Infrastructure building, job creation key to Africa’s growth, says AfDB President Adesina
• ‘Govts must be accountable’
Subsequent to the launch of the African Development Bank’s (AfDB) Nigeria office in Abuja last Thursday, Mr. Akinwumi Adesina, interacted with journalists regarding the bank’s investments in the country, explaining, among other things, what Africa’s infrastructure building and job creation strategies should be in the next 10 years. The Guardian’s News Editor Marcel Mbamalu captures the essence of Adesina’s responses to questions raised by journalists at the Transcorp Hilton, Abuja parley.
The last country regional report released last week highlighted the poverty level in Nigeria as very high. What steps do you think can be taken by Nigeria to reduce the poverty level?
I know that growth is very important, but growth itself is not enough to drive down poverty. The question we must always ask is the level of growth and also the nature of growth. You cannot go into an area to tell people that the economy has grown at X percent and expect everyone to be jumping up and down. People have to feel the impact of that growth in their lives. Therefore, even as one has to have high growth, the question has to be is that the growth has to be an inclusive process that actually drives hundreds of million people out of poverty.
The greatest concern that I have, not just in Nigeria, but across Africa is that as we grow, we still have about 70 percent of our population that are in the rural areas in poverty traps. And they are in the poverty traps for a simple reason that the source of their livelihoods in the rural areas is actually agriculture. And until we transform the agriculture sector to become a wealth creating sector, we will not succeed in lifting those hundreds of millions of people out of poverty.
So the way forward is to reduce the large number of poor people we have, transform our rural economies from zones of economic misery to become zones of economic prosperity. And for that to happen, we have to have agricultural industrialisation. I said this because I know a lot about poverty and a lot about agriculture. I wonder sometimes what God must think; If God looks down every Friday and Sunday after listening to the prayers that come, he must be asking himself questions like why are all these prayers coming. He would say what he actually needs from people is praises because he has giving them water, cheap labour, sunshine and lots of land. What I am trying to say is that, every time we walk past gold and we think gold is dirt; our job is to make sure that we take the agriculture sector and turn it into a mega business and that mega business would lift hundreds of millions of people with it out of poverty.
Second thing I would say about poverty, is that today, there is high level of poverty amongst young people. You have high level of unemployment and also high level of under employment. This leads to a lot of dissatisfaction among young people and I am not saying this only for Nigeria. Those youths brought back from Libya are not unique to just Nigeria there are other African countries that are involved as well. When I look at the television, when I see a lot of them scared to death trying to gasp for air on their rickety boats on the Mediterranean Sea, many of them sank. That is not the future Africa’s youth deserve. So we must accelerate our work and focus on rapid creation of jobs for young people. And that is why at the AfDB, we launched a fund called ‘Jobs for Africa’s Youth.’
This fund is to help countries create 25 million jobs over the next 10 years and impact on 50 million young people. Because for the young people you see today languishing in poverty, the future we are even talking about was already yesterday and we are too late. So we have got to put them at the heart of it.
The third thing I would say about poverty is that if you take a look at the private sector and enterprise today in Nigeria, I would say that 85per cent of the small and medium size enterprises don’t have access to electricity, the lack access to affordable finance and they lack finance to good roads and infrastructure to support them. So if we can fix these issues, I think the kind of growth that we would have would be one that would help us to draw a lot of people out of poverty.
Another thing we are doing in regard to that, is if you take the case of northeast of Nigeria, battered by terrorist. I looked at the recent report by the international food policy research institute about the world hunger index at the AfDB, we are investing about $250 on a special initiative for the northeast to provide access to water, basic education, basic healthcare services, jobs and repair infrastructure in that area; because these are some of the factors that drive the kind of poverty that you see.
At the launch of the AfDB the Nigerian government requested the release of the $400 million, the balance of the $1billion loan the bank agreed to give the country to ease its way out of recession. When will Nigeria receive this money?
