Home Interview Nigerians push federal character to the extreme

Nigerians push federal character to the extreme

by Business News Report

By Omoh Gabriel

At the conclusion of the April 2012 Spring Meetings of the World Bank Group/IMF, Minister of Finance and Coordinating Minister of Economy, Dr Okonjo-Iweala and Central Bank of Nigeria Governor, Sanusi Lamido Sanusi had an interactive session with the Nigeria press. They discussed the high points of the meetings and other financial issues affecting the Nigerian economy.


What was the center of discussion at this Spring Meetings?
Dr Okonjo-Iweala: I will mention three points. From our perspective, I think these meetings are still focused on the economic recovery in the global environment and the uncertainty of it. The fact is that some countries like the USA are recovering, but the Eurozone is still marred in crisis, and the emerging markets are decelerating in their growth. So what is the impact and implication for us? That is what discussions were centered on. It carries over to the discussions at the World Bank in the sense that the World Bank Group is developing a strategy to end extreme poverty by 2030. That was the main topic of discussion at the development committee.

With a new President in place, they are looking at drafting a new strategy with the goal of eradicating extreme poverty by 2030 and building shared prosperity for the bottom 40 per cent of the world’s poor. The issue is how can you marry these two things in an economic environment that is uncertain and what does it mean for Africa and Nigeria? Those are the things we have been looking at, at the various meetings.

Sanusi Lamido Sanusi: Three things are clear with regards to global economic recovery. For the world to come back to growth, we need to have financial repairs, we need to have fiscal adjustments, and we need to have structural reforms. The MD of IMF actually singled out Nigeria as a country that financial repair has taken place, fiscal consolidation has been seen. She has actually cited Nigeria as a model for other developing countries to take a cue from. We are taking advantage of growth conditions in Nigeria right now to consolidate on the gains. The IMF is encouraging low income countries to follow that path taken by Nigeria. So the major thing is to continue on the financial path.

On the fiscal side, the work has started. It will be more difficult in 2014 because of elections that will come on in 2015 so the Finance Minister has a lot of work to do on that and the buffers are being built up. On the structural side, you will see the progress in agriculture; PIB, power, and I think the take away is to fast-track the reduction in the dependence of the economy on import.

On the mortgaging financing programme, there was a workshop on the housing sector organised by the Coordinating Minister for the Economy and chaired by the president. And there were a number of proposals. There is mortgage finance facility which the CBN has designed and is already being issued as an exposure draft. There is work being done on land use and on the cost of land acquisition and the charges by the banks. There is work on- going on how to reduce the cost of building materials. The issue of housing goes beyond just finance. There is the cost of land, building construction, protection and the absence of standardization. So, there is a whole holistic plan to address the housing problem and this is the first time it is happening. And rather than just argue how to give people loan, we look at how to reduce the cost of housing and deepen the market as well as provide liquidity for the lending institutions.

Okonjo-Iweala: The mortgage facility was announced by the President a few months ago after a Presidential retreat, which the President chaired. The Minister of Housing and myself drove it along with the CBN that had to make the guidelines for such specialised institution. But the bottom line is that the demand for housing and mortgage in Nigeria is vast. We have a deficit of 17 million units of housing at the moment and we are adding to that at the rate of two million houses per year. That is on the demand side. You should also know that housing on the supply side can be a very strong driver of economic growth if properly handled. And so, we decided to do that. And we have so many linkages within the economy as regards housing employment. Once you start driving the housing and construction sector, you will employ carpenters, welders, mason people, interior decorators, etc. It is a whole lot of linkages.
So, this is a perfect instrument. That is why the USA monitors housing gaps every month. One of the key indicators they report is how many houses have been built, how many old houses have been purchased, and you have the index that measures the movement of housing crisis within the economy. It is high time, as the Governor said, we realised in Nigeria that this is an instrument.

What is the government doing specifically?

We have decided to add more access and liquidity on the finance side and therefore, we are creating a mortgage refinancing institution that will be mainly private sector held. Government will only be a motivator and will have a small share in it. The partners in it are the banks, which is why the CBN has a key role in it. The CBN is a partner. We will be looking for other investors, and hence, the document has been prepared to attract domestic and foreign investors into the housing sector.

The World Bank is a strong partner and it is providing $300 million of liquidity facility at concessional rate of 0 per cent, commitment charge of 0.7 per cent, 10 years of grace and 40 years repayment period to help us do this. This is very propitious. The CBN Governor has already told us about the framework. This will need to be coupled with other changes. To that effect, what we did in the retreat was to ask for volunteers, Governors who are prepared to lift the constraints on land titling to do it faster, to help us release land and prepare infrastructure, and any of the other accompanying measures. We got about six states that have volunteered to do this.

