Home Interview Nigeria is not broke but we must save now’

Nigeria is not broke but we must save now’

by Business News Report

By Omoh Gabriel

On Sunday 22nd April, the Nigeria delegation to the 2012 Spring Meetings had an interactive session with the press for just fifteen minutes. At the session were the leader of the delegation, the Minister of Finance and Coordinator of the Economy, Dr. Ngozi Okonjo-Iweala, CBN Governor Mallam Sanusi Lamido Sanusi, Governor of Anambra State, His Excellency Peter Obi, and Dr. Manseur Murtar, Executive Director, World Bank. The delegation demonstrated a high sense of team spirit as each member of the delegation was given opportunity to add his voice in answers to questions raised at the session.
The Run for the Presidency of the World Bank; how was it received by others at this meeting?

Okonjo-Iweala: We have extremely wonderful reception here at the Spring Meetings. Developing countries have come one by one to say how excited they are; how grateful they are that they have someone who could try to open the door. So, I think this has been extremely beneficial to Africa. Most of all, the Africans have been most excited. For Nigeria and for the image of the country, I think we have achieved quite a lot with this. I just wanted you to know that this is one thing that also came out of this Spring Meetings

The economic projection for this year has been reviewed downward from 7 per cent to 6.6 per cent, what does this portend for Nigeria?
Okonjo-Iweala: First of all, we need to look at the projection. They have their projections; obviously, we have our own where we are aiming at 7- 8 per cent growth in the economy in 2012. Let me say that 6.6 per cent growth in this current environment is regarded as exceptionally good in the uncertain international environment which we are in. So you should know that the projection for the growth in the global economy is 3.5 per cent done by the IMF; so if we are growing at something at 6. 6 per cent, I think it is something we need to be very proud of. Only few countries are doing well except for China and India, but that being as it may, we will compare notes with them because we are looking into our own growth to be slightly higher than that and we will see what the sources of differences are.

Lamido Sanusi Lamido: What we are saying is that a lot depends on how quickly the growth drivers we are working on steadily come into play. We already have fiscal consolidation, macro-economic stability. What is left is to make progress on the power and agricultural reforms. Once we are able to make that progress and there is increase in power generation, in agricultural production, I do not think that the 7-8 per cent numbers that have been forecasted by the Finance Minister will be unachievable. We might as well surpass this number. Really, it is the structural reforms that will determine the pace of growth. The foundation has been laid in terms of stability.

Okonjo-Iweala (Let’s give a man chance, laughter)

What is Nigeria taking away from this Spring Meetings?
I think one of the most useful things about coming to the Spring and Annual Meetings is that we listen importantly to what people are saying and forecasting about the performance of the global environment. It is vital for us because we need to know what is happening around us. Nigeria does not exist in isolation. Moreover, 60 per cent of our exports go to Europe and US, so we need to hear what is happening in these economies, in order to use that to calibrate how we might be impacted.
So, one of the things we are taking away from this meeting, very centrally, is that, though, a fragile recovery is emerging in the US, although a recovery is coming, it is still fragile, unemployment is still high, 8 per cent here, the Euro zone is even more fragile, because the sovereign debt crisis is still overhanging in their own performance. In addition, Spain is now joining in this whole configuration of countries that are having serious problems of sovereign debt, as you know, things are very though in Spain, unemployment is 23 per cent or so and youth unemployment has hit 50 per cent.
One of the big economies in Europe is having a big problem, in addition to Greece, Island, Portugal. When you hear that Euro zone is very fragile, US is recovering but very fragile; that gives you information with which to calibrate what you need to do. To me, it means we must continue the diversification of our economy, which the CBN Governor spoke about; the structural reforms on power, on Ports and so on and the development of the sources of growth in agriculture, housing construction and improving our exports of other products.
Because we need not to depend on oil alone which is sent to these economies that are in this difficulties, we need to diversify our markets which is the other message. We need to send more to other countries that are growing more robustly like India, China and Brazil even within Africa and other emerging markets, we have to do so. That is a very key message. It just reinforces the part we are already on, isn’t it?

Sanusi: What I will add is that the minister has made the point. She has made the point a few weeks ago that until we have this structural reform in place, we need to protect ourselves and hedge because of the vulnerability of our economy to oil price, and therefore, this reinforces the need to save at this time that oil prices are high, because if these dark clouds translate to fall in oil price, we are going to have major problems. So, the whole idea of saying let us look at the excess crude account and save now that oil prices are over $100 is basically not that we have problem now, but if something happens; it may happen given what we are seeing, we will have difficulty on the fiscal and exchange rate sides, and so this reinforces the message in the last few weeks that the Minister and myself have been trying to send out.

Okonjo-Iweala: Let me just refine that because the last time I spoke about it, we ended up as saying that Nigeria is broke. Nigeria is not broke, ok, can someone give me that headline. (General laughter), seriously, Nigeria is definitely not broke, the CBN Governor and I are very clear that we need to save. I like what the CBN Governor said, His Excellency, Governor of Anambra State is the vice-chairman of the Governors’ forum and is here with us and he has been very supportive. I like him to also say a word on this. I have been saying it, if someone says you should save, does it mean you have no money in your bank account?

