President Bola Tinubu has undertaken a few economic reforms since he was sworn-in. Can you provide an overview of the economic reforms being implemented and their impact on the economy?
A lot has happened in the last two months in the domestic economy of Nigeria, and I am the type that watches before talking because I want to get the momentum gradually. I have watched in the last two months the sensitivity of our economy, both the policies reeled out by the new government.
I know the burning issues of petroleum deregulation, and I know the burning issue pertaining to the foreign exchange unification, that is dollar, naira unification, that we should stop having window one, two, or three windows in the market when managing our forex.
These issues are not of today’s making. All these issues are the active ingredients that have caused a lot of distortion in our domestic economic management since 1973. Nigerian economic historians will tell you that from Independence in 1963, 1970, we are still spending pounds sterling from the UK. Nigeria’s currency from 1962, 1970 was still Pounds Sterling. Nigerians didn’t feel anything that time because they were just spending Pounds Sterling. And that is the colonial master’s currency, and in 1973, we changed to Naira. Immediately we changed, there was an exchange rate differential. The margin was very small, but just to show that look, we are not equal to Britain, our economy is not as strong as them, so we weren’t exporting enough, so we were exporting crude oil, and we had a boom. In 1973, 1974, we earned so much money, and then 1974, the then government declared Udoji Award to everybody, the income of everybody in Nigeria was increased suddenly, and then we also embarked on a subsidy regime from that 1973/74 by setting up an institution called Petroleum Equalization Fund to sell petrol at the same price across the country, even if the petrol is supposed to sell for 20 kobo in Lagos and sell for 50 kobo in Maiduguri, because of the transportation cost, who bore the difference? Who will pay the difference, so it became the federal government’s liability since that time till today, that gap of equalization became so wide.
So that was what led us to this situation. So, the new government of President Bola Tinubu is the first person that is now trying to bell the cat. Former President Olusegun Obasanjo tried to bell the cat, he almost succeeded, but his successor, Late President Umaru Musa Yar’Adua of blessed memory was having this his socialistic tendency so, he reversed the final attempt for Obasanjo to bell the cat. President Obasanjo almost removed the subsidy completely, he almost closed it down, but on his way out in 2007, President Yar’Adua reversed it so this is the first President that has now summoned courage from day one to bell the cat, if he had waited, people will say don’t do it, don’t do it, but it this case now, we have to manage the consequences, even the unintended consequences, we must prepare to manage it, so it isn’t a journey of 1-2 months, the Nigeria Labour Congress (NLC) needs to understand that this matter is long overdue. It is part of the fundamental reason why we have never gotten enough resources to fund good roads, railways, build seaports, build schools, basic universal education scheme, it is the reason why we have not been able to get good resources to manage even good universal health facilities for the country because we have made the whole resources available to be going to fuel subsidy all these years, so now we have been given a journey that everybody must come on board. We must have a good understanding of this initiative, we shouldn’t contradict what the government wants to do, we must follow subjectively and passionately, not minding whether you are APC, Igbo, or Yoruba, or PDP or labor party, no, this is the right thing we expected any president to do.
Would you say that the subsidy removal, though long overdue, the approach taken by the government was the right and appropriate one, and what measures should be put in place? How would you recommend that the government handle the fallout?
Now, the interventionist scheme or the Marshal Programme to now start managing all the fallout will be dynamically managed every day. The Marshal Programme will be rolled out on a weekly, monthly, quarterly basis across the country. It is not a one-stop solution that will be applied to all the consequences, both intended and unintended. It is going to be a continuous exercise. The federal government will do their own, and the states and local governments will do theirs. So, the government now needs a holistic arrangement, a holistic Marshal Programme, with the governors and the National Economic Council.
This interview is very timely, and I am very happy because these things are going to be published and documented. The robust economic management team we expect to have should be the type that will marshal out what to do with education: primary, secondary, and tertiary levels, and cascade it to the states and local governments. The same economic management team must address agriculture because the federal government doesn’t have land for agriculture, but there can be an interventionist scheme with the states and local governments. The same thing applies to health: primary and secondary health. The economic management team must consist of people in the cabinet and outside the cabinet, bringing an economic team together that doesn’t necessarily have ministerial portfolios.
Many people may say that I am looking for a job for myself, but no, it is because we have been around and we have participated for 35 years in this domestic economy. So, we know where all the problems are, we know where the misalignment took place, and where the alignment needs to be done.
