terms of reference of the NESP is growing the MSMES and job creation, improving fiscal policies to enhance revenue from oil and non-oil earnings; articulation of specific measures to support the 36 States and the FCT, and also ensuring liquidity, preventing business collapse, and staving off the worst impact of economic recession facing the Nigerian economy.

“She will also be expected to advise on how to deal with COVID-19 impact on the economy. Nigerians also expect her to guide the private sector especially the MSMEs on how to optimise the opportunities inherent in African Continental Free Trade Area agreement already in force.

“If it’s possible, Nigerians would expect her to intervene with her wealth of experience with the Bretton Woods organisations on how to minimise or cancel Nigerian rising debt portfolio.”

Similarly, Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, stated that the WTO intervention was “certainly welcome and we should be extremely proud to have such a figure that readily embraces her Nigerian heritage.”

He said: “Nigeria currently contributes less than 1 per cent to global trade and for a country our size; that is quite appalling. We certainly must utilise this opportunity to boost our international trade, especially given the fact our economy requires serious diversification.”

Also, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said her interventions remained positive for Nigeria’s international diplomacy on trade and foreign relations in its economic aspirations and challenges.

According to him, “The DG of WTO being a Nigerian understands all the challenges plaguing our country as regards to trade and her visit will help us restart some dormant trade relations and break new grounds.

“The DG of WTO was accompanied in the visit by trade ambassadors of some countries, which is good for us to ensure that we take advantage and leverage on trade deals with those countries.

“Nigeria is having a running battle with some European countries as regards our ban on importation of some items, e g milk. The visit of the DG with enable her interact with our ministry of trade and investment and other relevant ministry to broker a deal that will be a win-win situation for Nigeria.

“Finally, the visit of the DG must not be seen as only a thank you visit to the government of Nigeria but a good opportunity to launder our image in foreign trade using the position of the DG being a Nigerian to achieve this.”