Ahead of the Law and Development Summit webinar, Dr. Olisa Agbakoba (SAN) sat down with Chuba Agbu of Legal Business to discuss the Nigerian current Economic situation, the role of law and policy in addressing the financial deficit and the steps that the Federal government must take to avoid a deeper financial crisis.
How would you review the state of the Nigerian economy?
Everything here is about money. There are two critical things in the battle for Nigeria. This year COVID-19 has shut everything down, Nigeria is an import-dependent country with only oil as the main export, and with COVID-19 (Covid) shutting everything down around the world the demand for oil plummeted. We’ve gone from a relatively strong GDP of about 2.5% growth in 2018 to a negative position according to the National Bureau of Statistics. Now in terms of impact; the government will not say it, but I will say it, if Nigeria is not wheeled into the emergency department figuratively speaking, we might go into cardiac arrest. Nigeria presently can be described as suffering from Metabolic economic syndrome. When you talk about metabolic syndrome, it is a combination of clogged arteries and high cholesterol. The Nigerian economy is clogged, and therefore it is not making use of all its resources. The government needs to be very conscious of realising revenue, and the end SARS protest demonstrations showed very clearly that you couldn’t have 30% of your workforce, youth force unemployed. Therefore, the government needs to look for ways to create financial resources.
We can learn from history by observing the American economy when Franklin Delano Roosevelt became president during the depression years; down to president Obama who avoided the great depression that would have hit America following the collapse of the international financial system. They used legislation to turn the economy around because what legislation does is that it gives backing to the government to carry out certain activities. So, for instance, if you wanted to invest in port development as a European and think to yourself -Nigeria has got a good opportunity to make money I want to invest in port development-. So, you ask your source on the ground in Nigeria, what is the law? And he says there is no law; you will be less-inclined to invest. What law does is that it gives assurance to investors to put their money in the system because they are likely to get returns.
Yesterday, I discovered that in the first quarter of this year Nigeria’s borrowing requirements reached just below 100 billion dollars and our debt servicing requirements is about 100%. So, what this means is that if you have Naira, you have got to pay in Naira. Nigeria is broke, and that is showing in the context of government not being able to pay salaries. Something has to give; otherwise, it is going to collapse.
We’ve seen other areas of the economy that could perhaps point to a brighter future for Nigeria, particularly the digital economy. People describe Paystack as a rose that grew from concrete, because the environment isn’t enabling. How do we use policy to encourage young entrepreneurs, especially tech entrepreneurs, to move in that space?
Government has to be positively disruptive. How does the government, by using the left side of its brain, translate new opportunities for young entrepreneurs, so they know that they are being supported? What the government is meant to do is to make the environment comfortable, and its role is not down to the semantics of business. I was looking at the US budget last year I did not see anything on roads, half of the budget is for welfare, for the aged and the like. Unlike us, that spend money on this and that allocation because we have not built the resource. So, for these new technology-driven business’s like Paystack, the government must say come on, anyone with an idea, skills acquisition, innovation we will be able to support you with grants, loans all sorts. So instead of the economy being based solely on oil, new avenues are being opened up.
There’s been much criticism targeted at the federal government for its seemingly endless borrowing from the Chinese government and the World Bank. How do we mitigate this through internal restructuring?
The problem with borrowing is that we have a bad history in Nigeria. Remember the Paris club debt that was about $35 billion which Ngozi Okonjo-Iweala under Obasanjo cleared? It has built up again to about $100 billion. So, people are saying all this money that has been borrowed; where is it? There is an outcry about the public sector borrowing requirements and the issue being brought up, is that the government has no extensive plan. A plan is supposed to list out what is needed, how much is available, and how much is required to execute.
You need to borrow money to build the east-west road; you need money to borrow to build the Manbilla power plant, you need money to borrow to take your power sector from this load point to that load point. Every year we hear the same thing, and this has caused a trust deficit, people don’t believe the government anymore.
