• Friday, December 08, 2023
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‘The most important thing as a nation is to keep our eyes on the goal’


  Q:Can we get the full names of the MIINTs? You said Mexico, Indonesia, India, Nigeria and Turkey. And the “S” is for?

A:I will also like to put ASIAN to MIINT because of the recognition of free trade in those countries. Singapore, Malaysia, Thailand, Vietnam, Myanmar and Indonesia are a large market of about 750 million people where there is common infrastructure, planning and customs regime.

Investors are looking at that and I think they can compete with China. I think part of the point for Nigeria is that it actually competes now for investments with Indonesia, India, South America and Mexico. When international investors look at these countries, there are certain features that they will like to see, which actually influence their investment.

Let me take you up on KPMG’s impression of Nigeria. Most times when global CEOs go into a market, it’s not just to give a pat on the back to those who are running the operations in those economies domestically. What is the biggest ambition that has brought you here to this market as a global CEO?

Well, it is probably better to keep a broader perspective on Africa. Africa is going to be the engine of growth of the global economy for the next 10, 20 years. We actually regard the Nigerian practice as the best practice in Africa, so if we can replicate what happens here and leverage the skills, the talents we have across broader Africa, then that is a smart business strategy for us to employ. So I’ve just been here talking to them about what we call Project Africa; that is how we can actually tap into the skills and talents and business models we have here for other markets. So, what we are doing is more broadly across West Africa and even pan-African.

A lot of people say Africa is going to provide food for the global economy…are you looking at that area, the area of investment in agriculture in Nigeria?

Certainly, I think 43 percent of people here are employed in the agricultural sector and there has got to be tremendous capacity to be more efficient and productive over time. We are also looking at consumer markets, we are looking at financial services, we are looking at energy in particular-the downstream aspect of energy.

So if you have oil and gas reserves, to petrochemicals, to fertilisers, which again links into agriculture, which also forms a manufacturing base, if you actually have the ability to start to utilise the substantial population that you have here. So agriculture would be a small part of what we are actually looking at. We are looking at services, energy and the financial system in particular.

What is your opinion on the power sector reform in Nigeria, particularly the recent sale of the Discos and Gencos?

I for sure, welcome the sale, the privatisation of the Discos and Gencos. Of course what you have to do is ensure we sell these assets at the right valuation, and that the process for doing it is very transparent. And from what I understand, the process is being handled by someone I have a lot of respect for-Mr. Atedo Peterside.

The process has been very transparent. You are not going to satisfy everybody in this particular deal. My own opinion is that we need to move forward. We need to move forward in this particular direction because if we don’t, we are going to have a real problem. It has been shown quite clear that the public sector cannot deliver the megawatts of power that we need to form an effective industrial base in this particular country.

We need the resources, we need the expertise of the private sector. So, on overall basis, I will say I welcome the process; the process has been fair; the valuation from what I understand has also been fair. What can I say? Let’s move on and deliver the power objectives that we say we want to deliver.

Still on the power sector reforms, there is this impression that the Federal Government set up a task force which did a very fantastic job; it disbanded it and set up another one and even with the new Power Minister in place; and the private sector is not sure, perhaps the Federal Government is not even ready for the reform they are talking about. Are there any concerns?

I will tell you this without going into why this task force is being set up while another one is being disbanded. We all know government procedures. But I have been in functions and I have interacted with very senior people in government. The conclusion is that deregulation and privatisation is the way forward. Government has no business in business; that is the reality.

If we look at it, we have priority sectors: education and health sectors, which are major for us. The kind of Gross Domestic Product (GDP) contribution from those sectors is very minimal so the thrust of the reforms is that we change the way we use to do business.

The key thing is that proper due diligence has being done, and liabilities are properly accounted for because all these agitations are coming from unions and pensioners and the rest of them. When the proper diligence has been done and the liabilities are properly accounted for in a structured manner, there will be no problem.

The reality is that we are generating just 4,000 megawatts, There is a company that has just been set up in Dubai, where they are getting coal for aluminium smelting from Australia. That company alone requires 6,000 megawatts for operation. We are talking about one plant. Then we are talking about 4,000 megawatts for the entire country.

Right now, its time we say, let’s move forward. Let’s face it, there will be vested interests both in the public sector and private sector and even inside government that will not want us to go ahead with the reforms in the power sector simply because they are vested interests. These vested interests, let me tell you, are very, very strong. We have seen them in pension, we have seen them in the petroleum subsidy scam.

