By Emma Ujah, in Zurich
Last week, Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, led a federal government delegation to Europe, on a Non-Deal Road show to meet investors over the Nigerian Eurobond floated in January last year.
The delegation comprising the Director-General of the Debt Management Office, Dr. Abraham Nwankwo, his top officials and federal legislators met the investors in London, United kingdom and Zurich, Switzerland, to assure them that all is well with the Nation’s economy with a GDP growth of about 7 per cent, at time when developed economies are shrinking.
In this interview, Dr. Okonjo-Iweala encouraged foreign investors to bring their money to Nigeria where they are sure of very high returns. She also spoke about the on-going reform in the petroleum sector, the ports, as well as the efforts of Jonathan’s administration to create more jobs for Nigeria’s teeming population.
Excerpts:
Could you please tell us the importance of this road-show?
This is called a non-deal road show and it is extremely important because those who have invested in our bond need to know from time to time, the situation in our country. We have to update them on the economic and even political and security aspects.
*Finance Minister, Okonjo Iweala
Given the fact that we have some recent events in the country, there may be strong demand from investors in Nigeria’s bond and investors in Nigeria in general to have meeting with us to be updated on the situation in the country and that is why this road-show is here.
We are not floating a new bond yet but those who invested in the $500million Euro bond which was put to the market at the beginning of last year want to be updated.
How is the instrument fairing in the market?
I think it is doing very well. The yield is very reasonable considering what we are seeing in the Euro Zone, the US and so on. I think we are doing reasonably well.
There are concerns over increased borrowing by the Federal Government. How can you assure Nigerians that what happened in the 80s and early 90s will not repeat itself?
Before even commenting on the issue of lending, I should say one very important thing. Since we are still under a partial subsidy phase out regime, that means we still have to maintain some subsidy. It is important for Nigerians to know that things should be done differently; that the Ministry of Petroleum and the Petroleum Products Pricing and Regulatory Agency, PPPRA, are looking at a new way of managing subsidy.
There will be a more limited group of marketers- those who have genuine business in the sector and are known. They will look at criteria; we fix the number, limit it to a smaller number that can be more easily monitored and I think all these should be published so that Nigerians will see.
We are looking at PPPRA publishing this, so we are not going to be administering subsidy in the old way where there were so many companies- more than a hundred were involved. We are going to have a more limited number, we are going to know who they are and the amount of fuel they will be importing will be known. Every Nigerian should be able to follow and this should be published.
Back to the issue of loan, you asked how we can assure Nigerians that the nation is not yet again brought under a heavy loan burden and that loans are prudently applied. As someone who was involved in the debt cancellation under the President Olusegun Obasanjo’s government; who actually spear-headed the discussion, there is absolutely no intent.
I will be the last person and the President Jonathan will also be the last person to subscribe to a situation in which we would pile up debts. We watch those indicators like a hawk. Mr President is very clear on this issue. As you well know, we have some ratios that we monitor with regard to GDP.
The norm internationally is that it should not exceed 60 per cent of GDP. In Nigeria, we have adopted 30 per cent out of that because we want to be really careful. Right now, our debt to GDP ratio is about 20 per cent well below the 30 per cent ratio we have set for ourselves.
I may need to also clarify that the $7.9 billion external borrowing that we are talking about is over three years, not one year. At end of that period, even with the GDP growth rate we have, we are still going to have a ratio of around 20 per cent or so. 20 per cent to 21 per cent is not going to be much because our GDP is growing and our debt is not growing as such. We are very prudent.
The only segment that we have monitored even more closely is internal debt. We don’t want domestic debt to keep growing because interest rate is so high in Nigeria. Right now, what the government is trying to do is to issue bonds at an interest rate of about 16 to 17 per cent and that is a very high rate.
We want to diminish the amount of borrowing domestically as well and we intend bringing down domestic borrowing from 2011 to 2012. You saw that we brought it down from N852 billion last year to N794 billion this year and we will continue to do that so that we don’t accumulate too much interest on domestic debt.
How can you explain the irony in Nigeria’s economy where GDP growth rate is as high as about 7 per cent, yet this growth does not translate into better living standards for the people?
