- The currency is the lifeline of every nation, and every day the naira is declining. What do you think is the catalyst required to shore it up?
Let me begin by saying that the most important economic discussion in Nigeria today is the issue of PMS and diesel and how to stabilize prices of goods and services especially those basic ones that majority of Nigerians need particularly food stuffs. The full deregulation is good but a phased approach, dealing with the corruption in the system is key.
Another issue that requires urgent attention is security because it is at the heart of any other endeavors needed to revamp the economy.
Going to the issue of currency, the value of a currency is largely driven by the strength of the economy, supply and demand dynamics, inflation, and market confidence. For Nigeria, the naira’s depreciation can be attributed to low export diversification, over-reliance on oil, foreign exchange scarcity, and high inflation rates (currently over 20%). To strengthen the naira, a multifaceted approach is required:
a. Export Diversification: Nigeria must reduce its dependence on oil (which accounts for 90% of export earnings) by aggressively investing in non-oil sectors such as agriculture, manufacturing, and technology. Countries like Vietnam and Malaysia have seen their currencies stabilize after diversifying their export base beyond commodities to value-added goods.
A country like Nigeria shouldn’t be a mono exporter relying only on one major products, all across the country Nigeria is blessed with many important commodities and mineral resources requiring proper framework to tap them, process them for export. The value addition mechanism will create millions of jobs, create massive entrepreneurial opportunities for the teeming population, revitalize rural economies and enhance the economic fortunes of the country. All that’s is required is a solid leadership with the altruistic capacity to prioritize the needs of the people.
Many of these require serious legislative and policy frameworks that enhances the ability of multiple players in a transparent system to achieve growth. Africa and indeed Nigeria hold sizable and valuable chunk of the minerals needed to power some of the contemporary innovations for this century, but governments must be smart enough to position these opportunities as catalyst for growth and development.
b. Currency Stability Mechanism: The Central Bank of Nigeria (CBN) needs to enhance its currency stability measures. The Rwandan franc has been relatively stable due to Rwanda’s proactive monetary policies that ensure stable inflation and foreign reserves management. Nigeria could benefit from a similar approach, ensuring that inflation is controlled and reserves are adequately built up.
Transparency is key to regulate and stabilize the currency. Government must use home grown policies to reduce pressure on forex, excessive travels, a government led effort to prioritize local products even for the optics of it. There is no reason Nigerian governments both federal and state governments shouldn’t drive Nigerian made vehicles, government offices should be littered with furniture produced locally, it should be illegal for government officials to purchase foreign furniture and office equipment that can be sourced locally.
Governments can inject funds into these areas to stimulate production, innovation. growth and employment. That is how serious economies do things.
c. Enhancing Foreign Direct Investment (FDI): A consistent inflow of FDI can support currency stability. Nigeria needs to make its business environment more attractive, simplify regulatory frameworks, and offer incentives for foreign investments, as seen in countries like Ethiopia, where industrial park policies have attracted global manufacturing firms.
FDI is key to attract the right kind of capital and technology Nigeria needs at the moment. One thing I can say from the benefit of hindsight is that most governments that travel to seek foreign direct investors do not go there with properly prepared bankable projects. The Nigerian bureaucratic set may not be well positioned to prepare projects that can attract quality investments into the country. This area must be prioritized.
The legal and judicial framework operative is a also a key component of FDI drive, if investors feel that the judiciary and law enforcement system can be compromised, if they feel that bureaucrats can be corrupted, they would think twice looking the way of Nigeria in terms of investment.
Money is not emotional it goes to places that it can grow. Remember most of these type of investors have capacity to source credible business information, so before you show up to their door steps they have done their due diligence too.
d. Strengthening Local Production: Reducing import dependency is key. Nigeria imports over $60 billion worth of goods annually, contributing to trade deficits and currency devaluation. By implementing targeted policies that support local industries, as in India’s “Make in India” initiative, the country can reduce its reliance on imports and bolster its currency. During the last Buhari administration an executive order. No 3 was initiated to support the buy in Nigeria programme, this must be sustained through intentional support to local efforts to improve the manufacturing sector.
Our banks must change their current operational practices from a rent economy and high interest rate regime to incentivize manufacturing and SME operation.
- The Nigerian business environment is anti-investment because of the high cost of production, with imported goods, especially from China, being far cheaper. What do you advise the government to do?
The Nigerian business environment faces challenges such as inadequate power supply, poor infrastructure, and high borrowing costs, which drive up the cost of production, poor regulatory frameworks, bureaucratic bottlenecks. To counteract this, the government can adopt several measures:
a. Improve Infrastructure: According to the World Bank, Nigeria loses over $29 billion annually due to inadequate infrastructure. Investing in modern energy, transport, and communication infrastructure would lower production costs and make local goods competitive with imports. China’s rapid industrial growth can be attributed to massive investments in its transport and energy sectors, which lowered production costs for businesses.
