Category: Comments

Our biggest problem is our addiction to oil revenues; the belief that we are doomed unless oil flows and oil money fills the Federation Account for our tiers of government to share.

Another related, and flawed, belief is that the federal government alone is the only force, the know-all, be all, and do all that would direct and bankroll the diversification of our economy. And we have convinced ourselves, again wrongly, that the only reason that the federal government is unable to spend money to do all we expect it to do is that the money has been stolen. We must erase that mindset in order for us to begin to climb out of our current depths.

 Of course government can use oil receipts to improve the lives and livelihoods of our people, to fix our horrible roads, crumbling schools, ramshackle hospitals and to pay its numerous, but hardly busy, workers. However, oil money is not a requirement for diversifying our economy.

 Rather we need federal government officials who are willing to step back and carefully work out how they can empower the private sector to grow the economy and create jobs. And I don’t mean selecting a few companies deemed worthy of government support. No, we need radical reforms that streamline our bureaucracy and eliminate rules and regulations that stifle innovation. We also need robust management processes that ensure that public money buys us better infrastructure, education outcomes and healthcare.

 And above all else, we need to understand that our most valuable resource is not our oil; it is our people. All of our people.

 The good news is that most Nigerians have forgotten about the oil money and moved on with their lives. The bad news that our governments and political leaders don’t seem to have noticed that shift. A few numbers will illustrate this. When we were still under military rule, through the 1980s and 1990s, oil and gas accounted for roughly one third of our GDP. When I joined the government in 1999, oil and gas accounted for 29%, though at the time – remember that was before the rebasing – we thought oil and gas accounted for almost half of our economic output. But by 2007 the oil and gas share of GDP had already dropped below 20% and by 2015 it had fallen to less than 10%. So while petroleum production levels stayed flat, our people have made all the difference.

 But don’t get me wrong: oil revenues have helped. In addition to infrastructure, oil revenues support professional service firms, real estate, the arts and so on. So the indirect effects of the petroleum sector are bigger that the headline figures suggest. But this doesn’t change the fact that due to the ingenuity and hard work of the men and women who looked beyond oil, our economy is much more diversified than we usually acknowledge. In 1980 agriculture contributed 15% of our GDP but by 2015 the figure rose to one quarter.  Services which were almost non-existent in the data now add more than one third to domestic output.  Even our manufacturing, despite all odds, increased its share from 6.5% of GDP in 1999 to almost 10%, quadrupling its value in real terms and moving on par with oil and gas production.

 Unfortunately the move away from oil hasn’t reached all parts of our economy. As you know, our non-oil exports are nowhere near where they ought to be to balance our non-oil imports. But what worries me much more is that even though oil receipts have dropped from a long term average of about 70% of Federal Government revenue to about 50% in the first half of 2016, non-oil receipts are also falling – fast. Between  January and June, the federal government collected 1.2 trillion naira in VAT, corporate taxes, customs and excise duties, and various other levies – 13% (or N150 billion) less than it collected over the same period in 2015. Corporate income taxes dropped by 40% over the past two years.

 In short, whereas our economy diversified because our non-oil activities took off, the oil share of revenue dropped because our oil revenues have nose-dived, not because the government found new revenue streams. This worries me because I think one of the main reasons why we are suffering, the reason why we are so vulnerable to swings in the oil price, and one of the reasons why we can be held hostage by those willing to blow up export pipelines is that unlike our private sector, our governments have not really embraced diversification. And this at a time when major oil consumers are making massive investments in alternative and renewable energy.

 And it has huge implications. The fact that our government literally runs on oil means that we cannot rely on public spending to mitigate the impact of oil slumps in the commodities cycle. Unless we don’t mind going back into a debt trap.  According to the Central Bank of Nigeria, in the second quarter of 2016 the Federal Government collected less than half what it expected. It also spent 13% more than it had planned. Consequently in just three months 1.1 trillion naira shortfall was created as well as roughly 700 billion naira primary deficit, about the amount the federal government budgeted for the entire fiscal year.

 In the same second quarter of 2016 the Federal Government’s interest payments already exceeded its Federation Account allocations, and debt servicing absorbed almost 60% of retained revenue. In fact, 57 out of every 100 naira the federal government received went straight to its creditors.

