‘Absence of clear-cut development plan is hurting Nigeria’s economy’
Sheriffdeen Adewale Tella is a renowned Professor of Economics at Olabisi Onabanjo University (OOU), Ago-Iwoye, Ogun State. He specialises in Monetary, Regional and Development Economics. A fellow of the Institute for Data Processing Management of Nigeria and an Associate Member of the Institute for Capital Market Registrars, he served as a Vice President of the Nigerian Economic Society between 2013 and 2015. In this interview with KABIR ALABI GARBA and ONYEDIKA AGBEDO, the former Vice Chancellor of Crescent University, Abeokuta, Ogun State, analyses President Muhammadu Buhari’s economic policies in the last four years ahead of his inauguration for a second term on May 29. EXCERPTS:
President Muhammadu Buhari came into office in 2015 with a pledge to restore the economy, fight corruption and tackle insecurity. Three weeks to the end of his first term, how would you evaluate the state of the economy on his watch?
The economy has not really improved the way we all expected. I think that when the government came in they didn’t know the extent of the economic problem that was on ground. They were thinking that it was something they could just take care of instantly. And they were hoping that the oil sector problem that was going on at the time would be resolved easily, more so when the economy is heavily dependent on the oil sector which is dangerous for any economy as it were. So, I think they took a lot of things for granted and when that happens the economic policy that you package would not be able to fit in easily.
Besides, the economy was already in depression and Nigerians were looking for a way out. That was why they felt there was need to vote for another party. But the depth of the depression was not envisaged and the continued oil slump in terms of prices and volume actually deepened the crisis. You could see that things started improving gradually when his first term started winding to an end.
Another problem they also had was the issue of budgeting. There was no time in the four years that the budget was passed six months in the year. When you have that kind of situation, it will take time for the budget to affect the economy. By the time the budget’s implementation starts having effect on the economy, another year has come in. Of course, that is the problem of both the legislature and the executive. The budgets were not submitted in time; the earliest that was submitted was on November 7, 2017 or so. Before then, it was around December and the National Assembly needs about three months to look into the budget and approve it. But the legislature did not also see the consideration of the budget as a primary assignment; rather they were doing other things. They only faced the job squarely when pressure was mounted on them.
So, if the budgets were passed in time and the budget implementations started early enough, I think the economy would have performed better. I say so because the Nigerian economy is not private sector driven; even the private sector depends on the public sector to act. In that sense, it means that in a public sector driven economy, budget issue must be taken very seriously. The economy started coming out of recession towards the end of Buhari’s first term, particularly when oil price also started rising. But I don’t like the idea that oil price is rising because it makes us to forget our problems and start depending on oil again. So, one can say that the economy did not perform well during Buhari’s first term.
A lot of Nigerians hold the view that the government does not have an economic team hence the absence of a clear-cut economic direction. Do you subscribe to this view?
When you talk about the economic team, you look at the Minister of Finance and Minister of Budget and Planning. If you look at their credentials, the Minister of Planning happens to be a lawyer and even if he has people with background in economic planning under him, he has to understand what planning is all about. For more than 20 years now, this country has no plan and that is not how you run an economy like this. There is no long-term plan although we have a medium term plan that was foisted on the government by the IMF and the World Bank. Initially, they thought they could do whatever they liked but those ones insisted on having at least a medium term plan, which they now run. By now we should have a clear-cut national plan that will run for 25 to 30 years, which will enable us to project where the country would be in the next 30 years. It has not been so.
Long-term plan is very important. When you look at the international plans, for instance SDGs and MDGs, they are 15 years plan that people have to follow. The AfDB ECA plan for Africa is up to 2067; it’s over 30 years plan. So, that tells you that long-term plan is very important for any economy, particularly an economy like this. Such plans are apolitical, that is, if any party comes in, it still follows that same plan. There is nothing like that now.
We said we have Vision 2020 but nobody runs any Vision2020. Even the government that initiated Vision2020 didn’t run it. Under the PDP, Obasanjo initiated the NEEDS. After that we had Seven Point Agenda and later the Transformation Agenda that Jonathan brought in. This government has also come up with its plan. No, it shouldn’t be like that.
So, there must be a national plan, which anybody that comes in must follow. Also, the national economic team must have people who are good in finance and economics that will make sure the economy is properly guided. But sometimes, you see that friends make up the economic team. That’s why if they say they don’t have an economic team, I think they are right.
Talking about development plan, do you think the Economic Recovery and Development Plan (ERDP) of the present administration will deliver on its objective?
It cannot deliver on any objective because it did not derive from a long-term plan. ERDP is a medium term plan that is supposed to be derived from a long-term plan but there is no long-term plan. The annual budget is derived from the ERDP and the ERDP must be derived from a long-term plan so that even those who want to assist us would have seen the plan we have and decide on where to come in. So, to that extent, the ERDP cannot deliver anything because they will continue to tinker with it based on whether we have money or not. That is not good for the economy.
