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Economy remains on life support, national debt may spiral out of control – Peter Obi

By Jide Ajani

A former governor of Anambra State, Mr Peter Obi, in this interview, insists that Nigeria’s economy is on life control. Obi explains why national debt may spiral out of control.

peter obi
Ex-governor of Anambra state, Mr. Peter Obi

One of the current issues in the country today is the revelation by Boko Haram that they have killed one of the people they held captive and the threat to execute Leah Sharibu, how do you react to that?

The question borders on the issue of security. I can only urge the President to do more on security. It is not only about Leah Sharibu but about the total security of the country. Various agitations in Nigeria are borne out of accumulated anger against the country because of cumulative failure of leadership over the years. Once the country becomes responsive to the people the way it should, agitations will drastically reduce and we would not be having Sharibu’s cases any longer. I therefore urge the Federal Government not to relent on Sharibu’s case or other similar cases.   As for those perpetuating trouble and crisis in the country, I appeal to them to have a re-think because we have no other country but Nigeria.

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How would you react to the   suspension by the Federal Government of the floating of National Carrier: Air Nigeria? 

When the Minister of Aviation unveiled Air Nigeria in faraway UK, even when   we had no single plane, many of us expressed shock and perplexity.   One is really worried about the way things are going and how we are ridiculing ourselves globally at a time we are supposed to be taken serious as a developing country.

How can anybody justify the fact that a federal government minister went to far away Farnborough International Air Show, where the whole world gathered, to announce and unveil Nigeria Air with a firm date that it would take off by December 2018 – giving an impression that everything as already finalised – and thereafter started looking for partners and investors, and now for the federal Government to suspend the entire exercise! Does it mean that they never discussed it at the Federal Executive Council before the Minister went to England to unveil it?   With the unexpected turn of events regarding Nigeria Air, no well-meaning investor or country will take us serious again.

The Presidency   recently spoke about the administration’s efforts on the economy to meet the expectations of Nigerians. However, you have been quoted in a national daily that the economy is on life-support, drawing attention to our huge debt of about N22.7 trillion. Does this justify your assertion that the economy is on life support?

Most of my comments in the last 18 months or so have centred on our escalating national debt, which will get out of control if not managed efficiently. When you keep on borrowing for consumption, it gets to a stage when you cannot control it. Some people take the simplistic approach of comparing Debt to GDP; but our GDP is low. Therefore, we should be looking at Debt to Revenue. Today, we are using almost 50 per cent of our revenue to service our debts, which leaves no room for decent investments in the productive sector. With such a high level of debt-serving and still borrowing, it may spiral out of control.

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Irrespective of the criticisms directed at my observations, the World Bank, IMF and some other respected global financial institutions have raised the alarm and cautioned against the escalating trend of Nigeria’s national debt.

There are also other related issues we have not been attending to. Statistics have revealed that Nigeria is the world’s poverty capital, with about 87 million of its citizens living in poverty. That is an increase of over 10 million over the past three years. So, what is the effect of the continued borrowing if the poverty level is not coming down? Other worrisome developments include the increase in the number of out-of-school children from 10 million to 13 million; rise of unemployment ratio from 14.8 per cent in 2017 to over 18 per cent this year as more people have lost their jobs. In effect, the situation is getting worse as the economy is shrinking ahead of GDP.

We heard the Minister of Education said that the number of out-of-school children has shrunk to about 7 million against   your figures, sparking speculation that you may not be correct with your figures. How do you respond to this?

I am one person that do not joke with data. Most developed countries know the value of data and invest heavily to get correct ones to help them in planning. It is unfortunate that our people are yet to take data seriously.     I do not quote figures arbitrarily and incorrectly. Talking about the source of my data   on Out-of -School children, may I refer you to the Vanguard of July 12, 2018, I remember the date because it was the day I met with the Ambassador of one of the European countries, who, out of concern,   showed me the publication. The figures were given by the Executive Secretary of UBEC, who is statutorily empowered to keep such figures.