They must bring people from outside the cabinet to join the economic management team so that every week, they must watch what is going on. Because this decision of President Tinubu is so fundamental that people don’t know. I will give you one history, check Nigerian history, political and economic history. The most difficult decision to take in 1957 was to declare the Civil War by the Gowon administration and his team. After that decision of the Civil War, which ended in 1970, there has never been another national decision that has been as difficult as this subsidy removal and foreign exchange harmonization. It is a decision that Nigerians should see as having opened a new frontier on how we are going to manage our domestic economy and the political decision has been taken. The person who took that political decision must now rapidly organize a rescue team that will provide remedies for universal education; primary education, road failure, water failure, electricity supply, gas supply. We now need to help President Tinubu. It is not a tea party, it is not a party for one month, it is continuous. What the country lost to Babangida’s Structural Adjustment Programme, it was not a journey of 2-3 years; it was a marathon race, but Abacha took over and because Abacha wanted to consolidate political power rather than economic management, he just stepped down the reform structural adjustment program. Obasanjo then picked it up and tried to restructure the economy; he did very well, but the momentum was stopped immediately he left office. Now we don’t want any distraction for President Tinubu. Let us join him. This is our last opportunity for my generation; I am already in my 60s, to manage this political economy carefully. If we miss it, I am sorry; I don’t want to talk about the consequences of missing this opportunity.
You have outlined different areas for the economic team to look at in addressing the economy reforms. In a more specific way, can you give your advice to the government?
We are running a federal system that has the federal government, states, and local governments. So, primary health, primary education, basic roads, and water supply at ward and local government up to the state capital.
What I expect the robust economic management team of the federal government to do now is to give a framework on primary health, primary education, basic roads, water supply, security, infrastructure, and say, with these frameworks, we want you to collaborate and buy-in with us. We will provide this much from our federal level and start to merge it in terms of money, in terms of human capacity to manage the framework. You can cascade policy, decisions, and action to the local government and to ward levels.
I don’t expect the federal government to be the one to do a borehole in my local government. It should be something the federal government will say, “This area has no water. State, what are you doing about it?” The state will ask the local government, “How do we get around this local government? What will it cost? Who will do the study, the river basin around that area, and the water board of the state should do something?” The federal government will now look at it and say, “We intervene up to this extent; you state intervene up to this level because it is your responsibility to give water.”
I believe that if we are able to decide on a framework at the national level with President Tinubu, that framework can now be cascaded to the states and local governments so that human resources will get it done, funding will come itself. Once the framework is proper, funding will come because the framework can attract money. Money can be created; any segment of the economy can attract money. Take agriculture, for example. The federal government doesn’t have to borrow land from the state; just develop the proper framework for the state and the local government, and you will see the private sector will come. We must rehabilitate cotton production, the cotton and textile industry, from cotton growing to ginnery, to textile. So, you can focus on it and borrow from countries like Egypt, China, America, Australia, Morocco; they have done very well in cotton.
So, the federal government doesn’t need to go and own a cotton farm; just develop the framework, tell the states what to do, the right season, the input, agrochemical fertilizer, and the state will go to the local government and say, “We must grow cotton.”
The safety of the country is very important. If a state has the best land for cotton farming and there is no security, how do you ensure that farming is done?
These are the issues in various segments of the economy. We can frame something properly and develop it down the lane.
All these policies will be implemented using resources and mostly by the local governments. Now, the local governments have been clamouring for financial autonomy. What should the federal government do?
There is a situation of “who governs the governor,” and this is a serious problem. Who governs President Tinubu? It is the national assembly. You and I elected people in the assembly to help us form one arm of government, and the second arm of government is to make law and check the executive arm of government, and that is why we have three arms of government.
So, at the state level, who governs the governors? It is the state houses of assembly because people elected them at the state level to check the activities of the government. The work of President Tinubu now as a democrat is to see how to help strengthen the state houses of assembly, the state senators, and how to strengthen the local government. The local government across the country has become so weak; you hardly see a highly competent person handling local government; they will just put someone there to take care. Now President Tinubu must help strengthen it. I think someone who did a good job in this country when you look back, President Tinubu did very well in Lagos, the immediate past governor of Kaduna state, Mallam El-Rufai did very well in Kaduna trying to situate the local government to play their roles. Even though he suffered a lot of insecurity problem, he still came out to be the best governor ever. So now, this question you ask is politically realigning the philosophy of governance. The governors have turned themselves to be like semi-gods. The State Houses of Assembly or the States Senate can no longer advise them, and this is wrong. It is part of the inherent problems of the political economy of Nigeria. The inherent problem is that the State House of Assemblies is weak; they cannot govern the governors. So, the governors now turn to dictate to them, so there are no checks and balances. In this case, I will say it is one of the major problems of Nigeria – that weak link between the executive and the legislative, but I believe President Tinubu will be able to infuse some new agility into the structure because we have seen him doing very well. I believe the governance will sit up, and the State House of Assembly should sit up, and the local governments should sit up. We should begin to ask our local governments to be led by people that have credibility and competency.