Peter Obi
On the issue of savings, you know, it is imperative, for an individual, for any country to survive. What they are saying is something that Nigeria need to take seriously. What we are saying is that today the oil prices are high, now that we have high oil prices let us save just incase the price of oil takes a u- turn tomorrow so that we might have something to fall back on even though…….

(Interjection) but sorry your Excellency, the pressure to share money from the excess crude account has always been from the Governors’ forum, that we should share what is available
Obi: No. I do not think that is the case, the pressure is that the governors are saying ‘the constitution says this,’ but there is nowhere in the constitution where it says do not save, that is very particular. The constitution never said do not save, it just said whatever we have should be shared among the three tiers of government, that means you can save. Even if you do, you are still saving for the three tiers of government. It did not say ‘do not save.’ Whatever is saved is still saved for the three tiers of government.

Chorus from the media: It is the governors agitating for sharing.

Sanusi intervenes: Let me say something here, you know in general, when you are in political office you are under pressure to use as much money as you can get to deliver. It is always a challenge when you want to use this money to deliver services and the managers of the economy are looking at what happens in the future. This is a process of political discussion and negotiation. The Finance Ministry and the Central Bank are saying, ‘yes you have this money today, but if you spend it and oil price goes down to $40, it happened few years ago, oil prices came down to $37 a barrel, who says it can not go back to that amount, where are you going to get the money to even pay salaries.’ So it is that process of negotiation, though I do agree with that discussion , it is very clear to people the implication of oil prices falling, we have to continue to engage in the discussion until all the people or all tiers of government, federal, sate and local governments agree that this is the sensible thing to do.

Peter Obi: I remember that above all, the constitution empowers the Federal Government to manage the national economy. So it is critical, what ever they do is in the interest of every body.

Okonjo-Iweala: The federal government is to manage the economy in the interest of the country. That should be something that is very important to run a federal system. The problem with the federal system is that the federating units are making independent decision. We have federating political system but one economy like happened in Argentina, what got it into trouble was that the provinces were borrowing and making decisions that were not coordinated for the good of the economy. You know what happened, they over borrowed, the federal government had to assume responsibility, it could not pay, it just defaulted and it ended up with hundreds of billion of debts. We do not want such thing to happen in Nigeria. I just give that as an illustration.
It is important that when you are in a federation, federating units must be respected; we also have to come together and agree to work together for the good of the economy. That is what the constitution says.

Social safety net came up in several discussions at the meeting and example of countries that made a success of it was cited even in Africa, what is Nigeria doing in this regard?
Okonjo-Iweala: Let me talk a little about the social safety net because I focused on that in my speech at the development committee. I will be happy to share that with you.
The very important thing to a successful social safety net is targeting. You must have basis to be able to target those who need help. This is why I insisted that because we do not have a data base to know who those that are poor are and what their level of income is in Nigeria, we have to develop a data base, do you understand. It is not enough to know that 50, 60 or 70 per cent of the population are poor. You need to have data on the poor households, because they are the ones who will come out to collect the benefits.
I have insisted that the World Bank must help in this area. We do not have the needed data, if you are going to target and build a safety net in Nigeria, which we are trying to do, it becomes difficult. Right now, several countries such as Brazil, that has been the most successful with it’s bosta familia, a family programme, have a great data base.
I have even seen people queuing up to receive this thing, they know who are the poor family, below the defferent levels of income, their family size and information about them, that when they want to deliver a particular service, be it voucher for education for the children, conditional cash transfers, where you get a cash transfer provided your child goes to school or they get immunized, they know exactly who. What I am saying is that we do not have the key to a successful safety net in Nigeria yet. Some states have a data base of the unemployed, of poor people, we do not have one central data base that we can rely on, and not every state has.
We are saying to the World Bank, we are not the only country though; help us to build this data base. Ethiopia has something they called the basic services programme that has been going on for a long time in the rural areas, where they are given support to improve their productivity in agriculture, that one is not conditional cash transfer; through that you also improve the income of the farmers and it work very well. But remember, it was a highly socialist country. I think it got a decent data base of who is who on what income and where they live. So, we need that and we are asking the World Bank to help us develop that kind of data base.

