The Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said as laudable as it seems to end the fuel subsidy regime, the implementation should be delayed until certain conditions are met. James Emejo brings the excerpts:
The federal government recently in a bid to further curtail the spread of COVID-19 has ordered closure of parks and bars and introduced curfews. The Central Bank of Nigeria (CBN) also frowned at another shut down of the economy. What is your opinion on this development?
Actually, I believe the lock down announced by the government was too quick, for the government to consider any lock down at this time. Nigeria in the past one year has successfully stemmed the tide of COVID-19 and with measures already put in place and ensuring that our borders are secure and monitored and testing actively done – I don’t see any reason why Nigeria should be announcing lock downs anymore. And again, the economy of Nigeria presently is extremely weak. Anything that seems to lock down or suggest inactivity will definitely throw Nigeria back to recession and increase the inflationary trends. So the truth of the matter is the Nigeria as it is now, just as the measures that are being taken in other advanced countries, should identify countries like India and Brazil that have dangerous strains of the virus and ensure that travellers from those countries are closely monitored or a red ban can be placed on them and ensure that our contact and tracing and those that are coming into the country are undergoing the normal seclusion for the two weeks and ensure that it is enforced. If Nigeria can do this, we have seen that the rate has drastically reduced to less than a hundred in a day and we have seem that Nigerians over a period of three to five days have not even witnessed any single deaths as regards to COVID-19. So, going to take drastic measures of lockdown in this present economy is going to really affect the economy in an adverse manner.
How much damage has the current state of insecurity exacted on the country’s foreign investment drive?
Insecurity is a major disservice to the Nigerian economy presently. COVID-19 did a part but insecurity is our major problem and is the most dangerous trend that has caused the Nigerian economy to continue to slide when it comes to foreign direct investment. Any investor in an economy will most importantly first look at government policies after which they’ll look at the security of their investments in such a country. Presently in Nigeria, the security of investments, except if you are investing in the capital market – is very dicey because you cannot move freely in two-third of the Nigerians states presently. And therefore, I don’t see a foreign investor coming into Nigeria to establish for example a mining or gold manufacturing plant or any manufacturing plant presently without being kidnapped. We have seen at most times that even expatriates are being even on the oil rigs in Nigeria. So even foreign direct investments as regards the oil and gas services has also dwindled because of the fear of insecurity. We have seen that the likes of Total and ENI among other oil companies are looking elsewhere where their investments can be secure. So, insecurity presently is really affecting Nigeria’s economy and is reducing the foreign direct investment that is supposed to come into the country. Yes, we have had investment announcements of intended investments in Nigeria, the major thing that could affect these potential investments from materialising is insecurity and if the investors do not see government’s concrete actions in stemming the tide, they’ll be forced to withdraw or wait until the situation is better. So, insecurity is really affecting us and the government of Nigeria seemed to be overwhelmed as to how to stem the tide.
Away from foreign investments; how are the local investors coping with the present business environment?
The government with their approach to businesses is really affecting productivity as regards those businesses. One, the government is all out to tax business owners to their teeth. And most of these businesses are suffering from multiple taxation presently which the government needs to look into and make the tax regime as flexible as possible for these companies to be able to survive. Secondly, we have seen over time that because of the neglect of host communities of where these manufacturing companies are located, most of them tend to resort to self-help by ensuring that they make the environment in conducive for manufacturing companies in their respective localities and these are the things that government should have done in the first place. In any community there should have been an arrangement with the communities to ensure that any industry that is sited there can be able to operate peacefully. So, if there are destruction to their operations, it’s definitely going to affect their production and their output would be low. So when we look at the relations between host communities and the companies that have sited industries, it’s hostile presently in Nigeria and the government is inflicting heavy taxes on these companies and coupled with the insecurity that pervades the country. For a company that is manufacturing in Osun for instance, it has to be assured that the company will successfully be able to carry their goods and move them to place where they’ll be able to sell or move them to their distributors. The government has not put enough enabling environment to ensure that the rail system can be used effectively, logistics as regards transportation is having a serious challenge in Nigeria because it’s either the manufacturer use the rail system or they use the containerised system which is fraught with serious security challenges presently. So most of these manufacturers suffer huge losses as regards either accidents on the road or attacks on their goods. And at the end of the day, when they are now giving reports to their directors and shareholders, you discover that these issues that we have listed affect their bottom line and make the balance sheet most of the time go to the negative.
Most of these companies have voiced out their concerns to government. We’ve seen most of them packing out of Nigeria to a saner environment where they can do their business and over time in the past 10 years, I have not seen any government policy to directly address this and it’s affecting business seriously.
What would be your recommendations to the government in reducing the current tax burden on businesses?
If you see that approach that some countries in the world are using, you’ll discover that they operate a tax friendly regime. What I mean by tax friendly regime is to ensure that you bring tax payers together and look at ways of having a win-win situation that would ensure that the taxpayers would be truthful in the remittance of their taxes and there would be no corruption in the system to deter the government from receiving its dues for taxpayers.
