Why Nigeria does not attract quality investments, by Omotola
Lai Omotola, group managing director, Masters Reality International Concepts Limited (MRICL) and chancellor of E-Boot Camp Limited, recently spoke with a select group of senior journalists on the ‘state of the nation’. He touched on issues of Nigeria’s rising debt profile, infrastructure deficit in the country that is hindering productivity, why the right investments are not coming into the country, border closure, among others. ZEBULON AGOMUO was at the session. Excerpts:
Nigeria’s debt profile is already high and government is going ahead to borrow more. Do you think there is no problem with that?
The way government is now structured, there’s nobody that you’ll put there that will have any other option than to borrow. They have been pushed to the wall that the only option they have is just to borrow because there are pressing needs. What are they borrowing for? They are borrowing for pressing needs and what are the pressing needs? The recurrent expenditure and servicing of the budget; these are the pressing needs. They understand that when it comes to recurrent expenditure, if there’s fuel scarcity, there will be trouble in the country; there will be trouble in the country if they don’t pay salary, and if they cannot pay their debt on time. All those things are not negotiable. Now, the capital expenditure can still be negotiated. You can tell a contractor to go to site and you pay him according to cash inflow or when able; but these pressing needs that government over four years has drawn themselves to a corner, if there is anybody that will came now and say, this is how to solve the problem without borrowing; within this short time; you can’t get it out. So, anybody that comes to government as at today, the option he has is just to borrow that money. And this is as a result of what they have created for themselves in the past few years, and borrowing this money is further pushing us into crisis situation; serious crisis situation because what that means is that our debt servicing figure is going to increase. Now we are using 30percent of our income to service debt. That brings me to a question on how serious is this government? The government set up an Economic Adversary Council (EAC); have you seen any impact? Have you seen them sit down to even come up with a direction or any rescue mission? It is just there in terms of name and position but in terms of impact to critical thinking and radical approach for the survival of the nation, is not there. As things are, we have to be on toes so that we don’t get to a point where the best of geniuses in Harvard cannot solve our problem. You know, when a cancer gets to a certain stage, there is no more solution. And that is where we are moving towards, that we as a nation, we are not paying attention to. Buhari is going to finish his tenure. When he was campaigning, he was making all manner of promises, but when he got there, he began to say he never knew things had degenerated to this extent. Another person is outside there now campaigning; he wants to get there; but when such a person gets there, he many even do worse in terms of borrowing. He is just criticising now, because he is not there. When he enters there, he continues to borrow. But it is unfortunate that we have continued to borrow having cleaned our sheet to zero when Obasanjo was there; and we build it up to this extent now. A lazy man’s approach all the time is to borrow money. Our leaders must understand that we have now entered an emergency mode. The best this country can have in 2020 is to ensure that things do not degenerate beyond where we are now. If we cannot make it better, let it not grow worse. Budget of N10.9trillion will not make any impact in anybody.
Is there any correlation between the current state of the economy and the state of power (electricity) in the country?
Well, electricity is the basic thing for productivity. Any nation that must be productive- when I say productive, I mean manufacturing; must first have basic electricity. Take that away, you have not started. So, there is a correlation; have you solved your power issue? Are you thinking about productivity? As long as we don’t solve our power issue which is also getting worse on two things. Number one – funding; number two – debt, the country will remain in trouble economy wise. It is getting worse by the day. Today, what some DISCOs are doing is what they call ‘willing buyer, willing seller’. So, they are putting you on a premium line, such that you have minimum of 20-hour light every day as long as you can afford it. That is an escape route for some people. But within the next three to four years, that can also be congested when they begin to bring everybody into that arrangement and they don’t have the network to support it. Our electricity situation has not taken a significant leap to where we need to be.
The Nigerian land borders have been closed for some time now. How has that, in your own opinion, impacted the country?
The question to ask is; the closure of the border, what is it fundamental to? We are closing the border because we believe that there are constraints that do not help our economy. They are bringing more rice and it is not helping our local farmers to build capacity. There is always this problem of supply and demand. Whenever there is a demand anywhere, the supply will get there; it will only be a matter of cost and that is why all these years, the issue of eradication of cocaine has become very difficult because as long as there are still people demanding for that cocaine, with all the military strength of USA and their funding, cocaine still enters the country. That is the power of demand. Now, the border closure will not significantly solve any problem if there is still demand. If the people are still demanding that they need rice and local production cannot meet that demand; people will ensure that that rice gets there. But what the government was supposed to have done is to say that these people bringing rice from Cotonou we are going to overrun them. How do you overrun them? You overrun them with production. So, the government has the capacity to say we can build more tonnage to the extent that the cost of what Cotonou is giving them, for instance, if Cotonou rice is N7,000, even in Cotonou, we are going to increase production so that it can be N5,000 even Cotonou itself. So, the Nigerian rice will be selling in Cotonou at a far cheaper price. But to continue to close borders without any plan simply means that you are creating emergency millionaires, because it is about cartel; the people that know the way. Water must always find its level, no matter how you want to block it. So, you now build a cartel that they now have their own route. So, always understand that as long as there is still demand, people must look for the product wherever they can get it. Let me give you an illustration; there was a time we used to import cement into this country; but today we do not need to import cement because the supply outweighs the demand. Before, we used to say, we want imported electrical cables, but today, the production is there; everybody is saying; no, it is Nigeria’s cable that we want. So, as long as you don’t address this rice issue from the area of productivity (production) by setting an agenda that in the next five years, we are going to feed Nigeria or the whole Africa with rice; you don’t need to shut down your border. What you need is reversing the flow. If you bring out quality rice at a cost-effective price and the rice becomes N5,000; immediately, all these other rice will disappear.