There has been this clamor for regional autonomy and integration, regional platforms can be used to mobilize resources, float DFIs for people of that region to invest so that governments can leverage such resource mobilization strategies to achieve massive infrastructural development.
The reality is that the kind of financial resources needed for the quality of infrastructure needed now is largely not available within the current financial system but ingenious financial engineering can be a viable option for those who manage the country currently.
b. Reduce Import Dependency through Industrial Policies: The government needs to strategically invest in sectors where Nigeria has a competitive advantage, such as agriculture and natural resources processing. Countries like South Korea and Brazil have used targeted industrial policies to promote local industries, making them globally competitive.
c. Power Sector Reform: Nigeria’s erratic power supply adds 30-40% to production costs for local manufacturers. A reliable power grid can significantly reduce these costs. South Africa, with its Integrated Resource Plan (IRP), has reduced power shortages and improved business productivity.
The current effort to unbundle the power sector should be sustained and improved upon, more players are needed to remove monopolistic practices, this will drastically crash down the cost of energy. The fact is that successive governments have not been honest with Nigerians, power generation, distribution and transmission is a very expensive.
What majority of Nigerians use power for is just domestic use, that cannot inject the kind of financial resources needed currently, all over the world power is paid for by industries and manufacturing concerns while domestic consumption is subsidized. Government must look at how to create the structure to ensure incentives for interested players. Recently we saw the interview with Davido’s father where a government official swore that he will never allow his investment in power to thrive, such stories does not engender confidence in the minds of investors.
d. Access to Finance for SMEs: Affordable financing is crucial for businesses to thrive. By setting up development banks with lower interest rates and targeted funding (as seen in Germany’s KfW Bank or Brazil’s BNDES), the government can provide easier access to capital, which would spur industrial growth.
I have argued that the Nigerian banks are part of the major impediment to economic growth, they are not properly set up to support economic growth, tenor of facilities, high interest rates, collateral requirements and sharp practices hamper economic growth. Banks must be enablers of the economy. Resources must be available to SMEs, young entrepreneurs and new businesses, seed funding must be created to catalyze the economy.
Government must prioritize ease of doing business policies and programmes that will enhance the business operating environment. The private sector must lead out in job creation and economic growth, but government must create that enabling environment for this process.
- Every year, the various state governments in the East claim to invest billions, but the results are rarely felt. From your experience in government, what do you think is the solution to this?
The lack of tangible results from state investments in Nigeria often stems from a lack of transparency, poor project management, and misalignment between budget allocations and real developmental needs. To solve this, the following actions are necessary:
a. Strengthen Public Financial Management: States need to implement transparent budgeting and procurement processes. Countries like Rwanda and Botswana have improved governance by adopting public financial management reforms, ensuring funds are effectively utilized for development projects. Openness and transparency must be mainstreamed in both laws and institutions of governance.
Budgeting must be bottom up approach, government should prioritize needs of the people by conducting proper needs assessment and evaluate with their own plans and objectives. Advocacy and stakeholders must be an important aspect of governance. Government must be willing at any time to frontload project and programme information and be humble and willing to clarify gray areas.
The people have the right to appropriate information about the projects including cost, essence, impact and value. These will make it easier for government to build trust and also provide avenue for stakeholders to share information and ideas in the end they will own the projects in their domain.
Poor project management mechanism is another issue. I had an opportunity to do a diploma programme in project management and business analysis, apart from my experiential knowledge, that opportunity offered me more insights on why there are many abandoned and poorly structured projects littering the entire place.
b. Performance-Based Budgeting: This approach ties funding to the achievement of specific outcomes. States should implement performance-based budgeting (as in Ghana), where funds are only allocated to projects that demonstrate measurable progress and impact.
c. Community-Driven Development (CDD): CDD programs, as seen in Brazil and Indonesia, ensure that local communities are involved in decision-making processes for developmental projects. By actively engaging communities, resources are allocated to projects that meet real needs, and accountability is strengthened.
There was this system Peter Obi introduced in Anambra which I think is a great model, using PGs and their committees to identify projects that are important to the people and ensuring funds are monitored during execution.
d. Enhanced Monitoring and Evaluation (M&E): Establishing robust M&E frameworks to track project execution and impact is crucial. Successful examples of this include Kenya’s Vision 2030, where project results are closely monitored, ensuring accountability.
- Education is the bedrock of development. Looking at the speed the world is advancing in information technology, don’t you think the world has left Nigeria far behind?
