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By Oluseye Ojo
A former consultant to the United Nations Development Programme (UNDP), Dr. Samson Olalere, an economist, in this interview with Saturday Sun, gives insights into how Nigeria can return to the path of economic prosperity.
What would you say are the implications of rising external and domestic debts for Nigeria?
It’s quite unfortunate that we continue to accumulate external debts that also lead to internal debts. Internal debts are money, maybe owed to people who have done some jobs for the Federal Government and they’ve not been able to pay them. That’s what is called the domestic debt.
For the external debt, those are monies borrowed from external bodies like IMF, World Bank, other financial institutions that are international. The problem we have will definitely have an effect on the economy, negative one. The reason being that, in the past, most of these debts owed are not deployed to what they are borrowed for.
If want to construct a dam or we want to expand the agricultural base of the nation and we are going to borrow money, then we should use the money to boost that sector.
But what we’ve had before now is that such monies borrowed are not deployed to what they are meant for. It is meant for a situation where if you deploy the money, that sector will be able to pay back because the reason for borrowing the money is functional. But in Nigeria, unfortunately, most of the borrowings we have done, we cannot pinpoint what they were done with.
And this is why the debt burden is becoming a burden on the economy. Except we change from that area, what we will discover is that we will be going down the drain because the monies are not used for what they are meant for.
For instance, we borrow for rail. But we cannot find the rail functioning. If the railways are functioning very well, you know that we will be getting revenue from it. That revenue will be used to offset the loan.
But oftentimes, monies are borrowed, you will never see the construction. Maybe some people just split the money among themselves. And that is why the thing has become a burden on the economy.
When you borrow, those people want you to service the loan. And the external loans, for instance, those people don’t even want you to pay anyway. They want you to keep servicing. When they tell you that you are servicing loans, what it means is that you are paying interest. The capital is still there. So, we discover in Nigeria that what you use in servicing loans will be triple the amount of money you have borrowed.
Since the Obasanjo era when loans were forgiven and all, we have borrowed so much again. We cannot point to many things that we have done with that money. And that’s why you see that the thing is escalating.
You cannot but service the loan by paying it in interest, because there are sanctions attached to the loan. So, they keep servicing. By the time you cumulate the servicing of the loan, it’s even more than the capital that you have borrowed, because we did not deploy to the right sector. So that’s the problem. Recently, we discovered that this particular government has been able to offset the loan that we got from the IMF during the COVID-19 era. If we have governments in place that are serious about doing this kind of a thing, we might easily get out of the dungeon that we find ourselves in now. The money borrowed should be deployed to where it will yield revenue that can pay off.
Is it a bad idea to obtain loans?
No. It is difficult for us not to borrow money. If we borrow money, let’s deploy it to the sector of the economy that can be productive and yield revenue that can pay off the loan. Once the loan is paid off, what we use the money for will still be there to be bringing revenue to the country. So the problem we have is that loans and the funds now have not been rightly deployed.
What should the government do?
We must start not to solely depend on one sector. We have been dependent on the oil sector. When oil revenue started coming in, we neglected other sectors. And because Nigeria is a mono-economy, most of the money comes from the oil sector.
So the fluctuation of the oil prices continues to affect the economy to a very large extent. When the oil was bringing in money, if it has been deployed to other sectors that are productive, like the agric sector, which is where we have comparative advantage to a very large extent in Nigeria, we will be able to feed ourselves, we will be able to export.
A country that cannot feed itself will find it difficult to develop. And that is why most of our infrastructure is down. Look at the energy sector.
Without energy it is difficult for you to develop. And we have never deployed our money to the energy sector.
Look at the gas sector. We are only concentrating on the crude oil. The deposit of gas that Nigeria has, if we have exploited that, that would have helped us also to develop other sectors. Many companies are moving from Nigeria because the energy is poor. They move to other countries. And that is affecting the economy. For instance, when the factories close down, you know the number of people who will lose their jobs? And if you lose your job, how can you contribute to the growth of the economy? So, we need to deploy what we have to the other sectors, whereby we have multi-sectors bringing in revenue to the country. Every state just sits down waiting for the revenue allocation on a monthly basis. Majority of the revenue comes from the oil sector. There is no state that does not have some mineral resources that can be exploited to develop the economy.