Let me say that this is a legitimate concern. This is something that happens in many countries, not just in Nigeria, where you see growth that does not lead to the creation of jobs- a jobless growth. So, an economy can grow and those sectors of an economy growing may not be creating as many jobs.
What we want in Nigeria is to grow the economy in such a way that it will create jobs. You know the central concern of President Goodluck Jonathan is job creation in this economy. What we have to do is that we are focusing right now on those sectors that have potentials for job creation.
We are looking at agriculture- this is where the greatest potentials to create millions of jobs for young Nigerians lie. It will not be the traditional jobs in agriculture but we are working at really transforming the sector, adding value, processing the products, creating agro related industry, encouraging SMEs in agriculture.
That is really the road that will lead to that job creation so that youths can be employed in that sector. Let me give you one specific example, we have investor from the US who has invested in rice farm in Taraba State who is putting in $40 million.
A Memorandum of Understanding, MOU, was just signed last week between him, the Federal Ministry of Agriculture and the Taraba State government. This investor has also agreed to take 50 young Nigerians to his farm in Kenya, because he also invested in Kenya, to train them in rice farming.
When they finish, they will come back to set up their own farms in a kind of cluster and they will then be able to take their rice to the mill because he is also establishing a mill along with the farm. These people will be farming rice in a much more technological fashion with improved seeds, fertilizer and the like. That is the kind of agriculture we want to go into.
The move by the Federal Government to open up the oil sector, the strikes that followed and the National Assembly’s probe have thrown up many issues, particularly the rot in the sector. As the Coordinating Minister for the Economy, how would you review what has happened so far?
What happened in January actually had some very good important lessons. We believe that this is a democracy and people have absolute rights to protest when the government does not do things in a way they want and it is up to the government to explain.
The fact that Nigerians- young and old- came out to ask questions; there is nothing wrong with that. The civil society groups also did a good thing because it has also helped to bring out explanation- why the subsidy needs to be removed and I think Nigerians are much more cognisant now of what is happening in the oil sector.
It also opened up dialogue. In the oil sector, different committees have been set up. we are going to look into transparency in the sector so that Nigerians can understand what is going on there.
We should not see what happened in negative term. A lot of good has come out of it. Of course, when the demonstration was diverted to something different by some forces, that is a totally different story, we separated those forces who are trying to bring down the government from those who are genuinely concerned about the policy and wanted to know.
I think we must not allow infiltration when genuine Nigerians are asking real question of government, they should not allow it to be taken over by those whose objectives are totally different; that part of it I don’t think was good.
When people are asking the government genuine questions, yes, they should ask. There is an open door conversation on subsidy, oil industry, transparency and good governance in managing our resources, it is a good thing.
The nation’s population is growing at an astronomical rate but the economy is not growing that fast and the government doesn’t appear concerned.
Population growth can cut growth rate. When you are a large country and your population is growing, if you are able to grow your income faster then per capita income could grow. That is a good thing. But if you are not able to turn that into what is called a demographic dividend, meaning that you are able to create jobs so that your people are employed.
When they are employed they are creating wealth isn’t it? If they are seating at home not doing anything, that population doesn’t do you good. Yes! Population is something you have to be careful about. It is a double edged sword.
If you cannot create jobs, you cannot grow the economy, and then having a large population is not that meaningful. Instead people will be suffering, but if you have sectors of the economy you can actually develop and grow to create jobs in a large population, that can be good because of an internal market. We always have to watch it. We don’t want the population to grow in such a way that it affects the growth in income. This admin
istration is very concerned about the poverty level in the country. We have poor people in Nigeria. The thing to do is to target growth to those areas where poor people live and where they are found. That is why we have come up with policies that directly target the rural areas.
We cannot forget to help people in the rural areas; we must grow the rural economy and that is why our agricultural policy includes value addition through processing. We must provide housing and social services for them and that is why we are looking at the housing and construction industry.
The housing and construction sector provides a lot of jobs. So what we need to do is to set the stage for Nigerians to be able to own houses and for the construction industry to flourish. We are looking at that very critically.
