The Managing Director, Asset Management Corporation of Nigeria, Mr. Mustafa Chike-Obi, bares his mind on the economy in a public forum. OYETUNJI ABIOYE was there
What are the challenges facing the Nigerian economy?
One particular topic I am very passionate about is the Nigerian economy. I break it down to three topics. The first is capital. The Nigerian economy suffers from a tremendous lack of capital. We do things in incremental fashion because we do not have enough capital to do the big things. We are a very big country and we must start thinking about big things. We cannot, for example, think we can address our mortgage problems with N100bn. We should find the ingenuity to have a mortgage refinance company that has over N2tn in capital; that is the minimum amount.
We must build a functioning railway system in Nigeria, and we must build a minimum of 4000km of new railways and the cost of that is in the region of $20bn, and we must find it and build it. We must find at least $10bn immediately to fix our transmission lines. The power problem will not be solved until we get a modern transmission grid. We can perk on the edges; we can do things to make us feel good but I assure you until we face the problem and tackle it, it will not be solved. Capital is an issue. I will tell you how we can raise the capital because citing problems without providing the solution is a useless exercise.
So what is the second challenge?
The second challenge is competence. Competence is not just having the skills to do something but also the commitment and the hard work and the humility to reject an appointment you are not able to do. I tell people that if somebody makes me the managing director of a commercial bank, I will decline because I don’t have the skills.
Nigerians take a job because it is a higher prestige and higher protocol job. And when they get there, they are amazed at the challenges and many of them give up and start enjoying themselves because they realise they cannot do the job. So I think it is very important that we identify the key jobs in our society and make sure that the people who start them are competent and committed.
We must stop an era where somebody who does not understand power is the minister of power. I am speaking generically. I am lucky to be the head of AMCON because there are other people that could have done it. I think my big advantage is that I had no relationship with financial institutions in Nigeria. We must make sure that by the time my tenure in AMCON ends, we have someone who can continue the job; and I will make sure that in my tenure, we have a succession plan as much as it is within my powers to do so.
Let us go to the third challenge.
The third thing is culture. Take note that I did not say corruption. I did not say corruption because corruption is the symptom of many things. People are not corrupt because they want to be. They are corrupt because it pays them to be. The system suggests that corruption works.
People offer money to get jobs, and these are both elective and non-elective jobs. As soon as that happens, they get into the job and they have to get back the money they used to get the job. And you start on a system of corruption because in our culture, people don’t ask you where you get your money. They have seen people who are living normal middle class life, get huge political appointment and four years after, they have houses in Ikoyi, Victoria Island and they throw all sorts of parties and nobody questions them. Even their churches don’t question them. We have a culture of big consumption of foreign goods.
I have said many times that the only flight from any two points in the world where you find a 12-year-old, 14-year-old and 16-year-old in the first or business class must be from Nigeria. You will never see a flight from New York to California with a 14-year-old in the first class. But in Nigeria, especially around the Easter break; the first and business class cabins are full of 12-year-olds and 14-year-olds. You ask yourself why these intelligent parents are doing this to their children. Don’t they realise they are using their own money to set up their children for failure in the future? It is this culture where people are celebrated by externalities that make us steal money.
How about unemployment? How big is the challenge?
I think we are in a very critical period of our economy. I do not share the view that things are getting better. I think things are getting much worse. We have to confront a critical problem in Nigeria, which is that we are 170 million people, growing at 3.5 per cent a year, this means roughly six million Nigerians a year. Based on the model you wish to employ, that means you have to create approximately four million jobs for those people a year.
In addition, we have a backlog of unemployed people. Every Nigerian parent today is very concerned about jobs for their children. And we need to create six million new jobs a year. This problem is very exponential. If you don’t address it today, five years from now, you have to create eight million jobs a year. And at that point, I don’t think the society will hold. This is a very critical thing to consider. We have an employment emergency in this country. Ten years ago in the US, the largest population of intellectuals that were not Americans were the Chinese, followed by the Indians, and followed by Nigerians. The Chinese have created an economy and they have dropped to number three. The Indians are continuing to create an economy and the gap between Nigerians and the Indians is narrowing. Soon, we will have the largest number of intellectual property in terms of people in the US. And that is it because there is nothing for people to come back home to do. We send them and train them abroad and stay abroad at a great loss to Nigeria. We must create policies that will bring these people back home. Believe me, those people are very productive. There are Nigerians in the US that run major hospitals and major departments of universities. There are Nigerians who are mayors of many cities. And it is very difficult to find British doctors who are heads of any hospitals in the US because they go back home. We must ask ourselves at this point, why we are oppressed by tight fiscal and monetary policies? Why do we think inflation is our biggest enemy?
So what is the way out of this?
We must have one policy geared towards growth. We must grow this economy at 15 per cent for many years. If I were the President today (I am not and I will not be), I will ask everybody who wants to work for me in the economy: What is your plan to grow the economy at 15 per cent and what is your plan to grow the economy at six million jobs a year? Give me that plan and if you don’t deliver after a certain number of years, I will fire you. We must grow this economy or we are living on economic time bomb. To grow this economy, we must go for growth and manage inflation. We must not go for inflation and manage growth. This means we will tolerate higher inflation as long as it is manageable; but we must have growth.
The second thing is that private sector Cash Reserve Ratio must drop to six per cent and not rise because the banks cannot lend much money except it drops. We should have better coordination between monetary and fiscal policies so that they are not offsetting each other. Whatever the Ministry of Finance wants to do, higher interest rate can kill it; and whatever the monetary policy wants to do, a fiscal policy can kill it. We must stop working at cross-purposes and work by a plan. We must also engage in massive industrialisation. It is not only by agriculture. Manufacturing and service industry will create more jobs.
We must address our cultural priorities. We must really think about sanctions for people who have destructive cultural tendencies and I will leave it at that. These things are conspicuous consumption as I have said. People should account for their source of wealth.
There are so many private jets in all these private terminals in our country and nobody is asking them how they got these jets. Some of these jets are owned by government officials. If you can buy a private jet at $40m, you certainly have tax returns and should be able to explain how you got the $40m to buy these jets. So I think we should start asking people how they got the money.
Don’t you think the nation’s debt profile is too high?
Nigerians have aversion to borrowing because we have a history of wasted money. But let me give you a few numbers you should bear in mind. When our Gross Domestic Product is rebased this year, we will have a debt to GDP ratio roughly 12 per cent. The international standard is 60 per cent public debt to GDP. If you look at countries like the United States, India, Brazil; they are well over 60 per cent public debt to GDP. Some of them are even closer to 100 per cent public debt to GDP. So if we go from 12 to 60 per cent public debt to GDP, that means an unused borrowing capacity of N28tn that Nigeria is not using. It is also a fact that no nation has developed with a public debt to GDP ratio of under 60 per cent anywhere and anytime in the world. It is not possible.
So the challenge is not whether we should borrow or not. The challenge is what we do with the money. And I suggest that we should start gradually because leadership is about carrying people along. We should do it project by project. We should tell Nigerians we are borrowing $20bn to build 4000kilometre of railway system. Punch