Henry Boyo, economist and industrialist, tells FUNSHO BALOGUN in this interview that Okonjo-Iweala, the Minister of Finance and Coordinating Minister of the Economy, has damaged the Nigerian economy

In terms of performance, can the Finance Minister, Okonjo Iweala justify her statement that the outgoing administration is leaving behind a solid economic legacy?

The truth of the matter is that Nigerians are gullible and to a very large extent unfortunately ignorant about the operations of an economy. Because even the expectation of extraordinary or excellent performance from Okonjo Iweala ab initio was totally misplaced. Misplaced in the sense that the failure of her first term in office was promoted as success. Consequently, you find that because that failure of her first term in office was not recognised, expectations became so high. Unfortunately, you cannot build on falsehood. You cannot give what you don’t have.

I recall two articles which I wrote at the end of Iweala’s first tenure in office, when I said that it is impossible to judge her performance based on debt forgiveness. In the first place, no country pays every debt it owes when its people are suffering. In addition, there was evidence that we had paid the initial debt owed several times over and yet we were told to pay 12 billion dollars to be able to get a reprieve of God knows what, at a time when poverty in the country was deepening. A Finance Minister in any country is generally judged on the basis of certain indices. For example, what was the level of inflation when the Finance Minister came in, and what is the level of inflation when she is leaving? What was the level of consumption spending when the Finance Minister came in, and what is the level of consumption spending when she left? What is the level of capital accumulation in terms of fiscal discipline, directing more resources towards capital formation and infrastructure?

Did consumption expenditure (recurrent expenditure) continue to exceed capital expenditure such that recurrent expenditure constantly edged around 70 percent while capital expenditure was 30 percent? You cannot cover failure forever. Those were indices of failure. What about the exchange rate at the time the Minister came and the exchange rate when she left and what level of employment did the Minister meet? We should also consider her policies about generating more employment. In all these critical indices, Okonjo Iweala failed. So, with such failure, it was totally baffling for anyone to consider her return based on good performance in the first instance.

Henry Boyo

Because Nigerians were gullible and did not really understand what was happening, they were bamboozled by the razzmatazz of this lady president from the world Bank. We were totally fooled. It is totally inapplicable to expect the same person to come back and suddenly change over a new leaf.

There is the issue about those indices I mentioned initially with inflation at eight percent running to 10 per cent and cost of funds to the real sector at over 20 per cent. The Minister of Finance and Coordinating Minister of the Economy was asked a question by a ThisDay Newspaper reporter at an interview less than two years ago that “madam, why is it that the cost of funds is well over 20 per cent? And the Minister of Finance, this so-called exalted personality in the area of economics management said, “ In fact that has been bothering me, I don’t really know, it is something that I must discuss with the banks.” If she did not know after she had been there for a long time, is it the question by the reporter that has now prompted her interest, When she knows that no economy can thrive or succeed when cost of funds to the real sector is over 20 per cent?

No economy can also succeed, especially with a population like ours, when the ratio between recurrent and capital expenditure has even risen from 70:30 the last time she was there to a recurrent of over 90 percent now. Is that not alarming? After she dashed out our money for debt relief, she came back and reaccumulated the debts under the guise of good economic management. In what way can you congratulate her for the four or five years she has now spent in office? If anything, she has damaged the economy. She came up with all kinds of things. There’s YouWin for instance. Have you ever seen anybody’s character being built on just being given money without discipline or any sustainable control attached to it?

Yes, young people are doing business. But why should you throw as much as N8million or even N10million to them and you say “go and continue doing the business and employ people,” without the proviso that this money being given belongs to the people and that they have a responsibility to repay it. Any business done using people’s money, and the persons doing the business are not made to know that there is a schedule for repayment is money thrown down the drain. How she can exalt herself and her performance by referring to that as an index of superior economic management is baffling.

