November 14, 2009

Deregulation: FG should go back to the drawing board, Ajagu

Since the Federal Government declared its intention to deregulate the downstream sector of the  petroleum industry confusion has dogged the plan. No matter how hard the government tries to justify its action many people and groups believe that it is a disgrace for Nigeria as  a major oil producing country and a member of OPEC to still import petrol for domestic consumption. Dr. Ausbeth Ajagu,a Political Economist, and business administrator.

The president, Academy for Entrepreneurial Studies, Nigeria (AES), member of the National Technical Working Groups of Vision 20:2020 and as well as a member of Nigerian Economic Summit Group among others. In this interview, he bares his mind on why the reasons adduced by the government for the proposed deregulation exercise are wrong as well as other unresolved issues in the economy. Excerpts.

CONFUSION  has continued to trail Federal Government’s     Proposed deregulation. As an economist, do you think the time is ripe for the exercise?
You see, Nigeria can never operate in isolation. We belong to the world economy. We belong to World Trade Organization and other bilateral trade organizations. So, it is not possible for us to isolate ourselves. So, deregulation is imperative as it is absolutely a necessity in  this nation and the world at large because it is incumbent that government sets standards and allows the private sector to organize things properly. Government has no business in business.

However, what we are looking at is transparent deregulation. If you take a case of the AGO (Diesel), it is already deregulated but how transparent is the deregulation? Are we talking of creating monopoly? Right now’ we have about three or four people solely in charge of importing AGO in Nigeria and as you know these monopolies determine the price of their products . So,  whatever they decide is what they sell to you and I to buy ,so that’s not transparent deregulation.

So , we must be able to differentiate between transparent deregulation as practiced in other parts of the world and what is practiced in Nigeria.

Deregulation itself is very much in tune with modern governance because it brings out the whole thing on the balance sheet as the price is always  determined by the market forces but that’s when it is an open market. So, competition would strive and competition would set the price but when you say you deregulate and you have a few people who are in charge, you have ended up tying the hands of other people, so what you have done is creating monopolies which is wrong and, before you know it, they will form a cartel and that is what is going on in the AGO market.

If we are talking about deregulation they should be transparent in that, government should set up a standard and there should be equal playing field for everybody to enter the market provided you need to understand the nature of the quality of the petroleum product you are bringing in. If you bring in sub-standard product, it should be confiscated and the ship  turned back.

That’s what deregulation is all about but I don’t think we are ready for that. Besides, while we are looking at transparent deregulation, we should also look at palliatives because we are already  impoverished. Statistics have it that 71.9 percent of Nigerians live below one dollar per day. So, if we deregulate  we must have palliatives to cushion effect, such as railways that will transport people and goods round at low rates. Roads and electricity are still lacking and people are being forced to buy petrol to power their generators . So, it is like you are holding the economy and the people of Nigeria prostrate and only answerable to these few people you have created as monopolies.

That is not deregulation, so we have to bring in transparency in the process if we have the interest of this nation at heart. I am not saying that deregulation is not right or is wrong but the conditions prevalent to this deregulation now are wrong.

They are not in place. So, I would say let us go back to the drawing board, suspend the deregulation, plan it very well, invite more technocrats and transparent people who have the interest of Nigeria at heart to plan and put proper machinery such that when it comes, it would come transparently and Nigeria people would embrace it. Everybody wants change but what is the opportunity cost of the so called deregulation that it may be too hard for the people to bear?. Austerity measures in the past were a far cry in terms of suffocation of Nigerian people because everything would go up and purchasing power is not improved, rather it will make the naira weaker .

So, you have to look at all these measures. You don’t just take one commodity and say you are deregulating and so be it. I don’t  think it is right.
The Academy for Entrepreneurial Studies , Nigeria which is your brainchild has been on for a  while. How would you assess its impact on the country’s economy?

Over the years, we have been able to weather the storm and, to a very large extent we, have been able to make appreciable impact on the Nigerian economy. So far, we have trained over a thousand people to be very good in their chosen professions concerning leadership and entrepreneurship. These people we have been able to draw from all strata of the society from the private to the public sector, organized and unorganized society . We are very meticulous in terms of membership as we don’t just admit whosoever applies. We scrutinized and make sure they are above board and not people of unquestionable character.  We after helping them to acquire the needed skills also place them on a sound footing  in terms of corporate governance, best practices and world best known behaviorism. Our membership  cuts across associate membership, full membership and fellowship.