But because we have this allocation from the oil sector coming in daily, and people waiting for the end of the month to split whatever they have, not exploiting what they have in their states, this has affected the economy seriously.
I think of Zamfara State, which has a lot of deposits of mineral resources . But it is only individuals, and some foreign companies that come, exploit the resources and take them away, without much coming into the economy and coming into the revenue base of the economy.
So, we must have a serious government that will be willing and ready to monitor this thing and make the revenue to come to the central. Let each state depend on what it can produce. Let’s have a loose centre. When we produce and then we make revenue for ourselves, let the centre get some percentage to run maybe defence and some little things. That will help this economy to grow.
Can you briefly talk on the status of Nigeria’s financial health at the moment?
What I want to say is that, whether we want to like it or not, the current government that we have, is taking steps in the right direction.
Before now, we’ve been living in luxury, that’s the truth. When you compare the price of our petroleum products; our oil, petrol, diesel and everything that comes from it, before now we’ve been living in luxury. This subsidy removal, it hurts a lot because we’ve been living in luxury. But when you compare the prices with other countries, even in Europe, in Africa and all, Nigeria had the cheapest before now. But what this government has done, it’s made everybody to sit tight.
If I want to go to Lagos now, and I’m the only one going; rather than taking my car, I will go by public transport. I can take train, bus, or go to the motor park if it’s only me. How much will I pay? I might not pay up to N10,000. But if I’m going to use my car, I have to fill my tank with N50,000. I will think twice. If the whole family is going, about six of us, okay, we can afford to do that. But before, you would want to show off that you have cars. Your wife will take a car, you will take a car, your children will take another car. But now, everybody is sitting tight. We won’t like it because we have been living in luxury. But these are policies that can shape the economy. The pains might be there now, but eventually they will be relieved.
Can you briefly explain some things like treasury bills, bonds, savings bonds, which are instruments by which the government can borrow money?
Look, all those avenues are to make money for the generality of the people. What the government does in most of these things, they sell treasury bills and bonds to people.
When you see that the money in circulation is so high, and that money is not really circulating, it’s in the purses of individuals who are milking the economy, the government might come up that they want to sell treasury bills, which will be a form of savings for some people who will buy, and then a form of mopping up money from circulation. The money is not really circulating, it’s in the hands of maybe people who are keeping money, some wealthy people who are just keeping the currency, and then they are not contributing to the economy.
So, the Federal Government through the Central Bank might issue bonds, through states they might issue bonds, mop up this money. Then they can now deploy it into productive sectors. When you put in your money, maybe they will tell you, you are going to have this much interest upon it over this period of time. And then they will be expected to redeploy such money into the productive sector to boost the economy.
With the performance of the current administration in debt servicing or loan repayment, and state of the economy under President Bola Tinubu, what do you see as the way forward for Nigeria?
If we compare this particular government with the past government, definitely we’ll give them a pass mark in terms of how the past loans are being serviced. I just made an example of the loans collected for this during the COVID period by the last administration.
IMF itself came out, giving us a pass mark, and then boosting the ego of this government, that they have done well to upset that loan completely. And that’s a good thing. It’s a good thing for the government and for the government in place today.
So, when we compare with the past, no matter what, people will be complaining that we are going through some hardship. But there is no way, if you want to develop, and you have been living in luxury, there must be certain things that we must forgo.
Bring an Aba shoe and bring another from Italy. An average Nigerian will prefer the shoe from Italy because he wants modernity and all that. If we are buying the Aba product, what we are doing is that, those shoemakers will still remain in production. And then they will employ some people and we are developing the economy.
But when we are buying from Italy, we prefer imported goods, the scarce foreign money that we don’t even have enough of is what we are using to pay those ones. Now, their own factory is being developed on daily basis. They retain their people in employment. But we are just consuming.
So, this is like the new policy the government is trying to bring up. It is okay. We should buy local products. We should, as much as possible, encourage Nigerians to buy from the local producers or local production sectors and all that.
Those are policies that will help the economy to grow. So, if we can support the government in such areas, we will discover that soon, the economy will start taking shape.
