Odiadi: Central government should not keep too much of national income

Tony Odiadi, lawyer and public affairs commentator is an expert in development policy. He was a member of the Judiciary & Rule of Law TWG, Central Working Group of Vision 2020 and also a member of the Nigeria Integrated Infrastructure Master Plan (NIIMP). In this interview with ADELOWO ADEBUMITI, he proffers way out of recession.

With Nigeria facing economic recession, what is the way out for the country?
Now, the government has declared that we are technically in recession. It means that the economy is performing below par, stock market drops, unemployment will rise, many small medium Companies (SMC) will begin to shut down and retrench their workers. But to me there is an opportunity for recovery nonetheless.

First the government must have very serious policy rethink. Policy rethink will include, changing the forex policy, which is still on the side of speculation; raising funds to reflate and spend out of the economic doldrums. Saving is hardly advisable at a time of recession, better to spend, that is increased public spending and get the economy back to growth.

This is the time to diversify the economy and make the push to agriculture, spend more on infrastructure development, road, rail, agriculture, energy, etc are very good enablers for growth. It means seeking and getting some bilateral funding as well as from multilateral institutions. If you borrow for development with a clear repayment plan, you are on the right road.

Many countries borrow rightly for development and subsequent growth enables repayment. If you save your country into low productivity and economic recession, your saving becomes injurious to your economic health.
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To use and old classical example, when Europe was in clear recession after WW2, George Marshall, then Secretary of State who put in place a plan for economic regeneration in Europe spending heavily on infrastructure rebuilding. All the governments followed the prescription of Maynard Keynes and got their economies back up running.In both cases it was spending not saving, you save instead when your economy is doing well. If you spend on infrastructure you have development coming with increased productivity and growth. Whatever you spend has serious multiplier effect.

Most countries that enjoyed economic boom spent on infrastructure and experienced immediate growth, China, Brazil, South Korea, etc. Nigeria has the potential to do the same.TSA is good for auditing purposes, but it can be counterproductive if merely just applied without pausing to examine the impact so far on the economy, it will constrict the economy by taking fund out of circulation and warehoused without use in safe custody outside economic or commercial stream. That can slowly kill the economy.

What roles do you think the private sector should play in getting the country out of the wood?
The private sector must get involved as much as possible. It is the model we have prescribed in the master plan to leverage on private sector funding. The opportunities of private investment with a good return is in Power and energy, we have to look more at modular electricity generation for cluster areas, power-generating facility for 20-25 or more megawatts. The sector has about 45-46% currently and the target is about 75% private sector holding in the next couple of years with foreign and local investors, modular power plants powered by gas or other fuel linking with the DISCOS. Public Private Partnership (PPP) is very important today. Same thing with refining products, Modular refineries in a number of clusters will save the current massive importation of finished products.

On the question, how does the private sector come in? The responsibility of the government is to create an enabling environment. That will mean access to fund, security of investment, certainty of contract, ease of doing business, ease of reparation of profit, limited bureaucratic bottlenecks. The legal regime must be such that they must be seen as being objective and transparent. That is how foreign direct investment can come in with the assurance that it can have a return on investment. For example, if you want to do some road, do a classification of roads and concession to investors for development. Tolling is universally recognized as a quick funding or repayment source. To minimize tenure on project loan, the government can in some combination match the required fund by a certain percentage for example to facilitate takeoff of the project and leave the rest for the private sector.

Now, do our laws allow this?
Thank you, that is why some of our laws were immediately recommended for amendment so as not to pose any hindrance to investors or investment. Laws like the Land Use Act, NNPC Act, Mining Act, ICRC, Act, Electric Power Sector Reform Act. It was recommended that all sector primary legislations should be amended to be more investor friendly.

The Constitution places the Railways on the Exclusive list for example, that is already anachronistic in the light of the realities today. It must be removed to allow states to build railways and build their internal transportation potential. There are light rails, which can crisscross the rural areas of a state, powered by diesel for now and electricity later. It will help transfer humans and goods across the state and beyond. You allow states to participate, you allow private individuals to come and invest in rail tracks, in roads and in aviation. Other activities like mining and the rest can no longer be the exclusive preserve of the Central government.

So these are the areas in which government must open up. When people are talking about restructuring, they are talking about the Central government not keeping too much of the national income to itself. Development points are really at the local level, state and local governments. When you look at United States, India, and Brazil models, it is the states, the component entities that development really comes out from. The Federal Government can build roads, build rail tracks, airports and so on, but it must make more funds available to states in terms of percentage allocation so states can spend appreciably on infrastructure development within their territory and link up with neighbouring states.