Ekechukwu: Subduing Insecurity, Corruption Will Spur Economic Growth
Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, in this interview says with growing insecurity as well as policy inconsistency, it would be difficult for the government to persuade foreign investors to co
What’s your assessment of the economy particularly amidst the COVID-19 pandemic?
For an economy to grow, there has to be concerted efforts from the monetary and fiscal authorities and from other major government and private sector areas.
Many times, we concentrate our efforts around the monetary policy and whatever efforts that they must have gained would be dissolved by activities of the fiscal policy. And of course, when all these policies are put in place, it is expected that situations like corruption, nepotism, and situations that are adverse to the growth of any economy would not be existing.
And so, we expect that when knowledgeable policy making takes place in the fiscal and monetary policy, we expect that the system is supposed to start building from there and with all the supports of the federal government policies on their own, having to do with growing and expanding the frontiers of business that would actually drive the revenue base of the country and grow many sectors of the economy. Countries that have done well have taken advantage of areas of their strengths and for many years, oil became an area of our strength but also became one if the things killing our economy because we lost every bit of processing and refining of oil while we send out our crude, we are also supposed to be refining our oil locally in order for us to reduce the consumption of foreign currency. If that was not enough, we also should have developed many other sectors that we considered more profitable and that will have competitive advantage over many other countries. The mining sector has been neglected or overlooked for many years. A single item in that sector could actually sustain this particular country and here we have a lot of them and we are not doing a lot about them. I can tell you that if we have a very sincere purpose to grow the solid minerals sector, we don’t even have to mine half of them to actually turn around our economy. The agricultural sector is one sector that is doing well right now - but of course, it’s also experiencing its downturn considering the insecurity in the various farms. And so, we need to address our economic growth sector by sector. Now, today, we are seeing how well we are growing in the ICT world and in that space, we can sustain to this growth and use it to cover the lapses we are having in some other sectors. But the level we have grown in the ICT, we can also grow in many other sectors; manufacturing is one other sector that will continue to create employment and lack of it will also create a high level of unemployment. It will also drive the revenue base of the country. Imagine that there are 50 new factories or old factories that have been resuscitated and are doing very well. From the 50 companies we are going to be having value added tax, and personal income tax, and so you will see the revenue base we are losing for not having this real sector producing at even half the capacity.
So, it’s important that we make the manufacturing sector grow again. A lot has been said about it but I have not seen enough efforts to match the things said towards growing this sector.
Given that the agricultural sector is growing as I said, and if we add the manufacturing sector to it and some other sectors to what we already have today, you will see that the unemployment rate that is already as high as 33 per cent and other vices affecting our economy would obviously be reduced drastically. So, having survived the economic recession recently, and of course, we survived it so quickly - many people are asking what happened and how did it happen - but I can tell you that what happened was the fact that the government kept on spending probably far beyond the budgeted amount. How did such amounts come, we do not know but I know that in the monetary policy system, there’s always ways and means of actually spending just to spend out of recession and that’s actually what the CBN did to be able to take us out of recession.
But we need to sustain the growth that we have experienced in all the sectors and the fastest means to grow and sustain this growth is to eliminate the level of insecurity that is bedeviling the country today. So, these and other things put together should be able to take us out of the hard economic crisis.
There have been reported capital flight from Nigeria in recent times, what are really the investors’ concerns about the economy?
No investor would want to come into a country where there’s insecurity, even when they are secure, you will see the policies are not stable and consistent. Insecurity has held back a lot of developmental programmes that we should have expected in this country and once we are able to address insecurity, many other indicators are going to be looking well. When we talked about the foreign direct investment not going like other African countries, we know the reason. Once we are able to solve the insecurity in this country, all the other indicators are going to start looking positive. For emphasis, the first fear of an average investor into Nigeria is the level of insecurity. Inconsistency of policy is another factor that is actually a bane in the growth of investments in Nigeria. You see, for an investor to come into Nigeria, there are so many things to they are going to be looking at; the stock market, and money market, how well are they doing? How stable are they? You know in all the ease of doing business areas, government has tried to highlight many of the areas that they would want to reduce the burden of doing business. But, there are so many areas that government has not been able to address - areas of corruption, somebody having to come into this country and has the wherewithal to do business in this country but cannot do it because the level of corruption is so high and so you need to get something processed and fo you to get something processed it is so difficult because someone wants to take certain gratification before he does them. So we need to fight corruption head-on in order for us to invite the kinds of investors to that we want to have. Cost of fund is another thing to that is a problem in this country. Cost of fund is very high and cost of doing business is also very high. When we talk about cost of doing business we are taking about cost of electricity in order words, cost of power and energy which are very high. We are talking about exchange rate of the naira to other currencies which is also very high. We are talking about other costs of doing business, the fact that you must own your own electricity, you must own your own security - the fact that you cannot protect yourself and so for any movement you do, you have to involve the police. These are all the things increasing the cost of production and the cost of doing business in Nigeria. Now, it makes it difficult for products manufactured in Nigeria to compete favourably with products that are imported and so there are too many factors actually affecting investments in Nigeria. Availability of funds is also not there. Most of the funds we have in Nigeria are usually short-term funds. And the conditions that will even make it possible for you to attract long-term funds are very stringent and makes it difficult for a beginner or small business owner to access long term funds. I know that certain development banks have been providing opportunities for people to access long term funds but many times the conditions are such that they cannot afford and so we need to have other things that will make it possible for businesses to access funds at very cheap interest rates. So these are all the things and there are so many of them but each of these is contributing to the hardship of doing business in Nigeria.
Amidst rising public debt stock and dwindling government revenues and issues around repayment, how does this impinge on investor confidence in the country?
Yes, for other government to government relationship and business to government relationship and business to business relationship coming from outside the country, they’ll look at a lot of things. They’ll look at our debt burden and the size of our local and international debt and they’ll also look at the percentage of our budget used to repay our loans. When they look at all these things you see that the credit ratings that they may give to our country would drop basically. And when the credit rating drops, the interest rate they are going to charge the country will increase and so you see that countries with good, high credit rating receive funds at very cheap rates.
But for Nigeria with very high risk of borrowing, you see that interest rates are usually very high. There are several things international development banks look at before they give facilities to the country including the unemployment rate, per capita income as well as the growth of your population. When they look at all these things, they’ll now look at the size of your budget and see whether it’s even something you can possibly pay back if you borrow and over a period of time.
Relationship of the country with the international body also counts and these are the things you can always get when you have contact people who believe in what you ate a doing.
Today, inflation constitutes a major risk to the macro-economy, much higher than the MPR. What is really is the way forward for Nigeria?
Yes, because there are external factors away from the monetary policy, which are affecting inflation rate. Actually it is the MPR that is usually determined by the level of inflation. Usually when inflation goes up and down, it will affects the MPR. But the monetary policy body has refused to allow the MPR to move along the same correlation with the inflation rate. The reason is that the CBN has done everything to bring down interest rate. In other words, they want both the borrowing and lending rates to be as low as possible. Now, if the CBN now decides to follow the high rate of inflation to influence how high the MPR would go, then all the efforts they made in the past to be able to reduce interest rate would go lost. So CBN has retained MPR irrespective of high the inflation rate has gone just because it wants to achieve low interest rate for to there to be flow of funds into the system. Now, when the interest rate is very high, very few people will access funds and when interest rate is as low as possible, more people will access funds and the more the people access funds, the more the stimulation of the system. It also affects