Ibrahim: Nigeria Needs to Borrow More for Infrastructure

Founder of the Global Fleet Group, Mr. Jimoh Ibrahim, spoke to journalists during the IMF/World Bank spring meetings in Washington DC on the need for the federal government to revamp the state of infrastructure in the country through debt. Obinna Chima pr

The rising debt profile in Africa and other parts of the world was a dominant issue discussed at this year’s meetings. Are you not worried about Nigeria’s debt level?

I attended this meeting as a guest on the invitation of the World Bank/IMF. It has been quite interesting. I engaged a class about this same issue you have raised. So, debt is not an issue at all in economic growth. You need debt for sustainable development. If you are not indebted, we should be worried that you are growing without debt. The United States of America as a country is the highest debtor and it is growing. China is also in debtor. Now, let’s come back to Africa and specifically Nigeria. Nigeria’s total debt profile is about $20 billion. Five abandoned projects in Nigeria are up to the country’s total external debt. That was the point I made at one of the sessions I attended at the World Bank. Take Ajaokuta steel, $5 billion had been spent there and yet the project is not yet complete about 38 years after. Now, there is another power plant project which about $500 million has been spent on; take the Abuja 28km express road to the airport, that is a $3 billion project. Also, take the Hadeja irrigation project in the north-east, which is about $2 billion. I want to exclude the Lagos-Epe expressway, because it is a state-government project. So, if you look at about six projects, you already have about $20 billion cost of project, while the country’s total external debt is about $20 billion.

That is too small. Nigeria cannot grow with that size of debt and it is going to affect the country’s development. The problem with Nigeria is not debt, it is that we have a debt service problem. So, the cost of debt service is about 60 per cent of the annual budget which is worrisome. When you have a projected income and you use about 60 per cent of that income for debt service, the remaining 40 per cent is not enough for critical development. So, what we need to do, and I will be generous to give this advice, is to take more money and then wrap up all our debt, restructure, refinance and refinance it and get an aggregate amount of debt that we need to take, put it in about 30 years repayment scheme and focus the money on infrastructural development in order to realise sustainable growth. So, who will borrow you the money depends on the project you want to do. Again, we must understand that there are specific loans for specific projects and there are specific institutions that are noted for granting specific loans. So, it is very important that we go that way. The real issue is not about the size of the debt, it is still about how we utilise these debt. The high level of recurrent expenditure remains a challenge in Nigeria.

The IMF and World Bank are also worried about the country’s low level of revenue generation and also called for an aggressive tax drive?

Of course, because the economy over time had been dependent on oil. Why are they worried now? Since 1970, the country has realised over $200 billion from oil. They should be worried about where the over $200 billion went to and not about what we can get now. We know the world economy is in recession and so you cannot use tax to get out of recession. If you tax people more, they are already recessed. This is not the time to be talking about increasing tax or frightening them about that. They might be scared. What we need is economic welfare. We need to introduce welfare projects that would detach the people from poverty. We also need to have a very good plan that can really take us out of poverty.

Any government that decides to raise tax during a period of recession, would lose her legitimacy.There are various ways to grow an economy. This is the time to give incentives to companies in Nigeria and not to tax them. Let me give you an example, when the US economy was in recession that shook everybody, President Obama told companies operating in the country that if they employ four persons, they get tax rebate for two. What happened? Unemployment responded and reduced. If you do that in Nigeria, unemployment would be addressed.

You cannot tax those that are jobless or companies that are dying.

But if you give companies incentives to grow and remain sustainable, you can continue to tax them forever. But if you kill them in two years, your ability to collect tax from them will end in two years. Again, don’t forget that today you cannot compel people to set up their companies in Nigeria. So, the level of capital flight can be high as people can decide to take their companies to other countries. We need to encourage them to invest in Nigeria.

So, the Nigerian economy should be inviting and government should be able to develop a programme that would see that companies get tax rebates in certain areas. And the government has to reduce regulation. The IMF has been talking so much about regulation. We have a free world today. The world is flat and the barriers to entry have been removed. Today, people are more wired than we thought. So, obviously there is globalisation today and nobody can kill it. Don’t forget that as companies are competing, there is also competitiveness of countries. So, if your country is not competitive like the other country, people would move to the other country. So, the number of Nigerians that travel out of the country every year is huge. In Europe, there are 32 million Nigerians. If that 32 million persons are fully engaged and working in this country, they would contribute to the growth of the country, but if they move to live in other countries, then that country is enjoying free labour. Again, there is disaster in our educational system. You cannot grow when your educational sector is descending. So, you must look at how much you can push your educational sector because there are lots of issues in that sector.

Can the type of leadership we have in the country today help us achieve these things you have highlighted?

President Muhammadu Buhari did not tell you he was a professor when he was coming to run as the president and he doesn’t need to be a professor to run a government. What he needs to do is to be surrounded by technocrats to operate the system. There is a distinction between a system and a process. So, he needs a strategy and a system. Buhari has a strategy, but there is no system to drive the strategy. That is the problem. So, he wants to fight corruption, that is a strategy, but he has to go out to create a system that would drive the strategy. Unfortunately, the system on ground cannot drive the strategy. So, there is a mis-match. His strategy is not communicating with the system. And what is the system? The system is the civil service that would drive corruption. The EFCC is doing its best, but how many corruption cases can the EFCC tackle in a country of 200 million people. That is a very minute institution to fight corruption. Also, the process in Nigeria is bureaucratic.

What is your take on the country’s Economic Recovery and Growth Plan?

You see, plans are contingent on the environment. So, if you come to the IMF and you take a blueprint to Nigeria, it would never work. Your policy document, is it reflective of your environment? There are specific solutions in the Nigerian context, which are different from the Ghana’s context. Corruption in Nigeria is very difficult to fight because the solution to fighting corruption in Nigeria is different from the general solution to corruption. The general solution for corruption is to jail or kill the person involved in the corruption. But the Nigerian context is that they are going to fight back. So, there is a need to create a balance between fighting back and at same time reducing corruption.

Maybe the IMF and World Bank also