Nigeria is indeed lagging in terms of education, especially in information technology (IT). Globally, countries like India and Estonia have harnessed education as a springboard for economic transformation by focusing on STEM (Science, Technology, Engineering, and Mathematics) education and technological innovation. Nigeria’s educational sector needs overhauling. I once teased a former Vice Chancellor that students only read to pass examination, there is not proper studies going on in most of our schools.
The curriculum needs to reflect contemporary realities. Our school system is archaic and cannot respond to modern economic trends. The hullabaloo about unemployment can actually be that most Nigerian graduates lack relevant employable skills needed in the workplace of today.
To catch up, Nigeria must:
a. Prioritize STEM Education: Nigeria spends only 1.7% of its GDP on education, compared to 4.4% in South Africa. Increasing investment in education with a focus on STEM fields will prepare students for the global tech landscape. India’s IT revolution can be attributed to its National Policy on Education (1986), which emphasized computer literacy at all education levels.
b. Technology in Education: Integrating technology into classrooms will help bridge the gap. Countries like Finland and Singapore have adopted e-learning platforms and tech-based curriculums to ensure students are well-equipped for the future.
c. Upskilling through Vocational Programs: Short-term, tech-based vocational training programs can provide the workforce with essential skills. In Germany, vocational training is aligned with industry needs, ensuring a highly skilled workforce ready to contribute to the digital economy.
d. Private Sector Collaboration: Collaborations between the government and tech giants like Google, Microsoft, and IBM can facilitate skill acquisition. Kenya’s Konza Technopolis project is a model for public-private partnerships aimed at creating a tech-savvy workforce.
- Too much taxation in an economy where production capacity is declining daily—isn’t it counterproductive?
Yes, excessive taxation in a low-production economy is counterproductive, as it stifles growth and discourages investment. But you need taxes to generate needed revenue for government to function. One things is certain the tax net is not robust enough. Except Lagos which incidentally was an innovative strategy by then Governor Tinubu, majority of the states are underperforming in IGR.
Beyond the leaking tax basket, many taxables are not captured. There are also need to create tax gate keepers in the system. Many experts have advanced some ideas but one thing I have observed is that government and politicians are the problem. Most times bureaucrats are not willing to respond to modern systems because they fear losing power and opportunities to enrich themselves.
My thinking is that we need more power expert bakers in the kitchen to bake enough edible cake that can go round. But ideas abound and it will pay everyone including government to address this area by employing skilled hands so that it can have enough resources.
The Nigerian government must adopt a balanced approach to taxation by:
a. Tax Incentives for Production Growth: Tax incentives should be offered to local producers and manufacturers to encourage expansion and investment. China reduced taxes for its manufacturing sector, leading to a production boom that now accounts for nearly 30% of global manufacturing output.
b. Expanding the Tax Base: Rather than overburdening existing taxpayers, Nigeria needs to broaden its tax base by capturing informal businesses into the tax net. Countries like South Africa have successfully done this through progressive taxation models and tax education programs, increasing government revenue without overburdening businesses.
c. Streamlining Tax Regulations: Complex and multiple taxes reduce business competitiveness. A simplified and harmonized tax system, as seen in Mauritius, can reduce the tax burden while enhancing compliance.
- When we look at the micro-target, what do you think states can do to improve governance and economic development to achieve organic grassroots empowerment?
States must focus on inclusive, bottom-up economic policies to empower grassroots communities. State must collaborate with the federal government to resuscitate moribund industries. I once sent a memo to the federal government to set in motion a moribund industries resuscitation strategy using bailout funds as investment in partnership with foreign private partners. Across the 36 states are littered moribund publicly owned industries requiring urgent financial and technical intervention. These industries hold the key to our industrial development but a new PPP thinking is needed to get them back to operation.
Some other Strategies include:
a. Support for SMEs and Local Industries: States should provide grants, loans, and technical support to small businesses, as seen in Bangladesh with its microcredit revolution that empowered millions of rural entrepreneurs.
b. Agricultural Modernization: Most grassroots communities in Nigeria depend on agriculture. Brazil’s “ProAlimento” program modernized its agriculture sector, improving food security and boosting local economies. States should adopt similar programs to promote mechanization and value-added processing.
c. Decentralized Governance: Effective grassroots governance requires local empowerment. States should decentralize decision-making processes, allowing local councils to drive development initiatives. India’s Panchayati Raj system is an example of successful decentralization that has empowered rural communities.
d. Skill Development and Education: Empowering communities through vocational training and skill development, as practiced in Germany’s dual education system, ensures that individuals can find employment or start businesses, contributing to grassroots economic growth.
By adopting these measures, Nigeria can create a conducive environment for sustainable economic growth, currency stabilization, and enhanced governance at both the state and national levels.