March 12, 2017

Policy options for Nigeria’s recovery, growth, by Soludo, Aremu, Rewane, Alex Otti, others

Policy options for Nigeria’s recovery, growth, by Soludo, Aremu, Rewane, Alex Otti, others

By Emeka Anaeto, Business Editor, Babajide Komolafe & Elizabeth Amihor, Sebastine Obasi and Ediri Ejoor,  Frankline Alli,  Peter Egwuatu,  Godwin Oritse, Yinka Kolawole & Providence Emmanuel

Nigeria’s economy thought leaders bared  the hard facts to rescue the economy from recession. Below are the key contents of their presentations at the Vanguard Economic Discourse held in Lagos on Friday.

New economic plan needs review before implementation – Soludo

From Left; Comrade Adams Oshiomhole, Former Governor of Edo State;Dr Kayode Fayemi, Hon Minister, Solid Minerals Development; Prof Charles Soludo, former CBN Governor/Keynote Speaker; Mr Muda Yusuf, Director General LCCI;Mr Bismarck Rewane, MD Financial Derivations Company ltd;Dr Alex Otti, Former GMD Diamond Bank; Mr Issa Aremu, NEC Member,NLC &;General Secretary, NUTGTWN and Dr Obadiah Mailafia, Former Deputy Governor CBN at the Vanguard Economic Discourse with the Theme; The Hard Facts to Rescue The Nigeria Economy held at Civic centre Victoria Island Lagos yesterday. PHOTO;AKEEM SALAU

A  former Governor of the Central Bank of Nigeria, Professor Chukwuma Charles Soludo,  and the Keynote Speaker at the Discourse, led the thought leadership campaign. He called for a review of the Federal Government’s Economic Recovery and Growth Plan, ERGP, barely three days after it was announced. His words:

We already published the details of his erudite speech in our yesterday edition. So we present just the highlights which set the ball rolling as follows:

  • In domestic currency terms, the economy is in a recession, but that in US dollar terms, the economy has suffered massive compression.
  • The last PDP government was blaming “external shocks” while the current APC government blames not only the fall in oil price/output but also the past PDP government. No one admits of policy errors, and that is the problem.
  • The current government is responding exactly like some did in the past: treating oil price/quantity fall as temporary while treating a rise as permanent/normal. It is merely embarking on short term demand management—just as “coping strategy” while waiting for oil price/quantity to return to “normal” and we get back to business as usual.
  • The Plan (Economic Recovery and Growth Plan, ERGP, rolled out by the federal government last week) envisages to continue the practice of the last government of borrowing to finance recurrent expenditure. The deficit will continue to exceed the capital budget, meaning that every penny of capital expenditure will continue to be borrowed as done by the last government. So, what has changed?
  • Every Plan however is a life document. Perhaps before it goes into full implementation, there is a need for Extended ERGP or ERGP Plus Plus! Eight blind spots in national development

– Mailafia, Former Deputy Governor of CBN

A former Deputy Governor, Central Bank of Nigeria, Dr. Obadiah Mailafia spoke on  the blind spots.

I want to talk on what I call the blind spot of national development.

I agree with the key trust of his lecture and also on the Economic Growth and Recovery Plan, ERGP. I don’t think the objective of the Plan is structural diversification of the economy. It was never really part of the plan. What they have is a fire fighting framework to get the country out of recession. So I don’t think we can accuse them for something that they really did not set out to do.

But I will agree with you that they ought to have made it part of the Plan.  But they have not.

I will like to point out a few blind spots, that perhaps in a lot of our popular discusses and economy we hardly ever make mention to.

Broad national concensus: First, the absence of a national consensus. We have become a much divided country, more divided than ever. If you look at all the advanced emerging economy, the first thing that they had to get right was a broad national consensus with regard to national development. That was the case with in South Korea. That was the case in Indonesia; it was the same case in Singapore among others. We need to get that kind of broad national consensus if this country is to move forward.

Security and Rule of law: Secondly, I don’t care really much among economist especially, on the key issue of human security and crime. What is the economic cost of that to this country? It is very huge. As you know the flight to Abuja has been diverted now to Kaduna. Many of the international airlines say they are not going to Kaduna and this is mainly because of the fear and insecurity. If we are to become an industrial civilized nation we must get rid of this culture of nihilistic violence, rampant and unpredictable lawlessness. This must be stopped and of course added to that is the rule of law, respect to property rights and the rest of it.