On the issue of disbursement of the money, our board of directors approved $1billion for budget support to the Nigerian government. I want to say that we at the AfDB, were there at the most critical time for Nigeria because I said at the time that Nigeria was too big to fail. And that support according to the minister of finance was what provided Nigeria the opportunity and buoyancy it needed during a very difficult time and allowed it to come out of the recession you see today according to her.
Now the issue is that it allowed them to go to the capital market to borrow more money. The issue is, we disbursed $600 million of that but the $400 million that remains; it is for Nigeria to request what it would use it for. Because it doesn’t have to use it if it doesn’t need it for budget support. Things have changed and they have gone to the Euro market and have raised Eurobonds. So the issue is not as serious in terms of the deficit as it was then. So I understand that the discussion is on how to take the $400 million and transform it into sector support so it would go into critical infrastructure whether it is power, infrastructure or agriculture.
So, the $400 is there and I know the federal government is working on how to structure sector support so that we can release the money into the sectors they want and I think it is a smart way to actually use money to be honest with you.
You earlier said that in 1976 Nigeria invested more than $500 million in the Nigerian Trust Fund with the AfDB; what is the value of that investment today?
On the worth today, it is not an equity investment. Nigerian government set aside $500 million to provide grants to low income and fragile countries to be able to grow their economies and stabilise. Because if you have fragility, you cannot have economic integration and I think that was a great foresight by the Nigerian government.
Let me give some examples of what it has done. It allowed us help Liberia when it was going through crisis. It allowed them have access to technical skills and basic services to water, sanitation and so on. It allowed us support countries like Mali and Côte d’Ivoire that went through fragility.So this is part of the developmental mindset that Nigeria has in supporting other countries. It is not an equity investment.
How would you explain the bank’s strategy in terms of new investments and interventions in Nigeria?
The magnificent building that you see, says very clearly that the bank is here in Nigeria to stay. The bank is also here in Nigeria to help Nigeria to succeed. And we would always work with the government based on the direction the government wants to go.
In terms of our work, the total amount of portfolio we have with Nigeria is $6billion and we expect that to grow to $8 billion by 2019. The critical sectors for us are firstly, infrastructure, because there is a massive amount of infrastructure deficit in Nigeria as with other African countries. So we would support investments in infrastructure.
One other area is power. Without power you cannot do anything; you cannot develop in the dark and you cannot be competitive without electricity. And so we are investing heavily in the power sector. We would invest heavily, not only in the generation of power but also in transmission and distribution of power. To give some examples on that, we plan to invest a little over $250million in the Transmission Company of Nigeria (TCN) to rehabilitate its existing transmission infrastructure and allow them to have sub stations and so on.
The other area is renewable energy. Nigeria has huge amount of renewable energy especially solar. So our power stations don’t have to be run only on gas, we can run it on solar. So we have in the portfolio going forward investments in Jigawa, Sokoto and Bauchi, solar power projects that would allow us to have utility scale solar investments in Nigeria and we know how to do this. The AfDB supported Morocco to set up what is called the Quarzazate, which is the largest solar plant in the world. So we think there is a lot of potential in solar. So energy is a big one for us.
The other important thing to us, which is key for Nigeria, is diversification of her economy, which is in agriculture. Obviously, given my own personal interest in this; because it is a poor driven sector, we are going to be investing to help Nigeria develop what we call stable crop processing zones. These are going to be vast areas in the rural sector that are enabled with power, water, roads and other infrastructure to which the agribusinesses can locate themselves. That way, they buy produce from farmers and that way you reduce post-harvest losses, create jobs for youths and modernise the agric sector and reduce dependency on food imports. In addition to that, we are going to be investing in the areas of private sector. A few areas of interest to us are the seed companies, fertilizer sector and also we are going to be investment in commercial banks through lines of credit so they can actually lend more to small and medium size enterprises.
So in total, we would support public sector, we also support a lot of private sector. That is the balance we are looking forward to in portfolio and at the end of the day, it is how we and other partners make sure Nigeria has the resource it needs at scale for a faster pace growth that can actually reduce poverty massively.
