Diversifying Nigeria’s economy from its over-dependence on crude oil has been described as the only strategy to effectively resuscitate and bring stability to the ailing economy, says Ifeanyi Okoye, President of the Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA).
Okoye, in an exclusive interview with Daily Sun recently said the recent crash in crude oil prices, with its dire consequences on the value of the naira, foreign income earnings, and the federal and state budgets was a clear pointer to the dangers of operating a mono-product economy.
According to him, it was high time the government took seriously the constant call for the diversification of the economy by working assiduously towards making the required investments that will boost growth of other non-oil sectors.
He listed agriculture, manufacturing and the transport sectors as holding greater prospects of yielding huge revenue to the economy if the government showed the commitment in creating the right environment to assist, particularly existing and prospective investors in these sectors.
ECCIMA will be hosting the 26th edition of the Enugu International Trade Fair next month (March 13-23) and Okoye in this interview spoke on the importance of the fair to governments, investors, consumers and the people of the South East, in particular. Excerpts:
The Nigerian economy in the last 14 years under democratic rule has been extra-dynamic. The way things have been moving so fast has been quite impressive. You have to agree with me that the stability of any government has a lot to do with the stability of the economy and the stability of the economy cannot be separated from the stability of the government in place.
I can say that the Nigerian economy has been thriving. There has been a growth; at least a growth in the volume of investments that has been attracted into the country. The economy has attracted a lot of Foreign Direct Investments (FDIs). Many businesses have sprung up in almost all parts of the country and we have had more entrepreneurs in the country than before, creating jobs for citizens. Maybe such growth has not affected the majority of individual homes and families as should be expected. Maybe the impact on individual companies has been that of low returns, but certainly no one can say the economy has been stagnant.
The sad thing, however, is that in recent months the naira has been getting weaker and weaker everyday and the lending, borrowing and interest rates are getting higher. And that is a huge challenge. Therefore, speaking purely as a businessman, the major challenges, which confront us right now remain the interest rates, the next is energy. I don’t think the key infrastructure, which we need and, which is energy, to power our businesses is getting better.
And the crisis over the naira is directly linked to the fact that we have a mono-economy, which depends largely on crude oil and we know we have been badly affected by what has happened to the prices of crude oil at the international market. I want to believe that the people managing the economy are working on this.
The other is that electricity is not where it should be. All investors, manufacturers, entrepreneurs, small business owners need stable and uninterrupted electricity to remain profitable.
I cannot really blame the government for this because I am also aware that the government has set up goals to improve power generation such as the privatisation of PHCN – both the generation and distribution companies are now in private hands. However, what remains is for the government to continue to supervise or regulate the system and ensure the full implementation of the terms the core investors entered into or agreed upon with the government so that the privatisation exercise can yield the required dividend to electricity users. Because if they allow the investors in this hitherto owned government firms get loose and do what they like, then it will be worse than ever. Let me give you an instance; just this January, the electricity tariffs charged by the distribution companies suddenly shot up all over the country. In some areas by 100 per cent; in some areas by more than 100 per cent. And this is not good for businesses. You cannot say you want to encourage new and existing businesses to remain active, and at the same time you are introducing such electricity tariffs that will be harming those businesses.
What has happened to the naira and the economy in recent months as a result of the crash in crude oil price calls for an action by federal and state governments to break the over-reliance on crude oil. The greatest headache Nigeria has is the issue of this mono-product economy where crude oil has remained the major source of income or revenue generation for all tiers of government. The Federal Government feeds on the petroleum industry. The states and the local governments also rely on this same source. If it rises, everybody rejoices that we are progressing and getting richer. And if price falls, as it recently did, then it exposes us as being poor, some say broke. I don’t think this is a good way for us. Only the pursuit of a committed diversification programme away from this over-dependence on crude oil will help bring stability to the economy. We need multiple and strong sources of earning.
