‘Legislative, executive disharmony draws back economic policy implementation’
Babatunde Ruwase is a chartered accountant, and the president of the Lagos Chamber of Commerce and Industry (LCCI). In this interview with FEMI ADEKOYA, he explains how he is steering the Chamber in its public policy advocacy goal, and proffers measures that can make the Nigerian business environment conducive for investors. Excerpts:
Congratulations sir on your recent investiture as the new President of the LCCI. Considering the enormous advocacy responsibilities the chamber takes on, what are your plans during your tenure?
Thank you very much for your kind words. I am not unmindful of the fact that the task before is quite a great one, but I intend to build on the good things we have been doing by way of protecting the interest of our members, promoting good business environment and do more on public advocacy to improve the business community and we would also continue to dialogue with the government. These are the tasks before me.
What is your assessment of the nation’s economy, and how can the challenges be addressed?
We are just exiting from the recession and what the government is doing now is commendable. They are taking the right steps, but the only problem we have as a business group is the political effect of this effort. This is because there is no amount of effort you put on economically, if we do not get it right politically, it will create a big problem and that is where we have our concern. A situation where the different arms of government are not working harmoniously as much as they should is not good for the economy. For instance, our budget has been up for weeks now, yet not much progress from what we have seen. The legislative arm of government needs to address whatever differences they have with the executives. The disharmony in the system is worrisome, and hindering the implementation of economic policy decisions.
Nigeria is still doing very little in non-oil export according to the latest data from the United States Government. Should this not be a concern for us, considering that the economy is still largely driven by oil?
We should be concerned, but then, the government is doing a lot. Like I said if you look at some parts of Nigeria today, you will find out that there is no cultivation of crops. In the north-east for instance, there is no cultivation; there is no meaningful economic business one would see and it is gradually spreading to the middle belt which we call the food basket of the nation and that was why I said if we do not get it right politically, because some of these things are just being politicized and politically, it is being promoted and this is one of the reasons why we are where we are. Why we have not contributed a lot in the non-oil export sector? Another thing that has come to our notice is that some of those things that go through the West African sub-region are actually from Nigeria, but because of the stiff regulatory conditions reported by exporters, people will rather export produce through Lome, and Benin Republic. Recently, we met with the Nigerian Export Promotion Council (NEPC) that the LCCI has this working arrangement with them to see how we can encourage and create standards and remove all the obstacles that are in the way of exporters. We are actually concerned about the low non-oil export the country is doing presently and the NEPC is working with us alongside other government agencies. However, with this political distraction that we have, if we do not handle it properly, there will be no meaningful growth.
Nigeria is believed to be one of the fastest growing economies, yet the poverty gap keeps widening. How can the well-being of ordinary Nigerians be addressed?
Our population is growing at a rate faster than the rate the economy is growing. That is one problem that we have; we have infrastructural decay which this government is trying to address. That also is a problem. People are no longer in the rural areas and there are jobs in the rural areas. Everybody wants to move into the urban areas. There is also a concern about the lack of skills. How many of the unemployed are employable? You still find Nigerians going across the border to employ masons because they have the skills that we do not have. So, these are things that are also promoting these problems. We have infrastructural decay; you have people without the right skill that is required to drive the economy, there is no power and factories are closing down or they are downsizing their production capacity. Getting agricultural produce into the hinterland and to the market is very difficult and by the time they get there the produce would have been very costly to the extent that the ordinary man cannot afford and there are also lots of wastages. These are some of the issues we must take a lot at holistically. The Economic Recovery and Growth Plan (ERGP) by the federal government is supposed to address this. If we can religiously and truly implement this plan very well, it will go a long way, but then like I said, we need to get it right politically, because more of politics is being played in the legislative arm of government. We must really get this arm to buy into these ideas to be as passionate as what we see from the executive arm of government. We are supposed to be the production hub of West Africa and even Africa, because most of the people are here, but lack of infrastructure is affecting this goal.
Also, you see people from Asia expressing interests in the Nigerian economy, but not many Nigerians believe in investing in Nigeria. These are challenges and we need to be more nationalistic by believing in this country, people are coming from other countries to invest in our economy and if you look at farming now, nations are coming to set up large farms in Nigeria.
In line with rising debt in the public sector, the financial sector in sub-Saharan Africa is also facing mounting pressure. The IMF noted earlier that the combination of lower real GDP growth and uptick in government arrears “has resulted in a widespread increase in non-performing loans, triggering higher provisioning, straining banks’ profits, and weighing on solvency.” How can the economic managers mitigate these issues?
That is not correct, because as at the last check, a lot of investments have come into the capital market. The rise that we have in our foreign reserve today is a factor of increasing oil prices and foreign portfolio investment. The Nigerian capital market is rated as one of the most profitable investment places in the world; people are interested and they are coming into it. The problem with the portfolio investors however, is that once things are going bad, they are the first to leave and that was how we got to where we were the other time, they pull out fast. They always go to where they would get good returns and when they see the red light approaching they move quickly, so one cannot also rely on them and that is why we are worried on the growth based on this portfolio investment inflow because you can never plan with it.
On public debts, there is nothing wrong with public debts because if you have to fix your infrastructure, you will have to get money and you will have to borrow from somewhere, but what you are using the debts for is important. The sovereign fund instruments that were floated recently were used to upgrade certain public infrastructure. So, it is not bad if we increase our debts to develop our infrastructure. So, I am not concerned about the debts, but how it is applied.
A recent study looked at the post-mortem statements of 50 startups that failed for one reason or another. Lack of market and access to operating capital ranked top as major reasons. What can be done better by businesses and regulators in this environment?
What has happened is that Nigeria has been turned into a dumping ground because of the harsh operating environment that we have. Locally made goods cannot compete effectively with imported products and that is why we say if we can address issues relating to power, roads and we are also able to reduce operating costs of local firms, they will be able to compete and the truth is that most of the things that are produced locally are of higher value compared to imported ones. The purchasing power of the people has been eroded by some of these economic challenges such as inflation and the rest. That has made people go for a cheaper alternative and that is why they go for some imported products. Patriotism is another issue.
We need to patronise Made-in-Nigeria products, particularly support the Small and Medium Enterprises (SMEs). On access to operating capital, as you know there is no cheap fund anywhere and for as long as we have high inflationary rate, interest rates cannot go down. There is a need for intervention funds, some of which government has created, but the SMEs do not have access to this, because banks believe that SMEs are not bankable and that they do not have the collateral to get access to these intervention funds so the government has now created what they call the Capital Credit Register where you can collateralise your plants and machineries, so with this, we believe that there will be some improvement in the fortune of SMEs. We also try to educate them and also engage those institutions to see how our members and indeed SMEs can access these funds. The case is not as bad as we think at times and I keep on repeating it that if the Asians are coming in here to invest, we also can do it. Although, people will say they have advantage of funding which this effort of the present administration is trying to address and at the end, I think it will be better for us.
Should Nigerians or investors be worried over the state of the economy as the election approaches?
I do not think they should be worried, because that was how we got into recession. During the last election in 2015, everybody was buying dollars, and people who could move their families were moving out because they thought the situation was going to be terrible, likewise the portfolio investors also took off and this led to the beginning of the recession we just experienced. We should just be hopeful, be patriotic and I believe that we are going overcome it. Nigeria has huge potential and if foreigners from another land have the confidence of coming here, why do you think I should feel hopeless as a Nigerian? I am very hopeful that things would turn out for good and it also depends on us. We should not allow ourselves to be manipulated by the politicians who are always using religion or using tribal sentiments to cause discord among the people.
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