ANI: Increase In VAT, Devaluation Of Naira And Fuel Subsidy Removal Are Not Fundamental To Revamping Economy
Etubom Anthony Ani, former Chairman of KPMG, former President, Chattered Institute of Accountants and former Minister of Finance in the Military era under General Sani Abacha, spoke with ANIETIE AKPAN in Calabar, on the economy, the oil sector, his days as minister and the state of the things today.
What is your take on the state of the country’s economy?
PEOPLE have made some suggestions that President Buhari should increase Value Added Tax rate, devalue the naira and remove subsidy. I think these are all wrong. There are some fundamental issues that must be tackled if we want to get the economy moving.
In the first place, we have to remove the issue of money laundering in the system. There is a lot of money laundering going on and this is supported by the CBN. We have a situation where the Central Bank allows money that is brought in by MoneyGram and Western Union to be taken out of the country and this should not be so, because what has happened is that the exchange rate mechanism was handed over to the private sector when we had the wholesale Dutch option. There is too much money in the system in pockets of private individuals and CBN has authorized that foreign money can be taken out and they are doing this through MoneyGram and money brought in from the sale of our export is taken out and this is totally wrong, because individuals with excess funds use this avenue to take out or launder money. This is what is causing the exchange rate mechanism to go yoyo. If we want to do things right, we should stop the money laundering that is going on in this country. It is too much.
The second thing is that we have the issue of our promissory notes being sold by J. P. Morgan. These notes were issued in Naira. The Federal Government did not collect any money in foreign exchange. The notes were issued in Naira and were collected in Naira and the interest is paid in Naira. I don’t know how the Ministry of Finance has catapulted a Naira denominated promissory note to be sold by J. P. Morgan. That is another money laundering in the system, which should be stopped. As soon as those things are taken care of, we will sort our exchange mechanism out, after all we brought in the MoneyGram and the Western Union and the money they brought in was very useful. We have a situation instead of having a Dutch option, we had the Central Bank selling foreign exchange (foreign currency) to manufacturers in the real sector and we had the banks and the Bureau de Change sourcing their own foreign exchange from the money that were brought in by MoneyGram and others. We had also a situation were we forced the exporters to remit money into the country and this was used by the banks for genuine purpose. If you notice also, in our days, the Naira was virtually convertible, you could walk into any bank at that time with your N82 and get a dollar, but that cannot happen now because of the money laundering that is going on in the system. Until we sort that one out, we will be having problems with our economy.
The issue of fuel subsidy removal has been canvassed, but the Buhari government doesn’t seem impressed. How do you see that?
There is no subsidy in our crude product. What is happening is that the template that Obasanjo brought in for the purpose of petroleum product was importation template. Myself, and Aminu Saleh and (then) General Muhammadu Buhari drafted the PTF (Petroleum Trust Fund) law and it was based on production. Let us go back to production. When you produce, you have by-products and those by-products are even more expensive than your barrel of oil. Therefore if you do the production costing properly, you will find out that the cost of production of your litre of oil is much less than what we are importing. Therefore let us go back to the issue of changing the template to that of using production. What we are doing now is that the driver in this country is subsidizing what is produced in the petro-chemicals and fertilizer because all the by-products go there and they are going there at zero cost. Whereas, if you do it properly, you will find out that what is going into your petro-chemicals the costing is even more expensive than a barrel of oil. So lets get our axe right. There is nothing like subsidy in Nigeria. Obasanjo did that to assist people to cheat this nation. We have a situation were one person was given the sole right to import diesel, yet we could have produced those diesel. Let us get our refineries right.
We have four refineries. The one in Kaduna is a state of the art and it is still working. The only problem there was the issue of the cooling system, which we solved that situation. In Port Harcourt, we have two refineries there and they are still okay, but instead of us carrying out turn-around maintenance, we gave it out to people who don’t know anything about turn-around maintenance and they destroyed it. Lets go back and get the refineries right. Let us produce here in Nigeria. We were not doing oil swapping in our time. There was nothing like oil swapping. What we did was that if we were going to carry out a turn around maintenance in one refinery, we look for another refinery that has excess capacity and they refine for us and send the refined products back to us. Not only that; they send to us a lot of money because they sell the by-products and send the money back to us. We were not spending anything and we were not swapping. Let people be sincere and come down to do the right thing and you will see that we are not having a bad situation.
The Federal Government for many years now had given licences to private investors to float private refineries but up till now, non has come on stream; what is the problem?