What is your take on foreign exchange unification and how to ensure exchange rate stability of the Naira?
When Late Sam Nda-Isaiah started LEADERSHIP, the news print manufacturing company at Oku-Iboku, Akwa Ibom State, was set up to produce newsprint for Nigeria’s media. Why? Because that part of the country can grow this type of long-fiber trees that you use in producing newsprints, why? Because the then leaders of Nigeria knew that if we don’t produce many things at home, we will continue to import. So today, all the newsprint I’m sure you are importing it, and they are demanding dollars. Instead of you to be manufacturing newsprint and exporting it, you are now the one importing from either Norway, Finland, or Canada. So, if you don’t produce at home enough for your domestic economy and your consumption and demand is for foreign goods, your foreign exchange management can never be stable because your foreign exchange demand is a behavioral pattern of the consumption of your consumers. If you hold some telephone, all these are imported, you don’t manufacture even the petrochemical components inside them. So, that means all our consumption and needs are import-based, which means every day the behavior of the consumer in Nigeria or what they need will drive the value of the naira. So, it is not a thing you can say, “Oh, because we have removed the exchange rate gap between official and black market, it does not mean because of that the exchange rate will be fixed.” No. There will be fluctuation on a daily basis because of the behavior of the demand of Nigerians and supply. So, if we demand less and we do things locally, there will be no run on the dollar, so the dollar will be extremely sluggish. We are importing all the tires in this country, and you have over 13 million vehicles on the road in this country. So, if each vehicle uses an average of five tires, then what about the trucks that have up to 24 tires? So, we are importing tires, nobody is growing National rubber, nobody is doing Petrochemical, carbon black to manufacture tires in Nigeria. So, that means your need for the dollar every day will be increasing. So, for that reason, it will continue to fluctuate.
It may be N700 to N800.
But as some of the marshal programs and policies of government begin to percolate and people increase production of food, hairstyles, basic wears, you will see that the demand for the dollar will start reducing. So, that’s why I said it is not a one-day journey. This journey is a marathon journey; we must get ready to build a support base with the government to go all the way. Nigerians must begin to adjust psychologically their consumption patterns. We must begin to behave rationally; we must begin to count the money in our hands and the interest rate so that you will say no, if I spend this, if I don’t do this, do I need two cars? No, I need only one. Do I need to buy the most expensive dress for a wedding? No, I can buy just a simple Kampala, a simple dress for the wedding because after the wedding, the most expensive dress, what do you do with it? So, all these adjustments have to take place before you see this happening. If not, if you continue to demand for the dollar, it will continue because you are not earning enough dollar from other activities to supply it. That is why the petrol price also cannot be fixed because you are importing the petrol, at what exchange rate? If you import it N700 to one dollar this week, the petrol price this week will be based on the N700 calculation. If two weeks’ time, you are importing the same petrol again at N750, the price of petrol that next week will be calculated at N750. So, Nigerians must know that this thing is not going to be a fixed price every month, no. We are going to average it so that the importer will not lose money. When they start producing petrol locally, then the price may become more stable, but that does not mean the price will be low, and it does not also mean that the price will be too high, but it will be more predictable when they are refining locally because you produce the crude, you feed it into the refinery. So, it is easier for you to calculate that one, the refining cost, and others, then you bring it out of the refinery straight to the market. So, you are now importing to the port and breaking boards so all those costs would have been reduced by maybe 60 per cent.
With the foregoing, what should Nigerians expect in the short, medium, and long terms?
In these circumstances, once a president can put in place an economic management team, I emphasize the economic management team because they are the ones who are supposed to wake up every day and monitor the temperature of the economy. How much steel do we need? They are the ones who are supposed to know it. How much steel do we need? Steel for construction, steel for engineering works, steel for this, steel for that, iron, and steel. They are the ones. They are the ones who will say we need this much volume of petrol; we need this much volume of gas to generate electricity. We need this much. They are the ones who, on a daily basis, keep on. So now, if in the short term, in Nigeria, short run in Nigeria intervention, people want to see things quickly, quickly, quickly, now, now, now, now. Short run, to me, today is six months to nine months.