I think the most important thing for us as a nation is to keep our eyes on the goal itself; on the goal of what we want to achieve for the common good. I’m not kidding myself here and saying there aren’t oppositions to these power sector reforms even within government itself. But I’m saying, what is profitable for the common good?

The thing that is good for all of us is to have enough power so that we can generate the middle class that we want to generate and develop the SMEs. I think that should always be the focus. Let’s say to government: ‘deliver on your promise; deliver the deliverables in the energy sector and let us move ahead.’

Government cannot deliver, they have had how many years to deliver? Yet they haven’t delivered; let’s try something else.

Given what you must have read about Nigeria and this is your first time of coming here and what you have seen so far, can you juxtapose?

First of all, what I see is a very vibrant economy and a very good class and sophisticated business people.

I see a massive population who are very nationalistic and very focused on the direction of the country; I see a lot of unity here, and I see huge potentials having studied the amount of oil reserves, the agricultural sector and the stability in the banking system and the entrepreneurial ability of some of your large companies.

What I have seen so far are very positive things. And I think you have a brand image that is still negative, there is still this global perception about security and corruption issues, which I think are largely being addressed. People’s thinking out there is still very much behind the reality here. I think what strikes me is just the need for investment in infrastructure here. And the focus on investments needs to be in place.

There is a need to invest in rail, sea ports, airports and roads to attract more international investors. From day one I’m sure of the need for internationally standard infrastructures. But having come from India, Indonesia and Mexico, I can tell you that you all have the same issues.

Looking at Nigeria which earns 80 percent of its revenue from oil and the US which was a major buyer of Nigeria’s oil is developing its own internal energy, and very soon it will be energy self sufficient and Europe is facing sovereign debt crisis; if you (KPMG) were to advise Nigeria what will you tell the government to do?

First of all, let me cover the energy sector. I think the very disruptive force in the energy sector now is the discovery of shale gas in the United States, which is basically providing the US with a huge competitive advantage over the rest of the world because it now can produce gas for $4 a giga joule whereas the rest of the world is on $14 or $15. And oil costs six times the cost of shale gas.

And if you get the US to reduce its import reliance and become an exporter, that changes dramatically, the focus on oil in the world economy. But this is going to take a long time to happen. First, there are environmental issues, capacity issues and the US will soak up a lot of its domestic reserves before it can start to impact the global economy.

On the long term when shale gas is efficiently exploited around the world, you can see a long term adjustment in the oil price downwards. So my advice is to diversify the economy and to make sure you don’t actually put your risk on any particular commodity and use the competitive cost advantage of other economies to drive other industries.

With the proceeds from gas, you can make other industries here competitive using the advantage you have to access to low cost and efficient amount of oil reserves.

You have a window of opportunity; it is not growing bigger, it is narrowing. You better use that window of opportunity to diversify the base of your economy. And you know, I’ll tell you something: I have always been a proponent of this idea that if you take oil out of the equation of this country, we will be a much better country.

Things are not going to work that way; that is not the real world. In the real world, they say, ‘Concentrate on your area of comparative advantage; develop your entire value chain. I tell you, if you neuter oil from this country, we have people with sufficient energy and entrepreneurial skills in this country to develop this country without the oil hang-on that we have now.

But oil will still play an important part but utilise it to develop your infrastructure, to educate your people and diversify your economic base. If I was advising government, that is exactly what I’ll say.

My question has to do with the aviation sector. The government has moved away from owning airlines but you find that many of the airlines are fundamentally weakened; even the so called new carriers are in debt and are at the verge of collapsing. The government has intervened once or twice but yet you still have lots of issues in aviation. So from your own understanding what are the problems and how can we arrest them? 

I can tell you something. You are not going to solve the aviation industry problems with government becoming a major player, with government buying 30 aircraft and saying, ‘We are going to have Nigerian Airways’ or whatever. You are not going to solve that problem that way. We have all been through this before. When I was growing up I knew we had the Nigerian Airways and you knew exactly what happened to the airways.

What has to happen basically is that you have to empower; you have to trust the private sector, you have to have people put their capital on the ground and make sure that it works. And honestly, as you know in this country, we were going to make it that way. Richard Branson came into Nigeria and made an investment in Virgin Nigeria. The only thing he asked for was basically, ‘Look, let me use MM1 as hub, as a regional hub’ and the Federal Government of Nigeria agreed to this. Isa Yuguda who was the minister of aviation at that time signed off on it and said ‘Yes, it is ok. Use that.’