Peter Obi: Just a follow up, for us in the state, it is the same thing. The World Bank in Nigeria is actually helping us in this. We now have a bureau of statistics and the World Bank is helping us to upgrade it to have accurate data. Without an accurate data base, there is no way you can plan to deal with issues of social safety net. Some of the states I know, there are two or three that I know, Anambra, Cross River, there might be two others, are following the World Bank plan.
Okonjo-Iweala: Can I just add something to that, you know we have safety net programme under the subsidy reinvestment programme, but because we do not have this data we are doing what we call targeted programme. The conditional cash transfer that we are working on are for pregnant women, so a woman is either pregnant or not (laughter), you understand, those are the imperfect measures you use when you do not have the required data base. So, we are only going to give this cash transfer to these pregnant women. The cash transfer is of a size, we are using approximate size, when I used to be at the World Bank, we develop some of the approximate. If you are self targeting, it is also of a size, that if you are a very wealthy person, you are not going to queue up for N5 000. You will not want to stand in line for that amount, so you target the cash transfer at a level that is attractive to the people who really need it and then are pregnant, the men can not come and queue up, (another round of laughter)
From the tone of the Spring Meetings, Africa accounts for two per cent of global trade. From your perspective as the Coordinating Minister, I can imagine fixing the road going into Apapa Port will obviously improve our economy tremendously, why is it difficult to do that?
You know fixing the road to Apapa Port is very important, but it is not the only element. There is the port reform committee; I am actually chairing the committee, the governor of Anambra state is here, he has been extremely helpful coming from a state that depends very much on the status of our ports, pushing and pushing within the economic team for us to do something. But we know that the cost of doing business for our population gets higher because of this. I accept what you said, and there are a lot of reforms going on at the ports. For the road, I have been on that road, it is in very bad shape, and there is absolutely no doubt that it needs fixing.
The federal government has consented to fix it, the federal Ministry of Works took the project to the Federal Executive Council, FEC, and something have to be adjusted in it, it was to be brought back, I believe the contract to do that road will now be taken care of. It is a costly thing; so many heavy tucks go on that road, so, it is going to be something short but very important. That is point one, we are acting on that.
But beyond that, our ports need a bit of attention. We need more investment in modern technology and equipments at these ports, and we are pushing the concessionaires’ part of whose contract had been that they would invest in the ports, and things will become cheaper if they do so. But they claim they have invested and so on, believe me we are talking to them. That is one side of the issues.
Another set is the long demurrage times, because people cannot get their goods out of the port fast enough, the ships cannot off load, there are too many containers that have not been removed and they are blocking the way. We have actually started working on the container management plan, which Sylvester Monye, the adviser to the President is heading. They are trying to move out empty containers to other sites, to create room at the ports. Then the issue of the number of agencies at the ports is another thing; you know, all along, that got the most noise, reducing the agencies at the ports from 15 to seven, making our ports work for twenty four hours, the President has now ordered that this be done. Nigerian ports are the only ones working nine to five in the world (another laughter); did you know that now they are doing it, I think it is intermittent, they say there are security issues. These are some of the challenges, some of the bureaucratic requirements, filling so many forms; we are also trying to do away with some of them. All these have not been popular measures with some of the participant at the port especially with those who are not doing the right thing.
Peter Obi:
The minister has said most of the things I needed to comment on. Under the present regime, they have started what I will call a deliberate and organized reform in the port, because in the past what was done is giving lip service to port reform. The ports have been concessioned, but those who were supposed to invest money at the ports after the concession have not really invested any money.
Every port today operates 24 hours, most ships come at night before morning they have finished off loading. Such ports have modern equipments that can off load ships, but in ours, you go to the ports today, you see equipment that takes days to off load a ship. The consequences are that if you are shipping goods to Nigeria, you take into account the delays. Take Nigeria and Ghana as comparison, it is cheaper to ship a container to Ghana than to Nigeria. The reason is that a ship owner coming to Nigeria knows that if he gets to Nigeria, it has to wait because they do not have the equipment to do it quickly, so it charges more. If it goes to Ghana, in few hours, it is gone out of the port. The clearing process is just too long in Nigeria. 60-70 per cent of the cargoes that come to West Africa ports are destined to Nigeria. Yes, you can get goods in one day in Cotonu, and you cannot get that in Nigeria. Cotonu ports operate 24 hours; you cannot get that 24 hours service in Nigeria ports.
These are the things they are beginning to do now, what Monye and his team is doing is slow but it is targeting what is expected; all that is needed is what the Minster is doing, pushing to ensure that it is achieved because that is a lot of cost that will be saved.
The CBN deals with banks, most of the failed businesses in the country are as a result of delays at the ports. You import goods and it stays at the port for 90 days, 60 days, it is cost, somebody is paying interest for something he is supposed to receive. Goods leave Europe for two weeks and stay in the port for three months, somebody is paying interest on loans used to buy those goods, it eats up the profit and everything.
Sanusi: I will just add that the port reforms are very important and that trade is extremely important, but the overall direction of the economy is to change the way we do things. Right now, we are importing too many things we do not need to import and we are not exporting what we should be exporting. We are a country of 167 million people; we should not be importing food, tomatoes, and things like that. So the policy that we have now to revive agriculture, textile, and industry are aimed at reducing these imports. We should be exporting refined fuel, petrochemicals. The PIB bill will get us to the point where we will meet domestic demand and export. Right now everything comes in and nothing goes out. The structured policy will become effective when you start exporting cocoa, fuel etc. Nigeria should stop importing food that will help to complement what is being done at the port.
Okonjo-Iweala: Actually he touched on something important here; part of the difficulty we have at our ports is that ships are reluctant to take empty containers. Only about 5 per cent of containers that come to Nigeria go back loaded with products because we are not exporting other goods. In other countries the containers come in and they are loaded with goods, so the ships make a lot more money, but when they are leaving our ports, there is nothing in the containers. So they are just there, only 5 per cent go back, because they do not make money off it and they are reluctant to take away empty containers. It is fundamental structural issue in our economy that we have to solve.

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