So, basically we train people to be independent and productive in their chosen profession and equip them to be change agents rather than change victims. We teach you to be proactive and in line with modern trend. We teach you to be strategic business thinker and business owner. So all our members have been excelling in their chosen professions and we have cause to give glory to God. Just about March this year we organized our first national conference and  vice president Goodlock Jonathan was the special guest of honour. We assembled  the best brains in the country such as Mazi Ohabunwa,  Chairman of Nigeria Economic Summit Group, Publishers of Business Day newspapers, Publisher of Financial Standard, group CEO of Standard Alliance Insurance, Chief Ade Ajo of Elizade Toyota, and others  to brainstorm as discussants.

The lead paper was presented by Prof. Anya .O. Anya and  at the end, a sound communique was  submitted it to the Federal government which has kept to its words by following our suggestions and advice.  Aside training we  publish a quarterly magazine called the AES Digest which we  distribute freely to every strata of the society telling them what it takes to be good leaders or managers drawing inference from people who have led their countries and organizations  well without criminal records and making them  realize the need to leave behind enduring legacies in their chosen fields.

It has cost us a lot of money but we believe it is part of our contribution to national growth. We are also visiting universities and other tertiary institutions  where we teach them entrepreneurship and leadership skills and at the end we induct them into AES  Entrepreneurs Club. We have successfully done this in Auchi Polytechnic and University of Agriculture Makurdi .

We are determined to do more since we believe that if you catch them young, they wouldn’t have time to get involved in  anti-social activities.

We have also started the ICT centre which we are doing in partnership with some banks. Oceanic Bank has been generous enough to donate to us some computers and we have also involved the best brains to teach ICT because we are in the information age. We have well, equipped library where people can come and read and make reference to materials available. There are rooms for improvement, and partnership .

So, we are calling on people to partner with us for the progress of the society because we are  a non- profit making and non-governmental organization.  We are calling for more support from the government, private sector and good spirited individuals so that we can make more impact in the country. As we speak the bill is before the National Assembly is being gazetted as Chartered Institute of Entrepreneurs of Nigeria. We are seeking to be chartered and we believe God that we would get there someday.

Globally, entrepreneurs are very crucial in the development of any economy. How in your view can the country really get the government involved in the promotion of growth of SMEs that would turn around our economic fortunes ?

World over, SMEs constitute the largest employer of labour. In Nigeria, it constitute  about 83 percent of the employment body in the country. It is always regarded as the engine of growth and development.

Therefore , any nation that is desirous of growth and economic prosperity must     not take the SME  sub-sector  for granted because it is always the largest employer of labour and going by that, Nigeria is not to be seen otherwise. Unfortunately, SMEs have been suffering in the country given the peculiarity of the nation’s entrepreneurship landscape which we are all familiar with. Issues such as poor electricity supply, poor infra structural facilities such as bad roads, insecurity problems, multiplicity of taxes ,

some very obnoxious like the borehole tax, generator tax and others are yet to be addressed and it is the duty of the government to supply all these. So, where they can’t supply instead of them being apologetic by giving incentives for not leaving up to expectations, they are now taxing you for that. That’s a moral attitude that is just absurd. A situation where the interest rates are very high compared to single digits you find in other countries, in Nigeria you are talking about 20-22 percent if at all you are to be given. There are so many other hard operating conditions.

World Bank statistics have it that the Nigerian  industrialist is at 35 percent cost disadvantage compared to his counterparts in Asia and Europe. So, that means before start your business, you are already at 35 percent cost disadvantage because you have to provide your own generator, borehole, security, virtually everything. Ordinarily, these are the things they take for granted in the Western countries. Unfortunately, it is not the case with Nigeria. I am saying whilst we are waiting for things to get better, there should be a template. Government should be able to give a tax holiday to SMEs and  palliative to cushion the effect of the lack of infra structure that we have if truly the government is desirous of getting things done.