He speaks on the current economic situation in the country, and offers some advice to the Buhari government in this interview.
What is your take on the depreciation of naira against dollars?
Many underlying fundamentals are weak even though we have continued to sustain supporting strong currency. The major parameter that helps to sustain the currency is having a strong reserve, low propensity to import, strong local production and consumption of goods etc. Our reserve, specifically over the last two years has weakened and the source of improving that reserve (oil price) has depleted.
The price of oil has been going down because of excess supply all over the world. The chances of the price going up are rather slim. Recall Iran is entering into an agreement with the Western world on its nuclear energy and eventually return to the market. We are talking about a minimum addition of 2.3 million barrels getting into the market daily.
Also Nigeria does not have enough reserve to support our import dependent economy. Strong local currency, largely encourage inexpensive imports. No economy can be sustained without savings. Developing countries like Nigeria that have huge foreign exchange earnings from oil export have mostly succeeded in building comfortable reserve.
The United Arab Emirate has over a trillion U.S. dollars investment in its financial assets. Saudi Arabia has over 800 billion U.S. dollars.
Nigeria's excess crude account is about 2 billion U.S. dollars. Nigeria's economy is import-dependent. The implication of import dependency is that there will be much pressure on scarce foreign exchange. While import may remain constant, foreign exchange revenue is declining with decline in oil price.
The Central Bank of Nigeria has come up with many policies, including asking banks not to accept foreign currency deposits and against market expectation, the monetary policy committee decided to maintain status quo by retaining MPR at 13%, harmonized CRR at 31% and liquidity ratio at 30%.
Despite growing inflationary pressure and volatility in the foreign exchange market leading round tripping/arbitrage depleted reserve is used to 'Protect' the naira while allowing imports to remain inexpensive.
Clearly the CBN has reached its limit in using monetary instruments to defend the naira especially given lack of clear direction on the Fiscal side.
A rather weird and archaic policy of refusing to accept foreign currency by Deposit Money Banks was recently introduced. An economic team need to be in place to assist the CBN with a clear fiscal direction to synchronise with the monetary policies.
What economic blueprint would you recommend to the current government?
It is to de-emphasise oil as a major foreign exchange earner for the country. The economy needs to be diversified. Power supply, local production of goods support for MSMES, education and human capacity development should be improved upon.
We also need to support Agriculture and Mining and improve its contribution to our GDP. We should expect severe measures by the FG to shore up revenue block leakages and curtail expenses. Implementation of Treasury single account is a positive step as that will minimize revenue leakages and provide for more cost effective expenditure planning.
What is your take on agriculture and waiver implementation?
The 7th House did not conclude their report on waivers, particularly on rice imports. The present House is taking it up. The situation at hand is that, some companies simply claim they have rice mills and go ahead to claim waivers on imports.
Theoretically people will say there should be free market, but there is no free market anywhere in the world. There is no harm in granting waivers or protecting local production, but there is harm in abusing the waivers.
Those who have aided and abetted this should return the money to treasury. There is need for strict policy on waivers and violators sanctioned.
What roles should states play in the economic diversification of the economy?
States have important roles to play. They are more vulnerable when price of oil goes down with reduced funds shared in FAAC, over 70 percent of States cannot pay salaries leading to requests for debt restructuring, bail out etc.
Over the years, most States rely on 'handouts' by way of monthly FAAC allocations from Abuja. The States have the sources and means of diversifying their income base. Most of the states inherited huge debts as well as plethora of uncompleted projects. I do not know how they will be completed with the current depleted economy.
We need to go back to the roots, and support small-scale industries. Several policies by the federal government geared towards supporting small-scale industries have been abused. We need to discipline ourselves and accept the new change as to how we do things.
States need to enhance their income sources by progressive taxation, blocking existing revenue leakages and becoming more prudent
The US and some countries have shown interests to return some looted funds kept in their countries to Nigeria. What does that portend?
It is all about trust on the commitment of the present government to fight corruption. People are beginning to be afraid of stealing with impunity. The approach of Western countries towards the new government is commendable. If we get at least 50 percent of the stolen funds and optimally utilize it, there will be positive development.