Regional and Urban planning: Another blind spot if I may is the regional and urban planning. We have virtually forgotten that. Of course Lagos has made some huge improvement in terms of its mega city project, but many of our cities and towns no longer get involved in anything called regional and urban planning and yet this is very crucial to manage the massive increase in population, rapid rural-urban migration and the rest of them.

Youth development: I have read the EGRP and the reference to youth is very very minimal, yet they are the majority. The young people of this country are the vast majority and yet they don’t really have a voice. If we don’t plan for them, if we don’t build opportunities for them, definitely we will be sitting on a time bomb. And then linked to that of course is chaos. Many of these young people, many of them are graduates, with all respect, some of them barely literate, are in the job market and many are unemployable. They don’t have the requisite skills.

Women empowerment: And of course if I may also add the gender dimension of development. Women are slightly more than men in population. Ours is still a society that is very bias against women and I will say particularly the northern part of the country. We need to emancipate our women, empower them and re-engineer growth by integrating women into the development process.

Social Policy: And my last two points are social policy. The plan talks about inclusive development. I welcomed  that. It is very important. My worry is that, like typical of many things in this country, it is done without clarity of policy, clarity of purpose. The way they did it in Brazil, they have to do very rigorous analysis to find out the geography and social strata of poverty in Brazil. It was much targeted, very rigorously administered and with zero tolerance to corrupt and rent-seeking behaviour in the process.

Industrialisation: And also the issue of industrialization, technology and innovation. Some of us are brought up in the western development classical paradigm but when it comes to Africa you never mention industrialization and you never mention technology.  But I dare say we must industrialize or perish.

Civil Service: The government, the quality of government.  Nobody talks about bureaucracy. I know that the Keynote speaker mentioned it in passing. But you see no matter how noble, no matter how visionary your policies are as a politician; you need the civil servants to implement them. And if they are not competent or if they are lazy or unwilling, they will simply sit there. That is really the big elephant in the room, the civil servants. The days where we have a high breed, well respected civil service, the days are long gone. We need to go back to that.

More visioning needed in economic planning – Aremu

Vice President, Nigeria Labour Congress

Frontline labour leader, Comrade Issa Aremu, said the following:

I want to say that one hard fact on how to rescue Nigeria out of recession is a hard discussion.

Maybe we need to be talking about not just economy but political economy. Why are we going up and down looking for hard facts when we have a good number of them written in the constitution of the country?

Soludo talked about whether the new Plan, ERGP, is consistent with the manifesto of the ruling All Progressives Congress, APC. I think the real document we should refer to is the constitution of the Federal Republic of Nigeria.

With all its limitations, the 1999 constitution is clear about the direction and thrust of this Republic. Chapter two, Section 16, states that government will harness national resources to promote national prosperity.   Government will ensure planned and balanced development and that is the key word.   Government will promote the welfare of the people. I think we should relate the new growth plan to that. Politicians take the oath of office based on the constitution.

I have always been saying that maybe we should not waste time to harass our politicians for non performance, but we should charge them for what they refused to do to keep to the spirit and content of the constitution.

One of the things we appreciate as labour about the Plan or growth is that there is an attempt to return to national planning because the bane of our development has been the absence of a road map. This government has done well in terms of security, anti-corruption to a large extent. But on the issue of the economy, we have not seen the real road map. But now we have plan and I am excited that we have a full blown ministry in charge of planning. The budget and planning are now put together.

You cannot drive the agenda of the constitution of 180 million Nigerians based on lack of agenda for planning. But we must also do this within the context of a vision. There is no vision. A nation without a vision will definitely be operating blindly.

It is sad that a country like Tanzania is operating a visionary programme and it is verifiable as you can see a lot of development taking place there. They are now talking about vision 2025. China is implementing 5th  development plan. Anytime you are engaging with them, it is based on their own terms. I think without limitations we must return to some vision process.

Before, we started with vision 2010. Later we had 2020. There are some vague references to these in this recent document. And I thought that we should read through and to some extent there were levels of consultations.

What I am saying is that we need some visioning; we need to improve on this document to be within a broad contest with the vision to know where we are going within the next 10 years and thereabout.

The second point I want to talk about is that we hear a lot about diversification, but I have not really seen the commitment to real practical diversification. As a matter of fact, this new Plan is still operating within the oil and gas paradigm. It is talking about 2.2 million barrels per day which I think is not really ambitious for the Federal Republic of Nigeria.

I graduated in the 80s and we said Nigeria was the highest oil producer in Africa, but we have been beaten by Angola, and others are coming in. Saudi Arabia is talking about close to 6 million barrels per day. I think people like Nike Akande would like to know what do we want to achieve in terms of manufacturing value added and those indicators are not there.