You find also that the same debt that she said she cleared, is what we are again almost back into. In addition to that, debt is being aquired at rates which even a standard six person as Minister of Finance should not accept. Why would you borrow to fund government activities at 12 to 15 per cent? How could you be Minister of Finance at a time that your President is going to China as President Jonathan did about 18 months ago or so to borrow $1.5billion from the Chinese for transport and other infrastructural development, and simultaneously on the same trip to China, your Central Bank Governor on the trip was asked, “what are you doing in China,” and he said he was looking for ways to invest the CBN’s foreign reserves. How could you have a Finance Minister and the Coordinating Minister of the Economy who cannot put the two together? How could you have a Finance Minister who, during the fuel subsidy upheaval of early 2012, did not know the level of rot in the subsidy business? She is not just the Finance Minister, but also the coordinating Minister of the Economy!

When Sanusi Lamido Sanusi came up and said people were submitting papers which were being stamped, approved and money paid, who paid it? Why didn’t the Finance Minister and the Coordinating Minister show any interest in that. Why must it deserve attention only when it became a crisis issue. Would you be satisfied and congratulate a Finance Minister when you suddenly find that apart from the huge disparity between capital expenditure and recurrent expenditure, the Minister has been sitting on a process that allows the payment of well over a trillion Naira on fuel subsidy, using over 20-25 per cent of our annual budget on fuel subsidy. And you call that a superior Finance Minister and Coordinating Minister of the Economy?

These are realities. These things are not made up. How did we get to that point. How did we get from paying N200billion for subsidy to over N1 trillion in her own tenure? This information is in the public domain. And why should we be discussing Okonjo Iweala in terms of performance if not because people believe the lies of the first term. These are the realities.

The Finance Minister often mentions the creation of about 1.5 millions jobs annually as part of the outgoing administration’s achievements, but the real sector that should be providing jobs is not thriving. Do you agree with her claim concerning job creation?

The National Bureau of statistics is permitted to produce figures on rising or falling rates of unemployment or employment. But, fortunately, economics is not rocket science. And fortunately also, you can compare the performance in your country with the performance in those countries which have adopted sincere and basic economic truths.

In all countries where employment is not an issue, you will find out that the conditions which prevail are the same, and that they have minimal levels of unemployment. In other words, their unemployment level is about 1 percent or 2 per cent, or a maximum of 5 percent, but not over 20 percent. In those countries with low-rate of unemployment, there are certain indices that you will see, and these indices are very clear because unemployment does not exist in a vacuum. Unemployment is created by a process. If the real sector has to borrow at over 20 percent, it is unlikely that unemployment will fall, because most industrialists and businessmen would not borrow to expand activities when the cost of funds is so high. That already gives “k-leg” to any claim by anybody to say “I have boosted the rate of employment.” Because in countries that have an optimal employment ratio, you won’t find cost of funds to the real sector to be over 20 per cent. It could be even two or three percent, and they may even give agriculture zero percent interest rate. In countries that have successfully managed their rate of employment to a level that is conducive for economic growth and inclusive social growth, you don’t find inflation running at 8 or 9 percent, because it means that the purchasing power of all income earners is depreciating by 8 percent every year. In five years, it means that the depreciation would have taken out about 50 percent of everybody’s income, unless you have been earning 8 to 10 percent increase in your income. And if that happens, the reality of that impact is that people will be able to buy less and less goods. Because if you have N18,000 minimum wage today, which can buy what $150 can buy, and five years later you have the same N18,000 minimum wage which has not changed but inflation and exchange rate has taken away over 50 percent of it, what happens to the individual? You buy less garri, less yams, less bread and when you cut down on your expenses and consumption in that manner, the people producing those things also cut down. If they cut down, they also lay off people.

In countries where employment grows sustainably, such that the level of unemployment is low, the indices you get are different from what we are getting in Nigeria.

With exchange rate totally and arbitrarily determined by the whims and caprices of government, you will find that you are creating a rent-seeking state in most areas. For example, in the area of subsidy where we are told that we are paying about 20 percent of total income and where we are also told that the chances are that over 50 percent of total budget may suddenly go for the same subsidy. Because if truly as it happened three or four years ago when subsidy was touted to have touched about N2 trillion – (that amount is almost 40 percent of our N5trillion budget) – you are spending that kind of money and also spending 50 per cent of all your foreign exchange earnings to pay for petrol, then that is madness.

