Professor Akpan Ekpo, the current Director General, West African Institute for Financial and Economic Management (WAIFEM), in this interview with Sunday Vanguard Business, gives guidelines on how to recover the country's looted funds, how Nigeria can gain from the President's visit to the US and other issues.
Excerpts:
What will be the economic benefits of the President's visit to the US?
The benefits include being able to bring foreign investors to invest in Nigeria, especially in non-oil sectors of the economy, which will in turn create jobs for Nigerians. The visit means we are renewing our strategic importance to US. That alone will bring a lot of indirect benefits, because if other countries see Nigeria going close to the US, they will know we are serious. But, it is going to be a win-win situation for both countries. US is very strategic and does not do anything for free.
Prof. Akpan Ekpo
They will also gain from the bilateral relations, so we need good negotiators and serious minded investors who will make good use of the opportunities in US. Nigeria is not the only economy in the world that US shows interest, so we must put our house in order to benefit from that visit.
If the US investors look beyond the oil sector like Buhari said, Nigeria can benefit from over $10billion to $15billion investments annually from US. This implies going into sectors like power, the chemical industry, solid minerals, communications, supplying our military with weapons and capacity building for skills acquisition. They should come and build factories here to employ our citizens, not portfolio investments.
Will the new bilateral relations make the US to start buying crude oil from Nigeria again?
The reality is that US wants to be less dependent on foreign oil.They have Shale oil and other alternative sources of energy.
The good thing is that US invited Buhari, not that he went there on his own, as their President said Buhari is a man of integrity and has a clear agenda. Making such statements even without the cabinet being formed shows that US is looking forward to a good bilateral relations with Nigeria.
Do you support the move by the CBN to publish names of bad debtors from August 1, 2015?
Yes, such action is one of the ways to recover non-performing loans and CBN sees it as the last resort. When people borrow, they should pay back so that the banks can loan to others.The CBN wants to expose them and confiscate what they gave as collateral, so that they don't go borrowing from other places. If people borrow money from banks and cannot pay at the appropriate time, they can go back and re-negotiate their terms of payment with the banks. For banks to send names to the CBN, means the debtors don't care and banks are at a fix, so the CBN sees this action as the last resort to recover such loans.Non-performing loans are not good for the economy. It will make banks not to lend to credible investors.
This goes beyond name and shame because some debtors do not have shame. The CBN wants people to know that these individuals are living on borrowed funds. When we have huge non-performing loans it shows that there is stress in the banking industry, as such, banks may not be able to pass the stress-test and that is not healthy for the economy.
Is name and shame publication in line with global best practice of debt recovery?
What makes the global best practice? Who decides the global best practice? In our own economic environment, name and shame publication is the best practice for those who have refused to pay their debts despite all appeals. They also refused to re-negotiate their terms of payment. It is true that peope can face challenges in their businesses, but they have to meet with the banks to re-negotiate their terms of payment. If they fail, the banks have the right to publish their names.
Have you also considered the legal implications?
What legal implications? CBN is a responsible organisation and must have looked at all that before coming to such conclusion.The debtors when they were borrowing from banks, did't they also consider the legal implications? My advice is for them to re-negotiate their terms of payment with the banks to prevent their names from being published. We hope it may not get to that. Note that these are non-performing loans in billions of naira that must be paid and not bad debts, because bad debts can be written off.
As a Professor of Economics, what measures will you advise government to take in order to recover the $150 stolen money from the country?
Nigeria should work with global agencies dealing with such funds. They exist in the US, France, UK, Germany and other countries. The $150billion is in the US and President Barack Obama, said he will assist Nigeria to recover the money. It means Economic and Financial Crimes Commission (EFCC) will work with their counterparts in the US to track the money. Our money is in UK, Germany, France and all over the world. Our government must also work with the monetary institutions in those countries to track this illicit money. They must trace the banks where the money is kept, those behind the money and how the money got there.