On job creation, I think we should take Soludo’s speech seriously. I am more optimistic that they will deliver and that is why we are here. I operate from the point of view that things can be done better. There are 10 critical sectors that I think we should look into.

I think the one that concerns me is that we should look at textile and it is one quick win that we can achieve. It is capital intensive and it can absorb a lot of labour.

There cannot be industrialization without electrification. There should be electricity. We can’t drive this issue further because Fashola is not here.

I think he is a lucky person. With such massive underemployment, he is over employed. He should have been here to be interrogated on how DISCOs and GENCOs will deliver power to the industry.

Our current budget is N7.3 trillion. The question is, what do we use this money for? Is it for made in China or Nigerian goods?

I think we can use this money to turn the economy around. I am happy that a factory in Umuahia is now producing booths for soldiers and that alone has provided over 3000 jobs for Nigerians. Our textile industry can produce uniforms for police, customs and children rather than going to China. Budget and public spending can be brought in to encourage local content.

The last quick one I will  add is about issue of compensation. When I talk of working people, it is that you can’t drive recovery with miserably paid poor working people. You can’t drive productivity from this. And I think at the heart of this is crisis of production. You cannot have production without productive workforce that is well motivated and paid for.

As regards N18,000 minimum wage, when we signed it eight years ago, the exchange rate was N115 to a dollar. Inflation rate was single digit and now it is about 18 percent. And today we use any rate.

Minimum wage has collapsed to about $45 and the key crisis facing the industry today is that there is no demand.

Purchasing power is low and the only way you can ensure real fiscal stimulus is to improve the pay of the working people.

I want to say here that we must as much as possible revamp the economy by increasing the wage of the working people and pay them as at when due. Not only that, pensioners must be paid appropriately.

As we are addressing the economy, we must also curb the indulgence of the ruling elite. The pay is not sustainable, unacceptable and most be reduced. Some of them collect double pay and every opportunity is to extract more.

We have xenophobic attack in South Africa and Senators want to take a trip. This economy can hardly sustain that.

Yes we must fix exchange rate. I think the exchange rate policy must drive production, must be seen to be stable and should be such that will promote public welfare. The recent one we have on Naira was done by speculators and in the process we are suffering from it. CBN has done few things and I think they could do more. There is a lot of distortions that they must address. You see CBN-anchored borrowing for rice production. Today, we are more or less building food security in terms of rice production.

From Left;Comrade Adams Oshiomhole,Former Governor of Edo State;Dr Kayode Fayemi,Hon Minister,Solid Minerals Develeoment;Prof Charles Soludo,Former CBN Governor/Keynote Speaker;Mr Muda Yusuf,Director General LCCI;Mr Bismarck Rewane,MD Financial Derivations Company ltd;Dr Alex Otti,Former GMD Diamond Bank;Mr Issa Aremu,NEC Member,NLC & General Secretary,NUTGTWN and Dr Obadiah Mailafia,Former Deputy Governor CBN.At the Vanguard Economic Discourse with the Theme;The Hard Facst to Rescue The Nigeria Economy held at Civic centre Victoria Island Lagos yesterday.PHOTO;AKEEM SALAU

We can target resources for productive sector of the economy. For the 41 items banned, I think it should be more than that, especially, where we have productive advantage at home. Why should we import textile materials from China? I think we should encourage Nigerian textile production and create jobs for the masses. That is the way to go.


Present policies are anti-investment – Yusuf, DG, Lagos Chamber of Commerce and Industry

The Director General of the Lagos Chamber of Commerce and Industry, LCCI, Mr. Muda Yusuf, listed the challenges.

We are talking about rescuing the economy and what can the private sector put on the table to rescue the economy?

You know that the economy has challenges, recession and all of that, and to get the economy out of the recession, we need to bring investment on the table.   There are a number of investments: we have domestic investments, we have foreign direct investments, and we have foreign portfolio investments; those are the key components of investments. So, if the private sector has to be part of the rescue mission, we need to see how we can activate the private sector to move along this direction.

But the key driver, just as the Keynote speaker said, is confidence in the economy. If there is no confidence, there is no way to get these investments to come into the economy. And the policy environment is a major driver of confidence. I will just briefly highlight some of the confidence effects of policy.

The Keynote speaker dwelt extensively on the significance of the exchange rate regime. That for me is very central because no economy can live in isolation of other economies. That is why getting it right with the foreign exchange policy is very critical and very central.

Now, the foreign exchange policy regimes that we have experienced in the last two years or thereabout have had a number of effects.

