John Nwokocha
16 November 2008
interview
Two-time Finance Minister, Dr Kalu Idika Kalu, who, at different times, also served as minister of national planning and minister of transport, penultimate week in Abuja, spoke to Sunday Vanguard on the global economic meltdown and sundry economic issues on the domestic front.
The BGL chairman and member, Presidential Technical Committee on Niger-Delta, also spoke on the Niger Bridge even as he gave insight into what Nigerians should expect from his committee.
How would you assess the Federal Government's declaration that it is prepared to weather the effects of the global economic crisis if eventually it impacts on the nation's economy?
Well, the first thing is to make it very clear that it doesn't help when we do not take a good look at the facts of the case, when we just join the chorus because we see it in the international media. Global downturns are not a new phenomena, they are in fact regular occurrences. Of course, the whole import of physical and monetary managements - the whole thing that led to the setting up of the IMF in particular, if not the World Bank - is to make sure that trade and payments, exchange rates and interest rates are sustained by member-countries in a way to cushion the potential for deep trust in economic activity and, therefore, general crisis in payments.
So, there is nothing new in the global payment situation.
Now, therefore, what I am driving at is that before we even begin to talk about joining America, Europe and the rest of them, we should define just how we are involved in the system. Our involving in the system is very very limited because we are still labouring with structural imbalances. We are still trying to produce food, we are still trying to produce building materials, furniture, housing, so on and so forth. We are still dealing with basic decision of how to produce efficiently, so, we don't have to import everything.
We had quite a bit of setback in some of these, as, you know, some of our industries are closing down. The steel industry that we started 30 years ago has not materialised, our aluminum smelter is high priced and we are not even sure whether it is producing or not, our refineries are all closed down. We don't have petrochemicals to speak of, so our plastics are rudimentary.
So, in essence, what kicked off the current crisis in the world's economies is that there was so much credits in response to demands by mortgage seekers in USA and, of course, it overflowed to Europe because Europe and America are integrated economies. So, the extent to which we are not feeling it is not something we would be so happy about.
It shows that we are not really integrated in the first place. So, all these show and there is a lot of noise over the preparations as if we are really so integrated. How are we not integrated? We are exporting the approximation of about three to four per cent of total US import, only three per cent, it might even get smaller with the push to drill in the continental shelf of the US, that could reduce Nigeria's share of US imports. They constituted an AGOA programme, which they directed at encouraging African countries to produce for the US market, but we never organised enough to take advantage compared to some other African countries.
So, what I'm driving at is almost as if we are behind a big wall and just hearing noises on the other side and we are making all kinds of preparations to ward off all the effects that really would not come to us. This is not to say that the effects would not be, but in terms of credit flow of funds to Nigeria from America or Europe, this is so minimised.
You know we have got into this psyche of 'we don't want to draw credit, we don't want to borrow,' we are in fact paying them off substantially down to $2bn which we are now proliferating and DMO office is all over the place to manage. Those are the things in trying to grow your economy you look for credit locally and outside your shores. You look for the management, technology and so on, that is how you get integrated. You are producing efficiently enough and you can be seen as a source of raw materials or intermediate goods; so that when the market to which you export these things begins to soften, of course, you will feel it. India, for instance, is a major supplier to IT and other software industries.
They are also producing some vehicles, they are producing chemicals and all sorts of things. So, naturally, when there is a recession that will impact on the demand for those products, of course, they would be affected. So, when you are not efficiently organised to even supply, what is all the preparations for? We are still trying to organise to valuarise our raw materials to produce efficiently, so we can be a supplier, so that when there is any bump in the demands, slow down, then we see how we can manoeuvre. These are things that led to new technology, new products, and, in the bid to adjust to these things, the economy continues to deepen its structure.
So, we must not overplay the international financial crisis. You see how Europe, from Germany to Britain and France, if you hear the kind of funds they are mobilising to keep up demand for credit so that producers would not suffer, bank shares would not drop because producers suffer. For us, this is totally a different kettle of fish and to the extent that it is similar, is so marginal. So, all these efforts to prepare for the implications, well, what we are worried about are basic things - water supply for our cities, for our farmers, power supply for the economy. We are worried about housing, we are worried about roads, we are worried about utilising our gas effectively, we are worried about our ports, we are worried about getting our refineries working.
Is it then correct to say that you are cautioning the government to stop whatever preparations towards managing the implications of the crisis?
I didn't say that. I'm saying we should stop this panic measure giving the impression that we also belong. We don't belong to the extent that we are coming out with all these sounds. I think that people are just trying to show that they are busy doing something. But we should watch it, we have enough to watch, in the domestic economy. I am describing relative order of magnitude. I am saying we should be reacting to the extent that we are affected. We can't be making more motions than is required by the impacts. There has to be a proper study and understanding. The language is just to make sure that we are not over-reacting. If we over-react, something must be missing, maybe we are not paying enough attention so that in future you too can be counted as a player in the market. Right now, we are not a significant player no matter the things you read on newspaper front pages, this bank did that, that bank did this.
Some say that what has happened to the US economy would cause it to lose its dominance as driver of world economy. Do you agree?
We are hardly in the position to make such statements. There are ways out there. Economic downturn, as I said earlier, is not a new phenomenon. The economic slowdown is part of what already has been studied. There are long slowdowns, these are fields of studies in economics and businesses.
The number one economy is still the U.S. Number two economy is still Japan. Number three economy is still China. So, this is not a signal of a decline of U.S. economy. And I think the last people to be making comments should be us. If we are going to go through the stages of growth, we are going to go through the same thing. The lesson is that we have to go through it carefully.
We must try to keep an eye on speculation, we have to make sure we are producing the real sector. We are not just talking about financial flows. Now the question we should ask is, which economy is taking U.S.'s place? All the G7 countries, even Russia is probably not so affected because Russia is still relatively insular. They have large volume of reserves, China the same thing. But because of the interwoven nature of their trade and the dependence on the supply of goods and services, it could be affected. They are all trying to make adjustments. When they make these adjustments, whether that would not now place new economies, already China is surging before this, they've also been hit by this crisis.
So, I cannot categorically begin to worry about the relative position of the U.S. economy. Look at the oil sector, just by additional drilling, they can tell everybody else to go to hell. It's a question of their choosing environmental concern and other things. Look at us, our incomes are still very low, we don't get to that fine-tuning, we can produce more yam, cassava, rice. The relative positions of the countries may not change very soon.
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