Part of what the government should do is to ensure that there is a seamless framework to ensure that the tax payers have a buy-in in government policies, to ensure that what they government had said the taxes will be used for are satisfied – that it is going to be used for it…we need to sit down with manufacturers who are they high-end of taxpayers- sit down with them and identify their problems. The government needs to sit with taxpayers, out their problems and policies to them and tell them that if they fulfill their own part, the government will also fulfil their own part. We have seen that in the past years, government only ensured that these taxes were collected from the businesses but government does not fulfil its own part. We need to have a synergy between the taxpayers and the government. If the taxpayers believe that whatever they are paying they’ll see the effects, they’ll dutifully pay and the government should eliminate all the loopholes of corruption so that these actual taxes can actually get to the coffers of the government instead of dividing it 50-50 by some unscrupulous elements.
Inflationary pressure has remained a key challenge to policy makers particularly the monetary authority as this has affected the cost of living. What is your panacea for the headline index which had risen for about 18 consecutive months before slowing in April?
We first need to look at government policies as regards how to stem inflation. We have the central bank, we have the ministry of finance, and various agencies of government that are supposed to ensure that government policies are implemented. And they are measured. So, we have seen a lot of policies that the CBN has introduced – the Anchor Borrowers Programme and ensuring that the real sector gets what it needs in the area of foreign exchange and necessary back up for those who are exporting their products. But what the government needs to do is to be able to measure performance of the policies which they have instituted. Because if these policies are not measured, then we will not be able to have a firm grip of how far we have gone or how far are we doing. So government needs to look at measuring these policies from the policy operators’ angle because if the CBN has given so much to the anchor borrower programme and given farmers so much loans, how much of these have gotten to these respective areas and how has it been measured and utilised. And if there are lines for repayment, how has it been done? Has repayment been coming? That is one angle. The second angle is that the major causes of inflation in Nigeria presently had been inflation that had arisen from food prices. One of the major reasons why inflation had arisen in food prices is still what we are talking about – insecurity. Because most of the farmers that are supposed to willfully go to their farms and ensure that they practiced what they have learnt are being denied this opportunity due to the spate of kidnappings, destruction of crops and all the banditry that is happening in the country and because of that, the output of agricultural inputs have reduced drastically in the country. The very few that has been had is what is now used to service the economy and we have seen that because there’s reduced production, it would lead to high costs of goods and services. The third thing that government needs to do is to start adding value to the raw materials that we have. One is the issue of petroleum for example; Nigeria is going to face more inflation because we are importing petroleum and we are paying so much dollars for it. If Nigeria can ensure that the five existing refineries which are supposed to work at 445 million barrels per day – but we know their capacity presently though there are turnaround maintenance that is ongoing at the four NNPC refineries, but even after the turnaround I doubt it if they’ll be able to meet up with the 445 installed capacity. And so Nigeria keeps importing petroleum and we keep playing expensive dollars for it. If Nigeria can look at adding value to the crude oil that is our own natural resources by ensuring that it is processed here in Nigeria, it is going to drastically reduce the cost without even adding subsidy to it. And also, Nigeria should encourage private sector involvement in the area of oil and gas. As Dangote refinery is going to be coming up very soon, more of it should be encouraged to the extent that Nigeria would now be a net exporter of cause oil products. If Nigeria can do that, we will receive more dollars and it would stem inflationary pressures. Also, Nigeria needs to start adding value to the non-oil sector products – we should add value to our cocoa, cow skin that is used for leather and shea butter among others. Nigeria is one of the highest producers of shea butter in the world but yet we are not adding value it and that is why we said the policy implementation of the government needs to be reassessed and valued to be able to be sure that something is actually being done and result is being generated. I give you an example…it’s a major problem in Nigeria that government needs to look into. We have to have a deliberate policy of consistently adding value to the raw materials or natural resources that we have. One of the major reasons for inflation is because of the high expenses that Nigeria incurs when products are imported. If we are having more exports than imports, it’s going to drastically affect the inflation that is happening in Nigeria and it’s going to reduce it. Similarly, if Nigeria can ensure that insecurity is reduced to the nearest minimum, then agricultural products which are now the cause of the inflationary trends that we are seeing in Nigeria will reduce.
How would you evaluate the present MSMEs space in view of recent interventions by government to strengthen operators in the sector?