These include Lagos, FCT, Bauchi, Niger, Anambra, etc. We want to start with these states and iron out all the issues. Once we have done that, we can spread it nationwide. This is on the mortgage finance. We hope that by the end of the year, we will be putting the institution in place and by early next year, people can start looking for mortgages.

You were seen with the Mauritius Vice Prime Minister, what were you discussing with him?

Okonjo-Iweala: The Vice Prime Minister of Mauritius and Minister of Finance who is also at the annual meeting, came to make a gesture of goodwill to the people of Nigeria from the people of Mauritius by asking me to deliver to Mr. President a cheque of $50,000 for flood victims. I will deliver the cheque to Mr. President. The Mauritians are very desirous of forging stronger ties with Nigeria. We visited them some months ago and did a double taxation agreement with them. They want to bring their business people. This is beyond that. But it is a very nice gesture that they do this to support our flood victims.

IMF has projected Nigerian economy to grow by 7 per cent next year, how feasible is this?

Okonjo-Iweala: The IMF has forecast a growth of 7 per cent by 2014. What do we do to achieve this? I think the CBN Governor mentioned that several things were already being done. We strongly believe that we need to diversify the economy, and everything we have heard during this Spring Meetings with regards to the vulnerability that exist within the global environment. The report presented by the Managing Director of IMF, Christine Largarde is that every country needs to build buffers, ie, putting aside money to safeguard the economy when things begin to deteriorate. She actually cited Nigeria for building buffers and encouraged other countries to do so.

The issue is that as you are building buffers, you should also diversify. So, to achieve this 7 per cent growth, we just need to keep working on the agenda that President Goodluck Jonathan has put forward which is to drive agriculture, create jobs, housing, even assisting in driving of Nollywood. Nollywood has asked the government to come behind it with an infrastructure and policies to help the industry move faster.

We have put aside N3 billion to do this. Actually, one of the reasons I had to rush back was that we have a meeting in town with Nollywood officials to finish designing the use of the facility and to launch it so that intellectual property rights can be safeguarded, their distribution processes can be taken care of. Nollywood can employ more and more of our young people. We will also make those structural changes that are needed in this economy like finishing the reform on the electricity sector in order to make sure that the private sector will continue to invest. We are discussing with the World Bank here on more partial risk guarantees to help de-risk the sector. And they are very willing. They have put together an energy team from IFC, Morgan, and World Bank to focus on this issue.

Is Nigeria buying into the proposal by ADB to invest part of the nation’s foreign reserve in infrastructural development?

Sanusi Lamido Sanusi: The ADB was planning to set up an infrastructure fund and was saying that suppose ADB issued a bond to raise money for infrastructure, would banks in the continent be willing to invest in the bond? And we said from a credit risk perspective, ADB is already rated AA, it has to make investment guidelines, but ADB will have to show us its liquidity facility that will enable us dispose of that liquidity instrument if there were problems. That conversation has continued in this meeting. There was another dinner yesterday or some day before where they have started putting some flesh to that proposal and exactly how the fund will work, and I read a statement on behalf of the Minister at that dinner that Nigeria will support anything that ADB will do to improve infrastructure in Africa. We also advised ADB not just to focus on infrastructure within countries but infrastructure that will link countries and facilitate economic integration so that we don’t just keep repeating what individual governments are doing.

Minister, there is the accusation that you are promoting Igbo agenda and instigating the sack of a serving public officer, what is your reaction to this?

