In this interview with NIKE POPOOLA, the Registrar/Chief Executive Officer, Institute of Credit Administration, Prof. Chris Onalo, speaks on how to address the country’s major economic challenges
Nigeria came out of the recession occasioned by the challenges of COVID-19 faster than expected, according to the World Bank. What is the impact of this recovery on the welfare of the citizens?
The impact of the recession if we actually got out of recession may be there but not felt. The reason is that the pump price of petrol and diesel are still high. So where is the positive impact? The cost of transportation, both air, road and sea are still very high. There is still high cost in an unprecedented level of food items. People go to the hospitals and are asked to buy drugs; the cost is high. The cost of doing business is still unprecedentedly high. The small and medium enterprises are groaning under intensive high cost of doing business. Where is the positive impact of getting out of a recession? That is why I believe and I have been saying it over time that Nigeria’s economy has settled in recession for too long a time. Not necessarily as a result of COVID-19 pandemic but this scenario has been there for a very long time. Nigeria’s economy has not really opened up to easy and massive facilitating of citizenry, simply because we have not been able to put our house in order as a country. Businesses that should have grown from startups to blue chips are not given the right tool of macroeconomic policies to grow. Nigeria actually getting out of recession is just a mere theoretical expression.
Nigeria’s appetite for borrowing is on the increase despite huge debts already. What is the implication on the economy?
The borrowing appetite of Nigeria can hardly be stopped because of compelling need for even development of the country’s economy. But the problem is we seem to be jumping from fry pan to fire, pillar to post. We are not seen to be at par to craft out policies that are implementable, that are focused on delivering certain level of growth objectives within a certain period of time. And as a result of that, we are moving as if we are directionless. There is no quick fix when it comes to developing road map for economic growth sustainability and transparency. Yes, the country must borrow at some point when its capacity to cope with certain capital expenditure becomes dwindled. That is the reason nations belong to a common front. For us, we have access to such high profile capital oriented borrowing. We must maintain our membership of institutions like World Bank, multilateral institutions so that we can have access to fairly cheap credit so that we can finance capital intensive projects such as infrastructure, electricity, road, construction, transportation system including security of life and property which require extensive military hardware and software. We really cannot stop borrowing. Unfortunately, we do not have a good record of proper, prudent utilisation of fund borrowed.
Something has to be done to change our orientation. We are too self-centered, we are too materialistic, we are too self-considered when it comes to good things of life than what we think on collective interest; the welfare of everyone as opposed to individual welfare. Nigeria at this time cannot actually stop borrowing whether we like it or not because the level of fund we need to prosecute highly intensive and extensive capital project around the wall of infrastructure, we don’t have that kind of money available to us, based on our current revenue. As long as we are unable to deal decisively with the issue of corruption, our recurrent expenditure will continue to diminish our commitment to capital project financing. When we borrow, it is obvious that not 100 per cent of that fund is deployed into the very project of which the fund was sourced. That is why Nigeria needs to revert to wherever funds can be borrowed. And that is a perilous time for our children coming and children yet unborn. It is not good for the country.
The country has been recording fiscal deficits for many months. In January, the Federal Government’s expenditure exceeded revenue by N485.51bn, according to the Central Bank of Nigeria. What is the way out of this problem?