First, critical scarcity of foreign exchange for the manufacturing and other critical sectors of the economy has been affecting the capacity of a lot of investors to move on with their investments.

Then there has been very serious transparency problem in the foreign exchange market across the entire chains. All manner of under-hands dealing have been taking place in the foreign exchange market across the entire chains. That has been a major problem in the market. Investors have suffered significantly, either dividends, profits, revenue; the airlines, for instances, are good example. There have been major disincentives to inflow of foreign direct investments either from exporters, from foreign portfolio investors. People have suffered very serious losses especially from transition of the former exchange rate regime to the current exchange policy particularly transactions we referred to as matured obligations.

The servicing of offshore obligations has become very difficult to all businesses; in fact, many businesses have gone bad because of their inability to service offshore obligations.

Also, a lot of businesses have lost credible credit lines that they relied upon for their services. All those credit lines have virtually vanished because of the issues of defaulting and credibility problem that has arisen from it.

There is a huge incentive for round-tripping. If there is any business now that is very lucrative, it is round-tripping of foreign exchange because the gains are so huge that it will take an angel to resist round-tripping.

Of course, we have the exclusion of 41 items. I agree with the Keynote speaker that we need to fix the liquidity issue in the foreign exchange market and the way to do that is to allow the market to play a much bigger role in the foreign exchange market. We should move away from allocation of dollars, pieces of intervention, and so on; the economy doesn’t work that way.

So we need to give more room for the market to play the rule in the foreign exchange market. Then there should be full liberalisation of foreign exchange inflows into the economy.

Right now, there are too many restrictions on investors who want to bring money into the economy. It’s an irony; you have a supply crisis, you have people who want to bring in money into the economy to support you on the supply side, but you are creating problem for them. I mean one can’t really understand the rationale behind that kind of policy.   So, as a rescue options, I think these are things that we need to tackle concerning the forex.

Also, we have monetary policy effects on business confidence. The monetary policy regime has not been supportive of efforts to rescue the economy.

First, on account of interest rates, it is ranging between 25-30 per cent. How can domestic investors invest profitably when you are having an interest rate of 25-30 per cent? There are no incentives for domestic investors to even play significant role, and these are the kind of things that shape economy and the investments people do. Because as they say, “an economy gets the kind of investments it deserves.” It is the incentives, the policy that determines the kind of business people will do, and that is why there are so many disincentives for investors to go into real sector (Manufacturing, Agriculture, Solid minerals) investments because of the issue of cost of fund.   How can you make any reasonable returns on investment at 30 per cent in agriculture, industry, property?     Maybe it is buying and selling which is even very difficult now. So, monetary policy regimes have been big issue.

Then, there is the challenge of the way government borrows. Government’s borrowing has become a major problem for investors; government is borrowing at 18 per cent, 20 per cent; zero risks, how can the private sector compete? And that is why all funds in the economy now are going into treasury bills, they are going into federal government wallet, so that has made it very difficult for the private sector to play its role in the economy in terms of this rescue mission.

As it is now, there is no way you can compete with government in the financial market, even the banks, they would rather buy treasury bills and bonds than to give money to manufacturers.   That is the kind of investments disincentives or structure that the policy has created.

So, one thing is to talk about wanting to diversify the economy, and yet the policies are moving in a complete opposite direction.

So, another rescue option is we need to check the rate at which government is borrowing, government can’t continue to borrow at 18 per cent, at 20 per cent; it is simply crowding out the private sector and even creating a lot of problem for government finances.

In the 2017 Budget, N1.6 trillion had been earmarked for debt servicing, how much was earmarked for infrastructure? So, this thing is completely lopsided and we need to ensure that we deal with it.

Also, we need to look at our trade policy.   No economy exits in isolation of other economies.   It is good to protect but we need to be strategic in the way we protect and in the way we make our trade policy choices. Many citizens today are complaining of high cost; if there is any major cause of poverty today, it is inflation and the key drivers of inflation , first, the foreign exchange challenge;   second, the trade policy because trade policy determines what comes in and what doesn’t come in. You have cases where the domestic capacity is so weak and yet we slammed a trade policy that pose a lot of restrictions. This has been driving up cost and affecting income and poverty up to every person on the street particularly those on the bottom of the pyramid. The greatest challenge of this administration is the high cost of goods and services and you need the right kind of trade policy frame work to address that.

Ideological differences stall clear direction


Managing Director, Financial Derivatives Company, Bismarck Rewane, reeled out several stumbling blocks that need to be cleared for development to happen.