I think its government policy. I am not worried so much about the refineries not coming up, but let us maintain our own refineries. We have refineries that can process 450,000 barrels of oil a day and that will give you about 33 to 36 million litres of assorted oil a day. If you have that going, you do not need to import from anybody. We were able to get our refineries working. The then Managing Director of NNPC, late Alhaji Dalhatu Bayero was able to get very good engineers but people do not trust our engineers, but Bayero trusted his engineers and gave the assurance that his engineers were going to do the turn around maintenance of Port Harcourt refinery and what he needed was a $100 million to buy turn around materials and I gave it to him; and he bought the turn around materials but when the time came for the boys to start work because of corruption they brought in someone (name withheld) through the then Secretary to Government) who had no experience and knowledge of maintenance and he messed up and destroyed the Port Harcourt refinery. We said since cooling was the problem of the refinery, we said let us go and bring the original people who designed and constructed the refinery. They took us to Total and Total was to charge us $325 million to repair the cooling system and stay there for five years to ensure that it works, but by the time we left nothing was done. So there was a deliberate policy to destroy our refineries as to encourage the importation of petrol and other products and they knew it because if you look at it, 80 percent of debt owed to the banks was the money in respect of oil and gas as everybody was investing in building tank farms. But tank farms did not work and we had to use AMCON to liberate the banks. If we had spent only N1 billion to get our refineries right, all these nonsense today would not arise. The people who were interested importing refined products destroyed our refineries. If we had sold those four refineries to Dangote, $750million then, Dangote would have been ten times richer because if he spent $50million again, he would have conquered the whole thing. Now he is spending over $10billion to do refineries of the same capacity. Importation was not the solution but production. We have made that mistake and we should be able to rectify it.
Recently, the former Governor of the Central Bank said the Federal Government should increase VAT rate; do you subscribe to this?
Yes Sanusi came out to say we should increase VAT. I am sure and I hope President Buhari would not do this. If he does it and increase the exchange rate and remove subsidy, then his government will collapse in no time because the cost will be so high. We don’t need to increase VAT because all we need to do is to send people to the Local Governments to collect VAT. At the moment consumers pay VAT. You have to consume and individuals are the ones who consume and not goats or trees. These individuals stay in the various Local Governments of Nigeria and let the VAT man or collector go to the Local Governments and the VAT is waiting for him to be collected. I estimate that we will be having about N3 trillion annually if the VAT man goes to the Local Government to collect VAT. We don’t need to increase VAT, let us collect what has not been collected. You will remember that when VAT was introduced in 1994, the first year it was N8billion that was collected. We moved and decided that we should be going to the Local Governments. The first year we moved into the Local Governments, the thing VAT revenue shot up so we found out that unless you move to the source where VAT is, which is the Local Governments, you cannot collect enough VAT.
You know VAT is a consumption tax by individuals. If you are buying beer for example, there is a VAT you should pay and the money is there waiting for you to collect at the bar or in the hotel. Therefore, go there and collect. You cannot stay in Lagos or Abuja and collect VAT in Kaura Namoda. You have to go there and sit with them. For in everywhere that you have a Local Government headquarters, let there be a VAT headquarters and then you go along with the Local Government Chairman and collect VAT in those places, I am sure you will make a lot of money. Those are the kind of things that I think should be done.
Today revenue from oil is dwindling and many people are talking of agriculture and solid minerals; how should Nigeria go about it?
People are talking about agriculture, but nobody has come out to say how agriculture should be pursued so that it will be an alternative to oil. We have a situation now were oil accounts for about 80 percent of our foreign earnings. Then we were working to a situation were oil will account for 30 percent of our foreign earnings. Therefore, we needed to go in for agriculture. We did a lot of work supported by the Raw Materials Development Agency. We were able to know where we have agricultural products and solid minerals in every Local Government in Nigeria. We divided the country into 10,000 wards and in each ward we had 15 cooperatives and in each cooperative there were 10 people. We need to go into proper agriculture production.
There are two things, agriculture planning\production and agriculture financing. The financing aspect is what was not happening in Nigeria. It stopped when the Bank of the North collapsed. Bank of the North was the best bank in the country then. It was started by the then Sultan of Sokoto and it was supporting agriculture in Northern Nigeria. This is where we had the groundnut pyramids and all those things that were happening in Northern Nigeria. But unfortunately, there was crop failure in two consecutive years in the North and Bank of the North collapsed. Therefore, we should look at financing agriculture and this is where the Federal Government should come in. the Federal Government should create a situation were the finance of agriculture is available and this can be done. This is the time that we can look at the whole economy and find out that it is only in agriculture that 80 percent of your expenditure is in Naira. Therefore, you can then use Naira or even print more notes to finance agriculture, knowing fully well that you will be able to reap and export the product and bring in the foreign exchange.
We must have to go back to review and re-introduce the Marketing Boards. Call it development boards or production boards but it must run in competition with agriculture. It is only in this situation that we can bring back the groundnut pyramids. It was a sad mistake that we abolished the marketing boards without creating an alternative situation. We have to go back and have the Cotton Marketing Board in Funtua, Katsina and Malumfashi. You come to Kano and Jigawa, you have the Groundnut Marketing Board plus the Beniseeds and Suya Beans. Then you come to the West, you have cocoa in Ondo, Osun, Ekiti, Cross River and Delta. Delta has the best land for cocoa and we can have the Cocoa Marketing Board there. Then we have rubber. Our rubber is the best rubber in the world. It is the rubber that is used in producing aircraft tires. You can have the Rubber Marketing Board in Edo and Cross River state. Then we can have a Marketing Board for coffee. The whole of Ogun State has one of the best Coffees in institutions in the world, and then you have the oil palm in Edo and Cross River with its marketing Board.
