Former president, Nigerian Bar Association (NBA), Chief Olisa Agbakoba, speaks on wide-ranging economic and political issues in the present dispensation, in this interview with journalists. BOLA BADMUS brings these excerpts:
Nigeria is now in recession, as declared by the Federal Government. What is your take on development?
Nigeria has had a decline in economic fortune, which is measured by quarterly performances. From Q4 2014, we’ve been going downhill. So, one would have thought that such type of figure would call attention to policy makers that something is wrong. But with the recent second quarter announcement by the National Bureau of Statistics (NBS), it is confirmed that Nigeria is now in recession, because we’ve got two successive negative contractions and that is what it is. We have this complicated, endemic, malignant, metabolic economic syndrome. And to say that and proffer no solution doesn’t help. The single biggest culprits in our predicament are the banks.
When the United States had the great depression in the 1930’s, the banks were busy speculating and trading, but the president at that time, Franklin Roosevelt, said no and he got the Congress to pass a law, the Glass-Stegall Banking Act, strictly restricting what banks can do. The work of a commercial bank is to lend but if you don’t regulate, things will go haywire. The problem is that the Central Bank of Nigeria (CBN) needs to have more cohesion in regulation, and the truth is that it is not easy. In the United Kingdom, their own CBN, Bank of England, created a special supervision agency, called the Prudential Regulatory Authority; that is all they did. No nation can afford not to regulate.
But, part of the steps in regulating the banks is the introduction of the TSA policy?
Has it occurred to you that the Federal Government of Nigeria is the biggest generator of money, yet they cannot control the rate at which the money is lent? They put the money in the banks and the banks lend the money back to the government at very high rate. That is ridiculous. So, in order to deal with that problem, the government threw the baby and the birth water out by depriving banks of liquid cash called the TSA. But that is not the solution because the TSA funds are sitting idle doing nothing. So, what the government should have done was to tell the banks that, ‘this is our money and we are giving it to you and the lending rate is three per cent.’ So, our biggest challenge is the financial sector.
Aside that, the second biggest challenge we have is that we don’t have a body of economic advisers. The only body constitutionally recognised in Nigeria is the National Economic Council (NEC) and they meet once in a while for a type of circles. That is a body that has absolutely no business directing the economic affairs of the country. So, we need to have a council of economic advisers, made up of experienced people and they will be the ones to plan the model of the economy. That absence is one of the reasons we have non-cohesive economic policy.
Thirdly, we also need to create a situation where monetary, fiscal and trade policies are clear. I don’t understand how the Central Bank thinks that without printing dollars, it can control the FOREX. Diaspora returns into Nigeria every year is in excess of $20 billion. Where does it go? It round trips because the CBN thinks it can regulate. So, the CBN needs to do what is called quantitative easing, which is easing the pressure by which people assess money. Another point is, what is the strong reason banks can’t do single digit? Banks have that public trust responsibility to assist the government to grow the economy, but the government will not be able to do this unless there is a lot of relevant financial services institutions and laws. I can tell you that 40 years as a lawyer, no bank has given me a dime. Yet, I have borrowed heavily from British banks. So, there’s something wrong if a person at my level can’t access cash. So, who are the people accessing cash, because we need cash to grow business?
What can we do to get out of the recession?
If we have to get out of the recession, I can recommend what Roosevelt did back then during the great depression period in America. He summoned Congress and made a great proclamation and said, ‘we have to fix this economy.’ I will appeal to the president not to consider this emergency power that is being proposed for a number of reasons. When we had this recessionary trend under former President Shehu Shagari, the Economic and Financial Stabilisation Act passed, which is almost the same thing as this Emergency Bill, failed. So, the way out is not in an Act but in policy. All the leakages in our policies simply require a strong president. There is only one way out of recession: it is massive bouncing of the economy. We must spend our way out of recession. When you go to the hospital and the doctor says you’re anemic, only one thing is done – transfusion. So, how can the government present an austerity programme? You have to bounce the economy. Niger Delta is crying for money; South-East is crying for money. We all know that South-West is crying for money. So, you have public works to spend money on. You will be surprised if there’s a situation, where Julius Berger and co are given contracts to build roads and you say for every contract, you must have 10 per cent labourers, you will find that the economy will slowly revive. But unfortunately, I am not seeing those things and if it doesn’t happen, we will be looking at a very long term, because a recession cycle is three years. But great economics, like the former Minister of Greece, can make it; we can recover by Q2 2017 but that requires applying the best possible method. So in essence, there is only one way out of recession; that is, a massive bounce of the economy. There is a conception by the policy makers that an emergency power for the president would mean that they can jump-start the economy; that very notion is wrong.
Those, who have dealt with recession, didn’t pass any law to say give me emergency power. But what you do is to identify the right policies, either fiscal, monetary and trade. Secondly, you must have the right people who understand how to move forward. Again, government should give Treasury Single Account (TSA) back to the banks at single digit rates and supervise the banks; I recommend a lending base of 5 per cent. Also, the CBN must limit its responsibility to monetary policy and take away banking supervision to new prudential regulatory authority, as well as banking ethics to new financial conduct authority. If banks focus on lending and not trading, money will flood the system for productive value.
But, the emergency powers are being sought to quickly reflate the economy and speed up things like procurement?
If the emergency powers will speed up things like procurement, then it is fine. But if it is to strip the National Assembly of its constitutional authority to appropriate money, then it is wrong and I personally will go to court because it is in the constitution and unless you amend the constitution. So, the Emergency Power Act, the way I see it, is simply to allow some of the processes to go quicker. You will recall that the Minister of Finance created efficiency managers in her office, who have direct access to her. I’m not sure that the Emergency Power Act will do what we think it will do; it is what the president determines. If the president says I want this procurement approved in 24 hours, then it will be done. So, the Bill doesn’t do anything, it is the political will that the president exerts that I think is more important.