The government claims the economy has recovered from recession and is now growing. You also expressed a similar view here but Nigerians are increasingly becoming poor. Even Governor Abdulazeez Yari of Zamfara State recently expressed the fear that the economy might slide back to recession in 2020. Is this economy better off now in actual sense?
The economy has recovered from recession. It’s just that it’s too slow, not that it has not recovered. The interest rate is not very high; the inflationary rate is coming down. Unemployment is still high but Nigeria does not even have data that you can say is genuine that you can pin things upon. But we know that the inflationary rate from the CBN point of view has started coming down and the exchange rate has firmed, although it’s being controlled by the CBN. Also, to a large extent, the GDP has risen and you can say that the recession is virtually gone. But we are still at the first phase of recovery; it can go back if you don’t have good policies in place. So I think what we should be thinking of is how to move forward.
The IMF, for the umpteenth time, advised Nigeria to remove subsidy on petroleum products, insisting that was the right way to go so the country could move funds into improving health, education and infrastructure. What is your take on this?
There is no country that does not give subsidy to its citizens. The western world has a way of subsidising the lives of the their people. If you are jobless in Britain or America, they give you some welfare package to sustain your life until you get a job. But if you are jobless in Nigeria you are on your own; you have to find a way of survival. So, asking the government to remove subsidy on petroleum products is like trying to create a kind of chaos in the country. And this subsidy they are talking about, what actually is the amount? We don’t have correct data.
So, what we should be talking about is how we can improve refining our oil here and also reducing the outflow of fund illegally. There is what we call over invoicing. For instance, when they import petrol worth $10 million, they could say it’s $15 million. Now, they are looking at the $15 million not the actual cost of $10 million. So, what we should be talking about is how to streamline our data to make sure that we have the accurate amount being spent on subsidy so we can start thinking of how to reduce it. But you cannot say that government should totally remove subsidy.
Statistics show that the beneficiaries of the low price of petrol are the common people because people who consume petrol in large quantities are the transporters. So, if they increase petrol price, definitely it will create chaos because it will pass down to the passengers and the economy will be in serious trouble. I don’t buy the idea that government should remove subsidy; I buy the idea that we should reduce it gradually but we have to get the correct data first.
You have consulted for the IMF and some other international organisations. How do you normally feel when they release their often-frightening economic indices about the country?
Some of those figures are quite right. When they release them, what we should do is not to start denying it. We should first sit down and analyse the figures to see whether it is in agreement with the figures we have. When they say that Nigeria is the poverty capital of the world, what we should do is to bring the economic team together, analyse what they have said and decide on how to address the issue. You cannot just dismiss them like that. Sometimes they have correct data that you don’t have. At times, these international organisations come in and engage experts to do some research for them collecting primary data. When they receive the primary data, they rely on it to make their findings because they don’t want to rely on the secondary data that we have.
Having submitted that over dependence on oil is the bane of Nigeria’s economy, what is your take on the efforts of the present administration to diversify the economy especially through agriculture?
The two major sectors that can drive any economy are the agriculture and manufacturing sectors. Now, we have made efforts in agriculture but the effort is limited to rice production. I have not heard much about beans. They are not talking about improving the yield of the cash crops yet. This country once relied on cash crops — cocoa, cotton, rubber and the rest. Those things are still there but nobody is talking about them. That is why I said that once you have oil money, which is free money, you don’t care about developing other sectors. So, they should go beyond rice and start looking at the cash crops again. They should also start looking at what Nigerians consume more and then go into the production of those crops. When you produce the food that you consume locally and reduce importation, you are reducing the amount of money that is being paid to outsiders.
The issue of industry is also very germane, especially the small-scale industries. This is an economy with a large population, therefore we should not be emphasising on large-scale production even though there is need for that because the unit cost is reduced. But when you have small-scale businesses, more people are employed and once you employ more people the economy thrives better.
So, to effectively diversify the economy, there should be incentives for small-scale businesses especially in the area of tax. It is also important to dedicate some level of output of energy to them because when they spend a huge amount of money on diesel, even if they borrow money they won’t be able to repay because the money would go into energy. For example, they can look at the country and identify the states that are highly industrialised and devote more energy to those places. While doing that, you can begin to look into how to get energy from other sources outside of gas and water until the country becomes energy sufficient.
Nigeria has experienced volatility in the foreign exchange market in the last fours years. As a consultant to the CBN, what measures do you advocate to ensure lasting stability?