I think   the Minister got his figure mixed up. In a particular state in the North with 5 million people, the number of students that sat for WASC was 128. It is pathetic, and they say the number of out-of-school children is dropping. What should be our concern today is what should be done quickly to stimulate those states lagging behind. Once the states do well in all indices of development, the country as a whole is doing well, but once one state is lagging, it will affect us all.

The Government spoke about the income ratio which should not exceed the statutory revenue – at about 50 per cent – and mentioned states like Sokoto, Anambra, Jigawa, Kebbi, and Yobe as those that have met a threshold. Did that seem to be all right?

They mentioned only 6 States of the 36 States of the Federation, which is a mere 16.6 per cent of the total. If you score that mark in an examination, would you commend yourself or acknowledge that you have failed woefully?

 But if the IGR in those States gets to a certain threshold, will that be okay? 

IGR is mainly about taxing the people. With so many people in this country living in poverty, how many people are you going to tax? Majority of the citizens are unemployed and have no income. So, when you talk about IGR, you have to ensure that the economy is growing with businesses   operating profitably. Today, most of the small- and medium- scale enterprises [SMEs] are collapsing as they have no credit or any other support from the system. Though the Government says that 95 per cent of the businesses in Nigeria are SMEs, the reality is that the bank-lending credit to them is below 5 per cent. This brings us to why there is gross poverty as there is great inequality or weighted distribution that has never existed elsewhere.

A recent AMCON Report revealed that 35 Nigerians owe N5.4 trillion. This is a very bad debt as each of those few persons owe N5 to N15 billion. It may sound simplistic, but distributing that N5.4 trillion to our unemployed graduates, at N1 million each, we would have empowered 5.4 million of them. As a businessman and entrepreneur, I can assure you   thatup to 60 per cent of those 5.4 million graduates – that is, 3.2 million — would succeed in their ventures. In turn, if those 3.2 million employ 3 persons each, we would have successfully removed about 10 million more persons from the unemployment market.

In 2017 the total value of goods produced and services provided gave Nigeria a GDP of US$375 billon which can be equated to about N335 trillion. With the total national debt at about N22.7 trillion, we are looking at a debt:GDP ratio of about 21 per cent, which falls within world’s top 20 in terms of lowest debt:GDP ratio. You indicated that the real issue is not debt to GDP but debt to Revenue. Looking at the 2018 Budget which is 9.7 trillion, debt servicing took up about N2.01 trillion, which is about 21 per cent of the total budget. Around the world, people are looking at 40-50 per cent of their budgets for debt-servicing, and yet you say we are performing poorly?

I do not know where you got your figures from, but the fact is that the budget is low. At N9.1 trillion, we are talking at about barely US$30 billion while for education alone, South Africa is budgeting about US$1 billion and Thailand US$18 billion. So, your budget is low and you are talking about debt servicing. Yes, our debt to GDP is low, but what matters is debt to revenue. If you own a house worth N100 million and your revenue is 15 million, you do not talk about your debt to your value, but about the value of the house. It is from the revenue that you will service the debt. The World Bank, IMF and others cannot be warning us if they think the debt profile is acceptable.

 But how come they are approving borrowing by some of the states because they say those states meet their indices?

It is not a question of meeting their indices. What we  have been  doing is to push those states to conditions that are not manageable. Today, we have states that are owing billions of Naira in salaries, pensions, and contract fees, and you are approving more borrowing for them, which they only use for recurrent expenditure. That is worrisome, and we need to apply the brakes now.

 In your estimation, borrowing for consumption is the problem. What about borrowing to build infrastructure?