The borrowing has not impacted development; there are still high levels of unemployment, bad or non-existent infrastructure; people then ask why is the government borrowing to keep us in debt? The new post-covid economic agenda should be to build up the trust deficit through a simple ethos; borrow and build, borrow and Innovate, borrow to develop.
America is over-borrowed, but they can manage it. The final trump plan to send in what we refer to as palliative was about $3 trillion. It simply prints the money, but they know that in the following year through corporate tax, personal tax etc they can get it back. However, in Nigeria, this is not the case, and the general mood is that of worry, and that borrowing will never bring a return. Honestly, I give full marks to the Minister for Finance, she is reserved but very solid, with a stellar background in taxation. She’s moved out from oil receipts. She’s had three critical bills the Finance Act 2019, 2020 and the very comprehensive Finance Act, 2021 which is going to pull in quite a lot of revenue, however, I think she can expand it, and that speaks to the purpose of the upcoming webinar. There are all sorts of things that can be looked at, hydrocarbons, solid minerals, the digital economy, textile trade and investment, the financial services sector; these create a diversified stream that can be pulled from to access more financial resources. The one thing Nigeria is looking for now is ègo -money.
So, it feels like we suffer from an execution problem when dealing with policy propositions such as the ones to be discussed at the law and development summit. How would this problem be overcome through the use of strategy and stakeholder involvement?
This is a big problem because every good plan needs implementation, and that is my concern. What we would like to see at the end of this is a robust implementation of the recommended strategies. At the end of the webinar, we will put together a policy document and recommend to the government the need for critical engagement between at least three government departments: Ministry of Finance, Ministry of Justice and the Office of the Secretary to the Federal Government. They need to bring their heads together to say these ideas here we need to implement vigorously. Failure to do so will see 2021,2022 get increasingly turbulent because if the government is technically insolvent now, it is not going to improve next year unless the money coming in improves. It’s not magic, if you’re running a company, the primary goal would be for it to improve its revenue intake. In moving from the oil sector, which has been the basis of our wealth in the last 60 years, we must identify critical sectors than can add on and have strong champions spearheading them.
This type of project takes a long time, and we’re talking a decade in the most conservative estimate. How do you tackle the problem of continuity given that each president has a maximum tenure of eight years?
This is a huge issue in Nigeria. Even when I was president of the Nigerian Bar Association and I started the so-called rebranding of the Nigerian Bar Association, I was only there for two years, and as soon I left everything collapsed. Continuity is an issue that can be resolved in an advanced democracy. When I hear a particular president of America, say, this is my 10-year policy; I am reminded that he has only got eight years. The government that comes in and looks at the plan generally inherits it. Even Trump did not do away with some of Obama’s policies. In Africa, we typically do not have that culture of continuity. If we look at the 60-year history of Nigeria to date, there is not any principle of continuity each government comes, says one thing the next government comes in and does a complete 180 turn around.
A good example would be when the four refineries were up for privatisation under Obasanjo when President Yar’adua assumed power he discontinued it, and today those projects are all dead. Some people look at the Asian model, particularly that of Singapore saying that the success they’ve seen would not be possible if not for the government being stable for over three decades. Some people even ask whether the democratic model actively fits development in Africa.
What key things would you like to see come about from the law and development summit?
I want to see a recognition that Nigeria is financially challenged.
I want Nigeria to understand that we are in dire financial straits. We are broke because if you add up the numbers, it will reflect negatively. I want the president of Nigeria to tell us that we are in trouble but that we are capable of solving it. I want him to do what Roosevelt did in 1933. He recognised that they were in serious trouble, and within 100 days; he passed 89 laws. He exhausted the congressmen, and there was no sleep because he realised how critical the financial situation was. Ministers should not have time to be doing conferences they should all be working. At the law and development summit, we have to make a diagnosis, the government needs to accept the diagnosis, and they have to implement a treatment plan; otherwise, we are going down.
The Law and Development Summit is a virtual conference that will focus on developing legislative proposals and policies that can generate 10 million jobs and significantly drive government revenue growth over the next four years (2021-25).
The virtual event is scheduled to hold 26th-27th November 2020. It will commence at 10a.m. daily.