10 October 2018

Nigeria: Economic Crisis Looms, Govt, States, Companies May Collapse - Ibrahim

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Chairman and Chief Executive Officer of Global Fleet/Energy Group, Jimoh Ibrahim says economic crisis looms in the country due to an imminent world economic recession, expected before the end of this year. Ibrahim, who is a PH.D student at the Cambridge University, discusses how to avert the impending crisis and other issues with Onyebuchi Ezigbo

You have been quiet politically, what is happening?

I just completed two Master degree programmes - Master of Science in Major Programme Management (large project) of the University of Oxford and the University of Cambridge's Master of Business Administration (MBA) which took me off the radar. Two degrees of two major universities (Oxford and Cambridge) at the same time took about three years of my time, which is why I haven't been around. When I had small holiday, remember I came and did small politics, which was for a short period of the holiday time. I didn't have enough time outside the time accepted by the two universities. It looks as if am back now, but not really, as the University of Cambridge has accepted me for the Business Doctorate programme, I will be off the radar for another three to four years. You may not see me often but you will see some of my activities in the international sphere like the International Monetary Fund (IMF) spring meetings coming up in Jakarta, Indonesia in October, and the IDFA meeting on infrastructural funding in Africa. I shall be combining these with my academic commitments.

We just heard that Nigeria is down with $22 billion debt profile. What impact will it have on the nation's economy?

One of the things I usually tell my colleagues in any 'strategy class' is that strategy is about finding favour in chaotic situation. This provides you with opportunities of doing alignment and strategic engagements. $22 billion debt is small in normal situations, considering the size of the economy. It will be apparently suggested that we are good managers of asset because gross domestic product (GDP) to debit ratio is 20 per cent but it will be a sad news, if GDP to current account is deficit or where GDP to reserve is not impressive. So also where GDP to revenue is not positive or if unemployment is increasing or inflation is on the increase or if there are challenges in the fiscal Federalism. In such critical situation, what you will hear people say is 'restructuring.' Why didn't you restructure when poverty rate was almost at equal proportion in the '70s across the federating units? This is the question I often ask on a normally day. Lenders, except China, will normally consider positive or likely positive GDP to revenue or reserves before lending. There is nothing wrong in borrowing if the money is to fund deficit infrastructure but certainly not to fund recurrent expenditure. If you service your existing debt with about 35 per cent of the total budget and your recurrent is another 70 per cent of your budget, your deficit is five per cent and there is no provision for capital project. IMF may not be your friend and locking out to China may not be an option. The synopsis of what my Doctoral thesis is addressing is the huge abandoned projects in Nigeria, given that over 62 per cent of the total projects from 1970 are abandoned. There are over 11,000 projects abandoned, out of which five of them are equal to the country's total debt, such that when completed, we can say technically that we do have zero per cent debt to GDP ratio. Let me name them straight away; Ajaokuta $5 billion, Hadija Dam project $3.5 billion and Okopia power plant $1.8 billion, two airports projects $2 billion and SUREP project $3 billion or thereabout.

The real point for Nigerian is what do you do with your abandoned projects? Are you going to borrow money to commence another abandoned project? Or is it the case that we are borrowing to complete those project abandoned or are we borrowing to close the poverty gap in the North East or are they no longer part of us because of high poverty ratio? Strategic alignment is key to whatever we intend to do. Completing abandoned project may be a starting point of saying bye-bye to unemployment and inflation. It is also a right way to grow reserve and one way to increase GDP to revenue with good foreign direct investment (FDI). I am concerned about the rate Nigeria is depending on China. China is almost everywhere in Nigeria like they are doing in other African countries. In terms of China, there is nothing wrong in borrowing from China and perhaps, there is no were to even borrow from apart from China. What we are saying is that we should be telling the Chinese that we are borrowing to complete viable abandoned projects and not much of a new project. So, when the last administration went there to borrow $5 billion to do the airport projects and told the Chinese that we want to do 10 airports, we ended up doing two that were also abandoned and the $5 billion is gone. So, what story are you bringing around again? China is coming to us for choice projects; petroleum projects, refinery projects, rails, electricity and so on which is the money making machine of the economy. If you are a lender like China, will you be lending to fund schools or military equipment? What we are saying is that you can go anywhere to borrow money but let the money be used to complete some of the viable abandoned projects as opposed to new projects, unless it is compelling.

Do you think the Nigerian government has any business starting a national carrier at this time?

For Nigeria to develop, we must learn very well how to run away from businesses that are within the exclusive jurisdiction of the private sector and projects that are money burner for the public income. Yes, certainly during the industrial revolution, state ownership of public asset was a policy that triggered development, but don't forget that it was the source of the great debt of the '80s which made institutions like IMF to be popular with the responsibility of helping to adjust developing countries' balance sheets clustered with convergence of debts. Never again will anyone be thinking of that now. In Dubai for instance, the government doesn't manage the Emirates Airline. They only have shares in the Emirates; it is managed by the private sector. A lot of things in Dubai are being managed by the private sector. So, when you say you are going to have something as terrible as the risk of national airline, you are just deceiving yourself. How will government handle issues such as cost overruns and schedule delays which will result in benefit shortfalls which the stakeholders will be unhappy with? Government should continue to provide enabling environment for businesses and I think the current Vice President office is putting a lot of efforts in this regard. They should completely remove their hands from business, develop more private people and teach entrepreneurship in schools. Don't come to say I want to run the airport or airline. Where in the world do you see any serious government running airports? Did you see the British government running the airport in London? It is even Israelis that run their security concerns at the airport. There is really no need to have institutions like the Ministry of Aviation. With NCAA and the Airport authorities, a Ministry of Aviation is uncalled for and most of the ministries we have are not necessary. If there are consistent and contingent demands of our constitution, the constitution should be amended. In Hungary, during the 2008 recession, one minister was overseeing four ministries in other to reduce cost of running government, because cost is a big challenge; states are not generating revenue, government must continue to be in existence, so you talk about cost. Let me give you one warning if that may help you. There is going to be another world economic recession, which is coming up soon before the end of the year. Like the one in 2008, more collapse of government and companies, more institutional challenges and where is it coming from? Deficit import from the United States, the US is in crisis. An average person in US owes 15 years debt on the credit card he is carrying. The situation is worse than Nigeria's. The growth rate in the US is between 0 - 3 per cent so Trump is saying we have four per cent this quarter but what about the end of the year. Nigeria's growth rate today is about 2 per cent. The problem with companies operating in Nigeria is simple; they will have to grow below the country's growth rate. So if your company is growing above the country's growth rate, we have to investigate what you are doing, whether it is legal or not. So, if you have a hotel, if you look at the total assets, you will probably not be able to grow it more because the country's growth rate is 2%, except if you will be growing above your country's growth rate. Again two per cent growth rate is insignificant in your balance sheet. Actually, it can be said to be no growth, all contingent on your environment.

