Beyond recession, towards a resilient economy

Government share of the major Oil Joint Ventures (IOCs) should be sold down to 40% or no more than 49%. This would represent a replica of the highly successful Nigeria LNG (NLNG) model that provides a healthy dividend stream for the Government. If it is good for NLNG, then it should be good for the IOCs too. I envisage that the main obstacle here will be our value-destructive NNPC who might be reluctant to become a minority shareholder (40-49%). The secret behind NLNG’s success is that NNPC was “reduced” to taking a minority shareholding in this worldclass investment project. Asset sales can yield $15-20 billion over the course of the next two years if planned carefully;

We urgently need to deregulate the entire downstream petroleum sector and also privatise NNPC’s three refineries + depots and pipelines and domestic gas;

Our civil/public service is still bloated, corrupt and inefficient and has become the excuse for a privileged 2% of the population to consume close to 60-70% of the annual budget via the recurrent expenditure vote. What is left over for the capital vote is insufficient to help finance social and physical infrastructure. Methinks mass redundancies are now inevitable, along with the implementation of an even bolder Orosanye Report because the nation is now stuck with a public service and legislators that we could only afford at $100 per barrel oil prices;

Less than 25% of our 36 States are economically viable. In the early 1960s, when Sir Ahmadu Bello wanted to build roads in the old Northern Region, he set aside salaries for a Works Minister (also a Parliamentarian) a Permanent Secretary and a lean Ministry of Works after which all the money set aside for roads was used in actually building roads. Today, overheads associated with 19 Commissioners and 19 Permanent Secretaries and their privileged workers

4) 5) 6)

consume virtually all the funds set aside for roads, leaving little or nothing left over for actually building State Government roads in most of the North.

The obvious answer is political restructuring, as unpalatable as it may sound to some. For example, in terms of zonal overhead spending, we “expanded” the North from one regional government to 19 States and now need to “bring it down” to a more affordable 3 zones by retaining some overheads at the zonal level instead of spreading same over 19 states. We should keep an open mind towards this political restructuring argument because it is not even true that homogeneity within a State or zone necessarily guarantees peace. Somalia is homogenous and yet it is probably the closest thing there is today globally to a failed State. Conversely, there are communities, States and nations around the world which are heterogeneous, but which are living peacefully together;

To help overcome, the social and physical infrastructure deficit, we need to embark upon the restructuring canvassed in 5) and 6) above, whilst also embracing the private sector as the engine of growth and a capable partner/ financier of infrastructural development. The Power and Transportation sectors are crying for more and not less privatisation. The logic of the power sector reforms was built around the adoption of cost-reflective tariffs, which we have since thrown out of the window. The transmission sector and gas supply difficulties are some of the other weak links in the power value chain;

A dysfunctional legal system is an impediment to the rapid growth of a modern economy. The Chief Justice of the Federation must “buy into” and spearhead radical reform of our legal system;

9) The anticorruption crusade will only complement the positive changes envisaged above if the Government itself respects the rule of law and obeys

7) 8)

the Courts. We should err on the side of extending the “benefit of the doubt” to accused persons whenever allegations are unsubstantiated or cannot be proven beyond reasonable doubt. This need not signify the end of the anticorruption crusade because there will always be enough cases which can be proven beyond reasonable doubt. It is better to let four people who might be guilty go free than to convict one innocent man. The latter drains all the energy out of the anticorruption crusade and also destroys business confidence;

Restoring business confidence should be the primary preoccupation guiding virtually every statement by public officers. This calls for a paradigm shift because the current preoccupation is for every Minister, Governor, Regulator or overzealous official to threaten investors with closure, bankruptcy, fines or seizure of their goods. Frightened businessmen (local or foreign) will not invest. We should be wooing investors instead of threatening them;

The Federal Government should immediately appoint directors to the boards of every regulatory agency. Keeping a Lone Wolf at the head of a regulatory agency is dangerous and therefore detrimental to business confidence. The important lesson from the recent Financial Reporting Council of Nigeria imbroglio is that a single rogue regulator can hold the entire system to ransom, help destroy business confidence and hamper economic growth. This only became possible because the checks and balances which our laws envisaged, through the appointment of Boards, Council members or Commissioners, were not in place.

10) 11) CONCLUSION

Our economy is underperforming because, amongst other things, it is caught up in a low foreign exchange trap. Borrowing alone is not and can never be a panacea. Indeed, borrowing without instituting necessary and badly needed economic and structural reforms is akin to suicide. Those who are canvassing for more foreign debt simply because our debt/GDP ratio is low are overlooking the fact that our debt service ratios are already high. Our debt service ratios are high because our Tax/GDP ratio at 6% is exceedingly poor. It will require a few years of concerted action to move economic agents from the informal sector to the formal sector in a significant way before our tax/GDP ratio rises significantly. Relying on debt alone to get us out of the present low foreign exchange trap is therefore a high risk strategy. I consider it to be ill-advised. That is why I also emphasise 2) and 3) above.

They help to improve the forex supply situation, without burdening our already high debt service ratios. If care is not taken, our deteriorating economy might take us on the “road to Venezuela or Zimbabwe”. Nigerians take pride in arguing that the Lord loves us and so he always intervenes by bringing us back from the precipice in the nick of time. I do not doubt that. What I truly believe is that the Lord intervenes through people. After the unbridled insults that were heaped on the Emir of Kano and a few others who dared to tell the Government the truth about the parlous state of our economy, the easiest path for me would have been to keep quiet or to simply blame speculators, detractors or past regimes. If I did that then the attack dogs would have won. NO, I am not about to abandon my right to free speech on account of some insincere sycophants. I speak because I want my country to improve. So help me God. *Atedo N A Peterside, CON is the President & Founder of ANAP Foundation and is also the Chairman of Stanbic IBTC Holdings Plc and Cadbury Nigeria Plc.