 As you can see, that doesn’t give us a lot of room to maneuver. And it is the reason why government’s efforts to get us out of the current difficulties should proceed in a manner that targets infrastructure improvements, public education, public health and, above all, reforms that remove obstacles to our people unleashing their creative and productive energies to set up and run businesses and create jobs and wealth in the process.

 Investors have noticed our predicament. Foreign investment has nearly dried up. In the first half of 2016 the total amount of capital brought into Nigeria was less than $1.4 billion compared to $5.3 billion in the first half of 2015. Direct investment has fallen by half, portfolio investment is down by 87% and our capital and financial accounts are deep in the red. A number of long established foreign businesses announced they were planning to leave and many of those that decided to stay are cutting costs and trimming their payrolls to balance their books. Some respected Nigerian companies are folding up as well.

 It is, therefore, clear that rather than praying for higher oil revenues, we should seize the current opportunity to get over our addiction to oil revenues. Discovering new oil wells in the north or south is no substitute. Government should look to sustainable sources of revenue, mainly taxes, duties and other levies. And it can only enlarge the tax base by encouraging diverse economic activities right across the country and investing in human capital development to produce the entrepreneurs, inventors and workers of the future.

 We can’t just borrow our way out of our oil addiction. Our governments must live on taxes, the way other democracies do. It will help us live within our means, as it means government can only spend what the people can bear. It will help ensure accountability as tax payers are more likely to ask for accountability when the money comes directly from their pockets.

A move away from oil rents will change our economy for the better. And it will also change our politics for the better.

• Excerpts from former Vice President Atiku Abubakar’s speech at the Chartered Institute of Stockbrokers recently.

While the skyline of Abuja, the capital of Nigeria was gloomy all through last Saturday, the 56th Independence anniversary of our country, that of Enugu, the capital of former Eastern Nigeria, and now of Enugu State, erupted in blissful ecstasy, the next day – a Sunday, as Rangers International Football club of Enugu, fondly called the Flying Antelopes, drubbed the visiting El Kanemi Warriors, 4-0, on the last day of the 2015/2016 Nigeria Professional League, to win the league title, after a 32 years hiatus.

Watching the exciting match, and the ecstatic spectators that filled the Nnamdi Azikiwe stadium, courtesy of free tickets, provided by the state governor, Ifeanyi Ugwuanyi, I could feel the palpable lifting of millions of souls, from the pervading gloom of economic recession, which made our country’s 56 independence anniversary, a non-event for many Nigerians. But for the free ticket from the state government, the stadium would have been empty, despite the fact that Rangers was at the cusp of history, 32 years after their last victory.

Except for the serious injury, sustained by a Rangers player, few minutes to the end of the match, the atmosphere was convivial enough, and lived up to any final match-day, in any of the major European leagues, that has made a short shrift of our own local league. As the trade-mark drum beats and enchanting and mesmerizing songs of the Rangers supporters club saturated the atmosphere, the players gave a five star performance. It was joy unlimited, with UP RANGERS as the Champagne toast.

Surprisingly, the spectators at the Nnamdi Azikiwe stadium, now nicknamed the Cathedral, were all excited, even though most of them are colonised subjects of the better organised English Premier League, the Spanish La Liga, the German Bundesliga and the French Ligue 1. Watching the excitement edged on their faces, I had no doubt that they got as much satisfaction, as they do, when glued to the European leagues. With their flags, totems and occasional Mexican waves, I was enthused that perhaps with a little more effort, the crowds and the diehard supporters may return to our local leagues.

Even the quality of play, was very high. Watching Rangers Obinna Nwobodo, dictate the pace of the midfield, one can favourably compare his ball sense and skill, with his contemporaries in any major European league. Also outstanding was Bobby Clement, whose imposing presence in the nine yard box, of the El Kanemi warriors, perpetually retched a wave of fear for the opponents, and excitement for supporters of the eventual champions. Also overtly outstanding was Uche Egbuchulam who scored three of the four goals, and also Osaz Okoro and Okey Odita, the Rangers skipper.

Of course, the rest of players were golden. Indeed, but for the five star performance of the El Kanemi goal keeper, Kazeem Yekini, the warriors from the ancient empire of Kanem Bornu, would have needed a mule to haul their harvest of goals from the coal city to the land of the ancient warriors. Another major excitement from the widely televised match is the quality of officiating. Except for the one or two errors, the level of officiating was world class.