Can you let us know the nature of all the support and investments into Nigeria?
On the issue of investments and portfolio, I want to prefix that with a comment. I don’t believe that any country can ever develop based on a grant. Countries develop based on investments and therefore, to have investments, you must have the discipline to source money, the right kind of money and to use the money well.
As a development bank, when we finance countries, what is important for us is the developmental outcome. The reason we are different from a commercial bank that just looks for a market where there is a return is that a commercial bank would be looking at private return to capital. But a development bank looks at the social capital stocks and asks itself the question what the value of the social capital stocks of that economy. And the same social capital stock has the same kind of prices in my view as your private capital stocks do and they are measured in terms of poverty and access to finance, health and education.
So the thing is, I don’t want you to think that in development financing, things are just measured only in terms of money. When we say investment, it is a development financing investment to get a developmental outcome, which allows you to boost the social capital stock of that country.
Therefore we measure the impact and the effectiveness of use of the resources given for that developmental outcome. And so when we look at the loans we give for example we give to the public sectors, we go to the international market to raise money all the time and because of our AAA rating, we pass on that concession of financing on to countries so they can get the developmental outcome. The interest rate we lend to them is very low. The loans that we give are about 1percent interest rate for 30-40 years because you must have that type of long term perspective to be able to develop. So one hopes that as that happens, the country can have cheaper access to capital to be able to drive critical and social investments.
But nonetheless, they are repaid back over the longer period of time because as you know development takes time. However to the private sector, we do lend but it is about +500 to 600 basis points. So you can see it is still a good rate at lending and in some few cases we make equity investments in very few.
You spoke about infrastructure deficit in Nigeria and Africa, how really do you measure the deficits and to what extent do your findings guide the bank’s interventions and investment decisions?
In terms of the deficit in Nigeria, we just released a report yesterday (last Wednesday) and what we found was that the amount of infrastructure deficit in Africa and the amount of money it needs to spend would be as high as $108 billion annually for at least 10 years, to close that gap.
The question we must ask ourselves: Is how do we mobilise the financing for that, especially in the case of Nigeria. It is very abnormal not to have electricity and we have become so comfortable with it that the abnormality has become normal. And that is what we must change. And that is why, when I became president at AfDB, I had to make sure that Africa has universal access to electricity not in 30 years but in 10 years. Why must we wait forever, because what can you do without electricity, you can’t industrialise and you can’t be competitive. So we are focusing massively on solving the power problem, which is the key.
Something that is also critical for us is investing in rails. I want to commend the last administration (President Jonathan government) and also the current government for investing in rails, because it is very important for people to move goods and for people to move from one place to the other. Nigeria is Africa’s largest economy and what use is there if Nigeria produces what it cannot export to other countries because there is no connecting infrastructure? That is why the AfDB is investing with the ECOWAS to develop a project that would create a rail from Lagos to Abidjan all the way to Dakar. I think what I would expect is a lot of critical analysis on infrastructure financing gaps for Nigerians.
I travelled on the road from Ibadan to Ilorin during Christmas, the road was very bad and I remember growing up as a kid, the road was like that and the road is still like that. So, what I’m saying is that there has to be a lot of focus on accountability for investments in infrastructure or we make sure that we get quality infrastructure. You can lend to anybody to build infrastructure but if you actually just pour tar on the road and the next season comes down and it turns bad again, that is just a wasted money. So I think there has to be a lot of accountability in how infrastructure investments are actually spent.
What is your interaction with the federal government in terms of eradicating poverty in Nigeria. And also are you satisfied with monies being spent so far?
On the issue of poverty, we seem not to have addressed this issue. The world poverty clock released a report in November and it said Nigeria would overtake India in February 2018, which is next month as the world’s poorest nation in the world. I came out of poverty myself, so poverty for me is not theory. I lived in neighborhoods in which we didn’t have sewage treatment. But we must put people at the heart of the government and accelerate every action possible to make sure we drive people out of poverty. Africa must not become a museum of poverty and neither should Nigeria.
