Lai Omotola, the Group Managing Director of CFL Group, a purely indigenous infrastructure development company with core interest in real estate, agriculture, oil & gas in this interview examined the state of the economy in the year 2017. Omotola who is also into publishing stated that Nigeria is not a rich country but trying to move from the third world, adding that for the economy to get better in 2018, it needs tactical, strategic and in-depth operation. Excerpts
s we wind down in 2017, it has been a very challenging year, what is your take on the economy?
There are three indices with which we measure the economy, one is the exchange rate. In the Private sector we used the black market rate because it is easily accessible. In the beginning of the year, it went as far as N500 to a dollar. It has been sustained at N365 for the past six months. This is commendable. The stability allowed the private sector to plan, but we pray that it comes down to below N200. Second is the interest rate that has also gone very high raging between 35-37 percent. The banks in the year under review have been most challenged. Liquidity issue and very low rate of granting of loans have been the order. The third index is the inflation rate which stands at 15.9. The promise of the government was that by this time of the year, we should be looking at a single digit inflation rate. With all of these, you will realise that the environment is indeed challenging. More challenging to the private sector especially the importers. We are of the opinion that if this economy must do well, it must be a private-sector driven economy. The statistics of businesses that have collapsed this year are amazing.
The number of people that have lost jobs is also very high. It means the private sector which is supposed to lead the economy is bleeding tremendously. Today, there is close to a zero percent credit disbursement in the banking sector. We are indeed in a serious situation. Again, the country is import dependent. As at today, Nigeria imports fish with a total value of N250billion, N720billion on importation of rice, N3.0trillion on importation of wheat and flour. So, this basically means that the country cannot feed herself. When the importation is high, then a high number of people will be chasing the dollar and that makes the value of the dollar rise. The only way out is make the private sector become very productive. The PMS importation is also close to N2.5trillion per day and we can all see why we are having challenges again in that area. Sadly, the government has come up to tax the same private sector in a move to shore up their revenue aggressively when countries like America is reducing tax for multi-nationals in a bid to create more jobs and draw in investments.
It is an error to say government is the biggest spender. They had promised that the budget will be passed by January but we are all witnessing the drama that is unfolding and the feelers we are getting is that the budget will not be passed earlier than March. This period, in an election year, means the economy will take the back seat. This is because every politician will think of holding on to power before governance. It is only when you are in power that you can talk about budget. We must tell ourselves the truth that Nigeria is not a rich nation. Today, nations that are rich have interest rate not more than 1 percent. One of the major challenges of our electricity today is that there is no money. It has been privatised, but the so-called money bags that bought over the infrastructure have since found out that their money was peanut to the massive investments needed in this sector. Our own money-bags bought over the infrastructure but they cannot invest. We are not a rich country. The moment we realise that we just want to begin to move from the third world, the better for us.
The economy is hinged on the resources of very minute area in Nigeria feeding 180million people, such that if that resource does not translate to dollar, and the cheque is not received by the end of the month, some states will shut down within two months. Sadly too, all efforts to diversify the economy have not yielded any result.
The state of our infrastructure in the last 20 years is poor. The major infrastructure development we witnessed in the last 20 years was the building of the Third Mainland bridge. And for about 20 years of democracy, no government has been able to build even half of the Third Mainland bridge, but when we look at the summation of the amount of money that came in the last 20 years, it is totally mind-bulging. We rather spend so much money on recurrent expenditure. Our economy needs an emergency operation, one that is tactical, strategic and in-depth. Otherwise, 2018 would come as another challenging year, beclouded by politics.
Do you think that the present administration could think out of the box to solve the country’s economic challenges?
To solve Nigeria’s economy, one does not need to think out of the box because the problems confronting Nigeria’s economy are mundane. Our challenges do not really require that one thinks out of the box. It is not Japanese economy or Chinese economy. The problem of the Nigerian economy is benchmarked on what the citizens would eat. All we are eating are 70 percent imported, too many people chasing the dollar. That is why the dollar is high. Such arrangement must be changed. That does not require any special economic strategy. All that is required is old economics to solve. There is nothing serious about the Nigerian economy that cannot be resolved. From my research, I have realized that the economic team in any country is not about bringing crowd together. The thinkers for the economy cannot be more than four. Those are the like minds. But when you bring 36 governors together for them to discuss on the country’s economy, what happens during that discussion would be quota system. But when the team has only four or five persons in strategic positions, things will change dramatically. In this session, there should be the Governor of Central Bank of Nigeria (CBN), Minister for Finance, Minister for Works, Power & Housing, Minister for Transportation and Group Managing Director of Nigerian National Petroleum Corporation. What they needed to turn Nigeria’s economy around is to create activities. It is because there has not been any form of activities in this government.