If you are investing or borrowing for production, it means somewhere along the line, it will help to grow the economy. It is like investing in a business. You can borrow to invest in a business but when you are borrowing for consumption, there is no way you are getting the money back and that is what we are suffering today. Look at what I said on the issue of our poverty numbers. From 1980 when it started it was just 4 million, but today it is about 87 million. The highest growth came within the past 18 years and that was the 18 years of abandoned governance. It has more to do with politics, because if you get your politics wrong, you have gotten everything wrong and in the process pushing more and more people into poverty with borrowing and investing wrongly.

That Minister also compared Nigeria with India; and for me, the best comparison is to look at per capita income. China had a per capita income of US$193 in 1980 and that figure is now US$8,000 while we are at US$70. In other words, the economy of China grew by 4,000 per cent between 1980 and 2018, while ours grew by less than 200 per cent over the same period.

I recall the then Finance Minister, Ngozi Okonjo-Iweala appealing every day to us state governors, to save the money and invest more in the Sovereign Wealth Fund for the rainy day. The majority said “No, let’s share the money”, and the money was shared and mostly squandered. Interestingly, the Minutes of that meeting and comments of each governor are reflected in Ngozi Iweala’s book,  Fighting Corruption is Dangerous.      We have no other country. If this continuous borrowing is for infrastructure, let us know the infrastructure. A lot of the borrowings are not necessary, like to build five new airport terminals. Some other smaller countries did not have to put themselves into debt in order to build new airport terminals. This and the like could be undertaken through growing the economy and a stable capital market.

Why did the governors say ‘No’ to saving in the Sovereign Wealth Fund [SWF] then?

It will be revealing to read her book I referred to. Most of the governors then who said “No’ are still actors in the present dispensation.

 Were you among the governors who said “No” and do you still advocate savings? 

I remember the then Gov. Liyel Imoke of Cross River supported savings. I not only supported, I saved for my state. Go and check all the strong economies of the world, especially at their developmental stages, there were strong emphases on investing in critical sectors: industry,   education, health, infrastructure and encouragement of savings. It is even more critical when one’s major source of revenue is extractive industry, diminishing assets that will not be there forever.   When the mineral exhausts, what do you do, especially if you have not sufficiently expanded your productive bases?

 Sometime ago, President Trump referred to African countries as “shitholes” because of their precarious economic condition fuelled by bad leadership. The same Trump   said they welcome people from Norway. Why?   Norway has 1 trillion Dollars in Sovereign Wealth funds and cannot be taken for granted. 

I have always believed in savings. From day one I came into govt, I said this state must save money. Go and read my notice of impeachment, the reason given was that I saved money by spending just 20% of my vote on travels and welfare. It may sound incredible, but their protest was that I did not travel with house members. I was also   queried   for saving money against the provisions of the constitution.   This boils down to good planning and prudence in the management of resources. To further show what prudence does, the day I left office , I was   not owing any salary, any gratuity or pension that was due. Iwas not owing any contractor for job executed and certificate issued nor any contractor for goods supplied. In some cases suppliers were paid up front to ensure the growth of their industries for   the benefit of the state   through direct and indirect employment. This was the reason we ordered over 1000 vehicles from Innoson and   paid him upfront. We also bought over 30,000 computers from Leo Stan Eke and paid him upfront.

In spite of all that we did, we ended up leaving 156 million dollars in savings,   over 25 billon Naira in local currency and over 25 billion Naira   in investment.

But that was for your state. What of the SWF?

Well, I was not representing the federal government then, but I know that Ngozi Iweala was appealing that we should save money and the response was that they did not understand what she was saying about the rainy day; that it was already pouring and that things were bad as they were.

Subsequently, we hired a new government at all levels in order to stop what is happening. If you are hired in a company that is collapsing, the first thing that shows you are in control is to stop that downward slide. For instance, in 1980 we had a projected power generation of 20,000 megawatts by the year 2020. Today, all we hear is 4,000, 5000, 6000 megawatts, and one wonders when we would get out of that vicious cycle.

What then should be the way forward on growing the economy and reducing poverty? 