Okonjo-Iweala: I think it was brought to my attention last week that an article was online and published in some Nigerian papers alleging that I was pursuing an ethnic agenda. As you know, ever since the President has ordered that out of the six or seven positions that were open, headship of key institutions, he said everybody now say they are marginalized, as such, he would do it in a way that every part of the country is served and reflects federal character. He summoned two ministers and he asked them to assist him to make the decision because he is the ultimate decision-maker.
These two ministers should advertise the positions domestically and internationally, and go through a process to help screen the applicants. And he wanted to use the screening procedure on the basis of merit. One of his objectives is to try and introduce some competition and merit into some of what we do in government like he did in You-Win which has been highly appreciated.
So, he summoned myself and the Minister of Health, and basically said that the Executive Director of National Health Insurance Scheme and the Chairman of the FIRS should be advertised and we should go through that process, then, we will end up giving him a shortlist out of which he will then pick whichever candidate he will give the job. The Minister of Health and I asked our Permanent Secretaries to handle this. The two Permanent Secretaries jointly set up a process of competition to identify a consulting firm which will help the government go through this process. And it took a bit of time for them to do this competition and short-listing.
Philips Consulting won the bid. So, they worked with Philips Consulting and open a competitive process to do this. It was a transparent process. At the end of the day, a shortlist was handed to the President for him to make a choice. But we noticed that somewhere during this process, a lot of attacks began suddenly on the issue of FIRS Chair. And this thing kept mounting and mounting, culminating into this article. We didn’t pay attention, but this other article you were talking about was brought to my attention and basically, the article, which was published on Premium Times, even says that I am pursuing an ethnic and anti-North agenda, and that since I came, all the people in the financial sector are from one ethnic group.
Then they listed all the names including the DG of the NSE, the DG of SEC, the DG of AMCON, the MD of the Sovereign Wealth Fund and myself. Basically, I didn’t know who wrote the article but it turned out to be someone who is within the government. But the point is this, most of those occupying those seats except for the Sovereign Wealth MD were appointed before I came into government. So how do you then say that I am responsible for their appointment? However, this article was popularised. It was published in Sun Newspaper.
It didn’t come only to Okonjo-Iweala’s attention; it was published for every one to read. I think people discovered that the person who wrote it is a serving civil servant. I have absolutely no desire or drive for anybody to lose his/her job. But I feel that if you have written something that is incorrect, you should politely retract it. The CBN Governor is here.
I wasn’t there when the AMCON was formed neither did I appoint the D-G. The CBN Governor will tell you that. You can check the date of appointment of these officers. The SWF was competed again on the instruction of Mr. President and who won it, won it on merit. And the people who ran the process published it in the newspapers so that Nigerians could see.
Who chaired the nomination committee? Fola Adeola. Who were the members who eventually made the decision? They were chosen from each geopolitical zone in the country. So, I feel this is an oppression of a Minister. It is a wrongful oppression by publishing wrong information on what the Minister did not do. You know it is not in my hand if you publish wrong information and paste it on the internet, the people who are in charge of the civil service and your civil servants will read it. So, trying to say that Okonjo-Iweala is driving an agenda to sack someone is not correct. But I believe that if you publish something wrong and you know it is wrong, you have to retract it.
Sanusi Lamido Sanusi:On two of the appointments, I was the one who came to Washington in 2010 and called Mustapha Chike Obi who was then in New York and told him to come and run AMCON. I did not consult Ngozi Okonjo-Iweala. I knew Chike Obi as the most brilliant boy in his class in Kings College. We attended the same Kings College. I know him from his work in Goldman Sachs. I was seeking for an investment banker who had not been corrupted by the system in Nigeria. And I was the one who recommended him for appointment. I was the one who called Kingsley Muoghalu from Geneva and recommended him to President Yar Adua for appointment. Yes, I did telephone Ngozi Okonjo-Iweala at that time because I wanted reference from people who must have known him. I was the one that invited him to come.
These things happen in Nigeria. It doesn’t stop the press from saying that I am pursuing a northern agenda because Mustapha is a northern name. Many a times, we do ourselves a lot of damage. My view about this is that we push first of all this federal character thing to the extreme. My idea of federal character is that whatever you do and whatever institution you have, you reflect the diversity of Nigeria. Diversity is not just ethnicity-driven, but you still have Muslims, Christians; northerners, southerners, women, men; and that is what is called federal character. Apart from all these ridiculous things of accusing someone of who you appoint and did not appoint, the entire concept about inclusion and diversity have been so abused that anyone who loses a position, for instance, you sack the management of an institution for fraud and someone says it is ethnic cleansing. You all know what we went through in the banking industry when people stole people’s money and we removed them, it was seen as a northern agenda. So is it southern agenda to steal N192 billion of depositors’ fund? So, we need to outgrow this. The second point is that it does not give any newspaper credit for a journalist to take an online story and publish in his newspaper. There was recently a story that says that I own an oil well, giving the name of a company that when we checked, it does not exist. There was a story of the CBN Governor owning a company that takes toll for parking with a name of a company that is not registered with CAC. And I was alleged to be a shareholder of the company. We don’t have the time to be pursuing people in court and charge them with libel. I don’t have the time because to sue for libel, you have to go to court in person. But this idea that every public officer is guilty and you can just write anything about them is wrong.
