Nigeria’s economy is already in permanent depression —Falae

A former Finance Minister, Secretary to the Military Government and joint presidential candidate of the Alliance for Democracy (AD) and All People’s Party (APP), Chief Olu Falae, speaks with the Group Politics Editor, KUNLE ODEREMI, on the economic implications of the lockdown in the country, what the Federal Government should do to diversify the economy, among others.

In the face of the rampaging coronavirus tension and fear in the land, what would you advise Nigerians to do?

The problem with us Nigerians is that we don’t take things seriously. We tend not to believe anything. Everybody has a recipe for virtually any illness and this is one of our problems. Some people would say, ‘drink hot water’ some will say, ‘drink ogogoro, it will cure it’ and all kinds of nonsense. Unfortunately, our people tend to believe such fictions. So, this is the basic problem we have.

We can see what is happening in other countries, even the president of the United States of America, Donald Trump,  said it was a hoax at the beginning. He said it was the Democrats who were just making a lot of noise about it. This was despite all the information available to him.

This is a danger that the world faces. We don’t take things seriously and now it’s beginning to dawn on us that it is a serious matter. Again, it is true that younger people seem to survive better when they receive the attack but it is also true that a good number of people are dying. Two –three per cent of those infected are dying. Even if it is one per cent, to me, it is too high because a single human life is too precious to lose if it can be saved.

So, the first thing to do is to get our people to accept that this is a dangerous situation. The second point is for the government to enforce- they say social distancing, that is the wrong expression, it is physical distancing. Social distancing relates to distancing my social status from your own, I’m the Olu of Iragun, therefore, you’re an ordinary reporter so I will not get close to you. That is social distancing. But this is physical, regardless of one’s social status. So, it is physical distancing. It is difficult in our culture; in the marketplace, there is a crowd. At the motor-park, there is a crowd. Everywhere you go, there are always crowds. This is the greatest danger that we face.

Markets are being closed now in Lagos. In Akure, Kabiyesi has said no market for some weeks. But, we first of all need to appeal to our people to at least for two weeks, let’s change our way of life for our survival. Let’s suspend markets. After all, during the NADECO struggle of which I was involved, we would tell Lagosians no market for one week and they would obey us, during the Abiola episode.

For our own survival now, if our obas and governors say no market for two weeks, let us accept it. Stay at home as much as you can, because in your home, the infection is not likely to reach you. The danger is that a person may have it and there would be no symptoms and the person can infect other people without knowing it. Therefore, the best thing, let us stay at home for two weeks as much as possible.

Of course, if you need to go out and look for food to eat, that is a different matter. But all the usual gatherings, markets, motor-parks, drinking bars, evening parties—there is a hotel next to my house in Akure, people shout there screaming until midnight everyday—that sort of thing should not be allowed. In their own interest, stay at home. That is the best thing really, to stay at home. Foreigners should also be prevented from coming into the country for two weeks Nigeria will not cease to exist, because if it gets to this place, we are totally helpless.

If New York City is screaming for help with all their sophistication and wealth and preparedness, how are we going to cope? We can’t. Therefore, don’t let it start. So, one, it should not start, then we should agree to two weeks for everybody to take holiday and stay home and survive as best as you can in your house. Forget the market; forget the school, Sunday meetings, forget about it. For church services that are crowded, we can worship God in our homes. God is everywhere and we can worship God anywhere just for two weeks. I believe if we do that, it will break the chain because this virus doesn’t spend more than 22 hours when exposed on any surface. So, if it’s there for two weeks, we won’t catch it.

So, that’s my advice. Let Nigerians agree to stay at home for two weeks. It’s a great sacrifice but it is a way of surviving because if it breaks, we’ll have no way of coping.


There is the popular saying that prevention is better than cure. Don’t you think we had enough time to have prevented it from entering into the country in the first place?

I agree. But as I said at the beginning, we were very skeptical. We don’t believe that anything bad can happen to us. We think we are special creatures of God; it’s not my portion. You say coronavirus, people tell you it’s not my portion. A disease is the portion of every human being, potentially. God that created us has given us intelligence with which to take decisions within His perfect will for us. If we surrender that God given ability to think and decide you expose yourself to danger, if you say it’s not my portion and go to somebody who has coronavirus, you will get it. That is the mentality which I don’t know where it came from. We think we are special and different from the rest of creation, thinking whatever is killing people in America cannot kill us in Nigeria, it’s not the same.  We’re ordinary human being. We’re not special in any way. If we are special, then let’s use our brain and intelligence which is God given to assess the situation and recognize that we have no medical facilities for treating it if it breaks out on a large scale and people would just be dying like flies. So, don’t let’s get there. Not to get there is to stay at home voluntarily for the next two weeks.


