TERIBA: We Need Liberalise To Attract Foreign Investment

Dr. Ayo Teriba is an economist and the Chief Executive Officer (CEO) of Economic Associates. Against the background that the Federal Government may be overwhelmed with too many ‘battles’, he told KAMAL TAYO OROPO that what the government needs to do is coordinate and influence the activities of other private players at home and abroad.
Recently, the Federal Government seems to be waging many wars on many fronts and being confronted by a number of economic challenges; from the economic point of view, do you think the government may be biting more than it can chew?
Frankly speaking, I don’t know what you mean by biting more than it can chew. The Federal Government is in fact not biting as much as it can chew. Tell me what the government is biting in terms of reforms?

But so many things seem to be unfolding on the economic front. For a starter, the naira has been taking a lot bashing against the dollar in recent times: how healthy is this for the economy?
The Federal Government is struggling with its own internal challenges, like putting a budget together or getting the money to fund the budget, getting the forex to fund demand, and so on, to the point that it is not seen to be attempting to coordinate and influence the activities of other private players at home and abroad in any forward looking way.

Government is about coordinating and influencing others in a forward looking way; not struggling with yourself. The news headlines are filled with the latter. There is nothing in the news about what the government is doing about the former. Individual cabinet members are working on their schedules in isolation, there is not much of centralised visioning and coordinated attempt to steer the economy of the country in any particular direction

Government is about coordinating and influencing others in a forward looking way; not struggling with yourself. The news headlines are filled with the latter. There is nothing in the news about what the government is doing about the former. Individual cabinet members are working on their schedules in isolation, there is not much of centralised visioning and coordinated attempt to steer the economy of the country in any particular direction.

Could this be as a result of those in the cabinet of President Muhammadu Buhari or the nature of the system as inherited?
The President needs to appoint economic advisers. He could have a committee, like the Umaru Yar’Adua-led administration did during the global crisis. Yar’Adua also reconstituted the National Economic Intelligence Committee.

Where does that put the desire to have a trim cabinet and save some overhead cost?
Why the does the President have media advisers and security advisers, if it was better to trim cabinet? Is the media more important than the economy? Is the economy less important than security?

But going back to my earlier question on appropriate valuation of the naira against the dollar. What’s your take, given that the economy is import oriented and with a weak balance of trade?
The problem with the naira is not a valuation issue; it is a supply shortage issue resulting from the fall in oil price. All Nigeria needs to do is find alternative sources of forex supply. It is also not so much of a trade issue as it is a capital flow issue. Saudi has, in a similar situation, taken more appropriate responses by opening some sectors that were under government monopoly to private investment, and offering 10 percent of its 100 percent stake in its oil giant, ARAMCO, in a well-subscribed IPO in January. The country already got forex to replace part of what was lost from decline in oil export earnings. That’s all Nigeria has to do. Attract foreign investment into rail transportation, gas pipelines, refineries, and power transmission now, to boost capital inflow to replace the fall in oil income. Nigeria can also learn from India in encouraging it’s Diaspora to come and invest in hard currency bonds that will be repaid in naira at home upon maturity at this time.

There is no other country in Africa or the Middle East that could match the non-oil growth and investment opportunities that Nigeria offers. Investors know that. What we have seen in telecoms is a joke compared with what we will see in rail or pipelines liberalisation. Much of East and North Africa are more insecure than Nigeria, and they still attract investors. Investors know how to manage security risks in realising profit opportunities

With government’s intention to privatise Ajaokuta Steel Complex and others, do you see it yielding in the desired direction?
Saudi Arabia is not announcing intention. It announced actions that have elicited responses from investors. Nigeria needs to do things. We should also not reduce this to one isolated steel plant. Rail is a bigger investment proposition than Ajaokuta. Think of the hundreds of new rail termini across 774 Local government Areas (LGAs) in the country. Gas pipelines can also be laid under the rail lines across the country, as well as fibre optics, and electricity transmission network –– all funded by private investment and operated by private investors, who will be regulated by government. Similar to what we have done in telecoms.

You will recall also, that previous attempts at privatisation by various governments have met with limited success. How do we avoid previous pitfalls?
We need more of liberalisation, licensing new entrants, than privatization or selling existing assets. Telecoms liberalisation is a compelling example of a Nigerian success story. Replicate that in rail transport. The Nigeria Liquefied and Natural Gas (NLNG) project based on incorporated joint venture between government and foreign private investors is another Nigerian example of the country success story. Replicate that in refineries, and pipelines. Both show that the country has succeeded in the past and should succeed again. But note that the two success stories did not involve the transfer of any existing assets to investors; the new entrants were licensed to come in and build greenfield operations, so there was nothing to steal and hijack. That’s how rail should be reformed.

Where there are existing assets to transfer, issuing IPOs in a transparent manner might be the way to go. Fortunately, we now have a President who eschews corruption. So, I believe liberalisation efforts will be more successful.
But some may want to say that while these measures are beneficial in long run, they may not address immediate needs.
Any measure that supplies you foreign investment is a good short-term and long-term solution. It means others are endorsing your actions. There are no quick fixes. No short cuts. You must fix rail, fix refineries, fix pipelines, and you don’t have money of your own. Liberalise. In addition, you need the funds to support your external reserves and the currency. If you can’t earn enough from exporting oil, earn more from exporting investment opportunities.

That takes us to the external perception and security. Do you think the government is going in the right direction?
There is no other country in Africa or the Middle East that could match the non-oil growth and investment opportunities that Nigeria offers. Investors know that. What we have seen in telecoms is a joke compared with what we will see in rail or pipelines liberalisation. Much of East and North Africa are more insecure than Nigeria, and they still attract investors. Investors know how to manage security risks in realising profit opportunities.
Will you support the devolution of some of Federal Government’s constitutional responsibilities to state governments as a way of reducing workload on the government at the center?
Like which responsibility?
Security (state police), fiscal autonomy/federalism, infrastructural development, and so on.
These suggestions are distracting. Fix all other infrastructure in the same way as telecom has been fixed, and as power is in the process of being fixed. States’ viability derives from the viability of Nigeria. Infrastructure and security problems should be solved centrally. If we can resolve the fiscal adequacy of the federation, the constituents will be fiscally adequate.