The policy of government during the COVID-19 pandemic was a welcome idea and on paper it was well thought. But over time, according to statistics, we have seen that that policy had not really reached the grassroots level and most people that even applied, up till now they’ve not been able to receive anything. And so that boils down to what I said earlier concerning evaluation of government programmes. Yes, the government said we are bringing N500 million and we are going to attack this and this areas but most of these areas, when applicants applied, it comes to something else; it comes to favouritism, it comes to who you know and at the end of the day, very few people benefit from a government programme that should have benefitted a larger society. That was why I said that the government should be passionate in their delivery of services to citizens in the sense that when programmes are implemented, we should be able to evaluate them. And when you talk of evaluation, government cannot evaluate itself, government should get people that are not part of government to be able to evaluate the success of government programmes. The government should reach out and look at none governmental organisations or other analysts even foreign analysts or organisations that are skilled in that area to be able to evaluate the programmes and be able to give reports to government so that government can be able to say we have done so much in this area and these are the areas needing improvement and then these are the things to be done to ensure policies are all round successful Government has not evaluated that programme. We see that over time it’s all noise and no action. So in as much as government knows what to do, they’ve put out the papers and plans but we have not seen success because there is no evaluation.
There is currently a debate on whether the fuel subsidy regime should be scrapped or not. What is your opinion on the issue?
Now, let’s start with the damage. Everybody in Nigeria and the world know that the Nigerian economy is experiencing one of its weakest form now. One of the problems Nigeria has is shouldered by the common man presently. Now, the removal of subsidy from petroleum is going to have a very serious repercussion on the ordinary Nigerian. Why did I say this? We know that petroleum product is enabler in every aspect of Nigerian life. Petroleum products are used for manufacturing, transportation, road construction among others. What that tells us is that when subsidy is removed from petroleum products there would be a hike in price and when there is a hike in price, it will affect cost of production by manufacturers and the cost of their goods will increase. The hike in price will affect cost of transportation because the cost of fuel has increased and who are the people to purchase these goods and services? They are the ordinary citizens of Nigeria. Just as we said earlier, inflation is on the high now and the cost of goods have seriously increased. I believe that the cost of goods could reach over a hundred per cent increase in a year in this 2021 if the fuel subsidy is removed presently.
Now, talking about the positives that could come out from the removal of the fuel subsidy – we all know that over the years, trillions of naira had been earmarked to very few people – some of them portfolio contractors to share amongst themselves. And we have seen that over time, this subsidy had not really been subsidised but had gone to some few hands. So if there is a removal of fuel subsidy, definitely it will eradicate one of the major arms of corruption in Nigeria which is in this area of subsidy scam. So the government will have enough funds to do capital projects and they’ll have enough funds to meet other obligations. So removal of subsidy will help government to be able to meet up with its obligations. But the truth of the matter is that if government removes that subsidy now, it’s going to be deadly and it’s going to affect Nigerians negatively. On the other hand, I am in support of the removal of the fuel subsidy if the following can be done: One, the government should give itself a timeframe. The turnaround maintenance on the refineries is expected to end in eight months. Let us look at how the TAM is going to be- if TAM can guarantee us 100 per cent production of refined petroleum products, then it means we will be having over 445 million barrels per day converted. It may not meet our needs but that will also give room for the private sector led intervention in the oil and gas like the Dangote refinery and others coming up to be able to jump start. We believe that Dangote should start running from next year. So, the government should delay the policy as wonderful and as nice as it is to curb corruption – it should delay it till when the turnaround maintenance of the four refineries has been done and certified to operate optimally between 80 per cent to 100 per cent. And the private refinery especially Dangote refinery is on stream; when that is done, the local refining capacity will be increased and we will be able to get the cost of the petroleum products at a very reasonable price because it will be based on some of the landing costs, FoB and some logistics would have been removed. So as much as it’s a laudable idea for government to implement, I think it should be delayed till things are in place.
The CBN has intensified efforts in recent times to deepen financial inclusion. What’s your thoughts about that?
To me, I am very passionate about the Nigerian economy especially the one that has to do with the lowest rung of the economy and we can call them the unbanked population. The CBN has to be more deliberate in the area if the unbanked population. It was that passion that made me to have a cooperative society registered because I want to really attend to the unbanked population.
They are the engine room that Nigeria has left lying fallow and the N10, 000 market money will not be able to help them if there are no deliberate policies to be able to attack that market and be able to bring out strong entrepreneurs from them. So, I believe that he CBN should have a look again into the unbanked population and have what I call a group of cooperative societies deliberately to be able to attend to specific areas of needs of this unbanked population in the agricultural sector, in the electronics and in all the sectors. We should have cooperatives dedicated to those areas that can stand as a governing body to this unbanked population and to be able to disseminate information and resources to that area so that area too can be lifted because they have been neglected for too long. I don’t see where N10,000 market money can help somebody that is selling orange in Ikorodu or some of those markets…we are just doing cosmetic approach, we need to be able to lift them up. Some of them, what they need is more than N10, 000. Some of them what they need is an opportunity to be able to enhance their capacity by being able to buy more or being able to buy in bulk so that it can be cheaper for them to sell at a higher rate instead of buying from retailers like them. So these are the areas I want the CBN to look at: have an assemblages of cooperative societies and deliberately attack that area. The government has not done that so far.