My advice is for government to involve intelligence agencies and monetary institutions of both countries. It is not good to expose the strategy for recovery because it is illicit financial flow. If not, the people involved can quickly move the money away. Such money may not all be in cash, it can be in shares, fiscal assets and real estate investments. So, we need to work quietly by not allowing people to know how the money is being tracked. Some of them do not use their real names in this kind of illicit financial flows, they use friends, relatives and even children.
Do you support government's plan to impose tax on luxury items?
In reality, the rich Nigerians do not pay tax like the workers. So, government is only trying to bring in more people into the tax's net to enhance revenue generation. People who use private jets, those living in mansions and enjoying other luxury goods should pay tax to boost government's revenue.
Should the Nigerian National Petroleum Corporation (NNPC) be disbanded as some people are suggesting?
We should demystify the oil sector. In my own opinion, we should not even have ministry of petroleum resources, instead, what we need is ministry of natural resources. Government should commercialise NNPC, sell shares to Nigerians and must limit the shares that each person can get. Government can shake up NNPC, because the President promised to carry out oil sector reforms, and this is part of the reforms that will make the sector efficient.
Such reforms will pave the way for forward and backward linkages of the oil sector to agriculture, phamarceutical and other sectors of Nigeria's economy. For instance, countries like Malaysia and Indonesia that discovered oil the same period with Nigeria usually go outside to make money while NNPC is not doing that. Note that what I support is commercialisation and not privatisation. Commercialisation means that government will still have a role to play in the Corporation but privatisation means giving it outrightly to the private sector.
Some people are saying that the new government is slow. So far, do you think the economy is moving in the right direction?
It is too early to assess Buhari. To start with, there is no data for such assessment. We need at least one year to see the data before we can assess him.
What pragmatic steps will you advise the President to take?
For Buhari to succeed in taking Nigerians out of poverty, he must discard the neo-liberal economic framework used by the previous administration. He should implement developmental-state-economic blue print, so that in the years to come, our economy can experience positive changes.
The problem with our economy is structural and neo-liberal system does not change the structure because it is cosmetic. He should adopt the developmental-state-economic framework to ensure that 80 percent of Nigerians enjoy the resources. It should not be like the previous government where only 20 percent enjoyed the resources. If he continues with the neo-liberal system the rich will get richer, the poor will get poorer and the inequality gap will widen. Nigerians have suffered 55 years of lack of basic necessities and Buhari should reverse the situation by blocking leakages and corruption. Buhari is not slow as some people are saying, because I believe he is taking time to do a holistic assessment to determine the best way forward.
Beyond Buhari as a person, what hope do we have for Nigeria's economy?
We must not depend on Buhari as a person, rather, let government build strong institutions for the system to work. So, we must go beyond Buhari as an individual to build our institutions for continuity and sustainability.
Another disturbing issue is the rising debt profile. Though it is not technically wrong to say that the country's debt/GDP ratio is still low, especially following the last rebasing of the economy, but that must not encourage accumulation of more debt, because it is revenue that pays debts and not GDP. Rising debt has economic implications and even negative impact on the well being of the citizens.
On the fiscal side, government should reduce the cost of governance by blocking leakages, curtailing wastage in government and ensuring zero tolerance for corruption. The salaries for incoming ministers and political office holders must be reduced by at least 25 percent, even as numerous allowances should be abolished.
CBN's restriction on foreign exchange for some items is still generating controversy. What is your take on this?
Some of the listed items like private airplanes and jets are usually used by those in elite class. Therefore, with the widening inequality and poverty in the country, why should private jets flood our airspace, even while forex is outside the interbank rate window. The action taken by CBN on foreign exchange market is in the right direction. This is practical because any point on the demand and supply curves of foreign exchange is the price of the domestic currency. Also, the apex bank has the mandate to manage forex based on the dynamics of our economy. Practically, a market determined foreign exchange rate does not exist.
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