That 50 per cent of all your foreign exchange is more than what you are using to pay for all your infrastructural imports-bringing in companies to build roads, ports and so on. That is happening in a country where you have an IMF expert controlling the waves of the economy. With the background of high cost of funds, galloping inflation, very weak exchange rate, and mounting debts that is being serviced – cost of debt service is over N900billion this year, meaning over 20 percent of total budget is for servicing debts – with no indication that there is a let up in the pace of accumulating debt, would you say the management skills of such a Finance Minister is commendable and should be applauded?

But as I said, her performance now is in no way different from her performance in her first coming, but the razzmatazz, glitz and hype around this IMF President candidate straightened us out, and in the end, she opened the roads for our foreign exchange to be carried away. Because the IMF conditionalities that were attached to the writing off of those debts at that time included opening our gates for free flow of our foreign exchange earnings. That was why suddenly bureaux de change were being officially licensed all over the place and then Central Bank started formally allocating dollars to bureaux de change.

It all started under her first coming. And suddenly you can buy dollars here to buy shares in places abroad. This is while our economy is crying out for this thing here and you are opening such gates. And finally it dovetailed into a system whereby every Nigerian can carry a card and without any protocol of application, go to America, London and places like that to go and spend dollars in Nigeria denominated card.

It is happening all under her purview. Let us be charitable to her and just ask her to kindly, please go.

What should be the focus of a Minister of Finance that wants to salvage the economy?

An economy, anywhere in the world is driven by these indices of interest rate, inflation, exchange rate. Those are the tripod on which any economy can stand. If the interest rate is too high, you can’t have rising productivity or rising employment. If inflation is too high, you can’t have rising productivity and consumer demand, so you cannot have a good industrial base. If your exchange rate keeps fluctuating also, you will continue to have problems like this fuel price which keeps galloping all the time. Those three indices are your ignition key to making the process work. If those three indices are harmonious – and don’t let anybody tell you they are the ‘unholy trinity’ or ‘unholy trilemma’- because that is a lie to deceive you. There are countries where the interest rate or monetary policy rate is 1 or 2 percent. These same countries have inflation below 2 percent and they have their exchange rate stable. So, why should anybody deceive you that in Nigeria it is impossible to have the three together.

In reality, those are the things that drive any economy.

In the Nigerian case, everybody talks of diversification and I look at them and smile, because diversification does not come as a result of wishful thinking. All governments before this time have talked about diversification and made moves towards it. But they all failed and will continue to fail because they do not recognise those three indices as the legs that must hold the table of diversification.

The legs that will carry the diversification include low interest rates, so that more industries can grow and spring up as people can take a risk. And with low rate of inflation people will have more money to spend. With more money to spend more industrialists will come into play. Also, we need stable exchange rate. Since we are import dependent for raw materials, the cost of our raw materials must be low, it must not be galloping. And we cannot continue to borrow that we don’t use at 12 to 15 per cent. And you will find that these three indices I have talked about are all underscored by the problem of excess liquidity. It is excess liquidity that makes cost of funds high.

Excess liquidity is the cause of high interest rates, high rate of inflation and a weak exchange rate that also gives rise to subsidy component in fuel pricing. So, if you are a sensible person, you will look for the root cause of excess liquidity. And excess liquidity is caused every time the CBN captures the dollar earnings of the country and substitutes Naira. The Naira substituted by the CBN is what instigates excess liquidity within the system. It makes it necessary for government to borrow money it doesn’t need.

And when it wants to mop up the money, it does not take it to go and use it. It is taken and locked up, because the idea is that there is too much money and it cannot be taken out and brought back into the system. The money is taken out of the system and locked up, but the government is still prepared to pay up to 15 percent for money it does not need, when the real sector that really needs the money is crying out for it but is debarred from getting the it.