UK’s unexplained wealth orders and Nigeria
How will the UK government’s new Unexplained Wealth Orders impact Nigeria’s fight against corruption? CNBC Africa’s Esther Awoniyi spoke to Mustafa Chike Obi, Executive Vice Chairman at Alpha African Advisory and former Managing Director of the Asset Management Corporation of Nigeria about this and more.
I think what the U.K has done is a good thing but we must always be careful to focus on Nigerian issues and not on issues that concern the U.S or U.K, because they have their own issues too, like terrorism and illicit flows of funds. I have made calculations over the last few years on the impact of corruption on Nigeria of the impact of corruption on Nigeria and I cannot find that corruption is more 1 or 2 per cent of GDP. It is not the big problem Nigerians make it to be for Nigeria. Nigeria’s bigger problem is growth and we spend all our energies chasing after 1 or 2 per cent of GDP because it is popular?
You thinks it’s just popularity?
Every single president comes in vowing to kill corruption. Every single one of them.
But the authorities consider is a big deal. For the U.K in question it’s said that many of the moneys stolen here are first kept in assets in the U.K. I think that’s why there’s this focus on that story.
I looked at the first ten 10 properties they’re looking at in London and I think only 2 of them belong to Nigerians. The rest belong to people from other countries so again I think that it’s popular to say. Nigerians love it. I think the bigger issue for Nigeria is the wealth disparity and the unproductive ostentatious display of this wealth disparity. You see houses that people live in in Niger, in this society and you want to throw a brick through a window. There’s a house where near I live. It is a big white house and I cannot justify the reasons for building such a monument in the midst of the suffering of Nigerians. You go to Abuja, you see all the displays of wealth. I think we should address that before we start worrying about corruption. Corruption really is not the problem that everybody says it is. The biggest problem for Nigeria today is the growth of our economy. If our economy does not grow in double digits for a sustained period of time nothing else will matter. We will not be able to employ. We have, depending on who you speak to, 4 million new Nigerians being born a year. Who is going to employ them? The only way to employ them is to grow the GDP in double digits. Once we agree that that is what we need to do, everything will fall in line.
So you don’t think we’ve been able to strike a line because that’s one of the pillars of this government, that’s one of their campaign promises – to fight corruption. Would you say that there’s been an imbalance between the fight against corruption and the focus on economic growth?
It is a huge imbalance. Everyone talks about corruption. Every discussion is about corruption, and we promote the idea that we are corrupt. We are not more corrupt than anyone else. One per cent of GDP as corruption is probably the same amount as it is in the U.S but because they are a much bigger economy and life standards are better, people don’t worry about it as much. Ghana is growing its GDP at 8.4 per cent for goodness sake. We should be able to do better than that and once we can start employing 4 or 5 million people a year and making credit available to businesses and having a government that understands that business is a partnership with the government and not be in the way of business. Once we start doing those things, corruption will wither away in the same way that unproductive things do. But now our entire judiciary is focused on corruption. The fight between the legislature and the executive leading to all of this non confirmation of people is as a result of the fact that the EFCC has been put in a position where only one man in Nigeria can run it. We are focused on something that’s entirely unproductive. If we can grow our GDP from the 1-2% they’re talking about now. All these issues of corruption will go away. Let’s get competent hardworking people in key areas and let’s keep an eye on corruption but it should not be the sole purpose of the Nigerian government.
Let’s talk about the macro-economy. Let’s look at the key indicators the authorities have been using to measure the economy. It would appear that the macro indicators look good right now.What are your thoughts on how we’ve been able to get there and how the macro economic team is doing right now?
No of the macro-economic indicators frequently mentioned are better today than they were in 2015. Not one of them.
Forex reserves were below in 2015.
You say so, but how do we measure forex reserves today? For example we borrowed $3 billion in a Eurobond and it goes into our reserves. We have $5-6 of hot money coming into the stock market and it goes into our reserves.
Plus oil prices have been significantly higher…
Yes, but think about a situation where if we went and we borrowed $50 billion in a Eurobond tomorrow, our reserves would go to an all time high but is it a realistic number? It is an obligation that you must pay back in dollars at a certain time. It should not be added to reserves because we must pay back the Eurobond in 5 years in dollars so why is it part of our reserves. It is already accounted for. I don’t look at the $40 billion as the sign of an economic accomplishment. Moreover $40 billion is N200 per Nigerian. Additionally what do you use reserves for. You use it to pay for foreign goods, so the foreigners love when reserves are high because it means you can buy more of their goods and you can pay for it. The impact on the Nigerian is far more felt by the fact that to keep those reserves you have to keep your interest rate high. You have to have a tight monetary policy and that impact affects businesses, employment and a wide number of things that the man on the street feels more than the reserves. $40 billion reserves doesn’t do anything for the common man.
Let’s quickly talk about the Monetary Policy authorities. We’ve seen them focus on inflation and many have said that it has been at the expense of growth and the CBN governor has made it clear that he’d rather keep inflation down and maintain exchange rate stability, but he’s come up with concessionary rates to cushion the harshness of a high interest rate environment. The authorities feel justified because it’s seen inflation come down and stabilise and that in turn has contributed to the hot money coming into the capital markets. What are your thoughts on this strategy?
Well, inflation is higher now than it was in 2015 by quite a bit. If you measure our monetary policy by results. They have not been successful in fighting inflation. The fact that it went up and it’s now coming down doesn’t take anything away from the fact that it is much higher than it was when they started. The naira is at a much weaker level than when they started. The fact that it went up to 520 and came down to 360 non-withstanding it’s still higher than it was when they started. Those are the facts. Now, at what cost are you doing these things is what I ask.
When I was at AMCON as MD the biggest challenge I had was people asking me for jobs for their families, friends, wards, constituents on a daily basis. If you talk to most Nigerian parents of children of employable age their biggest issue is employment. Nigerians would rather be employed and have inflation of 25% than be them be unemployed.