I do not pretend to
be an academic professor of Economics, but I believe that I have had sufficient
practical experience in running private businesses and in managing the affairs
of a State as to know what works and what does not work in the Nigerian
economy. By encouraging who works and doing away with what does not work, we
shall build a new Nigeria.
The key to our
growth as a country is to seek ways to build financial resources for economic
and social development of our country in the midst of apparent scarcity. As a
country, we seem to overlook what is besides us in search of what is far from
us. We seem to have the penchant for seeking the exotic instead of the basics
that are all around us.
In managing our
economy out of recession, we seem to have settled for the notion that we can
only borrow ourselves out of recession. While it is true that borrowing may be
necessary, if you don’t have saving, to spend out of recession, I am personally
worried with what the borrowing is being spent on. There is nothing wrong with
borrowing for investment in capital goods but there is everything wrong with
borrowing for consumption.
Today, our debt service
to revenue is almost 60%. Outstanding Debts account for about 50% of the total
national budget (states and federal), this excludes debt owned contractors, and
other matured contractual obligations.
In more organised
societies, even when you want to borrow for capital goods, you must carry out
an economic feasibility and viability report as well as social impact
assessment on the investment you want, and then you rank the competing
investments in order of preference. We have borrowed to rebuild four Airport
terminal at the same time.
Are we sure that
traffics in the four airports will generate enough revenue to pay back their
share of the loans. It is common knowledge that Lagos airport accounts for
close to 80% of our air traffic. So why didn’t we use the borrowed fund to
first modernise and improve the Lagos airport into a regional hub instead of
rebuilding 4 airport terminal at the same time, when none of them will even be
built to world class standard and none will have the capacity to pay off the loan
used to finance its reconstruction.
The need to borrow
by the different levels of government has been largely driven by two factors:
lack of savings and high cost of governance. We seem to have built our
political structure on epicurean life style: “let’s take care of today
and tomorrow will take care of itself”. Our constitution does not allow
savings; Section 162. (1) & (3) of the 1999 constitution states that “The
Federation shall maintain a special account to be called “the Federation Account”
into which shall be paid all revenues collected by the Government of the
Federation, (3) Any amount standing to the credit of the Federation Account
shall be distributed among the three tiers of government.
Unfortunately for
us as a people, the revenue we are distributing and consuming is coming largely
from oil which is a diminishing asset. No modern society can survive and
maintain its development without saving and investing for the future,
particularly in its future generation. This is even more so for countries that
depend largely on the extractive industry.
I want to use this
opportunity to appeal to the present government to please amend the
constitution for the sake of our children. We need to reverse our aversion to
saving and make fresh commitment to saving for the economic and social
development of our country today and particularly for tomorrow.
We already have a
law on saving of our excess crude oil receipts through the Nigerian Sovereign
Investment Authority Act (NSIA). I must appreciate Mr Olusegun Aganga and Dr.
Ngozi Okonjo-Iweala, our former Ministers of Finance, for their contribution in
establishing this Act and the initial investment of $1bn.
Unfortunately, the
NSIA Act makes provision for saving of the residue or excess, meaning that if there
is no surplus, we cannot save. Our own definition of excess depends on what
price we set as the benchmark for crude oil and our projected production
volume. All a profligate government needs to do to avoid saving anything with
NSIA is to set a high benchmark for crude price and volume. No wonder why only
$2.5bn has been transferred to the NSIA from the Federation Account since the
inception of NSIA in 2012.
Even while we are
waiting for the constitution to be amended, to make it compulsory for us to save
part of revenue, we can start today by saving the refunds rather than
distributing to the three tiers of government. We should bear in mind that
previous distributions of such refunds including over $20bn excess crude have
only gone to fuel the consumption of our governments without any tangible
infrastructure investment to show for it. Today we are talking about
distributing $6.9bn excess deduction from the Paris Club debt. Out of which
$1.250bn being N380bn had already been distributed and the second tranche of
about $1.650bn (about N500bn) for possible distribution leaving about $4bn yet
to be distributed.
NNPC/NPDC have just
agreed to an unremitted $21.8bn and N316.1bn respectively and have given a
proposal on how to repay same to the government. The federal government has
announced their intention to sell 10 NIPP power generation plants this year,
this 10 power plants if I can remember when I was in office had a reserve price
of about $6bn as at 2013.
