October 9, 2021
“I invited President Obasanjo in 2005 when I was launching my book in Lagos. He sent Prof. Jerry Gana to represent him, promised to implement my recommendations but maintained that he would not pay consultancy fee. I told him I didn’t want consultancy fee and that my professional views and advice were to help my country. A year or two later, like magic, he bought back Nigeria’s debts, following all the lines I recommended”
*What’s wrong with our economy; how to turn it around
*The hidden factor about borrowing abroad
We continue the Chief Olu Falae interview this week. Last week, the elder statesman spoke on how Nigeria can be restructured to be great again politically. He continues today with emphasis on the economy.
As a former Finance Minister what’s the way out of the nation’s dwindling economy?
The way forward for the economy is to put the right people in the right place. In economics, when you do certain things, certain consequences will follow.
So, until and unless we put the right people in the right places, to manage the economy, we cannot get it right. Let me illustrate what I’m saying.
I observed in recent times that the government has actually abdicated its responsibility to manage the economy through ministers and ministries which is the tradition in Nigeria and worldwide, and more or less devolve that authority to the Central Bank of Nigeria which is manned by unelected people, to take critical decision on behalf of Nigeria.
The Central Bank of Nigeria now lends money to farmers, doing retail banking. Central Bank, anywhere in the world is the bank to bankers. Other banks and financial institutions are the customers of Central Bank, not persons.
But in Nigeria, Central Bank is lending money to individuals and farms. It is an anomaly. They are not trained to do that, their orientation is not retail banking, their training is not towards managing retail credit, that is for the commercial banks.
They don’t have the staff, numbers and training that can manage it. So when you go into a venture for which you are not trained, you are bound to fail.
Actions have consequences. So, they lend money directly to a lot of people to go produce maize. They don’t have the army of trained credit managers to manage that credit and get it back.
And then, in the meantime, the Fulani herdsmen and their cattle have eaten up a lot of the crops produced through these credits, and the same Central Bank has followed up by giving licenses to private Nigerians to import expired maize from foreign silos ostensibly, to fill the gap which has been created by partial crop failure because of the fear and uncertainties created by the Fulani and their cows.
So, the Central Bank that lends money to farmers to go and produce maize, wheat and grains, the same Central Bank is giving licences to people to import maize.
The maize that is being imported is from reserves that are two, three years old in foreign countries.
Equally in America, those reserves have been discounted, their present value is close to zero, so they can bring it and sell it at any price.
With the cost of fertilizer running at N12,000 per bag and you need per hectare, that is N84,000 for one hectare, plus other inputs, there is no way the Nigerian farmer can produce grains and compete with the imported grains.
So the same Central Bank that gives money to people to produce, gives license to people to bring grains that will make the local production fail.
So, you see what I mean. Until the right people are in the right places, we can’t get it right. This contradiction goes on all the time.
Secondly, if you are borrowing, there is nothing wrong with borrowing. As an economist and banker, my business is just to lend money to people, companies to produce, but they were expected to pay back with interest.
Nigeria has been borrowing. Don’t forget, we got into a terrible foreign debt trap during Shagari’s era. Shagari started it by issuing import licences far in excess of our foreign earnings.
It was during Obasanjo that we were able to buy back the debts and we got out of that trap. Now we have been pushed back into the trap. Nothing is wrong with borrowing. As I said in my book ‘The Way Forward for Nigeria’, pre independence and immediately after independence, Nigeria was borrowing substantially from the World Bank and IDA, that is International Development Agency.
It is an agency of the World Bank. They gave out what we called soft loans geared specifically to projects.
Typically, in those days, the tenure or duration of the loan was 20 to 25 years and the interest would be two, three points below the market rate.
Those are the kinds of loan Nigeria was taking to implement specific projects. The examples I gave in my book are the Idi-Ayunren to Ijebu-Ode road, Ondo-Ore road, Ondo-Ife road. Those three roads are still some of the best roads in Nigeria today.
They were built in the run off to independence. They have been resurfaced only once since then and they are still in good shape today, why? Because they were financed by World Bank project loans.
Not just that the loans had easy terms, the specification had to comply with World Bank standards. They had to send their consultant to ensure that the roads were designed to good standard.
One is not condemning borrowing, but what are you borrowing for? From whom are you borrowing? What are the terms of the borrowing?
Now, we are taking Euro bonds. Those are commercial loans and the interest rate will be high. And when you borrow from abroad, there is a hidden factor that most people don’t know. It’s not just the interest rate or repayment period.
There is what we call the currency risk. You are borrowing in dollars or pounds sterling or euro. The naira has been depreciating against the dollar almost from time immemorial.
Not only do you pay the interest rate or the coupon rate, you have to bear the currency risk, that is the depreciation of the naira consequences for your borrowing. So, it is double jeopardy and the interest you are paying.
Unless you have competent knowledgeable people doing these things, you will be in a terrible mess.