If online people do this, those of you that work for a very responsible media should verify your own story. You take something from Premium Times and publish in credible newspaper. I don’t even know who owns Premium Times nor its address. After some time, it goes round. I get messages and people keep asking me if it is true. And I say sorry, if you know me you won’t even ask me.
In this case, it was someone working for government who wrote the article. Secondly, we strongly believe that according to what the Governor was saying, there is talent in every ethnic group in Nigeria. Every group has the ability to produce bright people. So, we should not be afraid that we won’t find the right people or when processes are used, it is designed to screen out a particular group. I know that if we follow that process, we will find the right people who will work in these places without undermining the credibility. Recently, we appointed Dr. Shehu as Executive Director of the African Development Bank. If you check his credentials, you will find that he is not from the South-East. You appoint people who can carry the name of this country with pride.
IMF said recently in its report on Nigeria that AMCON’s operation should be winding down…
Sanusi Lamido Sanusi:
AMCON was set up for a purpose which is to repair the balance sheet of the weak banks. Why Europe has not been able to recover is because the balance sheets have not been repaired. We had a banking industry that was overburdened by a non-performing loan. Until the market knew that those assets have been taken off those banks, there was no confidence. If you notice in Europe, what is killing Europe is confidence. You can put money in the entire bank, if people don’t have confidence in the banking system, the system will not work. One way to restore that confidence was to clean off the balance sheets of those banks. So we took all those non-performing loans and transferred them to a vehicle called Asset Management Company of Nigeria, the bad bank vehicle.
What that means is that the banks are now clean and healthy. Obviously, the banks transferred risks to one vehicle. So to say there is a risk in that vehicle is tautological. If those risks were not bad, the banks wouldn’t have collapsed in the first place. So, you have got these bad loans and money put in capitalised institutions, and AMCON now has the assets and we know that those assets even when fully sold, will not be enough to recover debt. So the gap has to be filled by someone. And what we have done in Nigeria which nobody has done, is to bring all the banks in Nigeria to make contributions into a sinking fund so that the Nigerian banks with some contributions from CBN will now fill the gap from what you recover from AMCON and what AMCON owns.
So you don’t need to come to tax payers or Ministry of Finance for money. This will take over a 10-year period. In terms of AMCON having succeeded in what they are set out to do, it is amazing. Everybody uses AMCON as a model. If you look at the extract of IMF, it said that AMCON should be used by other countries. So it has worked. But that is step one. The more difficult step now is to continue to manage AMCON so that those risks do not crystalise. You have solved one problem; you still have to deal with it over a longer period. And everything we are doing in terms of amending AMCON Act, putting in place, legislations and building models, is to make sure that over the next 10-12 years, between AMCON, the banks and CBN, we generate enough money to repay that debt without the government balance sheet. It is an ongoing process. It is not so easy. Any institution that carries N4 trillion of debt is a risk. Both the CME and myself are aware of the risk. But it is a risk that we understand and we have a solution. And it is not beyond our capability to manage. We want to assure Nigerians that everything is under control.
On the use of technical terms, the IMF uses a term like moral hazard. Most Nigerian newspapers said that something immoral happened. Moral hazard is not immorality. What IMF said is that if the banks believe that an institution like AMCON is there to continue buying their bad loans, you will run the risk of having the banks take irresponsible risks. That is a moral hazard. And also, if AMCON believes that the Nigerian banks are going to pay for its debt, you will run the risk of AMCON not exercising its best effort to recover its asset because there is somebody else that will pick up the can. These are moral hazards. There is no disagreement with the IMF on that. So moral hazard does not mean we have done something immoral or AMCON is corrupt.
To eradicate extreme poverty, what is government’s strategy?
We are working very closely to make sure that the risks in the balance sheets do not materialize and are well managed. The strategy to eradicate extreme poverty is that of the World Bank. The World Bank is proposing a new strategy to help countries to eradicate extreme poverty, ie, all those living below $1.25 per day by 2030 and they are now developing that strategy to tell us what the instruments they want to deploy to assist are.
But we are not waiting, we are doing our own work with poverty eradication because we know that growth without people being pulled out of poverty and growth without jobs is not what we want for our economy. So we have been working, this whole transformation agenda, what we’ve talked about is that we want to change agriculture and even the governor has been working and the central bank has been involved with this scheme. This move to help the Minister of Agriculture drive change in agriculture and to add value to our own products; to grow what we eat because we are able to do that is about poverty eradication. While doing this, we create good jobs along the way. This is what we mean by trying to eradicate poverty.
If you take 50 graduates as they did recently, you know a large investor, Dominion Farms, is putting $40 million into rice cultivation and the Minister of Agriculture said to them; ”once you build your own farm, a large farm of hundreds of hectares, you should also take 50 graduates who would be trained to grow rice in a modern way. They will cluster around you so that when you build your rice mill, they will automatically send the rice there also to be milled.” And the investor agreed and 50 of the graduates were sent to Kenya. That’s a new way of doing business. Those are some of the things like housing that we mentioned before, agriculture and even creative industries that we are working on.

Related Posts

Leave a Comment