First, the question is, hard facts to rescue Nigeria’s economy. The word rescue connotes something. Flight MH 370, Malaysian Airline search and rescue mission. You rescue when there is an emergency or when there is accident. The question therefore is where is the Nigerian economy now? In an emergency ward, or on the site of accident, and what are we going to do to rescue it in the short term?

The Economic Growth and Recovery Plan for 2020 assume that we would get to 2020, but before we get to 2020, you must face 2017.

Number 2, is that February last year, February 11, on this stage, Comrade Issa Aremu, Governor Oshiomole, we were here debating about the Naira. On that day, the parallel market was N275 per dollar, on that day the official rate was N199.  The spread was N76 and was considered unacceptable, on that day, the price of oil was $29, it was 100 percent less than what it is today. On that day I said, if you do not reform the foreign exchange market it will be a catastrophe, please don’t confuse the exchange rate and the forex market mechanism.  They are two different things. An exchange rate is the product of the mechanism that comes from the market, if you don’t fix the exchange rate system, what you will have is, I referred them to Fela’s song, ‘palaver’. On that day, the bankers committee met and made a comment that they have recommended to the CBN to remove education, medical bills and others from the interbank forex market that was 2pm. By 3.o’clock the exchange rate went from N275 to N310, by 4, O’clock it went up to N325. Then the CBN came out to say, we never said we would stop selling dollars for school fees and the rest as they say is history, in any case the exchange rate never appreciated, because the exchange rate is sensitive to signals, demand and supply and confidence.

On June 22nd, we announced a flexible exchange rate policy, two months later we suspended 9 banks from participating in the foreign exchange market. The exchange rate moved that day from N410 to N430, the next day it moved to N440, within a week, we got to N490. We readmitted the banks back, but the exchange rate never came back.

Prof Soludo

So, hard facts to rescue the Nigerian economy! Where is the Nigerian economy today? First and foremost the Nigerian economy is on the site of an accident. You can stabilise the guy, put him in an ambulance, put him on life support, or you can discuss how you are going to treat him when you get to the hospital. We are not at the hospital, we are at the site of an accident and we need to rescue the patient. The Economic patient is Nigeria and what are the symptoms of this patient.

First the economy is under performing. It is projected to grow at one  per cent this year, and targeted to grow at 7 per cent in 2020. This year, the nine French speaking West African countries are estimated to grow at 7 per cent. This year, Ivory Coast, post-conflict economy, is projected to grow at 8 per cent. This year, Nigeria’s labour productivity growth is minus 4%. This year the magnitude and quantity of the stimulus package in Nigeria is 20 per cent less in dollar terms than what it was in 2016. In nominal Naira terms there seems to be an increase but in dollar terms, Professor Soludo referred to it, actually contracted.

Dr. Malafia talked about consensus, one thing I agree with him, because in 2016 every time everybody agreed on anything, we got it wrong. For example, in 2016, everybody in this room agreed that Leicester will not win the premier league last year, and if you had bet on it, you would have become a billionaire. Everybody in this room agree that Britain will never leave the European Union, everybody in this room agreed that Trump is an outsider, and everybody in this room agreed that Barcelona will never come back. In the champions league, in modern day discourse, because we are talking about elevating the level of discourse, the more consensus you have, and alignment, the more likely that you are going to get it wrong because the world has moved into what is called disruptive innovation, where people just do the reverse of the obvious.

Now coming back to the issue of the Nigerian economy, the fact is that if you do not reform the foreign exchange market and you continue to tinker with it, nothing will happen. This economy will remain in the doldrums forever.

Now I say this again with all sense of humility, subsidies are reverse taxes. You either have a government-led, export-led or consumer-led strategy for growth and that is not development, growth is not economic.

Now for you to have that, you need to have government spend on development investment, not government spending on wasted resources. Now the exchange rate and petroleum subsidy are the biggest drain on government resources.

When you talk of taxes, Dr. Fayemi talks about the tax base, one of the ways to address the tax base is to eliminate or reduce subsidy so that the government will have more to spend. We talk about sale of assets; government should use the proceeds on impactful investment. The Economic Growth and Recovery Plan actually addresses some of these issues but the time frame is short, because we have a short frame which is recovering from recession, then we have the medium term frame and then the long term plan.

But more than anything else, the structural subsidies in the economy comes to about $20 billion to $25 billion, that is significant. We have a price discriminating monopoly which thrives on an imperfect market, creating barriers to entry, which people will call round-tripping, we call it financial osmosis because you are moving in different directions buying in one market selling in another using influence peddling and connections. It’s like a fibroid in a woman, which is taking all the resources from the baby in the womb and leading to a still birth. That is what this misaligned exchange rate, the dysfunctional relationship, which we have, is doing to this economy. And we continue to run around in circles.