What are the implications for the economy if all of us have to stay at home for the next two weeks?

Well, the economy would slow down but fortunately for us, our economy is not as developed as the economies of the other countries in Europe. What I mean is that virtually everything consumed in the United Kingdom is manufactured. Therefore, their workforce is almost 90 per cent industrial workers and commercial workers who have crowded offices and have to take buses and trains every morning back and forth. In our case, most of our people are still in the villages; they don’t take any train every morning. They don’t enter any bus where they can infect anybody every morning. It’s still a small fraction of our total population that is in the kind of danger people are in America because those are the ones in Lagos, Ibadan and Abuja who go in public transport to the office every day which is where the infection is greatest. Most of our people are away in the villages, and it is most unlikely that it will get there unless somebody leaves the city with it and goes to the village and infect the people in the village.

So, what I’m saying is that it’s not a huge number of people who will not be producing for those two weeks. I’m a farmer. After this conversation, I’m going to my farm. I go by myself. My driver will use a mask; my police orderly will use and I will use also, that’s three of us. When I get to my farm, I will be alone in my office, while my workers are in the field. So, the chances of infection in a rural setting are very low indeed. So that is what may save Nigeria, that most of our people are not in the cities, factories and shops, they are on the farms. Therefore, the effect on the economy will not be total as it is in the UK. For example, in the UK, about 4.5 million people are in the hospitality business, arranging holiday, flying people to the place, running the hotels. We’re not there yet. Those are the ones who are very vulnerable, and once those people stay home, their entire economy is shut down. If all the workers in Akure stay at home, apart from the schools, you’ll hardly notice anything is happening. In Lagos, if everybody stays home, because it’s more industrial than Akure, it will more noticeable. But in Ibadan, it will be not be as noticeable because most of the people in Ibadan are not working in any office, or in any factory, they are petty traders, farmers and in their homes.

So, what I’m saying is that because of the state of the development of this economy, staying at home for two weeks will not have as much negative impact on the economy as it would have in a more industrial country.


But the World Bank has said Nigeria may fall back into recession again in view of the fact that the price of oil

Are we not in recession? All this rubbish they publish all the time. Look, in a situation where there is no power to power the economy, where 50-70 per cent of manufacturing capacity has shut down for the past 20 years, are we not in permanent depression? When they talk of recession, what are they talking about? An economy where you charge 25 per cent to lend money to industry? We’re in depression, permanent underdevelopment. So, what recession are they talking about?

The effects, in my view, are that those who are producing food will go on producing their food, so we will not starve. Those generating electricity will go on doing it. Those in the water works will still be producing/supplying water where water is available but not in Akure where I live because I have not received government water in this house since 1979. I have been using well water since 1979. That is just by the way.

What I’m saying is that the number of us who are affected by the industrial work force is far less than it is elsewhere in the world. So, if we all stay home, I don’t know how many manufacturing factories we have in Akure where I stay. The factories that used to be here have been shut down, including my own for the past 15 years. The net effect will be marginal except for the schools, but since it’s all the children, then there is no relative advantage. The day they resume, they will all start learning the same thing. So, nobody has an advantage over the other. So the effect again is not disastrous.


Do you think the coordination for handling the situation at the centre is proper? Seeing that different positions are being taken by some governors shutting their borders while others are not doing same, how do you see the entire system?

We can do with a better coordination. For inter-state transportations, the governors should have done it together. After all, in America which is a very independent country, never mind what [Donald] Trump is saying, the governor of California can shut down California.  For example, the climate change treaty signed in Paris by Obama, when Trump came, he said it’s nonsense, he doesn’t believe in climate change, but various states in America are implementing it. So, it’s unlike Nigeria where the federal government is everything. In the United States, states can close boundaries and in Nigeria, states should be able to do that as well.

In this state, we are not allowing passenger traffic into our state or out of our state. Commercial goods can come in, commercial transport, Lagos for example, cannot keep out food from coming in. In a week, they will starve but they can say no to passenger traffic for the next two weeks. But commercial trucks carrying tomatoes, food like plantain, Garri and beans can come in. It is for the state to do as Buhari can’t take that decision for Lagos state. It is the governor of Lagos or the state government that can take that decision.

