African Development Bank (AfDB) President, Dr. Akinwumi Adesina, Was In Nigeria Recently, His First Visit On Becoming President Of The Continental Bank. In A Chat With Select Journalists In Abuja, Adesina Advised Federal Government On How To Pull Nigeria Out Of Recession, Amongst Other Issues. ABDULWAHAB ISA Was There. Excerpts:
What is your mission to Nigeria?
I’m very happy to be here since I became the president of AfDB and, as you know, this is home for me. As I explained to President Muhammadu Buhari, I did show my appreciation for his very strong support for my running for president of AfDB.
My appreciation goes to the former president, Dr. Goodluck Jonathan, and our other past presidents, Chief Olusegun Obasanjo, Abdulsalam Abubakar as well as Yakubu Gowon and former vice president Atiku Abubakar.
They all played a huge role during my campaign. It’s obvious times are tough in Nigeria, but the same way we stood together then is absolutely the same way we would stand together now. I’m in Nigeria to show strong support to Nigeria for three reasons: first of all, Nigeria is the largest shareholder of our bank and so Nigeria is very important for our bank.
Secondly, until recently, Nigeria has been the largest economy and it is very important that what happens to Nigeria affects the rest of Africa. Thirdly, is that, what happens to Nigeria is so important. When the world witnessed the financial crisis of 2008, everybody said the banks were too big to fail.
In the case of Africa, Nigeria is too big to fail. Therefore, we are here to really support Nigeria. What are we doing precisely for Nigeria? First of all, times are hard in Nigeria and I want to assure you that Nigeria is not in a debt crisis at all.
If you take a look at the debt-to-Gross Domestic Product (GDP) ratio in Nigeria, it is 15 per cent whereas; some people are running 50-150 per cent in developed countries. So, there is no debt crisis in Nigeria. What the country is experiencing is revenue challenge.
The problem of Nigeria is that, everybody talks about the collapse in price of oil and people talk about diversification and diversification is not a problem of Nigeria. Nigerian economy is well diversified. Oil and gas accounts for 10 per cent of the GDP, but it accounts for 98 per cent of the foreign exchange earnings of the country.
The problem Nigeria faces is low productivity and low profile of the remaining 90 per cent of the rest of the economy. The problem is revenue confrontation problem, it is not a diversification problem and so, what is needed is to give a lot more incentives to the remaining 90 per cent of the economy.
We believe very strongly that the private sector is going to play a very important role. So, rather than spending your way out of recession, our position is that you need to incentivise your way out of recession so that, by the time you get out of recession, the economy is structured in a way that the remaining 90 per cent can actually replace the income revenue profile of the revenue you are getting in the 10 per cent today; otherwise, if you spend your way out of it, you will still be left the same way you were at the end of it.
We’ve had excellent discussion with the vice president and rest of the Economic Management Team (EMT) and I must say that, I feel enormously encouraged to hear what is being done in Nigeria. It’s interesting to remind you that Nigeria just went through a very difficult period with Boko Haram insecurity.
What is your view on insecurity?
You can’t invest if there is no security. So, I want to commend the president and his government on the great job they have done in dealing with insecurity problem, but they have also taken some tough decisions and it is not easy to take such decisions.
Two of those tough decisions, first and foremost, is the issue of removal of fuel subsidy and secondly, the devaluation of the naira. Those are tough but they are the right decisions to take in the current situation. What one has to make sure happens is that Nigeria must not fail to reap what I call the dividends of the devaluation.
What would have been very bad is to devalue and not reap the benefit of the devaluation. When you devalue your currency, three things happen: your non-oil export becomes more competitive, your import becomes more expensive; import substitution becomes something you can do and do very well and third is foreign direct investment that is to come; foreign direct investors that are bringing in money can stretch the dollar and that stretch would help the devaluation.
Those three things absolutely have to happen but for them to happen, they require incentives and so, we discussed with the government the need to have incentives for critical sectors such as agriculture and agro-allied industries.
The solid mineral sector is very important and there is need for incentives for the manufacturing sector; incentive for SME sector because that is what is going to carry jobs for the economy. Don’t forget it’s not just about the question of inflation; it’s also about jobs.
We have high level of unemployment in the country and part of it is, what is leading to the insecurity issue that you have here? I just want to say that we believe it’s important to have some synergy between the monetary side and the fiscal side.
One thing should be above in our view, which is the temptation to raise interest so high calling a lot of what is coming in as foreign direct investments, which is going to be a lot of portfolio. That would be a lot of hot monies that comes in fast because they don’t stay long, they don’t stay in the real sector and they leave as fast as they can, and you might have a situation that is worse than what you have before .
We encourage the need to have the right kind of investment in the real sector. That is where the real issue for revenue concentration problem is. We want to commend their efforts in widening the fiscal space but also in reducing inefficiency in public expenditures.
However, despite all the efforts, there is budget deficit that needs to be covered. At AfDB, we will be holding our board session soon to consider budget support facility of $1billion for Nigeria and that would go a long way.
Let me be clear about what our terms of lending are: We are saying this is money that you get at 1.2 per cent interest rate for 40 years and so, this is almost like a grant to support the government to smoothen itself out of the current revenue situation.
Secondly, is that we are going to be supporting agriculture big time, and would invest $300 million in agriculture in a programme called: Enabled Youths, which is to develop a new generation of young commercial farmers for Nigeria.