But fundamentally there are ideological differences and this country is divided into three clear ideological schools of thought.

One, those who believe in the patronising and anachronistic system of the past, who hold on closely to it. We have those who are reform oriented and market driven, and there are those who want a mixed economy. If we don’t resolve this ideological differences and come up with facts which allows a clear direction, then nothing will happen.

Also, because we have the interest rate, the exchange rate, all of that is monetary policy, monetary policy is for short term, structural or fiscal policy is for long term, but there must be consistency between the long term and the short term. If that is not addressed and we have these vested interest who are benefiting from the exchange rate system, well, so I borrow money in intervention fund at 6 per cent. I use that money to invest in treasury bills at 18 per cent, I use the treasury bills as collateral to borrow money to buy foreign exchange at N305 per dollar, I sell the foreign exchange at N500 per dollar. Nobody in the world, even the Pope will not be tempted. So you must remove what is called structurally induced corruption. Corruption is not about missing money, it is about taking advantage of position to earn rent and selling patronage.

We have always assume the oil boom will always be here, $100 per barrel will be here, and there are those who have positioned themselves.

That vicious cycle, that political cycle, where you scramble for power, squabble for spoils of office, and use the spoils to fight for the next election. That is the cause of the economic crises we have in Nigeria. So if we do not fix the electoral system, and I am not talking about verification of votes, I am talking about electronic voting, this economy will go no where.

We need massive economic, polity restructuring —Otti

Dr. Alex Otti, a former Managing Director/CEO, Diamond Bank Plc, one of the panellists, stated:

There are things you cannot control; if you ban 41 items somehow they will still find their way to come in. If you mention a 100 items, they will still find a way to come in.    So when you talk about control and speculators, the speculator will only operate when you create incentive for them to operate. So when you have multiple foreign exchange rates people will go and buy things in foreign currency and find a way to bring them back. Therefore you must do things differently so that they don’t operate.

I want to talk a little bit about stagflation, which we call recession. The right word is stagflation.

Before 1970, economists did not believe that it was possible for us to have recession together with inflation. Subsequently, when it happened  they coined a new word for it and called it stagflation.

Now is it a major threat?      My answer is no. This is because the same way you got into stagflationary situation, you can also get out of it. I also know that some government representatives have told us that recession will end before 2016 what so ever. Some of us who write have written to say it is going to be here for a little while longer. I have said it may be here for two to three years if we do the right things. We have done a few right things, but we still have a lot of things to do.

On interest rate, I think the interest rate as it is today is maintained at that level because monetary policy rate has been fixed at 14 per cent. You cannot be increasing interest rate in a recession. When you have a recession what you need to do is to reflate the economy .When you increase interest rate you just crowd out every other person and    I understand all the argument that inflation is about 18 per cent and we want to stop speculators and we want to do this and that. There are one other argument,    what drive savings and the bankers know you can adjust your interest rate a million times and a lot of people will not even    feel    it .There are a lot of    other things, politics that will determine whether people will save money or not.

I must say clearly that CBN will need to think about bringing interest rate down and when you bring interest rate down people can borrow, they can spend in the economy; they can jump-start consumption, which will eventually jump-start production; more people will be employed and that is the way it goes.

Of course government spending is very important. Stimulus package have been talked about. But I think the major point that I want to make is that you can get out of recession if there is a positive GDP growth tomorrow and yet nothing has changed.    Oil price for instance, could for some reason recover and we begin to see another $100 per barrel of oil tomorrow. What will happen, we will be out of recession but whatever that has been holding us down will continue to hold us down.

I thank Professor Soludo for talking about some of the things that I thought we should be addressing. One of them is the structure of the Nigerian economy. But, we have come into this defeat, I call it the big defeat, where we like to eulogise ourselves, we are a big oil economy, we rebase our economy and GDP in 2014 and our GDP became $520 billion and there is nothing wrong with that.

We should rebase our GDP every five years; we have not done that in the last fifteen years or so. It was a good exercise but we started celebrating too early, we were the biggest economy in Africa and 26th in the World.

That was one part of the story but the other part of the story that we were not told is that what is important is not absolute GDP but GDP per capita. So we have 183 million mouths to feed, when you divide your $520 billion as at 2015 into about 180 million people, what you get is about $2,800 per head.

