Nigeria’s economic outlook
After slipping into an economic recession last year, Nigeria has launched its recovery and growth plan. Atedo Peterside, Chairman of ANAP Business Jets and, founder, former chairman of Stanbic IBTC Holdings, discussed the country’s economic outlook with CNBC Africa’s Wole Famurewa.
I want us to focus on the economy. We’ve seen the economic recovery and growth plan unveiled by the government. How are you feeling about the economy today, now that the government has put out a plan?
I hope that the very worst is over, but I cannot pretend that I’m happy or that I’m excited or that I think we’re on a rapid recovery path. I think we’re still a long way from that. If I’m to sum up this plan which has been launched with so much fanfare, sadly, as an economist by training, I think that as a response to a deep recession in a country of 170 million people with so much poverty, the plan in summary, is timid. If you want to drag an economy out of recession you’ve got to be a lot bolder. The point I’m making is that perhaps the problem is the political economy. You do not have the vision into what exactly the government wants to correct, what exactly they want to change, so what has happened is that people are bringing out a plan, making some modest changes and saying let’s live with this.
To give you an example, the statistics can be used in a number of ways. One, what if I tell you the figures and tell you that if I rearrange them the problem Nigeria had in the past was that we were living above our means. All the revenue we got was spent on consumption and recurrent expenditure, and therefore we left almost nothing for capital expenditure. If you take these figures and you remove the debt, it is exactly the same thing, all the revenue as currently planned is going to be used by recurrent expenditure, and then in order to invest in infrastructure, we want to go a-borrowing. Do you get the point I’m making? All the revenue that we’re generating is being consumed by all the civil servants and public servants leaving nothing!
Now, if you want to transform your household, or your firm, and your historical problem was that you squandered all your revenues… This is another plan to take all the revenues, squander them on recurrent expenditure and then say, “okay oops we have no money for capital expenditure so let’s go a-borrowing for that.” This means that all the money for capital expenditure is coming from borrowed funds and that there was no effort made to say, “Hang on. We can no longer afford this size of recurrent expenditure. We are going to cut it, and do what it takes to make it 70 per cent of the revenues.” But, there was no such thing.
If we were to cut our recurrent expenditure, many have argued that in a recession we need to spend?
Well, if you downsize in the right way, you will release money that can now be deployed correctly. So we all know that before, all the money was squandered, people just on recurrent expenditure.
But isn’t it possible that downsizing may lead to more funds available to spend on capital expenditure but on the flip side, the diversion of the recurrent expenditure could impact the ordinary Nigerian?
Well either way we went there was going to be some pain. I’m talking about whether or not anything has changed, whether or not there’ve been any adjustments. If all we are doing is still squandering all the money that we’ve earn, has anything changed? The previous government said they were going to borrow locally, this one says they’re going to borrow internationally. The only difference is that we now want to borrow overseas. The point I’m making is that there hasn’t been any restructuring or rearranging. It’s largely not there. It’s almost like saying, “perhaps if the last guys stole a bit, we will steal a bit less.” That’s the change we’re offering. It isn’t bold enough. Yes, it’s an improvement that will bring about little savings here and there, but like I said, if you want to drag an economy out of a recession go back to 2008 and look at the response of the United States to the global financial crash and compare that to the response of countries like Italy and others in Europe.
The U.S bit the bullet, and took all the bold measures, and decided to drag the country from recession into growth. The Italians and so on kept on postponing and made little or no changes. From where I stand it’s like we’re copying our brief from Italy. That’s why I say it’s not bold enough but hopefully it’s a start. It is better to have a plan than to have none. There was no plan before, now we have a plan of some sort and I am not sure that the government is saying that the plan is cast in stone. As it becomes clear that the plan is not bold enough. A number of things may still come to pass.
What are the bold moves that need to be made in terms of really upgrading the infrastructure, because that it is common theme when Nigeria is analysed. You often hear that our infrastructure is so poor that there is no way we are going to see significant growth?
We’re saying that less than per cent of Nigerians (public servants in all forms) consume 99 per cent of the revenue. So the other 97 per cent of the country is just watching while the privileged 3 per cent who are public servants consume everything. Is that how you transform an economy? That’s the historical problem that they inherited, but have they changed it. They’ve continued the same formula and they’ve called it a new plan.