Diversification is essential and crucial to Nigeria’s survival – Ajayi

Adeyinka Ajayi, chairman, House Committee on Aids, Loans & Debts Management in this interview with National Assembly Correspondent, KEHINDE AKINTOLA, speaks on diversification of the economy, funding of 2016 budget, revenue generation, debt management and other socio-economic issues. Excerpts:

The Constitution provides that the Executive Arm of government should present the Federal Budget three months to the end of the year, precisely every September of the financial year. Now that Mr. President has presented the N6.04 trillion budget proposal, how soon should Nigerians expect the passage of the 2016 budget?
We must understand that there is a change of administration and there’s a lot of inefficiencies in the system which has brought us to where we are now, to borrow from the slogan of the present government now, this is a change era and change is a very difficult process to initiate, implement and establish. To initiate change process is tough and we have succeeded in doing just that, we need to now begin to implement it; we are going to work with human beings, people who are used to working in certain ways with some kind of understanding on how things should work.

We have to change the mind set and making people in difference manner away from what they were used to before. That is probably one of the reasons causing the delay. As a parliament, we need the MTEF and the FSP to set the parameters for the budget but we really don’t want to sacrifice quality on the altar of speed. We don’t want to be dogmatic, let us have the MTEF and the FSP by September so that the budget would be ready by October. We recognise the situation as parliament that we are going through a change of government from one political party to the other, hence, the need to understand what the new government will do differently and that may have informed the delay in the preparation of the MTEF and FSP.

As parliament, we are going to try and ensure that as quickly as we are able to receive those documents, we’ll work day and night to ensure we return them to the executive in good time so that we can still have a budget proposal we can still consider and pass in good time. We are really not bothered about speed at this time; we understand that this government is saying now that we want to change so many things like putting the TSA in place and other major structural change which the system is not used to.

We have seen a lot of our so called big banks being fined billions of naira for non-compliance; this is a change of culture which we really need to understand. Also, there are lots of changes happening in the oil sector, this are things which could affect the parameters of the FSP and MTEF; so we do sympathise with the Executive but yes Nigerians are expecting and eager and we are hopeful that very soon, we can have the MTEF and FSP giving to us by the Executive.

There is fear over how to finance the N6.04 trillion budget as proposed by Mr. President, considering the huge debt profile hanging and the likelihood of resorting to borrowing. What is your take on this?

I’m aware that in terms of borrowing, Nigeria does not have a choice, not only because the price of oil is crashing, we have been anticipating this for few years and it has happened finally; so Nigeria cannot, even with the best of intentions the way the government is skewed at the moment, afford capital and infrastructural development. Even when the price of oil stood at $110, we still had infrastructural deficit of over 25 billion.

Now the price of oil is hovering around $40 per barrel, that’s clear $60 merging, if at one time we had a $25 billion infrastructure deficit, what do you think infrastructure deficit will be now? Even if you block all the loopholes, Nigeria will probably just be able to pay its workers as at when due, that is the fact that that Nigerians must accept. If we block all the loopholes where there are no leakages, we will just barely be able to pay our salaries and run as a government, that is the best we would be able to achieve and you can just develop a nation like that.

You will not be able to have the trillions of Naira you need to develop the power sector firmly in Nigeria; you cannot do that from revenue so Nigerians must accept that we have to borrow and no shortcut to it. Developed countries like the United States, China, United Kingdom and the rest of them borrow so we cannot develop the infrastructure without borrowing. The question many Nigerians may want to ask is, are we sure that you will spend the money as being borrowed for? What and how Nigerians can be guaranteed that if you borrow $1 million for one kilowatts of electricity, that is what it will be spent on, if you borrow $1 million to build the Fourth Mainland Bridge or whatever infrastructure you need, are we sure that that money will go there, are we sure that that contract will not be inflated by the middlemen and so on, that is the questions Nigerians must ask but that Nigeria should not borrow, you and I will go down faster than we think if Nigeria does not borrow.

As committee that has oversight function on all these sectors, have you been able to discover where diversions occur and several other things that go wrong?

In the past, there were a lot of question marks, but I will say that in recent times, we have had clear cut defined parameters for borrowing. We never used to have a fiscal responsibility act which requires that certain conditions be met before you can borrow, we never used to have Fiscal Responsibility Act that requires every state government to come back to the Federal Government for guaranty before you can borrow, we never used to having a Debt Management Office that monitors the terms and conditions of contracts of financial transaction and ensure the re-payment of those loans.