And when you now begin to look at yourself vis-a-vis other countries, at least IMF did that. As at that time, we were somewhere about 145th  or 146th out of the 258 countries that were rated.  As at the end of 2016, we had dropped to 188th out of the 258 countries and I think that is important. It is not the absolute number.    I do not think that there is anything wrong with our population. Because some people may feel the best way to do it is to shift people out of Nigeria and lets share the dollar. It does not work that way.

When you look at the oil economy that we claim we are, you find out that oil contributes just about 7.15 percent of the GDP.

Meanwhile, it also contributes over 90 percent of our foreign exchange earnings that means something is wrong. The part of the economy that contributes about 93 or 95 percent contribute less that 10 per cent of our foreign exchange earnings and that is where I come to the issue of structure.

Our current situation has presented an opportunity for us to re-examine ourselves and begin to think of what we can do differently and I think one thing we need to do differently is to look at the structure of this economy.

And I agree with Isa Aremu, we should not just be talking about the economy without talking about the politics.

So as we are re-structuring the economy, we should also be re-structuring the polity. I do not agree that we need the kind of presidential system of government that we are currently running today, we cannot afford it.

We cannot afford a President with a Vice President, all the Special Assistants, Senior Special Assistants, Advisers and all that. We cannot afford 109 Senators, and with due respect most of them do absolutely nothing.

A friend of mine who moved from the private sector to the Senate shared with me that he has never seen such an idle moment in his entire life. He says he works on Tuesdays, Wednesday and Thursdays, three days in a week. They do not sit on Mondays and Fridays. We cannot afford 360 House of Representatives members. We cannot afford 36 Governors and 36 Deputy Governors and all of them taking fat security votes. I am aware that some State Governors collect over N1billion per month as security votes and nobody ask questions. What are they doing, are they fighting a war?

We really cannot afford a thousand House of Assembly members scattered all over the place.    We cannot afford 774 idle local government chairmen and counsellors.

So, I think it is time for us to sit down and ask ourselves questions. My support for re-structuring is not to divide Nigeria. My support for re-structuring is for us to say what we can afford and what we cannot afford.

I believe that this country can do with six Governors, six and no more. I like to reassure Fola (Adeola) that if that happens I will drop my ambition to become a Governor.

There are still a whole lot of things we can do and is not just the political structure.    I also agree with Isa Aremu completely. Where we are today is because we refused to plan and it is not enough for somebody to say what we are experiencing now happened today but several decades ago.

It is not too late; we can sit down and plan this economy. Yes, the Economic Recovery and Growth Plan is a good start but we need a more robust economic plan. When you fail to plan, you plan to fail.

We’re linking planning to budget – Fayemi

In defence of the Federal Government’s positions on all the issues raised, the Minister of Solid Mineral Development, Dr. Kayode Fayemi, had this to say:

Prof. Soludo started by first presenting the ‘alternative facts’. I’m a historian and not an economist like Soludo, and one of the very key things that we learn in history is that context is everything, not just facts. And the pain that one really suffers from the exchanges that we have these days is that there is often a tendency to de-contextualize the situation we have found ourselves in. I’m not suggesting that is what Soludo has done. Soludo actually provided some contexts to his own discussion and I wouldn’t really want to do a line by line rebuttal or response to what he has done. But what is important for me is to say two things – first that the bulk of what he has said is actually what the ERGP seeks to do.

If you look at all the issues he has raised on stabilizing the macro-economic environment, on achieving energy sufficiency, foreign exchange predictability, driving industrialization – these are all points that we have in the Economic Recovery and Growth Plan.

And the Plan also does not pretend that there was nothing beforehand. As a matter of fact, it refers to a range of other Plans. In fact, if you look at the sectoral issues, these are products of the roadmaps of the different areas – agriculture, solid minerals, infrastructure, it refers to the industrial revolution plan, integrated infrastructure plan, it even refers to NEEDS (National Economic Empowerment and Development Strategy) in one or two places.

So, this is not a plan that has just come out of the blues; it’s something that speaks to some of all the good things that we can identify and that Nigerians already agree with around how do we take this economy out of recession, but much more fundamentally, how do we restructure the economy for sustainable growth rather than just consumption-driven growth. And I think these are things that the plan seeks to achieve.

You refer to improving on implementation, it’s simply because these are the banes of previous plans. It’s not lack of plans that we suffer from, it’s lack of implementation of the previous plans that has gotten us to where we are now. Yes I agree that we haven’t had long-term prospective planning and this is what this government is attempting to do, particularly in linking planning to budget because that has been disconnected for too long in our previous occasions.

