Government policies and actions which scare investors are not very helpful – NESG Chairman

Asue A. Ighodalo
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Asue A. Ighodalo, is the current chairman of Nigerian Economic Summit Group (NESG), an accomplished personality. Ighodalo, who sits on the board of public and private companies and non-governmental organizations in Nigeria, is a partner in Banwo & Ighodalo, a leading corporate and commercial law practice in Nigeria. In this interview with Daniel Obi, he says the interface between NESG and the public sector has been positive but he intends to strengthen it by constant engagement. On moving the economy forward, he says Nigeria needs sustained visionary leadership and effective policies at both the federal, state and local government levels. This leadership must be able to understand the problems in their different forms and dimensions and work with credible and competent people to address these problems. He addresses other issues in the economy. Excerpts:

Congratulations on your recent appointment as the Chairman of the Nigerian Economic Summit group (NESG). Currently in its 25th year, this private-public partnership could be said to have stood the test of time in its role as a convergence point for ideas and thoughts that influence policy. What are the big issues you will like to see resolved during your tenure?

Thank you, very much. The interface between the NESG and the public sector over the last 26 years and 25 summits has been extremely positive and contributory to the development of the Nigerian economy. Over the next few years, we will strengthen this interface by raising the level and frequency of engagement. We will improve the output of our Policy Commissions, and the rigour of our research work.  We will make the NESG even more available as an economic and social sounding board able to support the Federal Government at every level and we will improve our interface with State Governments.

With the tepid growth rate recorded by the Nigerian economy in 2018, analysts have predicted that the nation’s economic outlook for 2019 will also record very slim growth. What steps do we need to take as a country to begin our journey to prosperity?

Nigeria’s economic growth at about 1.9% in 2018 is far below the GDP growth rate we require for sustainable growth. As a country in a hurry to develop, our GDP growth rate should not be lower than 8% considering our population growth rate. But beyond the percentages and ratios, we must ensure that Nigeria’s growth is inclusive and that the average Nigerian contributes to, and benefits from the growth process. Our policies must be targeted at ensuring that poverty and unemployment reduce significantly. We must provide support to enterprises where we have comparative advantage, and support SMEs which are the backbone of any economy. We have to do this concurrently with increased investments in infrastructure and quality education. Every child from the age of 5 must be in school and must be able to stay in school until they attain their full potential.

What in your view are the quick wins or what economic reforms do you think Nigeria needs most at this time?

Unemployment and poverty have become prevalent in our economy and government must enable the private sector so it can grow and create jobs. We must ensure a favourable business environment, provide robust sector specific planning, and provide effective targeted interventions for ailing but critical industries. Also, government policies and actions which scare investors are not very helpful.

Secondly, addressing the power and insecurity challenges are key to attracting investments and creating jobs. Providing adequate training and sophisticated equipment to security agencies is also pivotal. The NESG is currently involved in a deep dive into the power sector and will present a prescriptive report highlighting issues, mechanics for resolving the issues and who has responsibility for implementing same.

Thirdly, the quick passage and implementation of the Federal budget is instrumental in improving the performance of the capital budget and addressing key infrastructure challenges. In addition, leveraging on private capital to fund critical infrastructure through PPPs and other tested arrangements must be considered. The government needs to take bold steps in addressing the uncertainties in the oil and gas industry. The passage of the different segments of the PIB, are critical reforms that must now be implemented. Sadly, since we started this reform process in 2001 we have not been able to complete same.

What should Nigeria be doing to attract more FDIs as a tonic for employment and economic growth?

We must always remember that there are many countries competing for FDIs. Foreign investors are not only motivated by a country’s potentials, it goes beyond that. Some fundamental concerns include a favourable business environment, security, certainty of policies and regulations that attract investments and support business growth. Exchange rate convergence and effective dispute resolution processes have always bothered investors. Also investors must be able to take their dividends and or capital out with ease. These issues are critical concerns that must be addressed. The Nigerian government, at all levels, must continue to demonstrate commitment and determination in addressing these issues.

Why do you think all the talk in Nigeria over the years about diversification to stimulate the economy has not gone beyond rhetoric?

First, if you look at the structure of the Nigerian economy, we have an economy that is fairly diversified in terms of output. The oil sector only accounts for 9% of total GDP, while agriculture accounts for 25%. Service has a share of 53% and manufacturing contributes 10%. The concern, therefore, is not whether the economic output is diversified but whether the economy is “rightly” diversified. We must focus on how to grow manufacturing outputs to meet local demands and exports, such that the sector accounts for over 20% of economic output. Evidence suggests that the manufacturing sector has a very strong forward and backward linkage with other sectors and its potential to create jobs is huge. We must prioritise the development of specific value-addition sub-sectors within manufacturing and provide support structures to enable this industry. Secondly, in terms of government revenue and export earnings, crude oil still accounts for the largest share. The non-oil sector (manufacturing, agriculture) has the potential to expand over time and account for an increasing share of revenue and export earnings, provided deliberate efforts are taken to develop these sectors.