Economy is contracting, but the NBS says there is a significant increase in growth rate and value, but you mentioned that generally speaking, it is not doing well. What informed your claim?
The thing is that a lot of economists mix things up. You see, economy is like your car; when you start your car, there are lots of parameters that will show there. It will tell you that the battery is ok; it will tell you that there is fuel; it will tell you that the car is not overheating, etc. But the major parameter of a car is that the car will start. But the car starting does not mean it can get to Ibadan from Lagos; because if it does not have fuel, it will not get to Ibadan. So, it is not a guarantee that because the car has started, it will take you to Ibadan when there is no fuel in there; it doesn’t happen that way. When people talk about GDP, they do not ask the question – what are the drivers of this GDP? When you talk about growth, GDP measures growth. So, what is driving our growth? It is just one particular area that is contributing to our growth. All of us are business people and we say, for instance, we are worth one billion dollars ($1 billion dollar) but in that $1 billion, just one person is contributing Nine hundred million dollars ($900 million) and next year, he brought Nine hundred and fifty million dollars ($950 million) and the rest are contributing the remaining fifty million dollars ($50 million). On that table, will the other people, except one person, be happy? But what would they record? They will say, that table has increased; but nobody is asking; ‘what is the driver of this increase? Now, GDP is not going to tell you about the rate of unemployment. As the GDP increases, do you find the rate of unemployment declining? As GDP increases, do you find access to capital; bank loan increasing? As GDP is increasing, our productivity in terms of, ‘O, we used to import fuel, now we are exporting fuel and we are giving fuel to ourselves; does GDP tell you that? But these are the essential things that will show that there is growth in the economy. Look at the 2020 Budget, Income Tax is N500 billion (five hundred billion naira) that is Company Income Tax. So, it tells you that if you aggregate everybody doing business in Nigeria, N500 billion is what we want to get from them as tax. But go to any other saner country; one company is producing that amount as tax. Just one company! Now, you just aggregate Nigeria of 200 million people and say this is what we are going to get from everything that we do. So, what we are now going to look at is that, coming year, that N500 billion will it increase or not? If it has doubles, you will know that the economy is expanding? Go to Victoria Island and begin to count the number of vacant offices that nobody is renting; does GDP address that? When people have built their houses but they cannot rent them out for five years; does GDP address that? These are the things that people feel. Let me tell you how the GDP works – it is just a balance sheet. Now, a company’s balance sheet will tell you that this company is worth, say, N2billion; but they don’t tell you that the company has debt; and that with this debt inside this balance sheet; in the next one year the company is going to collapse; Now, when you see a company’s balance sheet, it now takes somebody to investigate that number one, this company that has balance sheet, what business does it do; has government policies affected its business? This is because, if government policies would affect its business that means production will reduce; and it production should reduce; it is going to affect its workmen; if the workmen are going to be affected, it is going to affect its income; if it affects its income; it cannot pay its debt; if it is not able to pay its debt, AMCON will come in and take over the business. So, GDP tells you, for instance, the stature of somebody. So, when someone is walking you say that person is okay? GDP will show you the stature but the doctor will now come and say, ‘let us check you; do you have high blood pressure; do you have any heart disease?’ This is because the man does not know he is seriously sick, but when you see him, he is walking and looks healthy. That man is fat; he is 6ft tall; he is black, etc – that’s what the GDP does. It tells you the aggregate size; but it does not diagnose to tell you that in that same economy, out of 10 people, only three people have payable, workable employment. So, we must stop carrying GDP up and down; celebrating GDP.
Recently, a former vice president, Atiku Abubakar, in his ‘State of the Nation’ warned that endless borrowing would lead to endless sorrowing, suggested that the Nigerian National Petroleum Corporation (NNPC) should be made to be more productive and profitable. He cited Saudi Arabia’s ARAMCO, the most profitable company in the world that generated $29.4 billion through IPO. Atiku said the current government could look towards reforming NNPC to get more money instead of going to borrow again. What is your take here?
