Ayo Teriba

Dr. Ayodele Olalekan Teriba is the CEO of Economic Associates, a firm of business consultants. In this interview, he speaks on the genesis of Nigeria’s economic problems and the way to go

Q: There is economic hardship in Nigeria at the moment. What would you say is responsible for it?

The oil price slump since July 2014 has meant two years of sharp declines in foreign exchange supply that has precipitated a large devaluation and a recession. attempts to restrict demand for imports in the face of reduced supply of foreign exchange from exports had largely been responsible for the recession, and floating the currency without first creating foreign exchange supply buffers led to the large devaluation. Government is now trying to articulate measures that would help the country to fix the foreign exchange supply shortage, restore confidence, and turn the economy around. Up till now Nigeria has relied almost exclusively on volatile export earnings for foreign resource inflows. The collapse in our export earnings mean that we now have to look for more stable foreign resource inflows.

Foreign direct investment is a less volatile way of getting foreign exchange than export earnings. Nigeria funded the successful telecommunications reforms and the LNG project with foreign direct investment. To resolve the forex shortage and end the recession, Nigeria now needs to open up as other infrastructure sectors to the inflow of foreign direct investment, including rail, power transmission, gas pipelines, and perhaps education and health.

But when there was high output of supply and the price was high the common man didn’t fare better. How will you explain that?

Recession and large devaluation is not just about the common man, it is about the ship sinking, and everybody is sinking with it. It is also not true that the common man didn’t fare better during the boom, because 16 years ago, the common man had to go to NITEL and queue to make phone calls. Now the common man has many phones; the common man now has a bank account that he can operate from his phone at home or at work. Telecoms created employment for the common man. The economy boomed, trade boomed, jobs became more available to the common man.

To say that the common man didn’t fare better in the last decade and a half, nothing can be farther from the truth. The gains of the common man during the that boom is now threatened by devaluation, threatened by inflation, threatened by recession. We now need to save the common man. It is not just the common man, whether common man or rich man, when the heavens are falling, it is not a single person’s problem, it is about saving the system from recession, from devaluation, and inflation. The issue is not at all about the past, it is about the future.

At a point, the FG said it would not devalue the Naira, the naira is now devalued. What actually happened?

Bygones are bygones! FG said this, FG said that, we are dealing with a global shock, that is out of control of the Federal Government; it is not about wishes, it is about reality; at a point the government was denying the reality, hoping, trying to wish away the reality. That is not the issue now. Recession is a reality. So rather than say, hey, government wanted to do this, government didn’t want to do that, these are non issues, government had been forced to do what it had to do; the key question now is how do we get out of the mess. The economic crisis we face today is dire, very severe. What can we do to ensure a better tomorrow; that is the issue?

People throw around concepts like backward integration. How can we have backward integration in a recession?

The purpose of the devaluation is to correct the shortage of supply. We have to face the reality that we don’t have enough forex to fund the import requirements of domestic production, that is why the devaluation and recession happened. Then backward integration cannot happen in the face of infrastructure failure; we can’t get manufacturing or mining to boom in the face of high road transportation cost. No country that is integrating backwards relies on road transport for haulage, if you want to integrate backwards, you rely on rail for haulage.

When rail worked, Nigeria integrated forward and backwards; manufacturing boomed, agriculture boomed, Nigeria’s major cities grew around rail termini. The rail is now dead, so is agriculture, as much of our harvests cannot leave the farm because only crops that can afford road transportation can leave the farm and get to the market. If the market price of the crop is not up to the road transport cost, the crop will rot at the farm. Manufacturing plants across the country have closed down because the road transport costs for bringing inputs to the plant and the road transports costs for taking the output to the market are killing. We cannot compete until we fix rail transport. Infrastructure is key for backward integration.

Infrastructure is not just about absence of rail transport, power supply is not adequate, energy supply is not adequate, whether you are talking about electricity, petrol or gas. So stop talking about backward integration, stop talking about diversification, focus on infrastructure, if rail works and there is energy supply, whether it is power, gas or petrol, backward integration will happen without you doing anything extra, diversification will happen. In the absence of rail transport and in the absence of adequate energy supply don’t even say it, don’t talk about diversification.

