Akinyemi: Radical Ideas are Required to Stimulate the Economy
Eben Akinyemi is the principal partner, Stransact Partners, a front line strategy, transactions and tax firm. He spoke with Adedayo Adejobi on the economic downturn and the policies put in place by the Central Bank of Nigeria to stablise the economy. Exce
As a Financial expert, taking a cursory look at the Nigerian economy showing signs of decline, what is your assessment? The Nigerian economy in the last 6months has been very unstable. As a matter of fact indices show that trade, stocks and shares are declining. And as it is, analysts are showing that the economy is in serious crime. This issue with Nigeria is that we have a lot of experts in quote, and sometimes you begin to wonder if these experts have common sense. We really need people that can think out of the box at this moment and I am very worried because I don’t know who the government listens to. Nigeria really needs a radical injection of ideas to stimulate the economy. We need a radical intervention by the government. When I say intervention, I’m not saying the government should give out cash to people. Once it is called government, they should be able to control our collective productivity. In the 70’s, when they started indigenization decree, the first company to sell shares made some people rich. It kick-started our capital market, and today we claim to have the largest economy in Africa. What is the depth of our capital market? Now we are already cresting liquidity in the capital market, thus ensuring expertise and proper governance in the capital market as a whole. As the government has appointed its cabinet, with time fast ticking, we hope they will bring to bear proper governance with stimulating ideas that will help us all out of the current state Nigeria is in.
What is your critical and structural assessment of the economic team, in the wake of crashing oil prices and cultural factors considering potential population? I cannot claim to know more than the President especially when he has campaigned for the best advisors. I would rather just leave them to focus on their job and see how we can support them where it is possible. The economy is like a life boat where all of us are in. Nigeria has one of the youngest populations in the world, and the challenges are enormous considering potential population explosion driven by cultural factors which we cannot just take away like that. So with oil crashing to $30 a barrel, we need superior reasoning to help get out of the mess that we are in. It might not be out of place to reason that the President has access to the best advisers, and came up with the people he came up with. I am happy that for the first time in a long time, we have another Accountant as the Minister of Finance. Accounting is described as the language of business and for you to communicate effectively, you must master language. It is a good thing for us that someone who speaks the language of business, and understands the accounting is the Minister of Finance.
With the economic year just kick-starting, from a Professional perspective, what are your projections for 2016 economic year in view? We are hearing good news, although it may not be amplified enough. There will be census this year and the National Population Commission alone will be hiring one million people. So if we have one million people having the chance to increase their income in 2016, it is good. The central bank also says it has plans for graduates, and I believe people do not understand that for any scheme to work, it has to be sustainable. It is not enough for the government to have a scheme where it has a list of people, and they get money regularly without a form of sustainability. Most of those things are short term projects. The Minister of works, Power and Housing says he’s also committed to completing all construction jobs, and it is priority for government to get people who lost their jobs to be back working. There also a need for every one of us to work on our mindsets. In Nigeria, there are slush monies going around. You could see that from the current Economic and Financial Crimes Commission (EFCC) investigations and fraud cases are being unveiled by the day, a lot of our so-called big men never really did any job. We just hope that economy gets back to productivity.
The government looks at its finances, other arms like the Nigerian National Petroleum Corporation (NNPC), as sources of productivity. But they forget that the greatest sources of productivity are its people. Nigerians are naturally innovative. So in the midst of hard times, the Nigerians have to look deep within it to see what it can come out with. I expect that gradually the government should recognize that there is need for us to enhance and develop our service industry because globally even advance economies are all moving away from manufacturing to being able to earn revenue from quality service delivery. If the government is able to project what it wants to spend, the economy will be much better in 2016 than it was in 2015.
A critical issue making the headlines and de-stabilising the economy is that of devaluation of the naira, restriction of domiciliary accounts and foreign exchange drama, what should be the ideal role of the Central Bank of Nigeria in policy formation? At the beginning of this year, the Central Bank of Nigeria started out by restrictions on the domiciliary accounts. Meaning lots of small businesses with global aspirations who does not want to operate in Nigeria, but see the world as their stage would struggle for easy access to foreign exchange.
Trading itself is a business. But if a lot of small importers have to rely on a lot of foreign exchange to buy and sell freely. I don’t think the Central Bank of Nigeria is doing the economy any good by restricting foreign exchange. A few weeks ago, I read of the arrest of the man with 80 debit cards on his way to China. The man could be a very honest business man who needs access to foreign exchange. That by itself should be a cause for those responsible for policy to worry, saying if this man was doing genuine business, he just needs access to foreign exchange. Why don’t we allow an open market economy and gradually allow access to international trade, so that they can thrive.
