Johnson Chukwu, the CEO of Cowry Asset Management Ltd. He shares insight on how the Nigerian economy is likely to perform in 2019, the impact of the election on the country’s economy, and the reforms government needs to consider in moving its GDP growth to double digits in this interview with BusinessDay’s Enduranec Okafor. Excerpts:
How is Nigeria economy likely to perform in 2019 ahead of the average crude price projected at $60-$65 per barrel?
The Nigeria economy will be relatively weak in 2019 because the year will likely be dominated by political activities; we will see the first two months of the year will have election campaign and the election of the National Assembly and the presidential elections, March; the third month of the year will be for governorship election and also for the members of the House of Assembly.
So by the time we get to April and May, you will talking of preparation for the searing of the new executives, June you have the inauguration of the National Assembly and by the time you get to July you are talking of the appointment of ministers and commissioners and they will then have to enunciate their policies, and probably they will need to send budget to the National Assembly that will be based on they want to manage their ministries.
By the time you are done with all of that, you are will already be in the last quarter of this year, so I want to believe that 2019 will be largely dominated by political activities and for that reason, very few attention will be paid to economic policies, particularly the policies that you need to restructure the economy. So in effect, the economic growth that we are going to see in 2019 will be largely driven by natural growth like; if you have good weather, agriculture may do relatively well, if you are be address the displacement of farmers in north central, north west and the north east, then you could see better growth in agriculture and then the other sectors that are naturally performing, not necessarily because they have specific economic policy but just because our economy is still a very young one.
On that basis, I think we should expect a relatively weak performance; the Gross Domestic Product (GDP) figure may remain positive but a low digit growth, and I think the economy will still grow at less than 2 percent this year.
Data from NBS shows that FDI into Nigeria slummed 48% as at Q3 2018, what can Nigeria do in this election year to increase investors’ appetite for the country?
What will can only do is to de-risk our political environment in order to reduce the level of tension in the political environment. Investors are running away from Nigeria for two major reasons; they can’t see clarity in our economic planning and they are not certain of how our on-going political activities will end up so they want to stay away from a politically volatile environment until election is concluded and secondly they want some clarity on our economic direction. Those two factors are critical for you to have FPI and FDI inflow into the economy.
I want to believe that after the election we would have at least to some extend remove the most critical political risk and that could mean that some foreign investors will begin to come back, then if we are fortunate to have a government that comes up with very sound economic policies then we should expect a scramble for Nigeria asset and investment opportunity in the country by both local and foreign investors.
So for sure there will some level of recovery in foreign investment inflow into the country after the general election?
Yes, you will see some level of recovery like I mentioned earlier; the political risk would have been addressed, and so investors will at least be rest assured that in the next four years they might see some level of political stability. The policies that will drive stronger economic growth are very important because without relevant and appropriate policies, the economy will continue to grow at very sluggish rate and as such growth rate will not be attractive for a lot of foreign investors to come to Nigeria economic space.
Do you think this 2019 pre-election uncertainty is one of the worst the country has witnessed compared to its past?
It will be hard to say that, and when want to look at the economic environment, you don’t just look at the political issues, and you have to look at other factors that are driving the decisions of investors. In 2015, there were also election tension but we got reassurance from the electoral commission- INEC indicating then that they will remain neutral and there will be an unbiased umpire and that gave people some level of confidence, again the then president, Goodluck Jonathan gave several public comments where he said that the presidential position was not worth anybody’s blood, and that he was not ready to sacrifice any Nigerian blood for the position.
We have not seen such strong commitment from the current president; at the town hall meeting he held with NTA, the question was put to him and his response was not very direct, so that could have created some concerns and doubt in the mind of some people who might want to wonder if the president will concede should he lose the election.
People want commitment that whatever is the outcome of the election that either of the political parties will accept it in good fate provided the election is free and fair.
The honours is now on the executive arm of the government to make sure the country’s institutions are neutral , so as to give other political parties confidence that the election will be free and fair and then the INEC should also show assurance that they will remain neutral and objective in carrying out their duties. Those two things are very critical in determining whether this election has the highest pre-election tension.
Despite being an issues with most emerging markets, some investors wary about policy instability in Nigeria, so how do you think Nigeria can best manage this?
The believe that Nigeria have the weakness that is prevalent in the country is fallacious, this is because also of emerging economies have move ahead of Nigeria in several areas.
So we keep luxuriating our eagle that by believing that our failings are common among other emerging economics, that is not true; look at Ghana, there is no policy flip flop in that country neither is there such in Ethiopia, non is in Tanzania. So we have several countries that are actually on the route to economic growth, so we should stop deceiving ourselves.
The key things are the quality of leadership that we elect is very critical, we must get to a point as a people where we’ll have what we call national interest; nation interest becomes those interest that are held sacrosanct and cannot be violated by anybody, irrespective of their positions.
There are a couple of things we need to do; we need to get leadership right, if we get leadership right, the leadership will help us develop common national interest and then beyond that we should drive towards institutionalisation.
What do you think will be the after election effect that is likely to impact on Nigeria economy in 2019 either positively or otherwise?
Well, if the election is successfully free and fair, and the outcome is accepted by all parties involved, we should see some level of excitement, and euphoria that should go with the conclusion of the election.
Like I said earlier on, you will see a lot of concerns, a lot of people sitting on the side lines waiting to see the conclusion of the elections, some people are projecting, hoping that the country will unravel.
So after the election, if it’s successful, you should see some excitement about the economy and if the government that comes into power should provide good economic policies then you should see a lot more excitement in the economy.
So it depends on how the election goes and what the winners do immediately after the elections.
Apart from the election uncertainty what are the risk the country will likely face in 2019?
The other risk Nigeria may be faced with would be issues related to the crude prices, just recently the Russian parliament wrote to their president that the agreement they signed with OPEC was not in the interest of Russia but was actually helping America to strengthen its oil independence. So should the Russian president take the notice into consideration, they may pull out of the OPEC agreement and that can affect crude oil prices.
Beyond that the swiftness at which the new government is formed, and the kind of policies they will come up with.
Other factor will maintain the relative peace will have in the Nigeria Delta, will need to sustain that peace.
The last factor will be how the government respond to the herder setting in the north central, and Boko Haram insurgency in the north east.
What can Nigeria do to ensure it return back to double digits GDP figures like it reported in 2014?
It is all about the economic policies; the government must focus on economy. The reality is that all human endeavours are lifted into economic benefit or economic returns; there is no human engagement that does not attract economic reward that can be sustained in the long run.
So if government take its sight off the economy, it cannot fix a lot of things; like security, it cannot fix education system, health care as it needs resources to do that.
I believe that the government in focusing on the economy should have specific policies for specific growth sectors and we had things like that in the past and it worked for us.
When Obasanjo came into power, and he introduced the cement policy and wanted to domesticate cement production at a time when the country was only producing about 2 million metric tonnes of cement, today a single producer of cement can produce more than 16 million to 2o million metric tonnes of cement.