I think the critical thing is to make sure that we look in at the drivers of poverty. Obviously climate change plays a big role. If you take a look at the northern Nigeria, the whole of that Lake Chad basin used to be about 25,000 swamp kilometers in the past. So people could do fishing and agriculture. Today, it is 2,000 swamp kilometers; so, it shrank and so did the livelihoods of people. It is not surprising to me that you have a situation where terrorists take advantage of things like that to do all kinds of stuff. So you have to be mindful of the impact of climate change and make sure we can build resilient livelihood for people in the face of that.
The other thing is to make agriculture to work for poor people. The reason is that, if you look at the budget of a household and income of an average household, 65 to 70 percent of that household budget is cost of food. So, if you are in the rural areas and have increased productivity about agriculture and you can feed yourself and your kids, that’s a lot of money being saved. This means that you have more disposable income to do more things and invest.
I also think more generally now that there has to be what I call poverty accountability. China lifted 400 million people out of poverty in 10 years and that is twice the population of Nigeria. So, they are investing right, investing in human capital, investing in making sure girls go to school, making sure you can reduce climate and making social investments.
A short answer is that those poverty numbers are not acceptable and we have to do a lot of things about it. And I think investment in human capital, social transfers, making sure we address things that hold people down to poverty and access to finance can play a big role in addressing poverty.
What is AfDB’s interaction with China regarding the country’s strategy on doing business in Nigeria?
Let me say that China is Africa’s friend. China is investing heavily in infrastructure more than any other country in Africa today. At the AfDB, we have a $2 billion facility that is called ‘Africa Growing Together Fund’ and it is funded by China to support investments in infrastructure. Whether it is rail, roads, transnational highways today, no other nation in the world is investing more in Africa than China.
If you look at the trade between the rest of the world and China, China today is Africa’s largest trading partner. Yes, there are issues people raised about sometimes there are times they have displacement of some enterprises because the Chinese take their jobs etc. I don’t deny that, but we must not take out lines and generalise with them. The fact of the matter is that China is pouring a lot of money into Africa. President Xi Jinping announced $60billion of investment in Africa.China helped Ethiopia to develop what is called the Hawassa special economic zone, which today has turned Ethiopia into Africa’s number one country that is exporting footwear globally in a very short period of time. The point I am trying to make is that Africa has no reason to be afraid of China; Africa should strategically partner with China.
In terms of the engagement the bank has with different countries in the agriculture value chain, where you place the issue of pastoralists, herders and farmers. Would you be looking at engagement on policy issues that can address this crisis in a number of African states?
When it comes to the issue of pastoralists, this requires comprehensive strategy. In the past, there was never any conflict between pastoralists and farmers. The reason was that the population density was low and there was a market between pastoralists and farmers in terms of access for manure for their farms it was very symbiotic. All of a sudden, a number of trends happened; rapid population growth, secondly climate change.
In my view, I have never seen a pastoralist that wants to enter the Guinness book of records for going the longest distance with their animals. They are simply looking for pasture. So I think a lot of investments have to be made in ranches.
Another thing to bear in mind is that if you have flood that is coming, the first thing you do is build a buffer dam which allows you take care of the water that is coming quickly. So I think having similar kind of concept for public buffer areas that allows the pastoralists to reduce the amount of pressure constantly going on now.
Secondly, we have to use information. For countries having this problem, I believe they should have a national grazing information system.We also have another problem and that problem is that of cattle rustling. It is not unique to Nigeria by the way. Again, we can solve it in many ways. You can tag them with microchips and that allows you to know where they are going and who is moving where and also it allows you tell if someone is moving away with your livestock.
All I’m trying to say is that we have got to change our attitude; we have to change approaches, use modern information and be strategic on how we deal with this issue and it is a very urgent issue that requires a strategic approach and not a reactive approach. It is a very urgent issue we should address and the AfDB is willing to provide support to Nigeria in this particular area and to other countries facing this challenge.
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