Then we had a change in regime. When we had the change in regime, vested interests came and those vested interests said basically, ‘Listen, even though we had an agreement we don’t agree with this particular agreement; let’s do something else. You won’t have that as a hub.’ So the guy walked off and then what happened?

You then handed over that particular industry to somebody who didn’t have any real experience in it so what do you expect? Of course the whole thing collapsed and we are in the situation where we are now simply because of a wrong decision. So I am saying again that we are not going to resolve this matter by saying that government should own aircraft and start again in the aviation industry.

I can tell you now for free that it is not going to work and that if you do it in 10 years’ time that particular company you set up is going to fail. What we have to do is to put the incentive into place for people to go into the aviation industry which I can tell you now, is not an easy industry at all.

In fact, there are people who say if you are a billionaire and you want to become a millionaire, what industry should you go into? And people do say you go to the Aviation industry! So I am not saying that it is impossible but there are creative ways to fund these things. But it not by saying “We are going to have a Nigerian Airways again” because it is not going to work and it is just going to waste the resources of all of us.

Please, one more thing. I have a view that the world aviation industry would be dominated by Middle East airlines and you really need to know the capacity what the have in terms of models of their fleet, their regional hub and the fact that they have great access to cheaper fuel, they are going to be dominant. So you are going to have to leverage on the local flights.

In all your responses, you keep mentioning ‘vested interests’. How do you deal with these vested interests, with the kind of corruption going on around the country? How do you deal with these vested interests as a consultant?

It is not my responsibility alone. It is the responsibility of all of us; of civil societies. Every one of us has a role to play and if you take a look at the track record of KPMG for instance, you know what we did with pensions; the issue that we raised up with regards to pensions, with regards to the fuel subsidy.

We have done our part not only as a firm but also individually where we find ourselves. And journalists also have a responsibility to do that. To educate people responsibly, and say ‘you know, these are the issues’ and in this respect I have got to say that I respect some of you guys on this table.

When Emeka Eze at Procurement got into the transmission issues I knew the anger you expressed and what you said about the fact that you are angered beyond belief about the people who would like to derail this power sector reform maybe not for money sake, but just to prove a point that ‘I am in charge.’ We need to clean up the judiciary, so I am happy with what has happened recently with what the Nigerian Judicial Council has done together with the CJS. All I am saying basically is that the fighting of the vested interests is the responsibility of all of us. You are also included in that battle and I am sure it is a battle we can win if we all basically say ‘enough is enough.’ Let’s just get this country moving.

Let’s go back to the aviation industry where you said you don’t want to see government getting involved. Now if you take government out of it we feel that even those who manage the private sector of aviation don’t seem to manage properly. What do you think is the key issue with the running of those private / individual airlines?

First of all, you have got to have a regulator that does his job. You can’t have a regulator that goes to sleep or is in cahoots with the private airline operators on how to cut corners. You have got to be able to say to yourself: ‘I’m stand above the fray and insist on standards: ‘you have got to do this.’

What I am saying is that you need to have an effective regulator that says ‘these are the standards and they have to be adhered to.’

Back to what Andrew said. The business module of our operators is flawed, deeply flawed I told Jimoh Ibrahim when he said he wanted to go international. I said, ‘You are going to fail woefully; don’t fly international, go for a low cost carrier model. Stick to the regional and domestic market because you are incapable of competing on the international level.’

The same is applicable to Arik. So far as they think you see for them as an ego thing, so far as they think they can operate and compete with the likes of Emirates or Etihad or Qatar Airways or even British Airways, they will fail. And for your information, even the big airlines in Europe and US are suffering; most of them are operating on losses right now.

You cannot be borrowing money at 30% interest rate which you have to pay back in 90days, and think you will operate efficiently and effectively. So even the operating model, the cost of funds, these are the things that are hampering the operations and until they alter their models there is no way to succeed apart from the regulatory environment.

You did say something very important: as Africans, sometimes when we go into business, we go into it because we want to always represent. Sometimes, as Africans we prefer to own 100% of nothing rather than own only 10% of something profitable. Aviation is just like oil and gas, and telecoms; they are deep pocket business, they are capital intensive. It is not something you just stroll into.

And the reality again is the robustness of the regulatory environment and when I talk about ‘robustness’ I am not only talking about safety standards, but about the people who man those organisations. If you make the wrong assumptions or the wrong decisions on aviation fuel or safety standards, it can actually send you parking and those kinds of things are important to us. I think beyond all these things we have said, we need to know that the process of the regulatory environment is extremely important because even the safety and standard is truly important because in the sector, if something goes wrong it causes how many lives? Between 155 and 200 lives are lost.