So, speaking specifically about the South eastern part of the country, I think there is need for government to work hard and get the right infrastructure that will enable a speedy divestment away from crude oil. In the South East, we have a lot of prospective entrepreneurs who won’t wait for whatever is happening in the oil and gas sector before unlocking their potentials to create wealth for the economy.
Good road is the number one among the other infrastructure that the government needs to fix to realise this diversification in the South East. The government knows that it has not really done everything it should have done to put the right road network in the South East. Work is ongoing in some areas, but the requisite federal roads that link up the states to the highways are still absent. A typical example is the road that runs from Asaba through Onitsha, Enugu to Port Harcourt.
Between Onitsha and Port Harcourt, the road has been an eyesore up till today. And we are talking of diversification of the economy. You can’t do this when the roads to evacuate goods and services are not there. Bad roads impair investments. It works against the localisation of industries in certain areas that are even vibrant. The palm oil that gave Nigeria the riches it had in the 60s came from the South eastern part of the country. And with the right environment and infrastructure, this can still be reactivated to create massive jobs and the end products exported to generate revenue for the country. Other countries of the world rely on this as a source of foreign exchange. But for now, no matter how you reactivate this sector, the products will be hard to move out for exports because the transport infrastructure to ease the investors’ evacuation of the goods is just not there.
And if I have to go back to the issue of electricity, one also finds a situation where, after the privatisation of the Enugu Electricity Distribution Company (EEDC), businesses in the South eastern part of the country are so disadvantaged because the EEDC tariff is closing down many businesses. In fact, I can tell you that the tariff is the second highest in the country after that of Jos, which is the highest. As at January this year, the rate was raised to N46.66kobo per kilowatts. The original rate as at December 2014 was N26.97kobo per unit that is being charged manufacturers, industrialists and business owners within the South East. And you ask, why is this so? If the increment has to be made, the tariff should be what everyone, including the consumers, will accept as realistic. For Lagos, it is about 25 per cent. But in Enugu it is about 100 per cent increment. And as soon as payments are not made, the EEDC cuts off electricity supplies to the affected companies. Currently, some businesses have shut down. Why we are complaining is that this company had assured consumers and even the government that the next tariff increase will be about June 2015. But for them to suddenly increase tariff by January 2015, it is so strange to us. The agreement was for the increment to be adjusted bit by bit so that consumers can adjust and not a sudden and astronomical increase. But they negated this. We are badly affected. And you know very well how this can hurt businesses in the South East because outside Lagos, the next area in Nigeria that you will find businesses and manufacturing firms, medium and small scale businesses springing up, is in the South East. So I often ask myself, is the Enugu Disco trying to run us out of business? Because I don’t think what they are doing is very fair.
Corruption, both in government and the private sector, affects businesses and the economy seriously. And when you talk about corruption, you are referring to situation where you find some people liaising with government agencies to default in the payment of taxes due to the government. You also find situation where the taxes collected are not judiciously used. You also find situation where people are not paying the right tariffs they ought to pay for government services or utilities and they are covered up. And then there is also one where manufacturers produce sub-standard goods and pump them into the market for consumers and the regulators are not there. And then importers also bring in inferior goods into the country to deceive the people. And there is adulteration and all manners of such cheating going on in the country. So this is the type of corruption I’m referring to because it cuts across both public and private sectors and it is inimical to the economy. And the harm it does is that it blocks the genuine businessmen from getting across the right quality of goods and even services to the end users. The market is being robbed by such acts of corruption and the economy also loses. So everything has to be done to stem corruption in the country.
As business owners, we are not comfortable with the fact that interest rates are getting so high. The government started a process that could have assisted businesses a lot better. Like trying to marry the Bank of Industry (BoI) with the CBN to assist industrialists and businessmen, and I think it was working well. For example, through the intervention of the CBN and BoI some entrepreneurs were able to get facilities at 10 per cent interest rates and with long term period, some six years, some seven and some even eight and 10 years. But it is not consistent. It comes and goes, and never a stable policy. It was like they were testing the water to see how it would work. And the business community asked them to make it a continuous process. Let it be a rule. A single digit interest rate is the rule all over the world, especially in developed countries and the developing economies are doing the same thing. That is the best way to grow businesses. And we are saying why can’t this happen also in Nigeria.