What has become of the several rail projects initiated by the Obasanjo’s administration? Has the Lagos-Abuja speed train project, for instance being abandoned?
For the rail, the Minister of Transport is part of the delegation to China and one of the things he is going to talk about I think is the rail network and how we can work with the Chinese better. What we need to do in terms of money that may be needed to complete some of the works that the Chinese companies are doing is part of the conversation and I hope they can get them to finish two or three rail lines they are working on.
We have to be careful if we go out to say we are going to borrow in order to finance all of Nigeria’s needs all at once, and then those debt/GDP ratios you are asking me about will shot up.
The Federal Government recently terminated the Single Window contract at the ports. What informed the decision? Many interests must have been affected by that action.
The issue is that in Nigeria there are so many vested interests and that is what is killing our economy. It has become a very transactional economy. Everywhere you go, people think of what is in it for me, not what is in it for the country.
We need to change that kind of thinking. When you have a situation where people only look out for themselves, it does not augur well for such country. But then, if you are also afraid of vested interests in Nigeria you will never get anything changed because in almost every sector of the economy you enter, there is vested interest but some are more difficult than others.
In every country, particularly in Nigeria, there is vested interest so they have to see with us. We cannot allow the overall interest of the economy to be subjected to the interests of few. If the economy moves forward, those few people will even make more money.
I keep on telling people that if you allow the economy to expand you will even do better as a business person or as an interested party. So we have to fight and it is not an easy fight because you see that they attack you from every side with every means.
As Nuhu Ribadu said, ‘When you fight corruption, corruption will fight you back.’ President Jonathan has given his strong support about cleaning up this sector. He is the one directing it and he says ‘this has to be done or that has to be done.’
With him firmly behind this, I have every confidence that we will succeed in our reforms. Single window contract has been cancelled because it was not for the benefit of Nigeria. It was conceived in such a way that private sector practitioners who will use the system will be gaining far more than the government.
The concept was a Public Private sector Participation, PPP, but the cost they were talking about were ten times more than the cost in a neighbouring country. Now, if your business people are going to be charged ten times more than their counterparts in Ghana, Togo, Benin, what will happen?
One, they will divert to other ports, robbing Nigeria of their business. Two, even if they decide to pay it, who is ultimately going to pay for it. It is you and I the consumers, because they will pass the cost over to the consumers.
That is why in this country inflation keeps going higher and higher because of corruption. So that was why we had to get rid of them. We have to develop a single window system that is beneficial to all Nigerians and Customs has started the work.
We need to improve on it and develop it in a way that it is parallel to those in neighbouring countries. Why is it that in Nigeria we don’t even look at what is happening around us? Why is it that people think that they can come to Nigeria and cheat everybody?
Something that costs $5million in Senegal, when it comes to Nigeria, they will tell us it is $100million. That was the type of what we were experiencing in the case of the single window contract. We cancelled the contract so that Nigeria can have a system that is more beneficial and less expensive.
What feedback are you receiving from the committee set up to decongest the ports?
It was a committee set up by President Goodluck Jonathan. Again, he is behind it and we are receiving some good reports. Until recently, there was a little bit of confusion and that has been cleared up. Agencies that were told to be in the port will be in the port and the procedures and processes that have been amended will stay amended.
They are telling us now that we are down to seven days of clearance for those goods that do not have any other kind of peculiar problem because you know in Nigeria; even the private sector is not immune from corruption.
They bring goods and they will not declare the right goods and when the Customs finds out that they have declared the wrong things then they complain and that also leads to all sorts of behaviours.
So, I also plead with the private sector that they should carry out their businesses properly- don’t declare that you are importing correct thing when you actually brought in wrong goods and think you are going to bribe somebody in Customs to allow you through. That should not happen. We are changing that type of mentality and private sector operators have to work with us.
Clearing normal goods is getting down to seven days and our objective is 48 hours or 2 days like our neighbouring countries. We have also made a great deal of progress in clearing containers.
The Task Force has reported that almost half of the 4000 containers that were littering the ports; making a long line at Apapa, Tin Can Island have largely been cleared. So, I am quiet encouraged. The Task Force should clear the containers so that those who want access to the ports can have it.
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