With the balance of
$4bn of Paris club refund that is undistributed, NNPC $21.8bn and NIPP sale
proceed of about $6bn we now have about $31.8bn. If we resolve to save this
money as a nation today through our already established Nigerian Sovereign
Investment Authority at an annual contribution of $2.5bn and an income of 7.5%
(am sure they will achieve more) from January 2018 to 2030 which will be the
year of conclusion of UN SDG which we are signatory to; by then this amount
will be $51bn plus what we have today in the NSIA account will be about $55bn. Our
current foreign reserve is $30bn, I see that the Federal government has
increased the reserve by about 10%, if they continue with 5% increase annually,
by 2030, it will be about $57bn. A combination of sovereign wealth fund
investment and foreign exchange reserve, our total reserve will be over $100bn
by 2030.
A major and
critical part of the macroeconomic instability we are facing today is as a
result of our weak foreign exchange reserve. Should Nigeria have a reserve of
over $100bn, we would be able to maintain a stable exchange rate, rein in on
inflation, meet the demands for legitimate imports as well as attract foreign
portfolio and direct investors. We would be in a position to embark of massive
infrastructure spending. In any case, I do not think that our economy would
have gone into recession in the first place if we had over $100bn dollars in
foreign reserve.
To further
elucidate why we must commence savings immediately, Nigeria was not included in
the BRICS economy even when it was the biggest economy in Africa because of its
poor infrastructure. We have now been included in the MINT economy which are
Mexico, Indonesia, Nigeria and Turkey. If you look at these nation, Mexico with
a population of 130m has GDP of 1.1trn, forex reserve of over $150bn, Capital
market capitalisation of over $400bn, positive GDP growth, unemployment and
inflation under 10%; Indonesia population of over 200m , GDP $870bn, forex
reserve of $100bn, capital market of over $300bn, positive GDP growth,
inflation and unemployment under 10%; Turkey – over 80m population, 780bn GDP,
over 100bn forex reserve, Market Capitalisation of about $200bn, positive GDP
growth, inflation and unemployment under 10%. When compared with Nigeria, with
over 170m pop, GDP $413bn, forex reserve of $30bn, Market Capitalisation of
about $30bn, Negative GDP growth, Inflation and Unemployment of about 20%. One
can see clearly the need for us to resolve today to start saving in order to
turn around our economy tomorrow.
Once again, I
appeal to our current government officials at the federal and state levels, in
the interest of our country and our children not to share these impending
refunds but to rather invest them.
Apart from saving
for the future, we also need to begin a massive investment in education to
equip our children with the skills to compete in today’s knowledge economy.
Today, Nigeria is not only lacking in the number of enrolment of children in
schools but has also progressively deteriorated in the standard or quality of
education the few who are opportune to attend school are receiving.
We currently occupy
the unenviable position of the country with the highest number of out of school
children in Africa and the number two in the entire world. The greatest issue
militating against our global competitive index is the issue of education and
health (138th in the world). Today, our school enrolment in basic education is
about 60% .The reason why countries of the Asian tigers have leapfrogged
Nigeria is the quality and spread of their educational system. While they were
and are massively investing in education, ours is the reverse. Investment
in education is synonymous to investing in the future of a country especially
today that the world has moved from baggage economy to knowledge economy.
In fact, the focus
on education has changed to what is now called STEM, which means Science,
Technology, Engineering and Mathematics which will rule the World tomorrow. It
is now acknowledged that by 2020 the global economy will have a shortfall of
85m STEM skill jobs and nations are equipping their children from infancy for
that challenge and we are not doing anything.
To give an example
of today’s knowledge economy, Apple at April 28, 2017 has market cap of $750bn
which is higher than the combined GDP of Nigeria and South Africa, the two
biggest economy in Africa, Google has a market cap of $600bn which is about
150% of Nigerian GDP, Microsoft has market cap of $515bn is far bigger than
Nigeria GDP, Amazon $430bn is bigger than our GDP, Facebook that was
established in 2004 has a market cap of $416bn which is above our current GDP.
Even the networth of the founder, Mark Zuckerberg of $65bn is about 3times our
2017 national budget. Apple’s first quarter revenue is $78bn is about twice the
budget of Federal and states governments combined.