Before Jonathan became the President of Nigeria, remember that President Obasanjo did promise us a single digit interest rate. He never did it and he was gone. The cost of funds remains a problem for businesses in Nigeria and the sooner the government realises this and does something, the better for all of us. Those in government must begin to understand what business is done. That is the only way out.
We have to open up a better business interaction between Nigerian banks and business owners first and see how we can assist each other before we even talk about going outside to source for foreign funds.
The unemployment facing us can be solved if we can fix our manufacturing and agricultural sector well. These two sectors hold the prospect of massive job creation for citizens. There is no need to pretend. If the government is able to create the right environment in terms of stable electricity, access to single digit credit, good road network, and security in all parts of the country, I tell you that in the two sectors you will witness speedy progress in the manufacturing and agriculture sectors. And they will keep employing people. Anywhere you go in Nigeria, the first set of businesses you are likely going to meet are farmers. So, if agriculture is well funded and managed, and farmers are able to access markets both international and local, so that they rise above subsistent farming, there will be lots of job created in the country. A lot of youths roaming the streets due to joblessness would be engaged only if we have a vibrant manufacturing and agricultural sector. And then one other sector that holds a great potential for job creation is the railway system. If we have functional trains running from one part of the country to another, you will see the level of people it will employ, both directly and indirectly. The absence of the rail system in countries as populous as Nigeria is keeping many of our citizens unemployed.
Once there is stability in all key aspects of the economy, banking, insurance, telecommunications, sports, entertainment, health, among others, then people will always find jobs to do. It is a task that must involve both the government and private sector.
Enugu Trade Fair
I like to say that the preparations and planning for the hosting of this 26th edition started as far back as the beginning of the second quarter of last year. The idea is to boost technological advancement by bringing researchers, business people and industrialists together. This remains one of the core focal points and cutting edge of the Enugu Trade Fair. This trade fair is coming in an election year and we are holding it prior to the elections. We want to do our best to ensure that we grow the economy of the South East and by extension, the economy of Nigeria, through this trade fair. We want to bring in the experts, research institutions, creditors, banks, insurance, entrepreneurs, among others. The economy is very vital. And this is the right time to create the platform where the politicians, investors and the people can meet or interact to the benefit of the economy. People aspiring to take care of the people should be made to know that the economy is very vital to the people. They should have a fair grasp of the happenings in the business environment. And in the South East, we want a situation where our politicians can come out and tell us what they plan to do to grow the economy. So we have been very strategic in the timing of this year’s trade fair. Like I said earlier, we are aware of the current focus on political campaigns and rescheduled elections in March. We have strategically designed our action plan for the fair so that the current campaign and upcoming elections would not affect the fair in any negative way.
We are very much concerned on the issue of deepening our democracy as we are also aware that it is only with a thriving economy and free enterprise that our democracy would be well sustained.
A good number of corporate bodies/business organisations as well as government agencies have made very serious indication and commitments to participate in this fair. Also, the level of enquiries and interest made by companies and associations is quite reassuring. I am quite confident that the trade fair would be successful based on the following indices and factors.
The fair has been packaged to have meaningful and positive effects and outcome for all stakeholders, particularly exhibitors and participants. And we are expecting over 500 corporate participants, including foreign firms and 1.3 million visitors to the fair.
Part of the value addition to this fair is the erection and availability of over 100 square meters marquee air-conditioned dome for corporate and international exhibitors. We have equally put in place measures to ensure stable and quality supply of electricity and water. Being conscious of the state of the power supply from EEDC and without prejudice to the genuine efforts to improve supply, we have commenced the repairs and maintenance of the stand-by generating sets in the fair complex in event of power failure. [SOURCE: THE SUN]