Institutionally, Nigeria has moved what led us to the borrowing of the past, we have made tremendous progress and there is a lot more to do in terms of oversight. What we must also understand is institutional borrowers not bilateral now, they don’t give you money just for the ask, for example, the World Bank is not going to give you money to go to the hospital and go to sleep, it lends you money, monitors your procurement process and monitors your implementation. If you meet ABCD conditions, then that will enable you come back to borrow some other time.

As Nigeria is no longer qualified for cheap money anymore, we really need to be serious about our borrowing. The parameters are changing and institutionally, we are ready for it and it all up to you and I to make it a reality. The media also has a responsibility to play too, first they must encourage Nigerians to look well, what do I mean by that? We must encourage them to understand that Nigeria, like every other nation borrow, we should not see borrowing as an aberration, we should not think we are so rich then why borrow, if those were the case, America, United Kingdom, China and the rest of them will not be borrowing at all.

We must borrow but Nigerians must begin to realise that government will not have all the money to fix the power sector in the next four years without borrowing unless we don’t want to pay anybody salary or no recurrent.

The revenue of Nigeria in a year is N4 trillion and salaries will take up to N3 trillion of that unless we want to say no more salaries and we are going to spend the entire money to generate electricity for Nigerians and we cannot do that. We have to leverage on so many other things, Nigerians should understand that we will borrow and we’ll now say to how government not to borrow at excessive interest rate that will inflate the fund that we borrow.

Those are the areas Nigerians should hold the government accountable not ‘don’t borrow’. Of course, the volume (of borrowing) is increasing but when we paid off our debt, we paid down close to $5 billion from what it was then as at 2006; but Nigerians we say now the debt is coming back up, we are now in $10 billion, but the question to ask is; $5 billion has come on top of the five, where did it go to? If it is on power, where is the power? If it is road, where is it? We know our laws forbids us from borrowing for recurrent, that is why some of us have some reservations, although we were sorry that Nigerians were owed salaries for months but we still had some concerns, the law says you cannot borrow to pay salaries but if you have a bailout that appears to be a borrowing to those states to pay salaries, what happens, what is the position of the law? We are Nigerians and the welfare of the people is paramount to us, if as a parliament you come out to say government cannot borrow to pay salaries, the first question Nigerians will ask you is that, you are parliamentarians, were you not paid your salaries? So as an institution, we need to be sensitive to our people and that is why we are not raising the kind of dust that should have come seeing Federal Government lending states under the bailout arrangement to pay salaries.

Do you consider pruning down on the workforce of the country as the best way to go considering the huge cost of governance in the public sector?

The simple answer to that is yes, there is no shortcut to that, we have a very big government and we need to do a lot of work on the number of civil servants that we have and also on the seal and quest of potential workers are attracted to working for government need to change. Entrepreneur build nation and not how many people you have in public service, it is the number of entrepreneurs that you produce that will employs thousands of people and that is where our focus should be. Nigerians should begin to look away from white collar jobs and the zeal to work with government. We have made government job so attractive and it does appears that government job is a lazy man’s job where you can run your enterprise and earn your salary. We really need to change all that and when that is done, the push for people to want to populate public and civil service will reduce. It will be hard and tough on the side of government to lay workers off because you will be seen as not been concern to the welfare of your people.

Do you think there was a mistake for this new government to have made a promise to start paying N5000 to unemployed youths or do you see that practicable?

Yes, it is possible to pay. Every system, every developed nation, apart from your infrastructure, the next investment you must have is the social services. Name any develop country in the world that does not have a social security system; none because you cannot develop as a nation without having in place a social security network. That is why our government has promised that (to pay N5000 to vulnerable youths) but there are some conditions to it, there are parameters we’ll adopt that will prune down the number you think is huge. Some states already have that system, for example in Osun State where I hail from; we have the youth empowerment scheme where we have taken hundreds of our youths off the streets. It will not be a job per se, it will be an avenue to prepare you for an entrepreneurship not that we’ll prepare you to send CVs to government ministries looking for a job, we give you life development skills to begin to look outside of writing application for jobs and we pay you stipends in return. What the stipend does for us in Osun is to keep that money within the system of Osun because it will not be even enough for you to travel outside the state. It is designed to improve yourself within that system to see how you can contribute and become an entrepreneur at the same time be independent and not dependent on government. So, if a state that technical does not have a clear cut economy of its own can do it, we can as well do it nationally.

In the last administration, the former President presented budget expenditures and revenue and the projection has been between N10 trillion and N12 trillion, have we been able to meet that target?

I believe like I said if we block all the loopholes, if we can capture all the taxable income, I am sure we can hit that. I wouldn’t say 10 trillion because I don’t really have the basis for figures but I know we can double it if we block loopholes and tax every taxable naira, we can do it.