In Ondo State, the governor should be able to say well, look, for the next two weeks we will not let passengers travel into this state and we will also not allow our passengers travel from this state to the neighbouring state, so that whatever you have is contained by containing the spread and its people that spread it, not yam or garri. I think each state should do it. The federal government cannot sit in Abuja and decree that people should not enter Lagos or Maiduguri. It’s not a constitutional matter now but a matter of practical responsibility and accountability.

In any case, the governor of a state is the chief security officer of the state and security is not just about stealing and kidnapping, it’s also about hunger and disease. The security of life is threatened more by disease and by hunger. Disease is a threat to the security of the people of a state, so the governor has responsibility to protect his people either from hunger or disease or kidnapping.


The United States has announced a number of measures to cushion the effects of the coronavirus, what would you suggest that Nigeria should do, given the fact that at the end of the day, the citizens might be at the receiving end as far as this problem is concerned?

As I said earlier, a very high proportion of the population of America or in Britain are in manufacturing employment and production has stopped completely now. Therefore, their governments are offering, for example, in the UK, the government has said that factories that are adversely affected by the disease would be given guaranteed loans, their employees who went into unemployment through no fault of their own, the government will pay 70 per cent of their salary as grant so that they are not thrown out of employment.

Let me make a point, that it is not just an act of charity or kindness on the part of the government which it is, but equally important is the fact that it is the human beings in a country with the money in their hands that constitute the market in that nation. They constitute the demand for the manufacturers of that country so you cannot afford for demands to drop because of unemployment so you give money to workers so that they can have the power to continue to buy goods and services and keep the industries going otherwise, there will be a depression.

So, it is both a social welfare decision and a strategy for managing aggregate demand to prevent a depression. During the depression of the 1930s, Lord Mayard Keynes advocated and Europe agreed that the way to end recession or depression was to generate aggregate demand because there were factories that were empty and what did they need? They need demand for their products so that people can go back and start producing. How would they generate demand? By putting money in the hands of people, it eve made sense to hire people to dig holes and pay them and then pay them again to fill the holes back. As long as you are putting money in the hands of people then they will be able to buy goods and manufacturers will be able to manufacture and gradually the economy will pick up again.

We have not got there yet but this people are smart. They are anticipating what might happen after coronavirus by not allowing all the workers to be unemployed by giving them money so that they can maintain a reasonable level of demand for goods and services even when coronavirus is on so that revival thereafter will not be as difficult as it was in the 1930s depression.

So, all I’m saying is that if there are industries that are affected in Nigeria, the government should be able to give them- we have a terrible banking system, as a banker, I don’t understand, they want you to deposit your money and they give you half of one percent interest, you leave your money in the bank for a moth, or two or three months, but if they want to lend the money to you tomorrow they charge 25 per cent interest. If capital is kept, then owners of capital should get a higher interest rate to induce them to deposit and generate surplus which banks can lend to people. You give capital owners almost zero and you’re fleecing borrowers at 25 per cent. Which economy is going to grow and develop at 25 per cent interest lending rate? If they are paying 10-15 per cent to depositors, and they are charging 25 percent as lending rate, it makes sense but to pay almost zero for depositors and they are charging 25 per cent, who takes the whole of that money? The banks are just being allowed by the Central Bank to fleece this country.

So, there are so many things wrong in the economy apart from coronavirus. So, they say they assist borrowers by reducing interest rate from 25 per cent to 20 per cent. They are actually not doing anything. How many businesses would generate more than 25 percent profit?

The economy is in such a shambles. Those who are running the Central Bank, I don’t know where they came from I don’t know which school they attended. This is because what they are doing doesn’t make sense and there is no government that can direct them.


How do you mean sir, that there is no government that can direct them? Is it because the Central Bank of Nigeria (CBN) is autonomous?

