Says there is disconnect between economy size and the people’s welfare
‘The benefit of biometric authentication of bank customers’
BY UDEME CLEMENT
Mr. Mudashiru Yusuf, an economist, is the Director General, Lagos Chamber of Commerce and Industry (LCCI). He speaks on the nation’s economy.
What is your take on the monetary policy of biometric authentication of bank customers introduced by the apex bank?
I believe biometric authentication of bank customers, especially in the area of fingerprinting, is a good monetary policy. This is because with biometric authentication, deposit banks are expected to capture biometric details of all customers nationwide, including fingerprints. When fully implemented, the policy will address issues associated with personal identification numbers theft in the system.
It will also enhance security of transactions in the financial sector, because no two persons have the same biometric data. The issue of forgery and fraud in the system will be tackled with this policy. It will further promote financial inclusion, as many people who are not educated can do transactions by finger-printing. This policy is an improvement on what obtains in the financial system now.
As an economist, what measures will you advise the new governor of CBN to put in place to fast track growth in the industrial sector?
Reduction in interest rate, which is a problem affecting enterprises, affecting their capacity for growth and job creation. If he can do it as promised in his agenda, it will stimulate tangible growth in the sector. He needs to address short tenure of funds in the financial system, as over 80 per cent of funds in the banking system are funds not more than one year tenure for manufacturing, industry and solid material. We need funds that are more than one year tenure to enhance greater productivity in the sector.
He can do this through collaboration with the National Pension Commission, as the Pension fund is estimated at about N4trillion now. Getting this money into banking industry will improve availability of funds in the financial system. He should ensure that the system is more supportive of economic development because, commercial banks are driven primarily by profits.
So, where overwhelming motivation is profit, development issues will continue to suffer. Therefore, CBN should shape the activities in financial sector to support large scale economic growth and development, especially in the manufacturing sector. The new CBN boss needs to reserve the autonomy of the apex bank, without necessarily being confrontational. He must be firmed to ensure that the autonomy of CBN is not eroded.
As a stakeholder in the industrial sector, what do you think are the economic implications of the increase in electricity tariff announced by Nigerian Electricity Regulatory Commission (NERC) recently?
Well, increase in power tariff does not sufficiently take into account the sensibility of consumers. The reason being that you can’t increase power tariff at a time when the quality of the service is declining. This can happen in a monopoly situation. The fact is that power tariff has been programmed to increase irrespective of the quality of service, which is not good enough. One can only hope that the situation will improve with time.
As for economic implications, it will lead to increase in operating cost of businesses. Infact, there are instances where some operators of Small and Medium Enterprises (SMEs) opted to be permanently on their own generators, because they complained of being compelled to pay for power they did not consume.
How do you reconcile the high poverty rate as well as the unemployment crisis in Nigeria with the recent rebasing of the economy as the biggest in the West African sub-region?
The size of the economy is different from the welfare of the people. For example, it is like a family that is rich, yet some members of the same family are not living comfortably. What we witness in Nigeria’s economy is a reflection of structural defects as well as the issue of profound inequality. The major sectors of the economy that are delivering some of the goods are sectors which are not really creating many jobs.
These sectors have very little local value addition. Some of them include oil and gas as well as tele-communications. Agriculture as a sector has very low productivity. The manufacturing sector is heavily dependent on imports, while the oil and gas is dominated by export of crude oil.
The economy has very weak inter-sectoral linkages. Over 80 per cent of goods we consume are imported. These are some of the reasons for the disconnection between the Gross Domestic Product (GDP) size and the GDP growth with the welfare of the people. The GDP can only impact on welfare if the citizens themselves are significantly involved in the process of generating the GDP. This is what the concept of inclusiveness is all about. The small businesses that create over 80 per cent of the jobs account for less than 10 per cent of the total credit from the financial system.
The economy itself, especially at the level of SMEs, is constrained by low productivity because of the unfavourable investment climate. Aside from that, the structure of government’s spending is such that cannot impact significantly on the welfare of the people. Spending on health, education and other infrastructures is clearly not commensurate with the strategic importance of these sectors. Greater spending in these areas can go a long way in reducing poverty in the country. Therefore, the structure of government’s spending at all levels is also a major factor in the current poverty situation in the system.
What will you describe as the major achievements of the industrial sector after 15 years of democratic rule?
The performance of any sector can only be as good as the business environment permits. For instance, an economy will get the kind of investment it deserves. As you can see Nigeria’s economy is currently dominated by buying and selling. This is so because of the risk of failure in manufacturing, especially following the challenges facing the sector at present. There are many industrialists today who are lamenting their decision of going into manufacturing, because the challenges are overwhelming.
Investors by nature want to succeed but their success has been limited by the operating environment. Their success has also been limited by unfavourable investment climate, poor infrastructure, high cost of funds, hostile regulatory institutions, policy inconsistency, influx of cheap imported products, poor ethical standards and corruption in the system. Billing problems and power theft also constitute serious challenges. There are serious funding issues across the entire value chain of the power sector of Nigeria’s economy.