There would be 1,000 of them per state and that would make them 3,700. Each one is expected to create about five jobs that is creating about 185,000 jobs right there and if you take them with the 37,000, that is about 220,000 jobs and that would create a lot of jobs for the population. We are also going to be investing additional $200 million in the staple crops processing zones for Nigeria.
We should allow the development of zones with good infrastructures for agro-allied industries to process herbals into food and, therefore, contribute to the production and import substitution that I mentioned earlier.
The North East has a peculiar challenge and the president is working very hard and we, at the bank, are very sensitive to that because we have seen the challenges there and the need for reconstruction and we are very supportive of what the government is doing there. So, we are going to be financing physical and economic infrastructure in North East with $250 million.
What other areas are you looking at in terms of capital project financing in Nigeria?
Water, health, sanitation issues, skills, particularly artisan’s skills and all of that, are on table. I just announced in the meeting with the vice president that I heard about severe malnutrition that is occurring in the North East that we would give a grant of $1 million for the internally-displaced persons (IDPs) to be able to access the partly-needed food. When you look at the inflation in Nigeria, it is structured inflation.
Power is one of it and the situation in Africa just generally makes no sense and you can’t develop or industrialise in the dark, kids can’t learn in the dark, vaccines and so on cannot grow in the dark; basically, Africa is tired of being in the dark and I think Nigeria is also tired.
I grew up here, I lived here. Darkness, what are we going to do with it? We said power, power and more power is what is needed in Nigeria. For this year, we are going to be investing a total of $363 million in the power sector focusing on 1400MW of electricity that would be generated.
For 2017, we expect to invest fund that will roughly translate to 1, 385MW of electricity. We would establish in Nigeria what we call Energy Entrepreneur Fund (EEF) for Nigeria. That would allow small entrepreneurs in the energy space to be able to have funding.
One of the major problems confronting Africa and, by extension Nigeria, is increase in number of jobless youths. How is your bank helping out in this aspect?
In terms of jobs for African youths, we have gone quite far in designing that. That initiative is focused on helping African countries to train roughly 25 million jobs in the next 10 years. There is job crisis for youth world over. Take Nigeria for instance, the unemployment rate is very high.
You have a situation where young people are roaming round the street. When I used to be a minister here, Aliko Dangote advertised for jobs and a PhD holder applied for the position of a driver. I personally believed that the future of African youths is not at the bottom of the Mediterranean Sea.
We have to do everything possible to tap into their youthfulness, their talents, and their entrepreneurship. This is what this initiative is supposed to do. I discussed it with the vice president. The focuses are areas, which the young people are getting into.
First and foremost, the ICT is a big area. Zuckerberg, founder of Facebook, was here in Nigeria and I believe ICT service can play big in Nigeria. Part of our initiative is to help create more than 50,000 coders for Africa and a lot of these can be here. If all these programmes and computer apps of today were available when I was a child, maybe I wouldn’t have been an economist but a programmer. The opportunities are huge in the ICT sector.
The second one is agri-business; and we are going to be doing the Enabled Youth initiative that I mentioned to you and it’s going to be a big component. I think most of it is going to be entrepreneurship development.
Take agriculture, for example, it’s very important to support farmers to have access to productive input because that way, you can raise productivity and drive out inflation. Today, you have 16.4 per cent inflation, the larger part of that is food and the more you can actually stimulate that, the better.
The support for farm- ers is not a subsidy. Support for farmers is physical stimulus because it allows them to get into the rest of the economy. Those that are s u p p l y i n g them seeds, those supplying them f e r t i l i zers – everybody is there and when I was there, we initiated e-wallet system, those that are using the mobile phones, the telecom, etc.
The government might consider reducing the corporate tax rate so that those that are actually processing food would be helping the government to address the issue of import substitution. Our role, as a bank, is not to dictate to the government what it’s going to do, but to support government efforts to make sure that things work out.
We are going to be talking to the organised private sector and philanthropic organisations about how we can combine our resources and their resources to achieve a social good that they want to do.
The debate on sale of national assets is on, what is your view on this issue?
I’m sure the conversation is a local discussion and I’m sure the arguments on both sides have been heard; and I’m sure that the result will come out after a national deliberation.
Is there a way AfDB can intervene in the Nigeria financial sector precisely the banking sector, to stem the rising interest rate?
I thought I had talked about that in my earlier remarks. I can only say that, when we talk about high interest rate, we have to get three things clear: One is that, a lot of what you see today that is driving that interest rate is structured to power and all the infrastructures. Second, is to strengthen the banks in the real sector.
The good thing is that when I was in Nigeria, we developed the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and it was one of those things that you will be lucky to participate in. Today, we have 30 countries that want to scale up NIRSAL.
The bank has supported many Nigerians that now go and train other countries and the same thing for the e-wallet that we did to distribute inputs. Today, we have 30 ministers of finance across Africa the bank is working with on developing this initiative.
Sir, you talked about finance packages. Are they tied to specific projects?
As I explained in my introductory remarks, they are not; it’s a budget support for agriculture, and youth investment. When it comes to the issue of the government, we are supporting the government to do real projects; to do roads, whether its energy or investment in agriculture; these go right into the government budget system.
When it comes to private sector, we do quite a lot of that, and we do a lot of credit in Nigeria here. We do a lot of trade finance here in Nigeria. We actually have a way of monitoring the disbursement and how much jobs you are creating; and for us, value for money is the key and if we see that anybody is getting the money and not using it for what it is disbursed for, we have a way we could stop that.
So, we are not in the business of giving free money, it’s for development.