By Ayo Akinfe
(1) Over the last week, I have been following the details of the World Bank/IMF Spring Meeting in Washington DC closely where Nigeria has been represented by finance minister Zainab Ahmed and Central Bank of Nigeria (CBN) Governor Godwin Emefiele. They have both been trying to sell the message that Nigeria is open for business. Basically, they have been seeking to woo foreign investors
(2) That is part of their jobs, so one cannot fault them trying to sell the country. In their meetings with potential investors though, they would have had to answer tough questions on security, power supply, transportation, Apapa’s gridlock, the ability to repatriate funds, access to foreign exchange, the rule of law, etc. I actually feel sorry for the two of them as many of these issues are outside their remits and they would not be able to offer accurate answers. Investors would know that they are not in a position to guarantee many of the promises they make
(3) One thing Mrs Ahmed and Mr Emefiele do have control over though is monetary policy. Now, even if they cannot guarantee security of investment, one thing they should be able to promise potential investors is a good local supply chain. With an effective monetary policy, they can ensure that the local content bill works and anyone who comes to Nigeria is guaranteed a network of local suppliers to augment their operations
(4) Let me give you an example. If say Nissan Middle East Europe and Africa decides to relocate its automobile assemble plant at Sunderland in the UK to Abuja or Lagos in response to the Brexit crisis, Mrs Ahmed and Mr Emefiele should be able to guarantee a network of local contractors who can supply windscreens, headlamps, leather seats, tyres, wipers, etc. They should promise that if 10,000 cars are assembled a year in Nigeria, Nissan will not have to import one component for any of them because our ingenuity will ensure we supply all the parts
(5) Now, this is where monetary and fiscal policy is key to the operations of government. For this supply programme to work, the CBN needs about say $20bn to use as an investment fund. This money must be ring-fenced and only used as either trade finance or industrial expansion capital. Ideally, it should be handed to the Bank of Industry to hand out to those in the industrial supply chain. Only those supplying a company like Nissan should have access to this fund. It should be repayable within two years at an interest rate of no more than 5%
(6) At the moment, Nigeria’s interest rates are above 20%, which is sheer madness. Those levels of interest are just designed to stifle industrial growth and perpetuate poverty. The only people who benefit from these high rates are hedge funds who invest money in high interest accounts for say a year or two and reap massive profits when they withdraw their cash
(7) If the government wants to woo financial portfolios with high interest rates, then it needs a two-tier monetary policy. There can be high interest rates for finance capital but lending rates for industrial capital must not be more than 5%. I actually think there is a case for having a special Bank of Industry rate. The CBN may have to find a way to decentralise its operations as we are dealing with two totally different beasts here. It is like dealing with the Nigerian Army and the Nigerian Navy. One needs tanks and the other needs ships. Their procurement policy has got to be different
(8) When I look at what is going on in the Nnewi-Aba axis on the one hand and the industrial estates of Lagos on the other, I ask where is the industrial policy. To get these guys to produce goods of international standard in the right quantities and on time requires that they have immediate access to short term and low interest capital. Surely, Mrs Ahmed and Mr Emefiele know this and I ask myself what they intend doing about it
(9) Whenever I look at our paltry budget of $28.8bn, it just reminds me of how unserious we are as a nation. What exactly is that pittance supposed to do for 180m people? President Buhari should bite the bullet and be brave here. Can he go to the IMF and borrow $100bn to fund a radical 2020 budget that will blow our heads away?
(10) Ask yourselves what would happen if in 2020 we spent $50bn on infrastructural expansion, gave local manufacturers $30bn to expand production so they could supply any foreign investor who came to Nigeria with components and then spent a further $20bn on education, healthcare and security. However, you look at it, our problems are down to the snail speed of our growth. Mrs Ahmed and Mr Emefiele should have come back from Washington revitalised and should be giving President Buhari certain targets and ultimatums that must be met in 2020. These should include double digit growth, a $100bn budget and interest rates of no more than 5%.