Chief Olubintan Famutimi is the newly invested President of the Nigerian-American Chamber of Commerce (NACC) as well as the Chairman/Chief Executive Officer of Tricontinental Group. In this interview with Nneka Nwaneri, he discusses the effects of the new economic policies among other issues. Excerpts:
What is your assessment of President Muhammadu Buhari’s economic polices?
It all boils down to income and expenditure. The economic policy of a country is within the framework of the internal economic dynamics. It is a situation where the country is earning no money and we are going from a mono product country/ economy; living on oil for so long that we have forgotten how to earn money from any other source.
We lived in the denial that the real source of economy has been only one source- crude oil. Our economy should be based on the collective productivity of the people and the generation of the goods and services of the entire population in exchange of money from other countries. What we earn should be enough for us.
We lived all these years from one source that is not even enough to cater for 170million Nigerians. Not mentioning the few people in the oil business having to discover, explore, drill, sending it through pipelines to terminals. The percentage of those engaged in bringing the oil into the country is less than .0000001 percent of the total population. So when such money comes, it is what drives the entire 170 million persons.
That does not show you the reality of the situation. When there is a cut in the inflow of income, we have nothing to fall back on. We have no such income to help us when we import things. Then the little money we are having we are now exchanging it for import goods. Then, the naira goes on collapsing. The exchange rate will go worse because we are not generating any other income.
Cargoes crude oil that has been on the sea as at January is still floating because we have not yet found any buyers.
So those who call for the devaluation of the naira are only talking rubbish. You only devalue the currency when the goods are cheaper for importers to buy from you. Because our currency is low in value, it discourages us from importing. When we devalue the naira, who will benefit from it? There is no amount of cheap goods that can be sold to generate hard currency. Then, it means we are still living on exporting the little crude oil we have at a price that is near the price of producing it
If the price of crude oil falls below $20 per barrel, Nigerians will have to stop producing because the cost of production is almost the same as selling it. And we might get to that level because we have not seen the bottom of it yet.
As for the policies, government is taking policies that are in reality of the existing situation. The economy has been battered. All the hard currency has been stolen.
When Obasanjo was leaving seat, we had $67billion in our foreign reserve. Then, we sold oil at $140 per barrel. It still plundered and we plagued the reserve till it reduced to $29billion when the price of oil was its highest in our history. The then government pillaged the reserve and blew all the money instead of growing the economy.
Now, the result of it all is seen from all the probes that have been going on, and that clearly shows us why we have remained poor. Even other countries in the same type of situation as us managed their resources so well that they divested from oil and generated more income and employment for the future. They had already planned ahead for a time that will come when oil will no longer light the economic engine.
Now we are in trouble; our debts are growing, we are borrowing money and this year’s budget is budgeted on deficit of over N1trillion we are going to borrow both from local and foreign and local sources.
What we are doing is piling up debts for generations yet unborn to pay, but we are not leaving them with the means to pay by that time. By the time they grow and begin paying taxes, they will be so burdened with debt that only God knows how they will pay up debts which were consumed during our time.
Thus, the reality on the ground is what the government is reacting to. The reality is that there is no money and there is nothing the government can do to generate dollars when there is nothing the country can do to earn dollars.
So, this new policy now is forcing us to look inwards. That the only option left and now when there is no money to give to the importers, people will be forced to look inwards to what we have in the country since there is no money to import.
What is your take on the issue of delay in passing the budget?
The budget was made in such way of the usual Nigerian thing, not taken as a serious business. The Budget Office drew up budget and smuggled figures in there that was not immediately seen until it got to the National Assembly.
Then, there was a controversy about the authenticity of what was submitted. By the time they started asking questions, the dispute came and it was found that it was not really what was submitted.
So somewhere in-between the Budget Office and the Presidency and the National Assembly, figures were changed. Now no one owns up to the budget and it has to be taken back to the Budget Office to come up with a true and correct budget that is reworked and sent back to the National Assembly.
How can we cope?
We have to go back to basics because the question of oil prices increasing is not in the horizon. It is very unlikely since we are competing with the Arab countries that are producing and competing at very low prices as low as $five a barrel. So, if the sincere oil producers want to drive us out of the market by flooding the market then we make them go bankrupt. As of now, a lot of sane oil producers are going bankrupt because they cannot compete in this market.
Iran has been under sanctions for over 10years, they have not been in the market because America sanctioned them. Now they have a settlement with the international powers about their clear programme. Last November, they signed an agreement with the major countries to limit their nuclear weapons. So sanctions are lifted, Iran is coming back into the market with a vengeance because they have the second largest none reserved of crude oil in the world and they have the capacity to produce so much.
