Dr Ausbeth Ajagu, MFR, a renowned political economist and industrialist, chairman, corporate affairs and strategic planning committee of Manufacturers Association of Nigeria as well as the President of the Academy for Entrepreneurial Studies, Nigeria and several others.
In this interview with Saturday Vanguard Business, Ajagu reveals why the economy is in crisis and suggests the way forward. Excerpts:
With the state of infrastructure in the country now, do you think there is a future for Small and Medium Scale Enterprises in Nigeria?
Generally, public infrastructure in Nigeria has suffered a lot of decay. Maintenance culture and infrastructural capacity enhancement on the part of the respective government agencies charged with the responsibility of maintaining these infrastructural facilities are terribly lacking.
This accounts, mainly, to the poor economic state of the Nigerian economy and ultimately a clog in the wheel of the overall national development.
Since there are not so many good road networks, no stable electric power supply, no reliable air and rail transport services, and so on, the cost of running business, especially for the Small and Medium Scale Enterprises, becomes so high.
Consequent upon this, so many Small and Medium Scale Enterprises have either closed shop on account of going bankrupt or being unable to afford the over-head cost of running their businesses.
Sadly, only a handful of these Small and Medium Scale Enterprises are currently in operation with a majority of them within the fringes of collapse.
There is no disputing the fact, with the economic indices at hand, that the current state of Nigeria infrastructure cannot sustain the Small and Medium Scale Industries.
Hence the only way forward is for the government to rehabilitate, expand and build new infrastructural facilities that will in turn boost the national economy.
The banks are reducing in number because of the CBN measures meted on them. Capital market is still dwindling. Considering the rate of unemployment in the country, what effect will it have on the economy?
The Nigerian banking sector and the current operational policies meted out on the banks by the CBN provide very interesting subject matter for discussion.
In the first place, the CBN measures namely: recapitalizing distressed banks, provision of loan incentives, readjusting ailing banks’ top management team, buying over distressed banks, merging of banks to boost their capital base, and so on, are all well intended.
It should be recalled that in the not too distant past, top bank executives had hinged on the successes of the Prof. Charles Soludo’s 25 billion naira recapitalization policy to swindle a lot of innocent Nigerians.
These executives gave themselves jumbo pay packages and build branches on every empty parcel of land all over the country thereby creating the impression that their banks were ‘rich’.
What most Nigerians failed to understand was that these banks were not making money the way they pretended to be, but were actually squandering depositors’ money. Consequently, bank shares skyrocketed and there was more money for executives to buy ‘jeeps’ and go on summer vacations abroad.
They also frivolously granted outrageous amounts as loans to family members and friends without recourse to viable collateral with depositors’ money.
With this development, it was only a matter of time for the whole sector to collapse.
The economic crisis that sprang up in America and some parts of Europe was an eye-opener to what was to befall Nigeria if she did not put her banking acts together. Limens brother’s case is still fresh in our memories.
The current banking reforms are necessary. Although the measures entail economic ‘belt-fighting; and Nigerians complain about their inability to access loan, the plummeting of their share prizes and other attendant economic hardship associated with this seemingly and arguably purgative CBN policy, the whole measure ensures that the economy does not collapse totally.
The CBN is, in my opinion, not to blame. The blame should rest mainly on those ex-bank CEOs whose greed and recklessness nearly extinguished depositor’s money. We should be thanking God that the damage done only touched share prizes. The intervention came, fortunately, before those soiled hands extended to deposits of common Nigerians.
With Okonjo Iweala and her team, sir, looking at the economy that is almost collapsing and the type of politics that is practiced in this country, do you think they will achieve the desired result, and if the team must succeed, what must be done?
I personally believe that Okonjo Iweala will succeed. I find justification for my belief in the debt forgiveness she achieved for Nigeria during her brief stay in office as Finance Minister.
However, she may not be able to achieve her full potentials due to high level mediocrity in the Nigerian system.
Since we have thrown meritocracy into the dustbin of nepotism, individuals who are poorly equipped intellectually have assumed sensitive positions from where they have remained highly unproductive in developing and implementing adverse public programmes.
The world-class economist, Dr. Okonjo Iweala, understands all these. She knows that without proper sensitization of the Nigerian public for their support in her effort to resurrect the Nigerian economy, she will ultimately fail at the instance of mediocrity.
Here, it is interesting to note that since she assumed office as Federal Minister of Finance and her position as a member of the Economic Management Team, she has issued out a number of communiqué whereby she has sensitized Nigerians on her economic agenda thrust.
She has emphasized that domestic debt must be curtailed and that the Federal Government is to focus on job creation in other to kick-start the economy.
She has also proposed the development of a new parameter for budget planning. Dr. Iweala has at different forum, encourage the private sector to champion this by creating the right conducive environment for business to strive.
There is no doubt about this, Dr. Okonjo Iweala seems different from any other former Minister of Finance Nigeria have ever had. Her transparency and zeal to carry every Nigerian along is obvious.
She does not only speak ‘English’ couched in ‘national security’ mystics, but opens up with figures which are parameters for assessing and monitoring the economy.
For instance, in her latest press briefing, she stated that Nigeria’s debt currently stands at $39billion out of which $34billion is domestic debt. This shows that Nigeria’s debt burden is mainly at the domestic front, while our foreign debt remains manageable.
With this sort of information out in the open, the ordinary Nigerian understands the debt situation of the country and can relate positively to any economic policy that the economic management team may device to address the situation.