It is good to say that on paper. ARAMCO is not screwed the way NNPC is screwed. The way ARAMCO was formed was not the same way NNPC was formed; and it is not the same way that ARAMCO is run that NNPC is run. NNPC is a major appendage of government; so, it does not enjoy independence. NNPC enjoys quota system; and when there is quota system, you cannot talk about performance-driven system. You cannot talk about best international practices. So, it is different from ARAMCO. NNPC is set up for other issues. If you set up a business outfit; you set an agenda; you give the person a target and you get a CEO, not on quota system, but on merit and track record; so, this has been the way NNPC has been operating for 50 years and to try to rearrange it, it will not happen in four years. The issue of NNPC is bigger than that of Nigeria. NNPC that has not been audited since creation; so, to talk about reforming it in the manner of ARAMCO is not something that will take place in four years. The issues that we have found ourselves in are real issues, and what these people are doing, borrowing and borrowing, is what they have been pushed to, for the sake of survival.
Are there no alternatives?
We have alternatives, but they are not short run. This is because the problem did not happen one day. For any nation that has approached this level and has come out of this level; they draw out a 20-year master plan that remains unchanged, to resolve all these issues. But where you have policy inconsistency and for the sake of political exigencies; and for the sake of ethnic agenda you can’t get anything out of nothing; you are just wasting your time. The solution is in the archives of Nigeria; they have it there, nobody is ready to implement it. The problems confronting Nigeria today are problems that had been solved 200 years ago. The problems that many countries of the world have since taken for granted are still the ones besetting us. We are still talking about electricity, road; water; the problem of what to eat and what to drink. These are mundane and pedestrian problems that have been solved centuries ago and people have forgotten about them; yet they become our own major problems. We have to import flour; we have to import beans, we have to import everything that is importable. These are the issues. Look at our port; it remains the way it is because people are eating from it. Whenever you find any problem that lasts beyond one month; it is because people are eating from it. In this country, any problem that comes up and lasts beyond one month, it has become a cash cow for some people. For instance, how do you explain Apapa gridlock when a federal might came and said it was going to resolve it, but they are unable to resolve it. It shows a lot of people are making money down the line.
Some people say foreign investment is not coming into Nigeria because of disregard for rule of law and rights abuses. Can you speak on the seriousness of this, if you believe it?
Every investor, especially, international investor always reads report about every country; and the reports that they read is World Bank reports. The reports give you level of compliance to ease of doing business. So, the investor will look at it from many perspectives. Number one- enforcing contracts, what rate? The investor will see that Nigeria is below the ladder. He will then ask himself, ‘So, if I invest and anything goes wrong, how do I enforce my contract?’ There are two types of investors – The American, European contractors that believe 100 percent in the rule of documentation; that is, the rule of law is 100 percent. So, you can find that an American investor works in Nigeria, but you can sue him in his country. The American and European believe in the rule of law to the letter; then you find some other investors. They are not too far from Africa, where rule of law is not well-grounded – the Chinese, Lebanese, Indians and the rest. Those ones, Nigeria may be attractive to them because within that crooked rule of law, they enjoy their own largesse. So, every nation attracts different kinds of people. When you see a nation that attracts the later ones, you see that things are not done properly there. But you see other nations where they respect their rule of law to the letter; you see them in advanced countries doing great and mighty work there. So, the rule of law is the life of any nation just like blood is to the flesh. Obstruct it; terminate it, contaminate it; affect it, then the shape will come out in an abnormal way. There is no difference between the rule of law and democracy. Respect for rule of law and guarantee of it help the investors to secure their funds. The rule of law has so much to do in investment. But the truth of the matter is that the best investment is here. Nigeria has enough money domiciled here to turn every woe around. The PENCOM and Pension funds are in trillions of naira. There is so much money here; but what is not here is the business infrastructure. Am I going to advise PENCOM to invest in business in Nigeria? No; because anything can happen. If the money disappears, that’s people’s money. The business infrastructure is not here. It is only a few companies, perhaps, only two or three, that if you do contract for them, the day they tell you they will pay you is the day they pay you. They can’t be more than two in this country. But in other climes, they will even call you that your cheque is ready. We are in a very chaotic and hostile environment; it does not propagate growth. But you know again; a few people make so much money from chaos. If you are selling generator, you are not in the generator business. But a lot of people tend to think they are in generator business; what they do is that when they find out that power/electricity supply is going to improve and light is going to be stable; they go and bribe those working in those offices to frustrate the improvement instead of them thinking about graduating from being generator merchants to becoming ‘NEPA;’ it is our business thought. We have seen companies that started as travelling agencies ending up having aircraft; they are in aviation business.