Going round the states as a first timer you must have noticed that there is a huge informal sector here. What is your take on the potentials this offers viz a viz the financial inclusion that the Central Bank is talking about?

That is actually critical to the economy that you actually start the transition of the informal sector into the formal sector and that you encourage people by showing them benefits of being in the formal sector by way of subsidies, grants, programmes on entrepreneurship and demonstrate that you are better off in terms of your long term advancement by being in the system than outside the system and we do this through indirect tax mix?

There are ways of demonstrating to them that you benefit from greater government inclusion. There are many kinds of programmes and infrastructure available to you if you are in the system and if you stay outside the system you will be disadvantaged. So you need to have this level of settings in place and I think you have the quality of these economies.

It is incredibly important because you can do all the things we have talked about and you will create an entrepreneurial class and that will provide jobs and employment but if you have social unrest and you have massive unemployment and people don’t share in the benefit that is what starts to put tension on countries. So this is the biggest issue in China frankly. In China, it is growing enormously but not every single one of the population is actually benefitting from the progress in China and that has resulted in a number of the satellites.

In China, you are starting to see significance civil unrest questioning of the government module and that is becoming a very major issue not only for the government but for business. In Dallas this year, we voted a hub of the business council of the top 100 CEOs in the world and we said what is the biggest single risk to the global economy and they said, ‘civil unrest’ which you will basically see in Europe and many other countries where you have very high rates of youthful unemployment in a very socially disconnected generation who are quite organised through social media to cause immediate difficulties.

What is the size of Nigeria’s informal sector today?

I mean I cannot give you a precise figure but it is really huge. I mean there are some people who say it is up to about 50% of the entire economy. Let me tell you something: what is the key to inclusiveness? What the guys in the informal sector are asking is: ‘what have you done for me lately? What have you done for me today? If you want to take people from the informal sector to the formal sector you have to say to them, ‘Look, at the good roads that I have built, look at the hospitals, look at the quality of education.

When you see that people come around and say, Oh yea, it is a good thing, but you take things away from me, you take taxes and you do all those kind of stuffs, yet I look around and there is nothing.’ As all of you know, that is the basic. That is what is causing the issue over fuel subsidy removal because people are saying, ‘We don’t trust you; this is the only thing we have if you take it away, what are you going to give to us?’

Okay, you give us SURE-P but what is SURE-P? What has SURE-P done for me? So, in order to be able to take people away from that sector, you have to show them concrete things they can see themselves, so that people then realise that this is the advantage of being part of the formal sector; this is the advantage of being candid, this is the advantage of paying my taxes because I will get security, I will get good roads, I will get good education; the power is there.

But if you don’t do that, sure, I have stayed in my own cocoon because I don’t trust you. People say Nigeria is a country where you bring your everything you bring your own road, you bring your own water, you bring your own electricity, you bring your own security, why should I go into the formal sector when you don’t give me anything?

Over the years aviation has witnessed a reducing profile in its productive sector. On the graveyards of these production facilities are now churches, event centers and even self-service outlets with their huge stocks of products for their country. Now the government has been churning out the growth rate that somehow looks impressive. With this scenario how will you describe Nigeria’s growth trend in the context of global economy?

Let me just say something, and this is something I have said before. Several times growth rate doesn’t matter to me—6.15%, 6.5%, 9% means nothing if the ordinary man on the street is not seeing it. What does growth rate really mean? What we are talking about is economic development, what we are talking about is the common man? How does it begin to take people from poverty to the middle class and in that area we have a whole lot of things to do.

Sure, we have those growth rates in this country but it is heavily concentrated. Let me tell you, the country with the highest growth rate in Africa today on a per GDP basis is Equatorial Guinea. But you go into Equatorial Guinea and see what you see; it is concentrated in the hands of some people. Angola is the same thing; those are the two big leaders on the African continent. I am telling you if you have that then you are going to have what Mike is talking about—civil unrests.

I am telling you that and anytime I think about these things I remember the words of an American playwright who is dead now called James Baldwin, who wrote an essay called ‘The Fire Next Time’ and what he wrote is that God gave Man the rainbow sign which means no more water but it will be fire next time and we have to be very conscious of that in Nigeria.

In fact, indeed, all of the entire African continent because we are taking a look at the growth rate in the sense that it is not sustainable because you have not done that distribution because wealth is concentrated on a few hands like I said, the fire next time.