I can go on and on
how the world has left us behind but there is no point crying over spilt milk.
What matters is what we are doing to remedy the situation but regrettably we
seem not to even be conscious of how bad our situation is or what we should do
to reverse it. Today we have approximately 12 million pupils in our Universal
Basic Education when we should have been above 20m.
Assuming we target
a minimum population of 20m under our Universal Basic Education by 2018, our
minimum annual investment should be N200bn, that is, N10,000.00 per pupil. This
is my recommendation on how we can fund this annual expenditure for basic
education, which is the foundation upon which all subsequent training is built
upon. The Federal Government should contribute annually 50% which is N100
billion, the 36 state governments, N50 billion and the balance of N50 billion
should be funded by Special Education Tax.
Should we now
decide to start giving education the required attention and funding, let me now
recommend further how this money can be best utilised to make it transformative
instead of transactional which is the case today. I recommend that funds
meant for Basic education be domiciled in the office of UBEC and sent directly
to the schools based on each individual school headcount, at the rate of
N10,000.00 per pupil. The funds should be managed by each School’s management
authority to be composed of school head teacher, teachers and parents.
While the School
Management Authorities administer the funds based on defined standards set by
the government, the government’s role should focus on defining the standard as
well as supervising and enforcing those standards.
The fourth issue I
will like to touch on is the issue of proper job creation and employment
particularly by SMEs, which is the engine and biggest employer in any economy.
I am happy that the government seems to recognise this by stating in its
Economic Recovery and Growth Plan that it will encourage Nigerians “to buy what
we produce and produce what we buy” and patronise Nigerian companies. Serious
countries create enduring employment by nurturing and supporting their local
enterprises.
What is however
missing is the failure of the economic recovery and growth plan to put in
policy of prompt payment for services rendered. Today government has killed
more businesses that have supported their growth. About 75% of business that
collapsed was as a result of government indebtedness. In other serious countries
and I use UK as an example, government cannot owe for goods or services
rendered for more than 30 days. In most other sub-Saharan economies including
Ghana, it is 60 days.
In Nigeria the
reverse is the case, businesses are owed for years. Examples of this abound. A
few years ago, a state Governor ordered 50 Jeeps for his traditional rulers and
other prominent office holders within his government at the cost of N9m from a
company amounting to a total of N450m. The company estimated to make a gross profit
of N1.5m. Following this order, the company borrowed from the bank, N300m (and
added their own capital) to execute this order.
For four years now
they have not been paid. Not only have they lost their profit and their equity
contribution but their indebtedness to the bank is now N732m. The bank has
forwarded the company to AMCON and other financial authorities as a serial
debtor for defaulting on their loan and the company has retrenched over 200 of
his workers. While the governor has received all manner of titles from the
traditional rulers and several awards from various organisations for his
performance. The above is the same case of several enterprises, especially SMEs
whom are still pursuing various government establishments for their due and
matured payment for over 10 years
I know there is a
lot we need to do, while we have lost yesterday, we must not lose tomorrow.
Nigeria was a signatory in 2000 for the millennium development goals (MDGs)
which elapsed in 2015 without Nigeria as a nation achieving any of the goals,
though you can say one or two states were able to make reasonable impact.
Today, Nigeria is a signatory to sustainable development goals (SDG) (which is
inclusive of all that is required for a country to develop) signed by 193
countries in September 2015 which will be concluded in 2030. All that average
Nigerian demands of the drivers of this Nigerian vehicle is having been a
signatory to this global destination can we as other nations of the world
journey our part to this destination as other signatories by ensuring that our
planning, budgeting, execution and delivery are strictly based on the SDG
destination because it is clear and measurable.
As I conclude, let
me quote these two renowned personalities, first one is Professor Robert J.
Shiller of Yale University in his recent interview about the economy “to talks
about the economy is to talk about the psychology of people, what they think of
their future wellbeing”. And Prof. Donald Jacobs, founder of Kellogg Business
School, said “all economies are driven by hope of the citizens on the future of
their nation”. These two quotes show that in effect, people’s perception of
their present condition and the outlook for the future determine how they
respond to government policies.
•Excerpts from
the speech delivered by former Governor of Anambra State, Mr. Peter Obi, CON,
at the Covenant Christian Centre, Iganmu, Lagos, on May 1, 2017.
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