As it is, the naira is being managed. This is in the sense that the CBN sometimes decides what it wants it to be. It has been around N360 to the dollar for a while and that shows that it is being managed. It is not based on real market situation. So, when it is like that, it simply means that it cannot go down on its own neither can it improve on its own because you have decided that this is where you want to keep it. If the economy is improving, domestic production will be rising; when domestic production is rising, you find that you import less, so there will be less outflow of fund. When that happens, your currency will appreciate. But when your currency is managed by manipulation, you can’t know whether it’s improving or not, because they give a band. That is what the CBN has done. If they didn’t do that, definitely when the economy was in depression, it would have been worse than it were. But when the economy started to improve, we didn’t see the improvement in the foreign exchange market also.
What is important, however, is to make sure that we are producing what we are consuming and consuming what we are producing; not the other way round where you produce what you don’t consume and consume what you don’t produce. If we increase domestic production and buy less from outsiders, the exchange rate will rise on its own. At that point, the CBN can decide to let off its control on the currency and allow the market to determine its strength. But they can’t do so now with the way things are with continuous outflow of fund due to over invoicing and some illicit outflow.
So, what I will say is that the exchange rate can improve provided we want to improve our domestic production. As I said, many things are tied to electricity. If we improve electricity supply, a lot of things are going to improve. If power is no longer our problem here, you will see the way our economy will move. Power is the major constraint that we have and it’s not insurmountable. So, we have to look at how to get out it.
There was an argument recently on whether the country’s debt was sustainable or not after it emerged that the country is now indebted to the tune of $24 billion. What is your take on the issue?
Nigeria’s debt is not sustainable because we have unexploited resources. I have always written against excessive borrowing. If we have a budget of N7 trillion and they said they were able to generate tax revenue of N4 trillion, and we have improvement in non-oil sector revenue, what are we borrowing for? I think they are telling lies with some figures otherwise there is not need for that.
If you want to run even your life, you might have to engage in some debt that you can manage. That is why people belong to cooperatives and borrow from the banks and all that. But it’s not going to be a perpetual thing otherwise repayment will be a problem at the end of the day.
So, our problem is not how much we have collected but can we repay this money. Studies have shown that there is no relationship between our borrowing and our development. The debt we are incurring is not being spent on development. And I have said that if we go about borrowing money, the money does not come here. When you borrow, you use the money to buy machineries that are not produced here and engage expatriates that will come and assist you to fix the machines. So, at the end of the day, you find that the money remains where it is coming from. So, we have to look inward and see how we can generate fund. Recently, the SUKUK bond that the government issued was over subscribed. They said that they deployed it into road reconstruction and you can see that many of the roads are actually being reconstructed. If that money could be generated here, it means that there is money here and we can use our money on our own rather than borrowing money that will not come here. So, to the extent that the debt will become a burden to future generation, I don’t support the idea that we go about looking for money, particularly from the international market.
Do you support the idea of selling public assets to finance the budget?
The public assets that you want to sell would be those that are useless. For instance, if you have buildings that are not being used like the Federal Secretariat in Lagos, you can sell them off. By selling them, you are making them to become useful. Meanwhile, if you don’t sell, everything will be depreciating and they could even cause environmental hazard to people around there. So, you can sell assets that are clearly useless. But those ones that are still useful should be retained.
If for example you say you want to sell the refineries, you have to justify clearly that they are not producing optimally and that they cannot produce optimally. But if you are selling to some people, how are those people going to manage them that they will produce optimally. If those people can buy them and make them to be producing optimally, then something is wrong with your own economic management.
So, what you can do is to lease the refineries out so the people can be paying the government while managing them effectively. You can lease them out for the next five years in the first instance and those who do well for another five years. But there must be transparency in leasing them out because of what has happened with some of the privatisation that we did especially in the power sector. It is only in Nigeria that you say you sold electricity generation and distribution to people and you are giving them subsidy to sustain electricity supply because they are your people. It has to be done commercially. If people come to compete for them and it’s only the foreign bidders that qualify, give to them. Let them run them for five years in the first instance. But don’t sell them outright. If we have more refineries working in this country, you find that this subsidy thing will not be there because whatever they produce will go round.
Having worked with IMF and World Bank, why is it that the western countries always frown when Nigeria looks towards East to source funds?
Well, you should expect that because it’s a competitive world. The whole world is competing so if Nigeria starts looking towards Asia they know that they are losing a client. And since they have the power to make more noise, they will make the noise. But Nigeria is looking for cheap credit, so if they find that China is cheaper for them they can decide to deal with them. So, it’s about competition. They make noise but if you are making noise, why don’t you bring down your interest rate and introduce other incentives. If you are not doing that and another person does that, definitely the country will go that way.