The most important investment anybody can do in any country today is in education. It has shown clearly that the more you can invest in education, the better the growth of the economy being stronger. The literacy level of say, China, Thailand, Malaysia are all over 90, while ours is about 55, which you can observe in our human development indices. We are not part of G20, BRICKS or MINT; that is, the groups of Very High, High, Medium or even Low. We are rated Very Low. We are 152 out of 188. The least country in the MINT country is Indonesia at 112, which is still considered decent. The education budget of Indonesia is over US$30 billion, while Nigeria’s budget for education from 2010 to 2015 is not up to South Africa’s counterpart budget for one year.     Here, we are not investing in that future which everybody seems to be worried about.

 Is it about the structure because UBEC is not getting their counterpart funding?

The way we are going about Universal Basic Education is even faulty. Smaller countries like Kenya, Rwanda and Uganda that operate the scheme do not experience the kind of road-blocks we have in Nigeria. In those countries, every child, whether in public or private school, is entitled to universal basic education. The funds are sent directly to the schools, and not through the Ministers, State Governors or Commissioners.

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You were reported to have said that our exit out of recession remained dicey as the relevant   economic fundamentals are still weak. However, Nigeria got out of recession in spite of your prediction. 

I did not predict that Nigeria would not get out of recession. You may recall that government had said it was going to spend its way out of recession. My response was that spending ones way out of recession, by borrowing heavily, might not be sustainable especially when one borrows for consumption. It is not good for an under-developed economy like ours, because it will catch up with us eventually.     Before recession, a bag of rice sold for 9,000, during recession it sold for 21,000. Now they said we are out of recession, how much   is it?

As a   matter of fact, I think what we should be doing now is examining the factors that led us into recession and seeking ways to avoid such in the future. If it were due to our inability to save in the past, why don’t we start saving now?

What sector would you consider as the most critical in the development of   the country?

If you ask me, I would say, Education, Education, Education.   I have always believed that the basis of growth and development is education. Educate the people and liberate the country. This is why the basis of gauging improvement is through human development index.

As the Governor of Anambra State, we adopted the Millennium Development Goals (MDGs) as our vision and developed Anambra State integrated Development Strategy (ANIDS) as our strategy.   ANIDS allowed us to Plan,   budget and execute properly.

We considered education as the most critical component of MDGs and set to work in all sectors, but with education as our compass.  We improved education tremendously such that before we left, Anambra State moved from number 27 in external exams to no 1. What did we do? Realising that the Church is better placed to   manage schools, we returned schools to them and offered them all necessary assistance.

We continued to pay salaries, provided the schools with two buses, one in my first tenure and one in my second tenure. We also provided them with computers, generators, IT teachers, INTERNET connectivity, laboratories, sick bays, boreholes, among others.

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 As a top PDP man, the possibility of the PDP wresting power from APC, what do you think?

In Igbo parlance, it is said that   when a man marries two wives, he will be in a position to judge which is better. This is exactly what the coming election is: Nigerians have tested the PDP and APC, it is now left for them to choose which is better.   As I have said earlier, the determinants of the choice are simple, we have a party that managed Nigeria for 4 years, how have they fared? Are things becoming better? Do we have improved infrastructure? How much is dollars now against the campaign promises?

Has there been significant improvement on power supply in the country? These are necessary questions. In so far as APC has not fulfilled   any of   her campaign promises,   the PDP wrestling power from them is certain and not probable  I have been an advocate of an aspect of Chinese method of choosing leaders. In China,   For you to be part of the government at the centre, you must have shown clear   and sterling   performance at lower level of governance. It is for us to look at the visible result of people’s past performance before electing them to higher offices. We must stop the rascality associated with political offices in Nigeria.

For the sake of our children, this country should not be led by failures.   We have some people that have performed creditably in the past such as Liyel Imoke, Olusegun Mimiko, many of them, we shall look up to them and not glorified obvious failures for personal reasons.

 


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