We can argue back and forth about missed opportunities, about things we ought to have done that we haven’t done or we haven’t done in a much deeper manner that we should have done it. But it just simply brings to mind what my favourite sociologist, Antonio Gramsci, said that “when the old is dying and the new is not yet born, what you have in-between is a whole range of confusion”. And there is an element of that in what we are dealing with. But the reason why I said history is important to me is that we did not just get to this point accidentally, this rain has been beating us from way back.

And yes, there are people that will tell you that ‘the Jonathan administration was this or that, but that was why we elected you’. Yes, that’s why we were elected but we are not going to perform magic overnight in order to address these fundamental facts. People may not want to hear that, but the structural cycle and the electoral cycle are not the same. And that is an academic point that is backed up by reality – the structural cycle or the restructuring cycle is not aligned to the electoral cycle. We can do all that we want to do in our political reform, but before we get there we need to look at other ways of addressing this problem and that is what this plan has done.

Over the last year, let us look at some specific areas of restructuring that we are either taking for granted or that we don’t pay enough attention to, like the Anchor Borrowers Programme in the Agric sector which is leading us to self-sufficiency in some areas, particularly rice and other staple produce. What this government has done, for example, with cash calls in the Oil and Gas sector is not often talked about and we need to be much more open than that because this a problem that this country has faced over the last two decades – refusal to settle cash calls to companies and that in turn affects productive capacity in the Oil and Gas sector.

And no matter how much we diversify, which is an agenda of this government, we still need oil revenue to diversify because the money that we are going to use for building the infrastructure, for improving exploration in the solid mineral sector, for supporting the farmers will come from somewhere. And one of the main sources of our revenue remains oil, so I don’t think we should make a light commentary of it that we are not doing enough on diversification because we are still focusing on improving on oil and gas production, we will continue to improve on it. And talking about diversification is not tantamount to talking about ignoring oil and gas; it is about deepening whatever benefits that come from oil and gas in other sectors of the economy. That for me is one key point that we can make.

There is no doubt Nigeria is underperforming and that we need fiscal stimulus. And Soludo said something about what we have in the Plan not being enough, almost peanuts as he referred to it in terms of the stimulus, and I do agree with him. But that same Plan talks about two things which we don’t also often acknowledge. One is the reference to some assets sales; the second is the widening of the tax base because our tax base is one of the lowest on the continent of Africa, not to even talk about the world. And there are people who have the capacity to actually meet their own obligations to the State but refuse to do so because our tax system has given them the freedom to continue to shy, if you like, from meeting their obligation to the Nigerian State.

Now Soludo started on the premise of what our manifesto said. I happen to know one or two things about that manifesto. Yes, restructuring and evolution are in that manifesto and there is no failure of commitment to that, and I can tell you, at least in the sector where I superintend, we have already started on an administrative basis not on a legislative basis yet because the legislative aspect of it belong to another arm of government. If you talk to state governments now they will confirm to you how we are reshaping the relationship between the sub-nationals and the federal in terms of mineral resources management. And I believe that is something that is being replicated across the sectors on a practical basis, but I do agree with you that on a constitutional/legislative basis we need to fast-track whatever we are doing in terms of that.

But if you also look at the commitment that the federal government has shown to the States in helping to address a fundamental challenge on default on salary payment, it’s an element of that. Because we’ve spent, at least in the last 18 months now, three sets of funds have gone to States, whether you call it bail-out, or Paris Club, or whatever you want to call it. These were things that were never really the features of the previous administration but it’s gone down to the same citizens we are talking about because there is a multiplier effect to the funds that have been released to States in order to address the problems that they had.

I think on foreign exchange, that we have been hit by a double whammy; oil prices have gone significantly down, militancy has affected what is happening to oil production but this government has also taken significant steps to improve on the situation.

Today, the figure that I have is two million barrels; the plan talks about 2.5 million barrels by 2020. I believe that is realistic, we are even going beyond that and given the current arrangement with States and the host communities, militancy is also going to go down and production will increase. And if you look at the big wins that the Minister in-charge is also pursuing, I have no doubt that these resources, by way of foreign exchange, will come. The challenge is what we do when this money comes back. Do we use it for consumption or do we use it for investment? That is a challenge that all Nigerians must confront because we all like this goody-goody things that we don’t want to get rid of, even though we really don’t need them in order to live a decent life. So, it’s a question back to values, what are our values and what is the consensus that we have as Nigerians in order to move this system forward? Unless we address these things, I don’t see how we can ever get to the point where we ignore the good because we are searching for the perfect; I think we should continue to work on the good in order to get to the perfect.