When you have all these, then you create a Food Production Board (FPB). They say an angry man is a hungry man, but when you have a well-fed man, he will be a happy man. You must have to create a FPB. We have silos in most parts of the country but there is no silo that contains food. If anything happens in Nigeria today, there will be food scarcity because there is no food surplus that is stored anywhere in this country today. Therefore we have to get the FPB to produce food. President Buhari was saying the other day that we cannot be importing rice with N1trillion. We can produce and feed ourselves but we need somebody to do the coordination of the production of food. You cannot leave it to one individual; therefore, there is need also for collaboration between the States and the Federal Government. The Federal Government can do agricultural Planning and Financing but the states would have to participate in agriculture production because the land does not belong to the Federal Government. It was a mistake for the last Minister of Agriculture to say that he has 10 million farmers and he has no farm and land, therefore, he cannot produce. So we have to work with the state Ministries of agriculture. When we have all these, the government should set up a Coordinating Committee made up of the Ministry of Agriculture; Ministry of Science and Technology, including Raw Materials Development Authourity; Ministry of Industry; Ministry of Water Resources; Ministry of Planning; Ministry of Labour and Ministry of Youths and Sports to coordinate and fix these people into the agricultural process, you will start seeing the movement of agricultural production that will be exported and even though you are using Naira to support your agriculture, you will have income from agriculture coming to supplant oil. Nobody has thought of these, it is something that is there in the Ministries waiting to be implemented and unless we do that we are not going anywhere.
You are talking of Agriculture as a way out for Nigeria, but do our leaders have the political will?
Well, they have no alternative now because there are no jobs. Look, you are producing oil but there is nobody to buy your oil. President Buhari is an unlucky man in that we may be going back to what he did in 1984 and 1985, when he introduced countertrade because there is nobody buying your oil. Your oil is in the high sea and there is no money, so whether you have the political will or not the political will, government will be forced to produce things because there is no money again. That is why when thy call Buhari to India, he goes because the Indians are buying our oil. He does not need to do that. We have to come in and produce what God has given us and it is agriculture. When the time for oil comes we will sell, but as it is now you cannot even sell your oil, so you want to go back to canter trade, then do trade by barter? This is what we are heading for. This happened in Buhari’s time as head of state and it is happening again now.
This strategy on agriculture is already on ground. We developed it in 1996 and 1997. The papers and strategies are there; everything is there. We even mapped out the wards and the number of people that are going to be in each ward. The cooperatives are all there and it is the question of going in to dust it up. The people who worked with me at that time on the proagramme are General Moma, he was Minister of Science and technology; Dr Aliu, who was the Head of Raw Materials; we had the Minister of Planning; Professor Akpan Ekpo and Professor Akpakpan of the Nigerian Economic Society; Jim Nwobodo, who was the Minister of youths and Sports; the Ministries of Labour and Finance, the banks and few others. It is just the question of dusting it up and the documents can be gotten from me, Raw Materials, Ministry of Finance or any of the persons or ministries and organisations mentioned above.
It was a team wok and it was to create at least three million jobs. When 100 companies were going into liquidation because of money, AMCON came into existence and spent N6trillion in respect of 100 companies, but we can create three to four million jobs through increased agricultural production, stop importation of food, and export our agriculture product by spending N6trillion for the whole population of Nigeria. I will rather prefer to do that and borrow money from the system when I know that we are going to repay. By the time you give a farmer a loan he will be identified by his traditional ruler. By the time he is selling, you are there to collect your loan so you cannot loose. Imagine the one for AMCON they have not collected but in this case of Agriculture, every year it will be collected or in case of medium term things like Cocoa in the fourth year you will be collecting your money, you cant lose.
What do you have to say about the power sector?
The power sector is in a different category. Mistakes have been made. We had come into an arrangement with Mobil (Mobil Producing Nigeria) in 1995 and 1996. Mobil was to generate 1/3 (30 percent) of our power requirement at 1/3 the price without any charge or recourse to government for any money, except the guarantee of $55million. Mobil wanted some tax concessions, which we gave Mobil led by me as the Finance Minister. The only thing that remained was for us to sign an agreement for the $55million guarantee but when Abacha died, we could not continue and nobody followed up.
When then President Obasanjo came, he brushed aside all those things by wanting to do his own power and that is where the failure is. If they had allowed Mobil to do that 30 percent, we would not have this kind of power problem we are facing today and we would have gotten the cheapest supply of electricity in the world. Mobil was going to use the gas that is being wasted now through flaring to produce the cheapest electricity for Nigeria but we lost. So what is happening now is that we are spending and spending and we do not know where we are. Starting from Obasanjo, the excess crude account, they spent the whole thing but we have not seen any result. The problem with this country is that there is no continuity of good and laudable programmes and policies. We sincerely hope with Fashola coming on board there will be result. I pray he does not collapse because of the weight of his ministry. When you bring in Ministry of Works, all the roads are bad, Ministry of Housing and the housing are bad and crown him with Ministry of Power, then you want to kill that young man. He will not be able to cope. It will take a long time for us to get our power. The government should go back and negotiate with Mobil and let them come in with the expertise and do this power for us, the arrangement is there. We have wasted billions and billions of dollars and nothing has come.