A former chief executive of the Asset Management Corporation of Nigeria, Mr. Mustafa Chike-Obi, who is presently the executive vice-chairman of Alpha African Advisory, in this interview with Obinna Chima, spoke on developments in the Nigerian economy, leadership, as well as what Nigerians should focus on ahead of the 2019 elections
What have you been up to since you served out your term as the CEO of the Asset Management Corporation of Nigeria?
Well, it has been in stages. When I left AMCON, I didn’t do much for six months. I was mostly in the United States. After that, I was persuaded to work on a financial advisory firm called Alpha African Advisory, on which I am the Vice Chairman. We are trying to build it up as a primary investment advisory firm in West Africa. But these are very difficult times. We are looking at the long-term and so we have advised most of our clients abroad that this is not the best time to invest in Nigeria. So, for the first two years, we are trying to build up capacity and I hope that in the next five years, we would emerge as one of the primary financial advisory firms in West Africa.
Why do you think this is not the best time to invest in Nigeria?
I think that we do lack and still lack a coherent economic policy. I have for the last six years, without apology, advocated for a very aggressive fiscal and monetary policy. This is not a matter of the All Progressives Congress (APC) or the People’s Democratic Party (PDP), it is all about Nigeria. Nigeria must expand its Gross Domestic Product (GDP) in double-digits to survive as a nation. If we don’t, we will not survive as a nation, or else, nothing else would matter in the long-run. We are on borrowed time. I think that once we have a coherent economic policy and people understand what Nigeria is going to be doing in the next five to ten years, then it will be the right time for investors to come in. Right now, a new government might come in tomorrow and change everything and it is just too confusing for me.
Talking about an expansionary fiscal and monetary policy, from the fiscal side, looking at the size of the budget, with about N8 trillion estimated in the 2018 Appropriation Bill, from where it was in 2015, don’t you think the government has taken deliberate steps to expand the economy. Also, in terms of monetary policy, inflationary pressure, forex pressure are factors that would discourage the central bank from loosening monetary policy. What is your take on that?
Let’s take the points one by one. On the issue of the budget, N8 trillion budget, at an exchange rate of N360 to the dollar, is less than N4 trillion at an exchange rate of N150 to the dollar. So, in dollar terms, the budget is smaller than the last budget of the Goodluck Jonathan’s administration. So, it is not expansionary in dollar terms. But budget is not the only issue in terms of expansionary. Budget is fiscal. On the monetary side where much of the expansionary impetus will come from because there is much more money in the private and banking sector. Interest rates are too high. So, interest at between 26 and 30 per cent, makes it almost impossible for any bank to lend to a handful of businesses; and even these handful of businesses struggle to meet this high interest rate regime. So, what we have chosen is to defend the naira and inflation. Both of which we have failed at because the naira is weaker today and inflation is higher today than it was when we started this defence. We have chosen to do that at the expense of employment, expansion and growth. So, the debate we should have as a nation is what is more important to us. Is it more important to us that we have three or four million people unemployed every year or do we tolerate inflation and a slightly tougher life for the middle class. My position is that we should expand, grow and be aggressive about it. Interest rate for borrowers should be in single digit and not single digit monetary policy rate (MPR). For me, MPR should be at five per cent and we should be lending at about eight per cent to businesses. It has its consequences. The consequences are that there would be higher inflation for a while and the naira would weaken for a while. But in the long run all those things would stabilise.
(Cuts in)..And how will that affect portfolio inflows?
They would in! Why did they start coming in? they started coming in when the central bank allowed them to bring their monies at N360 to a dollar and they know they can take it out at N365 to a dollar. If you allow them to bring money in at N500 to a dollar, they would come in more. I would guarantee you that if MPR is at five per cent and the naira finds its market level, you will get more foreign investors than today. People measure Nigeria’s progress by how strong the naira is. By that measure we have failed because of how the naira has depreciated over the years. That should not be our measure of pride. Our measure of pride should be how many people do we employ a year? How fast is our economy growing and how quick can we transition from a third world economy to, let’s just say a second world economy? China did it and Brazil also did it. Brazil did a miraculous job. Their economy backtracked for about five years, but today, it has rebounded, and the economy is growing. So, we should just have a national debate and the best time to have a national debate is towards the election. What do Nigerians care about? The naira at N360 to a dollar and the loss of three million jobs in the last five years or the naira at N500 to a dollar and nobody must worry about unemployment? That is a debate we ought to have because nobody has monopoly of wisdom. Let’s have the discussion.
Do you support the federal government’s aggressive borrowing plan, and don’t you think it is part of efforts to expand the economy?
When this government came in, I was asked by a very senior official of this government, to write and economic report, which I did, because I am for Nigeria. I am not for APC or PDP, contrary to what a lot of people have posited in the past. I have never joined PDP in my life. So, I wrote the economic report, in which I pointed out that the government should use its balance sheet to issue guarantees to the private sector institutions. Based on those guarantees, they can raise a lot of money. The government didn’t have to borrow directly. Government could borrow contingently through guarantees, instead of borrowing directly. Look, the national debt has gone from N9 trillion when this government came in, to about N20 trillion today, and it is still rising. They have doubled the debt! I challenge anybody to tell me what they have done with the over N11 trillion they have borrowed so far. This government has borrowed more money in two and half years, than the civilian government since 1999 had borrowed. So, in two years, they borrowed more than what had been borrowed for 16 years and nobody can point out what they have done with the money they have borrowed so far. That’s the problem. It’s an ad hoc thing. It is not part of the coherent plan. I know there is an Economic Recovery and Growth Plan (ERGP) that they are all talking about, but when I look at the targets in the ERGP, I am not impressed. I believe we can do better.