The new government promised to improve power supply, agriculture and infrastructure. Recovering such funds will help in realizing this task. A few days ago, President Buhari asked Permanent Secretaries to respond to audit reports within thirty days. Hitherto those reports lie low without any response. Nigerians now appreciate the value of decency.
How can e-banking curb corruption?
On award of contracts, if we deploy e-banking, cash payment would have automatically been avoided. Corruption becomes accentuated when cash exchange hands. If electronic means of payment is adopted and with biometric data captured, the issue of ghost workers for example would have been minimised or eliminated.It was initiated by the past government and I hope the current government will sustain and conclude it.
What economic values does the recent trip by Buhari to the US have?
China is today the second largest economy in the world. There is a projection that in the next twenty years, it will become the largest. Her gross domestic product has been consistently going up. China's style is to come out as business partners and not as business men. They provide grants and look for partners. The Western world cannot operate with Africans on a business basis only.
They are currently changing their approach to Africa. When President Buhari was invited to the G7 meeting, we were told they asked him for his wish lists. Security of the country and the anti-corruption crusade are critical to Nigeria's future.
What the U.S. and other Western countries are is to tell Nigerians that they are partners. Nobody pushed them to tell us that such money was stolen. The other aspect is equipment to fight insecurity.
Nigeria is currently fighting an extremist organization. The rules of engagement are difficult to implement in that situation because it is not conventional war. As such we need support to fight it.
We expect the Western world to provide us with equipment and intelligence. They should also help in leveraging on subsisting anti money laundering laws to get funds stashed abroad and proved to be stolen back to Nigeria. US and the West are offering Nigeria hand of friendship and we must leverage on that to rebuild a win win business partnership.
What is your advice to Buhari in instituting a sound economy to Nigeria taking cognizance of Greece experience?
Economic crises bedevilling Greece today is historical and complicated. The world knew that Greece was understating its debts for years only in 2010, nine years after it joined the European Union.
Greece lived above its means for years and enjoyed liberal debt profile and low interest rate which triggered debt in household and financial sector. Greece's debt profile is about 320 billion Euros with unemployment rate of 25%.
However, there are key learning points especially on issue of living above means, historical data integrity and the need to be prudent. The major challenge that Buhari's economic team will face is instability of the economy.
JP Morgan group have warned that at the end of the year, it may withdraw its rating on Nigeria, citing lack of clear economic direction. If it is withdrawn, that will imply a loss of a minimum of about 5 billion U.S. dollars in FDIs because some fund managers rely on their ratings to invest in non OECD country.
An economic team must come up with policies that will support employment generation especially that of youths as well as fiscal policies relating to revenue and expenditure framework which will interface with realistic monetary policy that will encourage FDIs.
The Buhari government plans to probe the Jonathan administration. Don't you think it should extend beyond that?
To be realistic, we elect a government for four years. If such government wish to probe all past governments, it will not do other jobs. I cannot even see the possibility of the present government probing everything about the Jonathan administration. If it can recover stolen funds over the last six years, it would serve a good mandate.
There is allegation of wealth accumulated over the years. Probing Jonathan cannot be said to be a witch-hunt. If there are sufficient reasons to do the probe, it will be an abdication of responsibility not to do it. We should rather ask why former President Jonathan didn't probe President Obasanjo's government. In exceptional cases, the probe could extend over ten or fifteen years. But it is difficult to probe everything. It is only the most critical cases that should be probed, due to time constraint and also to avoid getting diverted attention.
What is your advice to Buhari in constituting his economic team?
He has rightly decided that he wants people with proven integrity. We have them in this country. President Buhari had twenty months as a young man. He never had time to implement whatever policies he had before he was overthrown.
Now he has been given a national mandate as an elected President. He is over seventy. It is like a culture that after a government is sworn in, politicians will begin to think about the next elections.
Buhari should forget what will happen after his first tenure. Given his antecedent, and having tried four times before getting the mandate of Nigerians at the age of seventy two, I think he has reached a stage not to be afraid of anybody.
He knows that Nigerians gave him the mandate to change things for the better especially on critical issues of security, corruption, economy and good governance. I am sure he will remain focused on that.