Because when you want to trigger certain policy issues, before they are actionable by the minister, ministry, down the line to state, to the local government, it always takes some time because of the type of bureaucracy we have. We have a bureaucratic system that is still not yet digitized. We need to digitize this part of the reform. So now, in the next six to nine months, I expect certain interventionist programs to begin to percolate and reach the masses. The shock they have seen now, they will adjust. It’s natural. They will adjust. If you used to drive about town every day, you reduce to maybe three times a week. That means you have saved petrol. You have also saved the environment. The more carbon you burn to the air, that is still part of even the whole reform. It’s a pity that this interview and conversation will not be able to cover climate, will not be able to cover the maritime economy, will not be able to cover the digital economy, will not be able to cover oil and gas, which is in front of my most desire. We will not even be able to cover infrastructure and the environment. But in this circumstance, we are today, the short run is six to nine months. You begin to see some activities, easing out the pains.
For now, all of us must suffer this pain. The rich cries, the poor also are weeping. The buyer spends more money, the seller is unhappy because he cannot make much profit. So now, what we need in the short run now is to help the president nationally to have a secure country. Security and safety are very important in anything we are aspiring to achieve as a nation. So, we must help the president, all the governors, all the local government headquarters in Nigeria. We must help the president to put security and safety as number one. Then that allows us to pressurize the president to please give us good governance, transparency, which I believe he will do. Put the right team, as I have advocated, put the right team in your economic management and make sure the reform and the structural adjustment program are followed meticulously. It must be dynamically managed every day, every week. If we see something not going very right, monetary or fiscal, we quickly align and realign. You quickly manage. It’s a dynamic situation. And the world is not waiting because the disruptive, innovative technologies are also shifting the goalposts every day.
So, as you are raising at 40 kilometers per hour, the world is already at 60 kilometers. So, Nigeria must be running to be at 55 to catch up because the fourth industrial revolution is here. We are still battling with the third industrial revolution, which is industrialization. We have not even industrialized. And now the fourth industrial revolution is here, which is the digital economy. Everything is in the cloud. Money is made in the cloud. I hope you understand me. So, about the question you asked me, the short run. That short run is six to nine months. Interventionist programs will definitely make up. I believe there are people somewhere that are calculating all the subsidy tolerances and the savings and where they can put a certain amount for intervention purposes so that the money is not just distributed to the three tiers of government and it will just evaporate. I believe the government is going to put something somewhere like a saving that they will use to now say, OK, mass transit support from this fund. Ecological support from this fund. Road intervention in bad roads. We need to remedy some roads that are very bad. Quick meal business. Not waiting for the contract, contract, contract for big, big new roads. All the existing roads that are bad, let’s fix them. Those are the interventional aspects from multinational and state.
In the medium and long term, the medium starts from the next one year. When you will have now been able to develop a budgetary plan on one full year is January 2 If that’s the calendar this government is going to adopt. But me, I will advocate that the government should adopt the calendar system of June to June. Since our academic program in Nigeria is also June to May. And our election calendar is always May 29. So, your budget should start from June. So, if the outgoing government has a budget that is terminated on May 29. So, you come on May, on the first June, you will reel out an interim budget before you now do a full year budget. So, I believe in one year’s time, this government will have now one full-year budget ahead of them. So, all their projections, both revenue and expenditure profile, will be clearly articulated at that time. So, they can now be saying, oh, sorry, in the last one year, we could not cover this, we could not cover this. We have now put it in our long horizon arrangement. So, all these things will be followed through. So, we will not somersault policies. We will not stop projects that are already midway or towards completion. Because that is part of the problem of the country. You will jettison something that is already halfway. You will go and start a new one because you are a minister that does not believe in what the other minister was doing. Okay, so who suffers? The country suffers because you didn’t complete the populist. So I hope you get it. So the medium term is one year to two years. The long term is three years to five years to eight years because the calendar of leadership in Nigeria is eight years. But I am beginning to see that if we don’t have a strong leadership team supporting Asiwaju for the next four years to eight years, the poverty level and the misery level may escalate. So, I want us to support him to de-escalate the poverty level and misery. To improve the quality of life of people and to build a society that becomes more rational. So that we can become part of the global players. At the moment, we are not part of it.