That is the consequence of what I said earlier. The resultant effect is we will continue to run economy in unprecedented deficit. You will continue to borrow; you are not able to generate the revenue to pay back what you borrowed, while the resultant effect would be you will never have a good balance sheet. It will continue to be in negative until the economy finally totally collapses. I pray we do not get to that level because governance requires courage, sincerity of purpose, governance requires discipline, taming of unwarranted expenditure. And when that is not in place, you will have bankruptcy. The country’s economy could permanently lock itself down in bankruptcy. When your obligations, liabilities are much more than the revenue available so that you can liquidate those liabilities, then you are heading to permanent bankruptcy. Again, we get back to the government that you have to sum up courage, to deal decisively with issues that will impact negatively on the revenue. You cannot continue to tax and re-tax the small businesses, or even multi nationals and blue chip conglomerates. When you put certain level of pressure on them that is beyond their capacity, what next they will do is to reduce the workforce, their running cost, and in the worst case scenario for multinationals, they could totally shut down their investment in the country. And so the fiscal deficit that the government is romancing with is not unexpected. Productivity side of the economy is very low, new businesses are not actually springing up, the tax and levy payers are no longer able to breath. They are rather suffocating. You cannot continue to increase taxes in the hope that you want to close the fiscal deficit gap. You will end up putting businesses into extinction. And because these are the people that the country is warehousing, you will also end up creating bigger socio interruption. People will become very hostile, greed and the struggle to keep ends meet become harder and that will be a threat to democracy. Government will not be able to handle such a situation. People are in debt here are there, they are not able to pay, both individual debt and business debt. Obviously, you are inviting anarchy. That is by the way because the consequence of continuous fiscal deficit is too grave for anybody to contemplate. And I think that government would have to be very tactical. Government has to be innovative, coming up with what can be harnessed in order to generate revenue steadily and to cope with the rising liabilities. Government also needs to look inwardly and be courageous to cut down on frivolous allowances, salaries that are paid. I think Nigeria is getting to a level that the economic condition needs a rapid action to be taken by the government because we cannot continue to borrow. Where you are borrowing from have their own conditions. If you struggle to meet those conditions, it will eventually result to mortgaging the future of the economy because if you borrow and you are not able to pay back, the borrowing is tied to forfeiture of certain items, not for your own future anymore but to the foreign interest where you borrowed the money. So that would be a chaos when you have assigned your right to the lender and he comes in to take that right, you are inviting anarchy because the government at the time if this borrowing is done today, and execution of that borrowing agreement is done today, what if tomorrow comes and the government is no longer in power and things become more difficult than you left, with the government of tomorrow trying to change everything with the lender? It brings a lot of damaging, reputation image to the country which consequently will scare away future foreign investors in the country. So the problem is bigger than what we are looking at and government should make no pretence about it that it is too dangerous, this kind of borrowing and you are not totally utilising the fund you have borrowed. It portends danger for the future of this country.
There are allegations that the government printed N60bn to augment FAAC allocation because of its revenue challenges. Is printing of money the solution to a country that is having financial challenges?
Government has the right and the power to print money up to whatever amount with the consent of the National Assembly and put the money into circulation. But it is the worst approach to weakening the economy. A credible economy generates its own fund from the market forces through demand and supply in terms of goods and services. If I sell something, I make money out of it and you in turn do the spending. Governments all over the world find it extremely difficult to resort to printing money at will. It is not the scarcity of money. The money we are talking about is tied somewhere and government is looking at those money. Some individuals are richer than this country. When you trace how they made their money, you get lost. It is not money available which plays itself around the legitimacy of commerce, buying and selling. But in this case, it is money locked down, it is not circulating, it is not generating fund, it is not creating wealth. It is not a tangible money. Government must not afford to print money that is not tangible. If we don’t want our situation to go back to the situation of Ghana in about 10 years ago when it would take a lot of thousands of Cedis to equal one US dollar. We know how bad that was to Ghanaian economy until they had to revert themselves. I think the gap is not much right now. It is a one million step backward for us to now go and print money and put it into circulation. The only money government can print is new notes to take out bad notes but not printing money as a means of generating availability of fund to meet up with capital expenditure, recurrent expenditure, you cannot do that. Money should come from productive activities of the people engaged in the economy. The government, I am sure they will not want to make that mistake because it would further depress the economy beyond our wildest imagination.
What are the roles played by the Institute of Credit Administration in the economy?
The Institute of Credit Administration is Nigeria’s only nationally recognised professional credit management body, solely dedicated to the provision of micro and macro credit management education, award of specialist qualifications, development of skills and capacity building of people involved in everyday management of trade, financial, consumer and business credits not only in Nigeria, but throughout Africa and the rest of the word. The mission of the ICA is to raise awareness and recognition for the importance of Credit management in all industries as the modern driver of economic growth and social development; stressing the imperativeness of professionally trained credit management specialists in all sectors of the economy with a view to contributing to the success and profitability of the organisations that employ them. As a professional body, ICA represents a field of activity (Credit management) in all industries which is super unique and not covered by any other professional body in Nigeria. The institute contributes strongly to the development and sustainability of the ease of doing business in Nigeria; attracting trade and investment into the country through a network of international collaborations and partnerships, knowledge and widening participation agenda with its counterparts in other countries.
