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Palliatives can’t fix economy, Idika Kalu declares 

•Economy in total breakdown, not recession  
•Govt must stop under-funding development
•Restructuring panacea to modern Nigeria

By Onochie Anibeze, Ishola Balogun,Charles Kumolu and  Moses Nosike

A two-time Finance Minister during the military era, Chief Kalu Idika Kalu in this interview declares that the search for solutions to the present dysfunctionalities in Nigeria may not be fruitful if the government continues to see the situation as just a period of economic decline.  

As far as the renowned Economist is concerned, Nigeria is experiencing a total collapse of all sectors and as such, should be holistic in coming up with a workable antidote. Beyond economic concerns, he submitted that a modern Nigeria that would guarantee real growth may remain a mirage if the country is not restructured in cognisance with Nigeria’s diversity and public mood.

You were among the World Bank team that helped the growth of most Asian countries and Nigeria is presently experiencing a severe economic crisis. What is the way out?

Dr. Idika Kalu
Dr. Idika Kalu

To say that we are in a recession is a euphemism. In the last 30 years, as far as one can remember, we have underfunded our development.

Underfunding means, that as a large country with a growing labour force that is growing rapidly with population increase that is one of the fastest growing in the world, you need to have a plan. But what we have is poor health care system, maternal mortality is still very high while the Nigerian economy is gone.

The projection is that by the year 2050, Nigeria will be the third most populated country in the world after China and India. That is scary enough to make the country to start funding development because we don’t require much work to get to that ominous target.

We have a large population that is growing very fast.    What to do is to build structures with the least cost at every point in time. We don’t have the disadvantages of some small countries. Our large population offers us the luxury of labour. People can gravitate from any part of the country to work anywhere. But we don’t even sit down to discuss with people who can tell us our gap and needs.

So when I say that we underfunded our development, I mean that we have not been painstaking in designing what we should do to give jobs to young Nigerians, build good roads, good hospitals, train professional, build the mass transit and other basic infrastructure.

What we have now is not a recession, the economy has totally broken down. There is no single sub-sector that is working in the country. We should approach it by looking at every sub-sector of the economy and not to talk about recession as if we are talking about a medium or high-income country where there is a liquidity squeeze that requires injection of funds.

We don’t have power, we don’t have roads and other basic structures. When you go to the Murtala Mohammed International Airport you will find a few planes. That is disgraceful for a country of our status. When you   go to countries like Korea and Thailand you will see how busy they are. They were able to achieve that because they created capacities needed for growth which we did not do. It is very shallow to just talk about recession because we must talk about the collapse of every sector.

On IMF, World Bank, others

I wrote the paper on privatisation when I was still a commissioner in Imo State, but we never treated it as an important issue. We had the famous debate over the IMF loan which was a non-issue. From that time we have remained totally deluded. We are well below the indicators with countries at our nominal income level not to talk of those, who are above us.

If you look at statistics for   African countries in areas like manufacturing ratio, life expectancy,   job creation in relation to population, you will find out that we are behind. It happened because, over time, we just got ourselves fixated on the wrong things. We started debating an IMF loan which should not be because the issue is that you will look at what you want to do, where you want to be and how to bridge the gap before talking about loan.

It is better for us to understand that what we have now is not just a recession like in 1985 when I came in as Finance Minister. We have a total collapse of the every sector. All we needed to do when I came in 1985 was to mobilise resources, change the indicators in terms of interest rate, tariffs, and exchange rate and mobilise funds.

At that time, we debated the wrong thing, we didn’t mobilise, we wanted a second tier which the Zambia was doing then. And when the IMF people visited, they were wondering what Nigerians were going to do. We need to address these issues by identifying the structural imbalances, identify the needs and mobilise resources. That is the only way in which we can begin to come out of the recession.

On addressing recession with palliatives

Palliatives are not going to solve it and if you apply palliatives without addressing the structural issues, you will just accelerate inflation. And the gestation time for increasing capacity is much longer than the time required to pump money. So that lag in time frame will impact on the limited supply.

That is the essence of the depth of our crisis. Manpower is also a problem to us and if you are talking about that, we need to talk about primary education, secondary education, technical education, tertiary education and maintenance education. We also need to be interacting with a lot of foreigners in the country but we created a situation that made all of them to run away.

That is why we don’t have the kind of interaction that we are supposed to be having that will continue to upgrade the quality of our thinking and analysis. We need to take a fundamental look at every sector and sub-sector which include power, housing, roads and refineries among others.