But as I said, whether it if rom East or West, sometimes there is no need for that. What we can do is partnership. For instance, the Lagos railway project is stalled but it shouldn’t be like that. The state can approach any of these wealthy countries, for instance China, and work out a build, operate and transfer agreement with them to complete the project and run it for the next 10 years and handover to the state. That is better than abandoning it. When you abandon, the cost goes higher; what you have installed will also be becoming obsolete. Meanwhile, the movement of people along that axis will bring a lot of money to the government. New industries will also spring up along the axis that will be paying tax to government but government seems not to be looking at that. It’s unfortunate.
Looking at countries like Singapore and Malaysia that were at par with Nigeria at independence, what are the things they did that gave them the edge over Nigeria?
The first thing that they have done is education. Once your people are educated, it’s very easy for them to develop things on their own. Up to the 70s and 80s, China was just like Nigeria. Beijing in 1980 was not as good as Lagos. But towards that time they started reaching 80 per cent literacy level. Now China with a population of about 1.3 billion has over 95 per cent literacy level. In Nigeria, they say we have 67 per cent literacy level. I don’t know the truth of it, as we are also aware that over 15 million children are out of school, which is a future problem. By now nobody should be talking of any child being out of school in Nigeria if we are serious about education. So, what they have done is education. Go and check and you will see that none of these countries has less than 95 per cent literacy level. When you get to 80 per cent literacy level, things will start changing. Even in India, things started changing when the population of educated people started rising.
It’s very easy for people who are educated to comprehend development than people who have not been to school. It’s people that are educated that you can teach birth control measures. Educated people will not have five, six children unless those who really have money because they want to train their children very well. When people are educated, they know when they are sick and that they have to take care of themselves. They know that they have to do some things to prevent sickness. And sickness reduces productivity. So, education is the basic difference between those people and us.
We have a culture in this country where the politicians concentrate on the struggle for power rather than the growth of the economy. For instance people are already talking about 2023 presidency even when the winners of this year’s elections are yet to be inaugurated. How has this attitude affected the country’s economy?
Well, politicians are supposed to think about their own survival. It is after solving their own problems that they think about national survival. It is always said that political expediency normally overrides sound economic judgment. You have a good idea on how the country should be run but a politician will tell you that it is not politically right if you run it that way. I always use the refinery in Kaduna as an example. An economist will not advise that a refinery should be sited in Kaduna because of the distance from the source of crude oil but a politician will tell you that siting it in Kaduna will make the people to have a sense of belonging. You are looking at it from an economic point of view but the politician is looking at it from a political point of view.
Now, the thinking of the politician is that if he/she becomes the speaker of the House of Representatives for instance, his/her status will be enhanced. The politician will also consider sharing the positions to all the zones across the country so that there will be cohesion. But in economic terms, if the people that will run the country very well will all come from the South, let them come from the South; if they will come from the North, let them come from the North. It doesn’t matter to the economist but they will tell you it is not politically right. You can’t blame them for what they are doing.
But what we should be telling them is that whatever they are doing, let them make sure that this country has a plan that will take it to the next 15 to 30 years. That will be helpful for us, but we can’t stop politicians from doing their business of politicking.
The President would be sworn in for a second term on May 29. What do you think he should do to stimulate economic growth in the next four years?
The first is for us to have a clear-cut development path. The second one is to have a good economic team that can fashion out that path and subject it to proper scrutiny by experts. The third one is to continue to look inwards on how we can improve domestic production rather than focusing on outside, including borrowing money every time. We have borrowed enough; we should think of how to improve on what we have because we have resources in this country. How do we make sure that those resources are harnessed properly?
I always say that each state has resources that it can tap from but because of the free money that comes from the Federal Government, they go to sleep. Lagos actually woke up when Obasanjo refused to release the state’s allocations. It simply means that Lagos would also have relaxed like every other state. So, we must not wait until we have problems before harnessing available resources and make sure that they become productive on their own rather than being dependent on the centre. If we have that kind of scenario, it will unleash serious growth and development on the economy.
By now we should have a clear-cut national plan that will run for 25 to 30 years, which will enable us to project where the country would be in the next 30 years. It has not been so. Long-term plan is very important. When you look at the international plans, for instance SDGs and MDGs, they are 15 years plan that people have to follow. The AfDB ECA plan for Africa is up to 2067; it’s over 30 years plan. So, that tells you that long-term plan is very important for any economy, particularly an economy like this. Such plans are apolitical, that is, if any party comes in, it still follows that same plan. There is nothing like that now.
To stimulate economic growth in the next four years from May 29, 2019, the government must first and foremost have a clear-cut development path. The second one is to have a good economic team that can fashion out that path and subject it to proper scrutiny by experts. The third one is to continue to look inwards on how we can improve domestic production rather than focusing on outside, including borrowing money every time. We have borrowed enough; we should think of how to improve on what we have because we have resources in this country. How do we make sure that those resources are harnessed properly?
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