The CBN cannot be autonomous of Nigeria. It is autonomous in the sense that it is not directed on a day to day basis by the government. It is allowed considerable freedom to run as a professional body. But surely, government must give strategic guidance to the central bank of any country from time to time. For example, if I was still minister of finance today, I would have called the governor of central bank not in the public but within and ask him to explain or justify presiding over an interest rate regime in which commercial banks pay next to nothing to depositors and they are allowed to charge 25 per cent to those who borrow money from them. That’s what you call the spread. Usually, in the past, if the banks get four or five per cent spread, it was compared very good. In other words, they are paying seven per cent to depositors and lending at 12 per cent. It was considered very good. That includes their overhead and profit. But now, 25 per cent is the spread. Where else on earth would they have that kind of interest? Who is asking those questions? I feel so frustrated, these days I don’t even talk about the economy any more.

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The CBN has an advisory committee that comprises seasoned administrators, professionals, professors. Are you saying those people are not doing the right thing, giving the right advice on how to boost the economy?

Managing the economy of a country is both a profession and an art. It’s also an admixture of politics. The economy is to deliver for all Nigerians, it’s not just a mechanical thing. You may as well hire a super computer to direct the central bank. I don’t doubt the qualifications of the people you mentioned, but how do they explain this unbelievable spread of 25 per cent between the deposit rate and the lending rate? Where else on earth does that happen? I mean any serious country in the world where we have a spread of 25 per cent. In the rest of the world, lending rates are close to zero. Britain is now one quarter of one per cent that is the Bank of England rate at which they lend to banks and banks lend two or three or four per cent and we are 25 per cent. What sort of thing is that? They cannot argue that because capital is scarce. It’s expensive in Nigeria. If it’s expensive and you are paying depositors a very high rate close to 15 / 20 per cent to justify your lending at 25 per cent and you’re taking money at 2-3 per cent. It doesn’t make sense. I don’t care who they are, what they are. To me, what they are doing doesn’t make sense. Unless they have facts that I don’t have, I’m an economist, I was a banker. I was also a public administrator and I’m a politician. I look at it from all these angles, it doesn’t make sense.

Anyway, back to coronavirus, my view is that the industries that are likely to be affected are not as many, for example, most of the people severely affected in America and Britain are those in the transportation industry, the hospitality companies, the hotels. That cater for tourists, that sector is very underdeveloped in our own system. Therefore, true, we are affected, but not on the scale at which they are affected elsewhere in the world.


We have always talked about diversifying the economy for many years now, yet the country still depends on oil as its mainstay. What is actually wrong? Is it that we lack the political will power to diversify?

What is wrong is the policy mix of the government. The way to manage a free enterprise is through policy change. For example, during the Structural Adjustment Programme, we introduced a number of measures. One, the domiciliary account which you never heard of before which allowed Nigerians to export whatever they have to export and keep the money in their domiciliary account under their control and use. That encouraged a lot of Nigerians to start exporting all sorts of things. There were some boys in Surulere where I was living who were sewing Safari suits and were exporting them to West African countries and earning money from it. There were people going round looking for shea butter and they were exporting and keeping the money. So, that policy change led to a lot of incentives. You know Nigerians love money, give them a chance, they will go after the money. So, it’s for government to direct people through policy. Make it profitable for the Nigeria business to make money by exporting non oil items and they will return. Let them keep the foreign exchange, which is what they have in their domiciliary account, because the logic is that in the past, every naira earned abroad by government or any Nigerian must be surrendered to the central bank. We said that didn’t make sense. If I export shea butter, and I earned a hundred thousand dollars and I’m allowed to keep it in my domiciliary account and spend it on my children school fees, by doing that, I’m no longer going to the central bank to ask for money to pay school fees for my children, I am relieving the pressure from the central bank. It’s like I give it to the central bank and I take it back. I don’t have to do that. Let me keep my money and use it, after all, it’s my money, I earned it, it’s not government’s own. It’s called inflow now. It’s my private inflow. It’s my personal money.

That kind of policy change is what will lead to diversification of non-oil export. After the structural adjustment, all that has withered away. If there are incentives for Nigerians, for example, in agricultural produce, the problem is that in the destination market, the quality demanded is very high so Nigerian shipments often do not pass the mark and they are rejected. This can discourage people but government can move in. Export promotion council can move in, and have experts to support and encourage Nigerians who want to export agricultural produce so that they meet the standards required so that they can export and earn money for Nigeria apart from oil.  These are the kind of practical things they need to do. It will not just happen. The obstacles should be removed one after the other.

Even in financing, in credit, the export promotion council also has the capacity to give credit to local people to produce what they want to export and to ensure that the quality meets what they want abroad. These are practical steps which bring about diversification and not just grammar in the budget.










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