I headed a committee on the fixing of the refineries three years ago and made recommendations that have not been implemented. I was supposed to have headed the Niger Delta Technical Committee but later joined them. We made recommendations but all we ever heard of our report was amnesty but there were several financial issues that were raised.


I introduced the   Value Added Tax, VAT, in 1994 at five percent under stress. It is now seven percent. Every time I hear that they are going to raise it but nobody comes to ask questions. Ours is among the lowest. I was told how someone nicely, someone said that the VAT should not be raised because Nigerians are already suffering.

But Nigerians also want to see improvement in the economy and improved services. I am sure that when they see it, they will be ready to pay what our counterparts in other countries are paying. We can’t cry over VAT because we can also have a measure of government performance with an increased VAT. The two go together.

In concrete terms, how can the structural imbalances be corrected?

The calls for the sale of national assets are shallow. The issue goes beyond selling national assets and beefing up the foreign reserve. And people are also talking about debt, which may entrap future generation. The reason our tax revenue is so low is because our government’s performance is also so low.

That is why people can’t be cajoled to pay. That is why those who are collecting are not efficient because they are busy helping themselves. That is why the person who is out there, who is worried about the absence of the basics in the society, would be very difficult to be convinced to pay tax. That is why it is just   not a matter of selling assets and getting money to beef up the reserves.

The IMF head was there, the World Bank man would have been here, the ADB man would have been here but they realised that we have not sat down to formulate a programme that would make them come. It was a travesty to suggest a two-year Structural Adjustment as a solution. Such programme is   continuous even if it would be an option.   We don’t just get down and address issues well in Nigeria.

For instance, I was involved with some American companies in an effort to establish mechanised farming here but the thing never came up because of the Nigerian problem. We have land, the weather is cooperative, yet, all Nigeria does is to talk without results. With fundamental things on the ground, the quality of management of the agricultural sector will be upgraded.

That can be done through the provision of credit and high-yielding seedlings. But how much are our governors, ministers, and other leaders aware of this? How often do they discuss our problems with credible global financial institutions that can give us solutions?

When someone like the IMF boss came here, we expected them to tell them our problems, present our plans and seek assistance. We are entitled to any assistance from the IMF. How often do they talk about the structure of the tariff, exchange rate, interest rate, the bonds and the whole constellation of how to mobilise resources to fund development.

IMF and World Bank will not tell you they would give you a penny. You have to push for it. But Nigerians think they will come and push loans at you. The media should be addressing these issues because they are important.   I get surprised when people say I was pushing for SAP and IMF loan. I never pushed for these, I was only pushing for the funding of whatever programme we agreed on. And when you are funding your programme, common sense suggests that you start with the cheapest.

Implementation is the key to the success of any programme but that is a challenge in Nigeria, how can that be addressed in order to achieve growth?

It is the duty of the various segments of the society to demand the right leadership framework. An economy can be managed in a way that people get so dependent that they can’t make these demands. You can run an economy in such a way that the people who are in the position to make decisions may not be the ones that understand the issues.

Nigeria must do things on merit so that the country can grow the way it was growing during the early time. It is unfortunate that we lost it at some point in time. That is why you find all sorts of people getting appointments without reference to their training and competence.

At 56 we should be able to tell ourselves the truth because if we don’t do so, it will genuinely be a betrayal to our nation. There is hope because as bad as things are now, you keep hearing about Nigerians who are doing fantastically well in every sector. Nigerians must tell themselves the truth because small countries like Senegal, Ivory Coast, and others have overtaken us.

Today, all you hear is Rwanda because they are doing so well. And if they are doing well how much more a country of our size that was   showing the path in those days? When I was growing up, my father used to buy newspapers where I read about Nigerian lawyers representing Jomo Kenyatta in Kenya. We also exported intellectuals to other African countries. In the global institutions, we also had a good representation of Nigerians.

When I got to the World Bank, there were so many Nigerians there. I got there on merit having finished my studies after the war.   I was immediately sent to Korea on my first mission. In the past, when you meet people outside the country and they know that you are a Nigerian, they will tell you that Nigerians work so hard. But that epitaph is not applicable now.

Therefore, we should not just talk about recession alone but the total structure of the Nigerian society. If things were working, there would not have been confusion because oil price dropped. We had all the time to prepare for today. However, the talk about diversification should not be done in a way that appears as if solutions will be immediate.

On restructuring

I was supposed to be at the National Conference but for some reasons, my name was dropped. One of the issues I was going to raise had been hinted on by President Buhari recently. It is about local government autonomy.   Given the size of our population, what should be a viable local government system? I have written on it in the past, so I know what suits this country.