There is a proposal that VAT should be raised to 10 percent, is this visible and will it not be too much a burden on Nigerians?

When you say too much a burden on Nigerians, what is VAT? It is a tax on consumption so if you have a sizeable appetite for consumption so you pay for it, if you don’t consume that much, you don’t pay that much. In our economy, because it is based on consumption, it really should not spike the cost of food, it may affect rice because it is a food that creates jobs for people outside of the country, it is product that does not create value for the Nigeria economy so left to me rice should be taxed but please don’t tax wheat (laughs) or any food that is not indigenous to us in Nigeria. We consume billions of dollars of imported goods that create jobs for people outside the country, why don’t we let those people come and get agricultural land in Nigeria and plant and harvest in Nigeria. If they want to stay out there and create jobs for their economy, let them pay, let the rich who want to eat rice pay.

Some people are advocating for a budget that will compel the National Assembly to have a time frame for the passage of the budget?

I do agree that we must have timeline for the passage of the budget, just as I agree that we must have state of the nation address by Mr. President and not delegated to any minister. We should have timeline for these things because they are not rocket science and not something that is impossible to do. That Nigerians want us to have a law that tells them what date the budget will be passed; I don’t think they are asking for too much.

If you have your way, what reform will you like to suggest for debt management?

Well, I believe the debt management office is empowered by law to do quite a number of important things and one of it I mentioned earlier is keeping tabs on borrowing. Making sure that the terms on all borrowings are to be guaranteed by Nigeria are not cut throat. The DMO also has a responsibility to ensure that we have plans for our borrowing; it is called debt sustainability analysis. The DMO does debt sustainability analysis yearly and it tells the government its borrowing capacity, if we borrow more than this figure in this financial, we are pushing the borrowing limit and by implication, we are stretching our repayment because borrowing is about repayment and your capacity to do so. We have an office that does the analysis and project our revenue flow with all the attendant risks that are involved. What I want to see is the DMO that can insist on that barrier of its debt sustainability analysis not being bridge. If it says you cannot borrow more than X, I want that recommendation to be binding on government as opposed to taking it as mere advice. That should be the critical component that of the part that the DMO should play.

Looking at the domestic debt, is it not something the real sector can work on?

In the last assembly, I had worked hard to ensure that the Debt Management Office comes up with their Medium Term Borrowing plan not under the MTEF but under the global borrowing window. You also recall that the last assembly tried to get the limit of borrowing like you have in United States of America where you have a ceiling of borrowing. Therefore, the domestic market, where it really hits you and I the most is of concern and the Debt Management Office is had done its best to ensure that we are housing some monies in a sinking fund because why those figures kept escalating is because we were not meeting those obligations as at when due. The down side of the domestic borrowing market is that the monies that banks would have been compelled to borrow business men, they were putting in safe government bonds so the likes of Dangote, Globacom, Oando. BusinessDay and the rest who should have had access to these banks to borrow are competing with those government’s bonds that are safe and secure. The question is, why should I lend Channels TV money to expand and employ more people when I can put that money in the safe hand of government at seven percent and go to sleep? Government is not going to tell me that because of diesel cost its profit is drifting but the private firm can say that hence the banks were taken into government bonds so if you look at the structure of the government bond you will see that close to seventy percent takers are banks. Monies that would have ordinarily go into the productive sector of the economy, so it is really affecting the industrialisation in Nigeria. As a government, I will love us to concentrate on reducing the participation of financial institutions. If you are going to put X amount in domestic bond, you must put X amount into SMEs and agriculture. Otherwise banks will just seat pretty put their monies in government bond for six percent and go to sleep as opposed to borrowing you the money and not paying them. It is really affecting the economy and the debt management office is taking a pro active step in now converting a portion of that money to foreign borrowing because the impact will be taken away from the domestic sector. We are transferring the risk outside so that it can encourage the financial institution and financial takers here to lift some monies in the economy.

What is your opinion on diversification of the economy?

If there was no reason for diversification before, the price of oil today has told Nigerians that diversification is the way for survival. It is not a luxury; diversification is essential and crucial to Nigeria’s survival. The contribution of the non-oil sector to the GDP tells you that if the government invests more in mining, real estate, agriculture then their contribution to the GDP will topple the contribution of oil to our GDP. It is clear that the rebasing of Nigeria’s economy is a pointer that the contribution of oil to the GDP is more or less constant in terms of percentages, so it is the boom in the other sectors that make our economy to expand and make us one of the largest economy in Africa. So, it is simple logic and not an ingenious statement that tells you that that is the way to go.