If I were the president, the first thing I will do, rather than encouraging the president to pass an Emergency Power Bill, is to pass the equivalent of the Glass-Stegall Banking Act. Tell all the banks to lend in this particular direction. That is the only way you can have banks conform. Why is it that in this recession, banks are declaring billions and billions of naira profit? How come they are not going down? It is because they collect all our monies and they lend it at ridiculous rates, and give it to a few people. So, we need a law compelling banks to do banking works not trading. If I go to a bank today with a government guarantee LPO for the supply of a 100,000 metric tonnes of Premium Motor Spirit (PMS), the banks will jump at it because that is what they want. But, if I go to bank to say I need to import machinery, they won’t budge. So, it is clear that we have a problem but we should not just look at the problem; we need local solutions.
The question that readily comes to mind is where did the rain start to beat us as a nation touted to be the biggest economy in Africa?
You know if you are driving in a car and you keep looking at the rare view mirror, you are not going anywhere; that’s an African problem. If you are driving a car, rather than focus on the road, you are looking at somebody chasing you, you are going nowhere. So, I am not interested in the past; I am not interested in every dog that barks. I am interested in the problem that is facing me today. So, rain beating us can be said to have begun in 1914. Therefore, it’s unhelpful to go back to history. The better option is to say what can we do to get out recession? What is, however, painful is that we shouldn’t be in this position at all because we have sufficient capacity. We have resources to generate business and do all kinds of things. The big problem is for the policy makers to understand that politics is secondary to governance. All I hear is the PDP and APC knocking each other. By the way, the PDP isn’t a party; it’s not an opposition party; it is dead. There is a coffin that has been brought to bury it and put it into the ground. The APC, on its part, is made up five or six components. Everybody knows the APC is not functioning unless you don’t know it. In real terms, we have no parties, and that is the problem. And it is the party machinery that creates policies that drive government. That is why surprisingly, I told my wife that it is good that Donald Trump is in the race for the US presidential election because it gives the African-Americans the opportunity to tell Hilary Clinton that she should not take them for a ride. I don’t want Trump to win, but his participation sets up political pluralism, which is so critical to governance. The APC government knows that the PDP are jokers and that on current form, in spite of this recession, in 2019, they (APC) will just return; why would they work hard now? But if both parties are grabbing our attention, not about who is going to occupy an office, but about policy, things would have been quite different. So, presently, our parties are not strong enough.
You posed a question on how much the government has recovered so far and could not get an answer. Right now a news online quoted the information Minister, Alhaji Lai Mohammed, saying the total amount is N78billion and $3million which he said is too small and here you are saying the government should spend more money even at a time when the government is saying it borrows money to pay its workers monthly, so where is the money to spend?
Look, there is money; it is called assess securitization. It is a special field of corporate finance. Now, my cousin, a farmer, has a ban full of yams worth about N50million. So, he came to see me from Onitsha and says he can’t pay school fees of his children. I can say why don’t you sell some tubers of yam or why don’t you give me some tubers of yam and I give you cash? Nigeria is the sixth richest country in crude oil in the world. We have bitumen, we have gas. Have you asked yourself how the NLNG, a Nigerian company controlled by non-Nigerians, makes the stupendous profit they make? Have you asked yourself? Now, Dr Ebogha, he was special adviser on petroleum, he came up with what I considered the most brilliant idea called ‘Future Market,’ which means you sell upfront. The Chinese are gulping crude oil like mad. You can say to them, ‘give me $50billion and I will sell oil to you.’ That makes it. Do you know the amount of experts we have in this country? We are under utilising this country; Nigeria is a giant. I can sell, if the president permits, $100billion worth of oil; they would jump at it. You just go to the Exchange; that is what the Exchange exists for. What do you think makes the Western countries so rich? It is because they are doing fundibility and securitization. You don’t have to have cash. Is it not a shame that we can’t provide ourselves with power? It is unbelievable. It is like me saying I have a lot of clients and I can’t attend to them; all I can do is to employ more lawyers into my chamber. So, how can a country have demands and can’t meet them and they are complaining there is no money? There is no money because they don’t understand corporate finance and assess securitization; the concept that could be understood very well. So, do you know the amount of bitumen lying under Ondo? Do you know we are standing on money, but the money we have is not in liquid? That is the problem, they are thinking of liquid cash. So, all these are fundability. That is why I say government needs to bring in people who understand how to create money. They need to bring in people who know how to create money.
The government promised to reduce cost of governance. Are you seeing their efforts in this direction?
They haven’t cut cost, honestly no! The need to be frugal hasn’t manifested clearly. If they are all flying private jets and still driving 25-car convoy and still having security votes, then they have not reduced the cost of governance. I am sure if all the governors’ put their security votes together, we would probably get about N500 billion. So, we need to see frugality; it is one of the conditions upon which many Nigerians will be prepared to take a fiscal policy of the Minister of Finance in raising taxes. When Mr Fowler introduced this N50 stamp duty, it produced N50 billion. But, we have to have the confidence that those who are making us go through pains are also going through pains. It’s got to be reciprocal. But if we are going through pains, I don’t know why they smile at the Federal Executive Council meetings. I don’t know why they smile when there are serious businesses hanging. It is a wrong impression. They are only telling us that we are onlookers; there is no link between us. We are looking at them on TVs, in the papers. They need to get real; they need to come down to earth and feel the pains that we are feeling, because it is only we are feeling the pains. If they feel the pain like most of us are feeling the pains, they would get real. But a lot of them don’t know what the pain the masses are going through because they are served free food. They need to be frugal. All we are hearing in the National Assembly is billions of naira.