Senior partner, Regulatory and Technology, Stransact Partners, EBEN JOELS, in this interview with MARK ITSIBOR speaks on how states can improve IGR among other sundry issues.
The MPC recently retained MPR at 12.55 despite exchange rate falling to N472/$1 at black market amidst rising inflation. What is the impact of this on the Nigerian economy, trade and investment?
The more worrisome issue is that the gap between the various exchange rates operating in Nigeria creates arbitrage opportunities for highly connected individuals. No less a person than Sanusi Lamido Sanusi told us some people do not need to work to make a billion naira because they can simply obtain foreign currency at the official rate and sell on the black market. Some people are cleaning out of this situation.
The spread between the black market and the official market is back to about N100 on a dollar. It is not that rate that is the issue right now. We need to move to a single, unified exchange rate. For all you know, the Naira may be underpriced artificially because of the quest to “defend” the Naira. Using purchasing power parity, I believe the Naira is underpriced and the so-called need to defend the Naira by operating several tiers of official exchange rate is part of the systematic theft of national resources going on as we speak.
What’s your structural and critical assessment of the PWC 2020 Report and H2 2020 economic forecast?
The issues raised and discussed in the version of the report that is freely available appear to me to be only the most obvious. They discussed coronavirus and global oil and gas prices and advised government to create policies to attract long term investment for post COVID-19 recovery. For a big brand such as PWC, that analysis is at best infantile. Firstly, serious thinkers are thinking beyond “post COVID-19” on how to take advantage of opportunities presented by COVID. For example, we can all benefit immensely if the federal government announces a massive public work of laying optic cables across the entire 774 local governments of Nigeria. That will deepen broadband penetration significantly and help launch proper public national online learning platforms.
Do you think the CBN’s MPC expectations and projections in its meeting last week are realistic within the context of the present realities?
The CBN is rightly focusing on inflation, by adjusting lending rates and bank currency ratios. I do not think I am adequately schooled to comment on the technical logic of that decision. However, I am more concerned with the bank’s role in promoting ethical banking in Nigeria and I think they can do better. Today, banks continue to earn more from non-lending activities than they do from lending to genuine businesses. You still need an arm and a leg to get financing. The only objective of the average bank CEO is to own the largest home in Ikoyi. Banks are still led by gods and goddesses. The CBN can do better in ensuring ethical banking, really.
Most states depend on the federal government for revenue to their operations, while focus less on increasing their IGR across board. Any solution to that?
The level of governance in Nigeria is decaying faster than that of an active radioactive element. The basic duty of most people holding government offices continue to be how to corner allocations for themselves and their cronies. It is difficult to increase the size of a pot if you are only focused on stealing the pot. Most states in Nigeria are run by small-minded individuals whose primary purpose is to steal every valuable object, kill unprotected individuals who oppose them and destroy whatever value system remains in the society. They transform themselves into tin-gods demanding worship in exchange for a morsel.
It seems this country rewards thieves by giving them increased responsibility to steal more. There are few people who have maintained a prolific career in politics that have ever run genuine businesses in their lives. The other day, a minister boasted that he thanked God he never found a job after school because he later found a career in politics that have seen him access federal government funds for over 16 years now.
The solution is not far-fetched. Where there is no vision, there can be no leadership. State governments should seek visioning help where necessary. It is difficult to describe certain things to a blind person who is unlettered and is not even ready to use his imagination. Most states can now access funds through the capital market. This means large projects can be easily financed by ambitious state governments. For example, what is stopping Kogi State from wholly acquiring Ajaokuta Steel complex? It is not so difficult for a state government to acquire or create a major enterprise, take it public and exit the investment in eight years – the average time a politician is in office.
How do you see the AfCFTA impacting on local, regional and pan-African trade and economic growth?
Eliminating the internal custom barriers to trade in Africa has been an objective of the African Union even when it was called the Organisation of African Unity. It is a no-brainer that importing from Ghana should be faster than importing from China. But I fear that until governance, infrastructure and education is suitably improved on the African continent, free trade within the territory will continue to be only a policy statement and no more than that. It is a sad commentary on the quality of governance in Nigeria when security is excised from the concept of governance anytime you discuss with officials. There is no government anywhere there is no security. The absence of security actually means the absence of government.
On the ease of doing business in Nigeria, how would you assess oversight functions of the Corporate Affairs Commission’s (CAC) efforts to stabilise the Nigerian business climate?
The CAC is only one agency among the myriad of both necessary and unnecessary government agencies impacting ease of doing business in Nigeria. CAC alone cannot stabilise the business climate. The business climate will only improve if there are intentional acts to improve both public and private sector governance in Nigeria. For example, in Nigeria, any charlatan can create a business centre, label it a “church”, title himself a prophet or overseer, and then begin collecting donations from the public which he uses to finance an ostentatious lifestyle. There is no governance reporting requirements for non-profits in Nigeria. The last guy that attempted to demand some form of accountability from churches was sacked unceremoniously and many of us were part of the crowd shouting crucify him! We failed to see the common good of the society demanding accountability from everyone.
Any step promoting increased transparency and accountability in a government agency is a welcome development and serves the greater good. Nigeria is one of the largest economies in Africa and has a lot of potential. The CAC has a major role to play in enabling business incorporation and other corporate affairs. As the CAC’s regulatory capacity is improved, there is a direct impact on the demand for professional services in Nigeria.
The consequences of the COVID-19 pandemic on financial statement reporting and audit engagements are complex and have resulted in challenges for audit management. What are the implications?
Nigeria’s financial reporting council (FRC) has issued timely guidelines to help auditors navigate the current difficulties. The Council referenced the requirements of the International Standard on Auditing on Terms of a new Audit Engagement and advised strict adherence as much as practicable. There were similarly copious guidlines on how auditors should deal with difficulties in completing relevant audit steps during COVID-19 restrictions. Auditors will do well to adhere to guidelines published by both the FRC and the Institute of Chartered Accountants of Nigeria.