The federal civil service numbers a little above 100,000, and that tells you that everybody cannot work for government, and you need to stimulate small businesses to grow.
The other issue is the direct fallout of the extreme restrictions on the domiciliary accounts. The direct fallout is the widening of the gap between the official markets and, the parallel markets. Today, the official market CBN rate is N197, while N485 in the parallel market.
No matter how we want to pretend about it, the restrictions imposed by the Central Bank of Nigeria need to be looked at again. The restrictions are not stimulating big, small and medium businesses. It is huge risk. Perhaps whatever rate the dollar wants to exchange for, should be allowed to float, with Nigerians hoping that our economy will grow.
With an unfriendly business landscape, dwindling economy, poor accounting standards, and square pegs in the round holes of Nigeria’s dwindling economy, what should be the role in checkmating the ilk’s of agencies like the Financial Reporting Council who churn our arbitrary operating positions? There are better ways government can spur the economy with reforms to make doing business easier, thus making the country more business friendly. Nigeria does not really have to be exporting any commodity for it to have a great economy. It may be the fact that the convenient place to do business and then it acts as an attraction to others. Dubai is a conducive place for business, although I don’t know if they are exporting any commodity. Nigeria needs to align its laws to be that conducive. In the last 16 years of democracy, what we have had is apparently a lot of law makers and/or technocrats who have never done business before, but have governed placing more burdens on businesses. They have not just been interested in taxes and other compliance requirements, but the regulator powers seems to have expanded dis-proportionately, giving an occasion to a situation where the regulators most times are tickled by individuals whose strength of character is suspicious and questionable. That is why we see lots of them stealing. When the pension reform act was passed in 2005, the government in its wisdom decided to rest the Nigerian Social Insurance Trust fund (NSITF), which was what people were contributing to then prior to the pension reform act. With the enactment of Pension Reform Act, Nigerian Social Insurance Trust fund (NSITF) was supposed to be wind up, and it became a Pension Fund Administrator. Within a three- four year period, that same agency that is supposed to have wound up ended somehow had its name re-inserted into the amendment of the workmen’s compensation act. A accompany must have a 30% minimum of the insurance to take care of work place injuries that could arise, and insurance comes to evaluate the level of risk they are expose to, and I agree a premium. But government in its so-called wisdom introduced Nigerian Social Insurance Trust fund (NSITF) which went ahead to place a1% fixed charge, of payroll monthly to be paid in respect to work men’s compensation to Nigerian Social Insurance Trust fund (NSITF). It is just an unnecessary additional charge on business. I don’t see how you are fixing premium by fiat. That is no longer insurance! You have the Nigerian Accounting Board for example which chooses to be a private sector organisation; it was founded by the big multinationals in Nigeria in early 80’s. These companies came together to enforce accounting standards. In 1992, the Nigerian Accounting Standard Board became an equivalent of an agency of the Federal Ministry of Trade and Investment, and recently the adoption of the International Financial reporting standard, the Nigeria accounting standard were metamorphosed to become the Financial Reporting Council. And the additional burden is placed on business, additional reporting and registration requirements are sometimes superfluous. For you to sign a financial statement as a director of any company today you are expected to have a registration with Financial Reporting Council and that’s part of the laws now. To have that registration, you will need to have to visit the financial reporting council office and have your biometrics captured. I don’t know if the people who designed the law did not think that there are lots of professionals and international businesses who simply have offices or representatives in Nigeria, but the directors don’t even want to visit Nigeria. And if you require every person that wants to do business here to have to visit your office and have their biometrics captured in a country that is deemed high risk and westerners not probably not sure that their biometrics will be safe. How can they be sure that data given will not b hacked and their biometrics stolen by someone else? We have a lot of clients and individuals who complain that they can’t come to Nigeria to do biometrics. How can they be sure that their essential data will be safe in Nigeria? The question is, in the first instance why with all other regulatory registration, why do I need as a professional be identified by another regulation and registration style? It is not just an additional bottle neck. My point is what government should be thinking about right now is how to loosen the various bottle necks in doing business in Nigeria. The government should think about serious reform of doing business laws in Nigeria as part of the ways to stimulate the economy base on the current circumstances. And they should also look very carefully and critically at the quality of individuals that are mandated to handle some of these agencies. We are hoping that there should be a reform of the entire regulatory agencies in Nigeria to make the dream business environment better. We need to stimulate the economy in some other ways and one of the ways is to make Nigeria a fertile land for business.