I said we should have a local government with a population of 650.000 or 750.000 in each local government.   The size may not be exactly the same everywhere but that range can reduce the number of local governments in the country from over 700 to about 300. It is important to have administrative units that can have some level of autonomy.

They can take care of the primary needs like water supply, primary healthcare, and elementary education among others. The regional centres under this should be involved in the provision of bigger responsibilities.   If we have that kind of local government structure, it must   ensure that everybody in that local government has equal rights. There should be no dichotomy over who is an indigene or a settler.

If that disappears, the culture and custom of the people should not disappear. That was how America got it right. Once the local governments are financially autonomous they can be viable. I have always questioned viability because I believe that it has to do with the quality of leadership available. Same applies to our states. It is not that they are not viable, the issue has to do with the ability of their leaders to mobilise resources for growth.

We have to explicitly agree if we are a nation or not. Is this conglomerate of over 350 ethnic groups compatible enough to stay together? We have to agree if we are to stay together because every nation is an accident of history. It could be military history or any kind of history. We have to agree if we will stay together so that 50 years from now, our children and grandchildren will see themselves as Nigerians. That is the fundamental question that should go with the restructuring.

I will say that what is going on now is very painful having gone through the civil war. Therefore, we need to ask ourselves if we want a modern Nigeria that will be number nine in GDP size in 50 years time. We should ask ourselves if we want a nation where all sorts of obscene social habits that we have now, would be present in the next 50 years. If we are going to be one nation, I think we should have a clean slate.   Until we restructure,   we will not have a modern state.

Nigerians can have a referendum on our future but I don’t support the idea that some issues about us are not negotiable. I am talking about a Nigeria where if you don’t like an area where you are, you can move over to another place and have equal rights there.

On industrialisation

We are so confined to the little that we have done, that is why they are always fighting. When I wrote the privatisation paper, I highlighted that government is always burdened with the things that are better done by the private sector. The role of government has been shrinking all over the world, and we should key into that. To be able to do things efficiently, the government in Nigeria should give up baking bread and push that to the private sector.

The private sector should not just be only a Nigerian private sector considering that we are at a low growth level and want to grow huge enterprises. Therefore, we need additional capital, technology management which can come from anywhere in the world. That model should be driven by people with the right technical know-how, who know what to do.

Many people have complained about how the economy is being managed, from the standpoint of an economist   are you satisfied with the way the economy is presently being managed?

I have made the point that we missed the opportunity of the global flow of development. The opportunity we missed was that we talk about being a large economy but have not worked for it by developing areas where we have comparative advantages.

The country should be able to work in a way that there will be a normal flow of development where knowledge, labour, capital, and technology are being transmitted. When a nation is faced with this kind of crisis, what to do is not to stop everything working. You can’t start lamenting the sharp drop in terms of trade because oil prices dropped. Everything depends on your ability to take quick measures.

And one of those quick measures is your ability to finance those things that are efficient that you don’t have the funds to work on. It involves financing the importation of essential materials to keep the country working. In the meantime, it gives an opportunity to identify all the problems especially unnecessary costs, misapplication of resources like manpower and capital among others.

There will be that restructuring but everything will be going on simultaneously. We have the capacity to tell the global financial bodies about our challenges, they don’t have to come here, and they will get all the data they need to assist us. Egypt has done that by having a quick adjustment of their finances. They got money from the IMF, Saudi Arabia, and others. We have to fix the problem through a continuous process. We could call it reform or anything, all that matters is that the problems are solved with the right decisions.

At a time like this, it is expected that people of the same professional background like you come together and deliberate on how to assist the government in fixing the economy. Is there anything of such?

There is the Nigerian Economic Summit Group which started in      my Sitting Room in Ikoyi when I was a minister. I used to invite people who would come and discuss the economic policies of the government. That should have been a very big framework for what we are doing but we really need to know how we lost it. At this level, we were all supposed to be working together. I am sure that what they will be discussing now is how to manage the economy in a recession. But that should not be.

Nigeria has shown that it can carry on without economics but that it is not right.   Whether there is an economic movement team should not be in doubt, the evidence of that should be there. It is that some of us are unwilling to do it, but it shows the way things are. In doing that for instance, it should not be restricted to micro and macroeconomic factors alone, but also the various sectors of the economy.

Things like these happen in small African countries, but they are not happening here because once people become commissioners or minister, they think that they know it all. They should be demanding this because there should be some vehicle to drive our development process.

And we will be very patriotic to make ourselves available if called upon. We prepared a report for this administration and presented it but my impression is that the report was never opened. Every single thing I have said is in a paper I presented during Babangida’s regime. This discussion is needed now because fixing the economy goes beyond fixing the reserve.



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