Hareter Babatunde Oralusi, an impact investment advocate and Executive Chairman of the Nigerian Capital Development Fund (NCDF), speaks with GEOFF IYATSE, on how local government autonomy would stimulate grassroots investments.

There was so much hype about the Nigerian Capital Development Fund (NCDF) some years ago, but it has been very quiet. At some point, people thought it was a public initiative. What has happened?
Well, it was never a government institution, but it was proposed to be in partnership with the government, to support the government in achieving its developmental objectives. There is no country in the world where government alone can solve all the problems. There are private sector institutions designed to support the government, which becomes their sole business model. We had administrations who provided support and are willing to partner for faster delivery of such projects. But some other administrations have been very uncooperative.

At what point were you disconnected from the government?
It stopped during the second term of President Goodluck Jonathan. We had leverages during the late Umaru Musa Yar’dua-Jonathan era, but for the eight years of President Buhari, there wasn’t any support. But it is also good because we have always wanted to be a long-term sustainable organisation. We cannot rely on partnering only with governments to deliver projects. We also have to drive most of our initiatives purely as a private sector organisation. So we’re able to do that and we’re also able to leverage international development partners as well as private institutions overseas who are also development-focused.

I suppose the fund was set to achieve some social benefits hence it started by partnering with the government. What are the social benefits? Have they been realised? How would you tie this to your long-term vision and sustainability?
We are an impact investing organisation. We raise capital for profit and social gain. We don’t invest in any business that does not provide social gain. All our investments must have two profit models—financial profit and social profit. The government’s responsibility is also to provide social profit, not financial profit. So that is how it aligns with the government.

But in our case, because we provide financial and social benefits, it makes it sustainable in the long term. Financial helps you to grow the business, while social helps you to sustain your community. I will give you an instance. If we have an opportunity to invest in real estate, which we do, and we have N2 billion to invest, we can choose to invest in a single building in Ikoyi or 100 units of affordable homes on the mainland. A conventional investor will go for the Ikoyi option because it is less cumbersome, the logistics are less, and it possibly has higher returns.

But for us, we will go for social housing. Yes, we will also make profits, but a three-bedroom or six-bedroom house in Ikoyi may take a single family of eight or nine. However, social housing of 100 units of the same N2 billion value may provide shelter for more than 500. So, you have provided shelter for many people with the same investment and still make a profit. The Ikoyi investment may be more profitable but the other has a higher social impact.

Today, the government is doing a lot. But it is not showing at the grassroots. How do they deploy it? That is the question. The Federal Government is willing, but how do they deploy it? You need institutions, organised private sector institutions that have a social mission, not only a commercial mission.

In the West, for example, in America or all these economies that we have copied, they have three business models – social, non-profit and profit. But here, we only have the profit or government. So, when the government wants to deploy, it uses the organised private sector, not non-profits. The non-profits get grants yearly because they are also very important to the economy. The government needs to realise this and know how to make use of the non-profits, and social private organisations. The way to create social impact is to partner with those organisations. It can’t be either the government or solely profit institutions.

Can’t we build this model into our existing government structure, looking at the local government and the state government?
I was very happy when I heard about the Supreme Court’s judgment on the local government autonomy. I was also one of the happiest persons when I heard about the creation of regional development commissions. Those are government institutions that can get close to the grassroots. And those are government institutions that can work with both the social and the non-profit institutions to deliver development because non-profit institutions are local.

If local governments can really be fully autonomous, it means that companies can engage them directly and invest directly in their areas. Public-private partnerships (PPPs) could be easily sealed with local governments.

But the concern of many stakeholders is whether local governments have the capacity?
Why do you believe that if the local governments become fully autonomous, it is the same people there today who will want to be local government chairmen in the future? Some people just want to serve in local governments where they can impact their people. I have a friend who is a top official in the UK public service. He wants to come back after retirement to serve in his local government and use his experience to build the place.

Some local governments are not viable today because of the governance structure. People cannot invest in the grassroots because of the overbearing posturing of the governors.

Do you need government approval to channel your investment to the local government?
Yes, because it goes back again to the States. No local government chairman wants to talk to you. They are like line managers. All their resources go to states. So, if you go to local government now and say we are putting this in place, they will tell you they want to speak with the governor first. None of them wants to talk to investors without getting clearance from the governor.

So, how do we break this barrier? Speaking from the perspective of regulations and economic reforms to create an environment that supports free enterprise?
One of the things is that Nigeria needs to grow the equity markets where startups do not necessarily have to get loans. If we put equity in a business, that means the business belongs to you and us.

With equity, the need to grow a business becomes a shared responsibility. Equity companies are always very experienced and resourceful. The genius guy who is driving the business has a chance of also growing the exposure because others who invest in the business are leveraging their networks.