SMEs are considered by many as the engine of economic growth, but they are still struggling under excruciating economic conditions with minimal government support. What policies and actions do you think will help the economy through this segment?

We need to address the electricity challenges facing the country. Expenses incurred by SMEs to obtain electricity from alternative sources significantly increase their costs and reduce the competitiveness of small and medium-scale businesses. The other issues that lead to high operating costs include other infrastructure deficits and high borrowing costs.

It is increasingly becoming difficult to do business in Nigeria considering the high interest rates, staggering inflation, epileptic electricity, with the measures being put in place defying solutions, where did we get it wrong?

Nigeria needs sustained visionary leadership and effective policies at both the federal, state and local government levels. This leadership must be able to understand the problems in its different forms and dimensions and work with credible and competent people to address these problems. We can work with and adapt models that have worked in recently industrialised countries.

Privatisation of Nigeria’s electricity sector has not made a visible impact on the generation and distribution of electricity to Nigerians; what should have been done differently in the privatisation process?

I was a key member of the power sector reform implementation committee established in 2001 to midwife the reforms of this sector. Unfortunately since 2007 the reform process has been badly implemented. The reform policies and the prescriptions in the derived law should have been faithfully implemented.

What remedial steps do you recommend, knowing the importance of the power sector to the overall economy?

Sadly the sector now needs further reform. We need to take a holistic review of the industry today, understand all the problems created by the defective implementation of the initial reform and resolve all of these problems with commitment and sincere will. The major problems of market illiquidity, incapacitated discos, failed electricity market, non-reflective pricings, weak and inappropriate regulation, poor and inadequate infrastructure must be effectively tackled, with Government taking the lead in a committed and realistic manner. As I said earlier, the NESG is committed to supporting a holistic reform process.

The present administration has focused on fighting corruption as a policy of economic development. What is your view on this and to what extend do you think this war has been achieved?

The NESG has consistently noted that the fight against corruption requires a robust top-to-bottom institutional reform framework. We must tackle the root causes, we must make corruption unattractive and difficult having proper and effective governance processes and we must have in place effective sanctions and efficient judicial process. A lot of work needs to be done to create an appropriate and fair environment. We must overhaul governance systems and processes to eliminate opportunities for corruption by increasing compliance and due process. The functions and roles for government control and audit which seem to have completely collapsed need to be reformed to ensure that those that seek to game the system can and must be caught in the act. Our governance standards must apply to everybody, strictly without fear or favour. We need to improve the fairness, quality, transparency and effectiveness of prosecution of criminal cases and the responsiveness of the judicial system through extensive justice reforms.

Nigeria is blessed with a teeming population, mostly youth. How can the country convert this to strength for economic growth?

The huge youth population ought to be a demographic dividend for Nigeria. Unfortunately, Nigeria has not been able to take advantage of this opportunity to lift growth. Unemployment among youth remains a major problem in Nigeria. Youth unemployment across the 36 states is two times higher than unemployment among the older labour force. About 64% of unemployed Nigerians are youth and 36% of the number of youth who have at least an economic activity going for them are underemployed. Youth employment constitutes only 28% of the labour force who are gainfully employed.

For Nigeria to take advantage of its youthful population, we need to put more youth in stable and productive employment. The education and training of our youth must be stepped up and they must be made fit for purpose. In today’s digital world many of our youth are inadequately skilled. We must also develop a medium for job creation strategies that clearly articulate the number of youths the economy will be absorbing into productive employment on a yearly basis, with practicable projections. Government must identify, support and encourage labour-intensive subsectors that build on national endowments and which enjoy strong domestic demand to absorb our youths. Lastly, the private sector is essential in job creation and productive activities. An enabling investment environment must be created to encourage and support our private sector to flourish and create value enhancing jobs, and the private sector must commit itself to this process. There are a number of countries whose growth trajectory was instigated mainly by their private sector.

As an informed business leader, what could you say are the economic implications of multiple exchange rates?

Multiple exchange rates distort the market, encourage arbitrage and discourage investments. Although some argue that in a highly disciplined environment, multiple exchange rates policies can be utilized to support focused sector growth, I am not a fan of that argument.

What is the friction between the private sector and government with regard to the approach to running the economy?

I am not aware of any friction. Our goals and objectives converge but we may sometimes have different approaches to implementation. Since the first Nigerian Economic Summit in 1993, the Private Sector and the Federal Government have always agreed on the underlying economic philosophy that would be the premise of 21st Century Nigeria, these are:

1.       Commitment to an inclusive, free-market economy (where no one is left behind)

2.       Encouragement of private sector investment

3.       Creation of an enabling environment

4.       Governance in the national interest

5.       Commitment to the rule of law, and

6.       Establishment of a strong economic foundation for democracy.

While we may disagree from time to time on processes, and implementation mechanics, we continue to foster and promote a collaborative public-private dialogue process that focuses on the co-creation of an open and globally competitive Nigerian Economy. There is still a long way to go for Nigeria to evolve into the first world, and a lot of work to be done. However I know that our Government and the private sector are committed to this.

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