Iran is hungry for the cash and their cost of production is very low, so much oil is going to come from Iran. So the people going to suffer are people like Nigeria because the oil companies have stopped exploration on land and shallow of shore, they have gone deep offshore, that’s the only place where our oil is coming from because of production in deep offshore is very stick so the oil company are not able to produce and compete in the market.
What is your opinion on the sack of head of parastatals and your expectations for the incoming ones?
Unfortunately when a new government comes, they are going to look at the books of the old government especially in a case where the old government had performed so badly. So the natural thing to do is that the people who were running the ministry departments and agencies. It is natural that the people who ran those agencies are painted and especially where you are seeing a situation like the budget office, what is coming out of the place. They are tainted; there is no time to investigate each one to see those that are not the cool people, so unfortunately you just use the same brush to paint everybody and then they have to go. It is not the best thing but what chances does the government have?
The antecedents of Nigeria replayed itself over and over because discipline has been abandoned, institutions have been corrupted, impunity was intoned and that’s why people believe no matter what they will not be punished. It’s much different these days because of the Buhari’s administration, ‘the fear of Buhari is the beginning of wisdom, and people who taught they could not be touched are being called to answer questions about their performance in the past. Now people won’t change but the system will make them do things differently.
Is it right that the bid to increase power tariff should be upheld when electricity supply has not improved?
Well you can’t blame Fashola for increasing power tariff, because this is a question of supply and demand, we all need electricity and when there is no power supply from the power grid or from the generating plants and industries, then we all try to get electricity by buying generators and running them, and the cost of running is very high, if you sum the worth of electricity generated in the country it will be very substantial. The cost of generating a unit per hour when it comes from a your private generator or the main source is totally different, the cost of generating electricity from your private generator is 3 or 4 times cheaper than when it’s from the main source. The source of fuel today is gas.
People have not been investing in gas because the cost paid for gas is too low to make economic sense for them. To invest the money and transport gas to where it is needed, which is the reason why Nigeria has a huge reserve of gas. We are referred to as a gas territory with a little oil. We have so much reserve of gas but they are not been invested in because the cost that they can get. In fact in the olden days until the government made rules that they must not flay gas that if they flay gas, they would pay but when we made the rules and set the penalty so low, it was cheaper for them to fly the gas than produce it. What is done now is that gas is been monetised, more money is paid to the producers of gas to encourage them to invest in gas project to produce gas and deliver it.
What can be done to attract more foreign direct investment from countries such as America?
It is to make economy friendly to foreign investors. Nigeria is a country that needs so much foreign investment and there is so much capital out there that are going all over the world but this capital would go where it is safe, where the rules are known, where it is possible for them to get their money out if they generate it and then they would come but you can’t be mounting foreign direct investment and have an environment that does not give confidence to people who are going to bring their money. Money would go to where it would make the highest returns but the safest returns that it is sure it would be back, if not it would not go there. So in ease of doing business, out of one hundred and eighty six countries in the world, we are one hundred and sixty six worst in the ease of doing business. So we need to ease our environment to make foreign investments to find our country friendly, safe and profitable to come.
What is the role of the Nigerian-American Chamber?
The chamber is a bilateral chamber between Nigeria and America and our job is to make it easy for American company to come here and do business. When they want to come in here, they get in touch with us to find out what to do, it is like we lead them by the hand, we take through the stages of doing business, we introduce them to partners they would do business with. We help Nigeria businesses to be able to do business abroad, to be able to find partners.
I just came from an interactive section with the governor of Lagos state with organised private sector to discuss, rob minds about what need to be done, to help business grow. I spoke on the perspective of Nigeria and what we need to be doing with the government to be able to make businesses between the two countries and Africa growth and opportunity act (AGOA) which has just been renewed for another ten years, last year is the major focus. Now that oil prices has gone so badly down, this is the time to encourage export of our product to the united states and we are at the fore front of doing that, helping businesses asking for land from Lagos state government. We made that they should allocate a parcel of land for us at Lekki free trade zone where we encourage Nigeria businesses and local producers to be able to locate us to help in educating them so that their product would be qualified to go to the United States under AGOA, we intend to do the same thing with all the states in the country and intend to have AGUA parts in every state of the country so that we can partner with the commercial department of the US government and subsequently improve the income of Nigeria.
Do you think the problem of unemployment is being addressed and what do you suggest is the way forward?
Employment can be tackled from letting small and medium enterprises thrive. If they are doing well, the SMEs are the engine of employment. They are the engine of employment all over the world. So government needs to establish a conducive environment for businesses to thrive. That is why electricity is important for enterprising Nigerians. Small businesses will spring up and we wouldn’t be producing only graduates looking for paid employment that is not available.