Recently, they said we are borrowing to construct a railway line from Kano to Niger Republic.
What makes that a priority for Nigeria? I’m not saying we should not link with our neighbours, I’m an internationalist but they say charity begins at home. Ondo State has no railway line, there is none in Ekiti and other parts of Nigeria.
Akwa Ibom, Cross River, do they have any railway? What justifies us going to Niger Republic. What are our priorities in Nigeria today? I don’t know what they are. One minister said we have not borrowed up to our limit.
Yes, there may be artificial limit set by whoever, as long as you don’t borrow more than 80 percent of your GDP, you are not in trouble. If you don’t borrow at all what is going to happen? You are even in a better position.
President Buhari recently solicited for the cancellation of the nation’s debt. Was that a smart move?
How can you be in the borrowing market right now and be saying to those who lent to you yesterday to cancel what you borrowed from them yesterday. Will the present people listen to you?
Even as a strategy, I thought that was ingenious. In my book, ‘The Way Forward for Nigeria’ I addressed this issue of debt forgiveness.
The first thing to look at is the popular debt forgiveness strategy. We are an oil producing country and 80 percent of the oil revenue is economic rent which is unearned income.
The price of oil contains within itself 80 percent that is not related to the cost of producing it.
More important than that, it is a fact that the people you are asking to forgive your debts, the western powers, you forget that all the money that our people have stolen and are hiding in foreign bank accounts, that those same companies owned the banks where our people are hiding money.
They know who stole what and how much. People stole your money and created a debt for you. They know that the buck of this debt came into existence because of corruption of public officers.
They know where the money is, since when, through what deal. All that is known to them. They will never forgive your debt.
The only viable option if you don’t want to pay your debt as agreed by your creditors is to seek a buy back arrangement. A buy back is taking back from your creditors the bonds you gave to them, the piece of paper you signed if you don’t want to follow those agreements. So, the only concession you can validly and reasonably expect is a buy back.
In my book, I said what to do is to use what you have to get what you need. What we had then and still have now is equity in the oil companies
I said that in 1988, when I was secretary to the government, Nigeria sold 10 percent of her equity in Shell BP.
We sold 10 percent for $1.8 billion. So, if we are to sell 10 percent of our equity in all the oil companies, we would able to raise some $20 billion immediately.
The oil companies that are our partners, they don’t partner with people anywhere in the world except here where we force them by law to let us take equity to be their partner.
They don’t partner with anybody even in Saudi Arabia or anywhere in the world.
What I’m saying is that if you decide to sell part of your equity to your oil company partners, they will be more than happy to buy.
There is always a ready buyer who has the financial muscle to buy. If you want to sell 10 percent today within a month or two, it will be done.
I said in my book that I could eliminate Nigeria’s external debt in six months when I was campaigning. I just wanted to be modest, it could be done in three months.
I have taken this approach, the equity is yours. You have sold part of it before, you want to sell more of it, they will buy from you.
They will be happy to buy because they have the financial competence to buy. The negotiation of the price and evaluation cannot take more than three months.
If it could be done then, it can be done now. The only realistic external debt strategy for Nigeria is still a buy back.
When I was launching my book in Muson Centre in Lagos in 2005, I invited General Obasanjo who was then president as the father of the day, he didn’t come but he sent Prof. Jerry Gana who was a Minister to represent him.
Jerry Gana read an address. He said the president said he would use whatever recommendation he found useful in the book for Nigeria without paying me any consultancy fee.
And I said I will be glad if that happens. I wasn’t looking for consultancy fee, I was expressing my professional views and advice to help my country.
It was like a joke when a year or two later, he bought back our debts, following all the lines which I recommended in my book.
Fortunately for Nigeria and for him, by the time I was doing it, oil price had jumped up. So we were earning more dollars on current account that enabled us to finance current import and still have surplus to do the deal and we didn’t have to do the deal. Debt forgiveness is a request dead on arrival, nobody will listen to you.
Will you oblige if called upon to advise the government?
Yes, definitely. I can say that process is on now. I won’t say more than that. Not by the government. But I have never ceased from trying to help Nigeria. You can see, I’m passionate about this country.
From my public service background and exposure, I know that Nigeria has huge potential. But with good management, good leadership, we can turn this huge potential into actual wealth, prosperity and to employment, and have a wonderful country.
It pains me that we are losing our chances and opportunities. If you don’t know you have the chance to win, if you lose, it doesn’t pain you but if you know you could have won and then you lose, it is very painful.
So, I’m a Nigeria citizen, I want to make a difference. I have the knowledge of what is possible as former Director of Economic Planning in Nigeria.
And as someone who has invested his whole working life in Nigeria project, I’m anxious that the investment must not go down the drain. These are the reasons I’m very passionate about this country.
You can see that we are in crisis now. We are divided. We cannot say we love each other now. People who came and kidnapped and macheted me cannot say they love me and they cannot expect me to embrace them that I love them.