The managers of the economy determine the success of an administration. How would you rate the current managers of Nigeria's economy? Let me follow it up with the sudden resignation of the finance minister, will that have a positive or negative impact on the economy?

Well, I shouldn't make comment because I have conformation bias! But, I think most of the appointments are contingent on political considerations. Ordinarily, this should be unacceptable. So, we have political allocations for important economic and social appointments. Some of the ministers in the present administration are very qualified; majority we don't know their credentials. But some are extremely qualified and they can hold such positions but my argument is that; the doctrine of reasonableness to national interest and capacity for the job should determine appointments at that level if we are to succeed again on the assumption that we reorganise our system and process of public service.

What do you think is the capacity, the skill level of the assembly members and the ministers that we offload from the states to the cabinet when the government is formed?

National Assembly membership is a function of legitimacy even if capacity is poor in terms of skills. In a majority government, single majority plurality will be difficult to fight. Again, products offloaded by governors to the centre for appointments are generally weak because of political interest. This is where the president must play a good role concerning his government and not the governor's government, at least at the federal level. Even within the good intention of collaborative responsibilities, we must compel the governors to play above personal interest. I saw the Vice President on television and I pity his good efforts. What was he saying? He was saying the South Western states don't make money, they can't collect tax; fantastic but the point is whose fault? The governors are not thinking about what direction things should go, they want Federal Government to think for them and sometimes when the Federal allocation is not coming on time, governors will abuse the Federal Government. In 21st century, such behavior praxis is far above ignorance.

What is your take on the 2019 elections? Are we going to see good elections?

Democracy can't be compromised, this is the fortunate news because anything that is done democratically is acceptable and this is the global standard. The world will not accept undemocratic behaviour and Nigeria can't be an exception. In political science, we study actors' and institutions' behaviours, leading to political outcomes. A good election is a function of excellent behaviour of actors and institutions. If the two are well behaved, the 2019 elections will be fine, but if actors influence institutions beyond acceptable level of influence, then go to the warning of Thomas Hobbies. In the Nigerian context, I do hope it will be peaceful.

You once had a faceoff with the electoral umpire. Looking at that body now, do you think that it has the capacity to offer Nigeria a free and fair election?

Yes, INEC can perform once the political actors don't influence it, if INEC is left to do its job without any interference. The electoral system we have in Nigeria is capable and sufficient to deliver democracy, but we are confronted with actors and institutions working to interfere. Our political preference should be more on capable electoral systems, creating value stick converged with moral legitimacy.

You once contested for the party ticket in Ondo State. In the nearest future, would Nigerians see you seeking another position?

Not immediately because of my educational commitments. I am very busy. Like I said earlier, I am in the University of Cambridge and I still have the next few years to finish. When I finish, I will find out what I will do next, may be to return to business and assist my colleagues and turn the business around. It could be political because there is interest but not sure of time because I still want to run another doctoral programme on religion in Oxford after this current one. I need to know more about God before I meet him. The last time I went to Ondo for two reason; firstly to stop Mimiko from producing a successor which I achieved and if I can clear him out then I can present myself for such position. Unfortunately, there was no sufficient time for the second mission for me to present myself in the way I would have wanted to present myself.

You said something about world economic recession. In your own understanding, is Nigeria prepared for it?

If we are prepared for it or not, global recession is in the making and it is something that will break out anytime from now and you have to get ready. We have economic recession coming and it is good that we are predicting it now before it happens. This recession will have a very interesting phase; the phase of massive failure of government and companies. The last recession in 2008, companies like A&G insurance, Ford Motors and Lehman Brother went down. This time around, it is going to be both government and companies that will collapse. So, the recession is coming, it is unavoidable. America's balance sheet is having a deficit of about a trillion(dollars) in import and China is growing heavily, investing (neo colonisation) in Africa, at least for Africa's support of China's desire to provide leadership for the world.

How do expect Nigeria, as a country, to prepare?

Well, preparation in Nigeria depends on the system. We have been having corruption fights but we have to take the fight to the ministries. We need to root it from our system and EFCC need more attention and priority consideration in financial matters and skill development, because the trajectory source of corruption in Nigeria is rooted in public service. EFCC is doing a very good job but maybe they will have to divide themselves into two modules; public module and systemic private module, such that no matter how small, corruption is corruption. EFCC will investigate and invite you the way they invite the big guys. When you clean up corruption at the upper level and the system is still rooted in corruption, then you might have to come back to fight the system and before you finish that, the upper level which is already cleaned, you might have to return again depending on how much you succeed in your systemic fight.

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