Some people have even suggested that to boost the real sector government should invite global investors, what is your position on this?

Right! That is the key issue.

Ayo Teriba

Will that not fly against the issue of protectionism?

What are you protecting? You are protecting the failed rail transport system, gas flaring, power outages, and inadequate supply of petroleum products? Is that what you are protecting? We generate power but our capacity to transmit power is lower than the generation capacity. Are you protecting inadequate electricity transmission capacity? Open up to investors as you opened the telecoms, when you had NITEL alone you had 300,000 lines, land lines nationwide, that landlines are dead now. We allowed investors come into telecoms in 2021, and they have among them connected more than 160 million lines. You don’t protect what is failing, you open them up and let investors come in.

They have succeeded in telecoms, they will succeed in rail; they will succeed in power transmission; they will succeed in gas pipelines, and they can even succeed in health, and education. Open all sectors, let foreign investment come in to rescue the system, as foreign investment has rescued telecoms, as foreign investment built the LNG project; let foreign investment come and rescue refineries. That is the message; it is the only way forward. We have a recession, we have inadequate supply of foreign exchange, the global economy does not have a recession, the global economy is awash with foreign exchange, so list the assets that the federal government owns one hundred per cent and they are not working and open them up like LNG project where the Government hold 49 percent, and investors hold 51 percent. Investors run it and it works.

Open all sectors; there is nothing to protect; and it is not about the real sector, it is first and foremost about infrastructure because the best thing you can do to revive the real sector is to provide them with infrastructure. So let investment come in and rebuild infrastructure, if infrastructure works, the costs that the real sector face will go down and there will be growth, backward and forward integration that will bring about diversification. That is the juncture that Nigeria is now.

What is your position on the move to sell national assets?

Do we want those national assets to die like NITE? In LNG, we don’t own 100 per cent, we own 49 per cent, foreign investors own 51 per cent. In all businesses where foreign investors own 0 per cent and government owns 100 per cent, let us give them a chance to own 51 per cent and run it. That is what we are saying, we are not selling, we are allowing others to come and invest. If foreign investors find money to invest, we won’t pay them interest, once they invest, it is irreversible, that’s the point. It is not about selling the national assets, it is about the government letting the private sector come in and share the burden.

Are you satisfied with the level government has gone trying to unbundle the power companies?

Government still owns 100 per cent of the transmission assets. Government still holds on to its unproductive monopoly like we did over fixed telephone network under NITEL. Government should break its own monopoly, privatize what it already owns, and even liberalize to give new foreign entrants opportunities to create additional assets in transmission, gas, and rail.

What other things do you want government to do to fix this economy?

People in power that we had in the past were the main obstacle to the entry of investment, because they held on to an unproductive monopoly. They couldn’t deliver on infrastructure, and they didn’t allow people who can deliver it to come in; they allowed new investors in telecoms to come in, but failed to allow investors who can deliver rail, power transmission, gas pipelines, education, and health. This government should succeed where past governments failed: break government monopoly as government monopoly has not helped the county in any infrastructure sector. We should kill government monopoly, as we beneficially did in telecoms. We should now do it across the board; encourage private foreign investors to come in and bring new ideas, bring new technology; bring new know-how; bring new money.

Ayo Teriba

When the money arrives it will solve the foreign exchange shortage, close our yawning infrastructure gaps, as our telecoms gap has been closed, and telecoms is no longer an issue. Now let rail line gap be closed, let power transmission gap be closed; let pipelines gap be closed, let gas get to our homes. The new government should break government monopoly. If this is done, Nigeria will get out of recession, Nigeria will have infrastructure, the cost of transportation and energy will fall. Nigeria economy and exports will diversify. Economy will integrate backwards and forwards. Nigeria will become able to produce for exports. That is the way forward, no other way.

What can individuals do to weather the storm right now?

The problem started in the first half of this year, if government takes necessary steps, we could be out of crisis by the end of this year, so there is no storm to weather, there is only a storm to stop. There are clear ways out of this storm, so let us rally round the government, encourage the government to take needful steps, and we will get back the good life. Nigeria can get out of the mess very easily and quickly, once needful steps are taken.