With many like me, glued to their television, throughout the match, there is the possibility that the Nigerian Football Federation, the League Management Committee and the clubs, may soon begin to reap from the wonderful improvements engineered under Amaju Pinnick, the President of the Federation. After all, some few years ago, our music and film industry was overwhelmed by foreign labels and acts; but now, any play or television station, playing or showing foreign stuff, is sure to lose followership.

So, the time may be near for a total renaissance of our local league. And there is no worthier ambassador from the old brigade of teams to lead this renewal than the much beloved Rangers International Football club of Enugu, which through rain or shine, had remained in the top league, while all her contemporaries, like Shooting Stars, Bendel Insurance, Stationary Stores, Mighty Jets, are either extinct or had lost their original flavour. So, with the old lady, which won six titles within 14 years, winning its seventh, 32 years after, both the people and their government have every reason to beat their chests.

While the state Governor, Ifeanyi Ugwuanyi, is entitled to his time in the sun for shepherding the new champion, the ugly blitzkrieg of an economy in recession, ruined any chance of celebrating the 56 Independence anniversary of our beleaguered Nigeria. At one of the events, marking the low key anniversary, President Muhammadu Buhari, reminded his young audience, how our country, came to the sorry pass. He blamed the past governments for not saving, while we had plenty.

Of course, the failure to save and the unprecedented corruption of the past years are the major contributors to the present economic calamity that we face. But as the renaissance of the flying antelopes show, with a good impetus, old bones can be made anew. How to do it? Recruit competent hands and top experts from wherever, to lead the charge. Those who won the league title for Enugu Rangers are not all Igbos. In fact, the goal keeper Nana Bonsu, is from Ghana, but neither the governor nor his people, will remember that, as they celebrate their victory.

PMB and his party should learn lessons from that. It would not matter who makes the economy work; what the people want is prosperity, and they would give credit to the president as long as it happens under his watch. If he fails, the blame also goes to him, and the people would not care, whether it was former President Goodluck Jonathan or his predecessors who mismanaged the economy or even stole the family patrimony. Of paramount interest to the ordinary folks, is their survival; and unless PMB can conjure a renaissance while he has the opportunity, all his blame game would not suffice.

But of course, we must all wish PMB and ourselves the best of luck as we mark our 56 years of Independence. Agreed, the journey has been very tortious; especially in recent years, with our so-called practice of presidential democracy, which has created more dubious dollar billionaires, than any increase in the megawatts of electricity; a major cause of our underdevelopment. Unfortunately, with a number of its own missteps, the PMB rescue team is now being maligned as the main cause of our present national economic crisis.

Such is life. While PMB is for now under the weather, Ugwuanyi is over the moon. Perhaps, if the Olympic dream team had won gold, PMB may have gained few days of respite from the general despondency, just like the governor. Another lesson from the triumph of the Flying Antelopes is that our future lies in our diverse human capital instead of our present obsession with the oil resources from the Niger Delta. While listening to the Channels television news, after the match, a source posited that Facebook generates about $17 billion, more annual income, than the federal government and all the states that make up our dear country.

This is a guide or roadmap of a man, whose knowledge of such “esoteric” science was learnt on the streets of the world; so calling me streetwise could be quite descriptive; let’s go at how I think Nigeria can get out of the present economic quagmire and degraded Naira.

First; let’s rescue the naira by changing the currency. No, not all the denominations but the ¦ 500 and ¦ 1000. We read the gory tales of how one of our former military chiefs would order military accountant/paymaster to exchange more than ¦ 800 million for dollars and other currencies every month end; we have heard about the soakaways and water tanks filled with naira; we have heard about how the security details of one high ranking politician carted away more than ¦ 300 million cash in one fell swoop; all our money that is stolen at the Local Governments level, embezzled at the state government parastatals and all the Ministries Departments and Agencies; all the pillaging and purloining, diverting and misappropriating at various government houses; state houses, legislative houses, business houses and kickbacks and kick-fronts all of them are stocked and warehoused in cash in private safes; underground bunkers, store rooms etc. They are mostly not in the banks.

