Ibrahim: Economic Crisis Looms, FG, States, Companies May Collapse
Chairman and Chief Executive Officer of Global Fleet/Energy Group, Jimoh Ibrahim says economic crisis looms in the country due to an imminent world economic recession, expected before the end of this year. Ibrahim, who is a PH.D student at the Cambridge U
You have been quiet politically, what is happening?
I just completed two Master degree programmes - Master of Science in Major Programme Management (large project) of the University of Oxford and the University of Cambridge’s Master of Business Administration (MBA) which took me off the radar. Two degrees of two major universities (Oxford and Cambridge) at the same time took about three years of my time, which is why I haven’t been around. When I had small holiday, remember I came and did small politics, which was for a short period of the holiday time. I didn’t have enough time outside the time accepted by the two universities. It looks as if am back now, but not really, as the University of Cambridge has accepted me for the Business Doctorate programme, I will be off the radar for another three to four years. You may not see me often but you will see some of my activities in the international sphere like the International Monetary Fund (IMF) spring meetings coming up in Jakarta, Indonesia in October, and the IDFA meeting on infrastructural funding in Africa. I shall be combining these with my academic commitments.
We just heard that Nigeria is down with $22 billion debt profile. What impact will it have on the nation’s economy?
One of the things I usually tell my colleagues in any ‘strategy class’ is that strategy is about finding favour in chaotic situation. This provides you with opportunities of doing alignment and strategic engagements. $22 billion debt is small in normal situations, considering the size of the economy. It will be apparently suggested that we are good managers of asset because gross domestic product (GDP) to debit ratio is 20 per cent but it will be a sad news, if GDP to current account is deficit or where GDP to reserve is not impressive. So also where GDP to revenue is not positive or if unemployment is increasing or inflation is on the increase or if there are challenges in the fiscal Federalism. In such critical situation, what you will hear people say is ‘restructuring.’ Why didn’t you restructure when poverty rate was almost at equal proportion in the ‘70s across the federating units? This is the question I often ask on a normally day. Lenders, except China, will normally consider positive or likely positive GDP to revenue or reserves before lending. There is nothing wrong in borrowing if the money is to fund deficit infrastructure but certainly not to fund recurrent expenditure. If you service your existing debt with about 35 per cent of the total budget and your recurrent is another 70 per cent of your budget, your deficit is five per cent and there is no provision for capital project. IMF may not be your friend and locking out to China may not be an option. The synopsis of what my Doctoral thesis is addressing is the huge abandoned projects in Nigeria, given that over 62 per cent of the total projects from 1970 are abandoned. There are over 11,000 projects abandoned, out of which five of them are equal to the country’s total debt, such that when completed, we can say technically that we do have zero per cent debt to GDP ratio. Let me name them straight away; Ajaokuta $5 billion, Hadija Dam project $3.5 billion and Okopia power plant $1.8 billion, two airports projects $2 billion and SUREP project $3 billion or thereabout.
The real point for Nigerian is what do you do with your abandoned projects? Are you going to borrow money to commence another abandoned project? Or is it the case that we are borrowing to complete those project abandoned or are we borrowing to close the poverty gap in the North East or are they no longer part of us because of high poverty ratio? Strategic alignment is key to whatever we intend to do. Completing abandoned project may be a starting point of saying bye-bye to unemployment and inflation. It is also a right way to grow reserve and one way to increase GDP to revenue with good foreign direct investment (FDI). I am concerned about the rate Nigeria is depending on China. China is almost everywhere in Nigeria like they are doing in other African countries. In terms of China, there is nothing wrong in borrowing from China and perhaps, there is no were to even borrow from apart from China. What we are saying is that we should be telling the Chinese that we are borrowing to complete viable abandoned projects and not much of a new project. So, when the last administration went there to borrow $5 billion to do the airport projects and told the Chinese that we want to do 10 airports, we ended up doing two that were also abandoned and the $5 billion is gone. So, what story are you bringing around again? China is coming to us for choice projects; petroleum projects, refinery projects, rails, electricity and so on which is the money making machine of the economy. If you are a lender like China, will you be lending to fund schools or military equipment? What we are saying is that you can go anywhere to borrow money but let the money be used to complete some of the viable abandoned projects as opposed to new projects, unless it is compelling.
Do you think the Nigerian government has any business starting a national carrier at this time?
For Nigeria to develop, we must learn very well how to run away from businesses that are within the exclusive jurisdiction of the private sector and projects that are money burner for the public income. Yes, certainly during the industrial revolution, state ownership of public asset was a policy that triggered development, but don’t forget that it was the source of the great debt of the ‘80s which made institutions like IMF to be popular with the responsibility of helping to adjust developing countries’ balance sheets clustered with convergence of debts. Never again will anyone be thinking of that now. In Dubai for instance, the government doesn’t manage the Emirates Airline. They only have shares in the Emirates; it is managed by the private sector. A lot of things in Dubai are being managed by the private sector. So, when you say you are going to have something as terrible as the risk of national airline, you are just deceiving yourself. How will government handle issues such as cost overruns and schedule delays which will result in benefit shortfalls which the stakeholders will be unhappy with? Government should continue to provide enabling environment for businesses and I think the current Vice President office is putting a lot of efforts in this regard. They should completely remove their hands from business, develop more private people and teach entrepreneurship