If you were the CBN governor, what would you have done differently to boost the economy?
The CBN Governor is highly challenged. A lot of experts claim that the government has no business in business. But what happens when the businessmen fail, the government must rise up and address the challenge. That is what we call intervention. The apex bank has been intervening in different sectors including real estate, manufacturing and others. The CBN has become the lender of last resort which should not be happening unless once in 50 years. It should be temporary. Perhaps after one year, the apex bank leaves the sector for the stakeholders. But the CBN has now taken that permanent role because the banks are lying prostrate. When the bank continues in that position, it would be difficult for the economy to come up. The CBN is the one giving the loans that the bank should have given. Do not forget that the banks too need the CBN to survive. You will remember the National Bureau of Statistics report stated that the money already collected by the commercial banks to remain healthy from the CBN is alarming. That was the same window the former CBN Governor, Mallam Sanusi Lamido Sanusi shut, which led to some banks to merge but has now been opened for the banks to survive.
Why do you think stakeholders in the power sector are not exploring the window of foreign investors to correct the challenges in the sector?
If this country is to get it right, three things must happen. This country is under a serious spiritual siege. Someone must step up to do what I described as spiritual correctness. God does not talk to a group of people, but to someone who will be appointed to embark on certain activities. It must be corrected spiritually. Things are happening and all we do daily is exclamation. Second, we must get our infrastructures right. Third, the orientation of entrepreneurs must be changed totally. Recently, the Asset Management Corporation of Nigeria (AMCON) reported that about 250 business owners owe it N3.2 trillion. If that money had truly been pumped into Nigeria’s economy, things would have changed.
You said the banks are lying prostrate, some banks declared profit recently. How does this justify banks’ assessment?
I have been taught in accounting classes that accounting is a matter of opinion. It is half full and half empty. Profitability is all about opinion. I can declare profit does not translate to Naira and Kobo for the shareholders. Rather than give the investors profit in cash form, banks asked them to plough it back through increase in shares. Because accounting is an opinion, it is responsible for some banks that ran into crisis in the United States. They juggle the numbers and present the statistics to the shareholders and customers. One needs to understand that the main source of income for any bank is to sell money. They do that through issuance of loan. When the banks are not lending, how then are they making the required profit?
The ease of doing business in Nigeria has improved by 24 steps compared to 2016 rating. Do you think this is justifiable and better for the economy?
The new ranking is justifiable but the mistake many often make is that the purpose for ease of doing business is different from the Fitch Rating. The reason for this improvement was that the World Bank has realized that what is important in every economy is job. That is why any politician that campaign more about job creation has ample chances of winning election. The bank realised that the sector that creates employment more is the informal sector. The informal sector players do not need to employ large number of workers. So, the rating does not justify the multi-nationals but the informal sector actors that could be affected drastically by any government policy and how the government is making things easy for them to embark on their business. They brought nine criteria which anyone must meet. After examining the country, the bank realised that the present administration’s economic team led by the Vice President, Prof. Yemi Osinbajo, has changed the strategy previously adopted; that is, the CBN assisting the small businesses to grow in the country. It is different from the Fitch rating which stated that the credit rating of commercial banks in the country is moving towards BB- (minus). The reason for this was that they discovered their revenue could no longer support their liabilities.
How then do we get out of this problem?
The media has to come to the rescue. Sadly enough, the media has failed because every knowledgeable person in Nigeria relies on it for information including President Muhammadu Buhari. When anyone makes allegation or claim, they all refer to the media as their source of information. That is why the solution to Nigeria’s problems is with the media. So, it is only the media that can change the narrative. The media has the power to set the agenda for the public. Though the media is facing its own challenge, theirs is not as bad as other sectors in the country. Men and women of goodwill can still do something about the media.