Atedo Peterside, the founder of Stanbic IBTC Plc, has said the perception that the Nigerian economy was rigged in a way that it benefits only well-connected investors was right and could further worsen investment inflows to the country if not checked.
The renowned banker disclosed this on Monday while delivering a speech as the Keynote Speaker on the occasion of the dinner to celebrate the ongoing 25th Nigerian Economic Summit in Abuja.
He said in Nigeria of 2019, only the well-connected could expect security of life and property; prompt dispensation of Justice; sanctity of contracts; no harassment from multiple rogue regulators; access to land via the Land Use Act; freedom from multiple illegal State and Local Government levies; provision of good roads and pipe-borne water to their door-step; access to subsidised financing; and public sector employment opportunities.
Peterside’s comment came against the backdrop of the sustained sluggish growth in the Nigerian economy since it emerged from a recession in the second quarter of 2017, compared with other African peers such as Ivory Coast, Senegal, Ethiopia and Rwanda with rapidly expanding economies.
He pointed out that increased investment remains fore-runner to a faster economic growth, but since 2002 when Nigeria recorded a double-digit growth following an investment level accounting for more than one-third of its economy’s total value of production in 2000 – the first full year after the restoration of democracy in Nigeria, the nation could not repeat such feat as uncertainties in the economy frightened most local and foreign investors away.
This, according to Peterside, leaves Nigeria’s remaining investment climate largely dominated by the well-connected investors, thereby casting a shadow on the outlook on how much of total economy value the country would have as an investment.
“They will not be coming back any time soon until we correct the structural dysfunction that frightened them away in the first place,” the banker said. “Our Investment/GDP ratio is likely to remain low until we make it possible for all other investors – Nigerian and foreign – to come back and partake in the task of baking a bigger cake on the basis of a level playing field.”
Speaking further, he noted that Nigeria’s Investment to GDP ratio slid below 15 percent in 2012, plunging its GDP growth rates a year after. A trend which extended to 2015 and 2016 when the Central Bank of Nigeria (CBN) exacerbated the situation through its foreign exchange (forex) policies, causing investors to both take fright and take flight at the same time.
“The inevitable outcome was an economic recession,” Peterside, who is also the President and Founder of ANAP Foundation, said. “It was only after CBN succumbed to pressure in early 2017 to allow a Nafex exchange rate, where all business units and individuals could buy and sell forex freely at a market-determined exchange rate of N360/$1 approx., that supply bottlenecks slowly disappeared and the economy limped out of a recession.”
Nigeria’s economy grew at a slower pace in the second quarter of 2019 by 1.94 percent from a revised GDP figure of 2.10 percent in the preceding quarter; this is lower than country’s estimated annual population growth rate of 2.6 percent.
However, the rate at which the prices of goods and service increase in Nigeria came weaker by 11.02 percent in August 2019 compared with 11.08 percent in July, according to data from the National Bureau of Statistics, “CBN appears to have accepted as being the norm” even though the index remained above its target band of 6 – 9 percent
“Compare and contrast this with Ivory Coast and Senegal which held inflation below 2 percent and grew GDP in excess of 7 percent in 2018,” Peterside urged his audience. “Investors now fear stagflation.”
According to him, while Nigeria may have recorded some levels of progress in certain areas such as telecommunications, commercial and investment banking, pension reform and other service sector pursuits since 1993 when the maiden edition of the economic summit was held, gains achieved by the country in the living standards of its inhabitants measured by income per capita over the course of the last two and half decades are slowly being wiped out since 2015.
“Hoards of Nigerians continue to join the ranks of the extremely poor year after year, at a time when several African countries are successfully lifting more and more of their people out of poverty,” he said citing a World Bank data which listed Tanzania, Chad, Republic of Congo, Burkina Faso, Congo DRC, Ethiopia, Namibia, Mozambique, Rwanda and Uganda as the top ten African countries that have been most successful at reducing extreme poverty between 2000 and 2015.
He further said the same could be said for education, healthcare and infrastructure where the country leads the world with the largest number of school-age children out of primary school (10.5 million) and total number of persons living in extreme poverty (90 million approximately), which he described as two appalling statistics, not in Nigeria’s records in 1993.
Explaining the frightening link between the two sets of statistics, the banker said that children who are ill-equipped in terms of basic primary education are likely to be the most difficult to integrate into a 21st Century economy, expressing fears that many of them were born into poverty and would remain in poverty unless something was done urgently to rescue them.
In the 1990s, rapid economic growth eluded many Sub-Saharan African economies, prompting nations in the region to seek ways to ramp up growth, according to Peterside. “We therefore no longer need to go to Asia to learn lessons about rapid growth. We only need to look to Ivory Coast and Senegal in West Africa which grew at 7.40 percent and 7.0 percent respectively or to Ethiopia and Rwanda in East Africa, which grew by 8.5 percent and 7.2 percent respectively in 2018.”
Way Forward
While Nigeria’s social and economic problems persist, the keynote speaker urged the youths, the less privileged and others in the country who are not well connected and often deprived of some benefits to concentrate on avoiding being the victims of extra-judicial killings and other forms of Police, notably Special Anti-Robbery Squad (SARS) or Army brutality.
He also warned that if these categories of people decided to go into any legitimate business activity, they should get ready to grapple with endless threats and harassment by the Federal Inland Revenue Service (FIRS), Customs, State Government Tax authorities, SARS, NAFDAC, among others. “The bulk of this harassment typically comes from corrupt government officials seeking to line their own pockets through extortion.”
On restoring business confidence to the country and boosting investor participation, Peterside said most utterances by important public figures give the remaining investors even more cause to worry pointing out that Nigeria is badly losing a global race to win the hearts and minds of investors even within Africa. According to him, “we need a paradigm shift away from harassing investors to one of welcoming them sincerely as well as taking actions that boost business confidence, as Morocco and Rwanda do all the time.”
“In the meantime, FG has lost fiscal viability because it lacks the courage to trim personnel overheads on account of a bloated headcount in the public sector. Will 98% of the population continue to suffer so that less than 2% who make up the bloated public sector can maintain their lifestyles? The same FG endorsed a largely unaffordable minimum wage and presses on with ‘populist’ subsidies which are largely cornered by the rich.”
He recommended that the federal government could quantify the annual petrol subsidy, apportion it and pay each Nigerian adult that falls below a minimum income threshold his or her share using the newly launched payments-enabled National ID Card. He said “if the FG is in the habit of being seen to grant subsidies then we should focus less on getting stubborn people to shed a bad habit. It is far better to get them to replace a bad habit of wasted subsidies with a much better habit of direct payments to the poor via an instrument that the rich cannot corner or access.”
The banker pointed out that the responsibility that Nigeria must share was to encourage FG to get its finances in order and attain both fiscal viability and macroeconomic stability. “We must also encourage FG to level the playing field for investors and quit dangling rent-seeking and/or arbitrage opportunities such as multiple exchange rates, which remain open to abuse.”
Furthermore, the speaker noted that Nigeria’s rising capital importation to the tune of $14 billion in half-year 2019 should not excite Nigerians as 80 percent of the inflows were “hot” money aimed at bolstering forex reserves based on distorted “carry trades”. He, therefore, urged CBN to quit expanding its mandate into other “questionable” areas, if it cannot meet its most basic mandate of containing inflation.