 At every opportunity the owners invade the black market to exchange the naira for dollars, pounds and other foreign currencies. These “owners” are prepared to buy the foreign currency at any price. Any price; because they have excess naira. These are the ones whose demands for forex devastate our naira.

 Traders; real; business people and manufacturers who need forex to sustain their productivity are wary of replacement value and are fearful of the capacity of their customers and off-takers to afford the new prices which the high cost of forex will impose; they are not going to buy forex at any price because their businesses and customers will not be able to afford the increases; so they close shop, retrench, or change their line of business. They are victims; they keep hoping their banks will help them secure forex at bank rates.

 So, if the government announces tomorrow that the currency will be changed in two months; we will experience a complete battery of the naira; it could exchange for as much as ¦ 2000 to the $1 as most of these crookedly acquired naira is outside the banking system and the owners of the naira might not be able to return the money into the banking system because of the restriction on how much cash can be deposited in one transaction and the requirement of the law that any deposit above a particular amount must be recorded and reported to the authorities. If you have ¦ 5 billion cash; even if you employ your whole village; you will leave a trail, so to the black market to chase dollars all the “illegal” naira will go.

The government must change our N500 and N1000 currency before the end of first quarter 2017, if we want to attract all the huge money into the banking system. This will help the economy as all the banks will be flush with cash and the liquidity crunch will vamoose; the banks will become liquid and awash with cash. They will immediately survive the Treasury Single Account cash crunch and the banking economy will begin to look brighter with less pressure on the staff to go get deposits, because the only way those with all these moneys can exchange it for the new currency is to get it into the banking system.

Revive the capital market. I must confess that this idea unlike the first is not originally mine, I will give credit to our former President General Obasanjo; who while in support of the sale of some national assets, prescribed that it be done through the Stock Exchange.

 If you want a riot which no police force; JTF or any force can stop, attempt to sell our stake in NLNG to any corporate or cabal or person or institution of whatever colour. But if like Obasanjo suggested, the government brings 5% of its stake in Nigeria Liquefied Natural Gas (NLNG) into the Stock Market through an Initial Public Offering with clear instruction that no entity can buy more than a particular allotment; we would have used one stone to kill so many birds as our Capital Market will get some badly needed oxygen; the government will get needed liquidity to fund the budget or whatever and the people of Nigeria will also have a personal stake in the goose that lays the golden eggs. The revival of the Capital Market will add fillip to economic activity.

In addition; Nigerian Communications Commission can “persuade” the big telecommunications companies, viz: MTN; Glo; Airtel and Etisalat to sell maybe 10% of their shares in the capital market.

 Unban anything that is not narcotics or globally prohibited. The irony of the Nigerian experience is the hypocrisy which all our governments practice when they prohibit or ban goods which all the authors of the ban use; take imported fabrics and furniture for example. The only people who benefit from these bans and prohibitions are smugglers and corrupt customs officials; the government loses revenue and income.

 It is not true that Nigerians prefer foreign goods to Nigerian goods; what I know to be true is that Nigerians prefer quality goods; that is why Nigeria is the only place where you have even grades of inferior or fake goods; yes there are grades of “Tokunbo” products and even grades of “fairly used” products; in the fairly used category the highest grade is called “follow come” while the new products are simply called “tear rubber”. I love this country. Nigerians prefer Nigerian made cables and wires because they are the best quality; when cars used to use tubes, Nigerian made tubes were the best.

 Finally; the government must get rid of senior government officials whose conducts are inimical to getting the nation out of recession; a minister who is hostile to investors by failing to do what needs to be done to improve the ease of doing business in Nigeria or clearly undermining due process like refusing to table before the Federal Executive Council (FEC) a transaction that has passed all the regulatory approvals by Ministries of Justice, Finance, Infrastructure Concessioning Regulatory Commission and even the mother ministries management; thus if a jaundiced minister fails to pass a project or transaction that is viable to the FEC, such a minister is an economic saboteur. A government that wants to get out of recession must ensure that its ease of doing business regime meets international best practices from the airport to the boardrooms. A scandalous story in the newspapers about a minister’s alleged obstruction of a ¦ 68 billion cash investment to turn the National Theatre and fallow grounds around into a mini Disney World will not help us get out of recession.

• Chief Azike, Ksc; member of the Body of Benchers, writes from Lagos.