Nigeria has never been this divided and this polarized.
Let’s talk about the unending killings and insecurity generally across the country
Nobody is profiting from this crisis. Most leaders of my status and generation can no longer live in their homes. Most of them are hiding in Abuja including traditional rulers. So, it has come home forcefully.
It is like Alibaba letting the genie come out of the bottle to do wonderful things for him but after that he tried to get the genie back into the bottle, no way. The genie is now going rampant, hitting friends and foes alike.
The genie is violence and insecurity using Boko Haram and almajiri to perpetrate violence against perceived enemies. Those forces have now turned against their progenitors.
I’m happy the president said recently that he wants to leave a legacy of a peaceful and united country. And I read that security forces are now more effective against those called bandits.
But bandits don’t shoot down jets. Who do you call terrorists then? What must bandits do to be qualified to be called terrorists? That’s part of the deception. You see a terrorist, you say he is a bandit.
Let’s call a spade a spade, a terrorist is a terrorist and should be treated as a terrorist. Or to say that those who are advocating for Yoruba nation are in the same category as terrorists, excuse me.
How many people has Igboho killed? The Yoruba advocates for the independence of the Yoruba, they are expressing their opinion.
And in law, expressing an opinion, even for me an intent does not constitute a breach of the law unless and until you perform an overt act to implement that intention.
This was clearly brought out during the trial of Obafemi Awolowo in the court, that even if the Action Group held a meeting and they said we are going to overthrow the government of Nigeria but did nothing to implement it, they have committed no crime.
So, if Igboho says he wants a Yoruba nation and he doesn’t do anything to actualize it, he has committed no crime. To go to his house and bastardize it is barbaric. It is not in conformity with the rule of law.
The Yoruba agreed to go into independence with other ethnic groups in Nigeria because we agreed that rule of law will prevail. Arresting and locking up people who have not committed any crime in accordance with the law is wrong.
It is law that defines crime not your opinion. If he says he wants a Yoruba nation, what is wrong with that? When we told the British we wanted independence, it was contrary to the prevailing law.
Were we committing a crime? But if we took up arms to fight the British government then it would become a crime.
For state security to go like armed robbers in the night is disgraceful, it is a shame. I’m ashamed of it. I’m a former public officer.
These are public officers, paid by the revenue derived from the public. The people whose homes were destroyed are part of their employers who have committed no crime.
If they commit crime, arrest them during the day, put them in court. It’s only military dictatorship that operates like that.
Many years of military rule has militarized our mentality. Security agents still believe that they are working for a military government and their loyalty is to the government not to Nigeria.
I’m not saying don’t arrest suspects. Arrest them, put them in court, try them if they’ve done anything wrong but don’t go and break down houses.
It is not an invading force from a foreign country. We didn’t hear that anybody shot any public officer during the raid. Whom are they fighting for.
I suspect there is a lot of bitterness in what they did and public officers are not allowed excessive emotions in carrying out their duties. You must be emotion neutral not behaving as party political thugs. God will save us.
In your opinion is this government doing enough to tackle banditry ?
Honestly, if the governments have been doing enough, banditry would have ended.
When this government came, the major thing we were fighting was Boko Haram. The new platform in violence came into being in the last four, five years after the inception of this government.
The banditry that is shooting down military jets, that is no banditry, that is insurrection. People who went into the military academy to kidnap military officers shows that they are not bandits, those are terrorists.
All this came into being to join Boko Haram in the last four, five years. So that is what makes it frightening that rather than things to get better, they are getting worse. And we can then begin to ask questions, why is that so?
When people are unemployed and desperate and they can see no future for themselves, they take to crime.
And because of the ineffective security arrangement in the country, they are tempted to go and grab people and kidnap them.
They are sure that nobody will get them. Ransoms are being paid. In other countries, people do not pay ransoms but here ransom is being paid.
So, kidnapping has become a fairly lucrative business in Nigeria. Some people even kidnap themselves and ask for ransom. It shows how terrible things have become.
You want to say more on Yoruba nation agitators and the invasion of Sunday Igboho’s residence by the DSS?
Let me start with the invasion of his residence, it shows that the rule of law is no longer in force. One of the fundamental rights of a citizen in a democracy is freedom of speech.
During the trial of Chief Obafemi Awolowo, I learnt that even if you are talking of a revolution, or a coup but you have not taken any overt action to implement it, you have committed no crime.
Then, there is law, free speech covers you. To say I want revolution in Nigeria, I want Nigeria to break up, if you did not and have not taken any overt step to implement what you are preaching, you have committed no crime.
So if Igboho is talking about Yoruba nation and all that, and he has not taken any overt step, he has not committed any offence.
To go to his house in the night is barbaric, completely unacceptable. The Nigerian problems will not be solved by security agencies over reacting and demonizing those who advocate self-determination.
Self-determination is the right of every ethnic group in the world.