State of the Economy

That we live in challenging times is an understatement. In the year 2015, the global political economy showed both stresses and promises for our nation. In Eurozone and the USA, economic growth slowed and imports of our crude oil reduced drastically, no thanks to innovations in fracking technology. China’s decades of double-digit economic growth fell to single digit with associated drop in imports of oil and other natural resources from Africa. India has emerged today as the largest importer of Nigerian crude oil, even though though it’s economy has slowed down a bit as well. During the same period, our country witnessed three historic events.

One was the years of wasted opportunity of deploying over $20 billion of excess crude savings accumulated by the Obasanjo administration in 2007 (with another $40 billion plus) meant for investment in key infrastructure like electricity, railways, deep seaports and gas pipelines required to diversify our economy and polity from oil addiction. Second was the unequivocal and resounding defeat of a sitting president and his party, and the election of a president respected within Nigeria and abroad for his honesty, integrity, forthrightness and discipline. The fact that the 2015 elections and their outcomes were largely peaceful said a lot about what we are capable of as a country when collectively determined to do the right thing. The other was the plague of an economic crisis, occasioned by the global economic slowdown and the consequent collapse of oil prices.

This situation was made worse by the previous administration’s inability to build healthy reserves when the oil price was much higher; maintain fiscal discipline or even govern with any notion of the paramount importance of maintaining the Nigerian state and its prerogatives. You will all recall that the excess crude savings and reserves accumulated by 2007 were during a period when oil prices were in the sub-$80s, yet even when they peaked at $140 per barrel, nothing was saved and every penny of the savings inherited were spent or diverted with little or nothing to show for it – this translated into blowing over $200 billion in the Yar’Adua-Jonathan years with no tangible outcomes. Corruption levels and impunity escalated during the period as well, and this time it even involved some women – another new and unprecedented disappointment as it is generally assumed that women are reliable, more honest and hard working than men! This is just a short background to a situation we need to confront and resolve as a country. It will take years for the extent of damage done to our economy to be unraveled and even longer to fix.

The opportunities we lost as a country to build the critical infrastructure that would have diversified our economy and driven real and lasting economic development; the chances we had of laying the foundation for an inclusive and fair society; the prospects we lost of building a prosperous and one of the top-ten economies in the world by 2020 – all these were frittered away by leadership incompetence, driven by greed and a total lack of appreciation of the purpose of governance and public service. But we cannot continue to remain fixated on who did what or who didn’t. The task of rebuilding our polity and economy is a collective responsibility of all of us, particularly those elected to chart a new path. Without any doubt, the mood, pace and policy direction set by political leadership matters more than any single issue and that we must do clearly and urgently.

Let us leave the appropriate anti-corruption agencies of government, the media and the Courts to be busy dealing with the recent past – and they will clearly remain busy for a while – trying to get to the roots of the decade long institutionalisation of graft. The federal and state governments, along with businesses, whether represented here or not, must focus and re-energise our domestic production capabilities, thereby creating jobs, manifesting progress and hope that then promotes peaceful existence.

Need for Strategic Repositioning

It is my humble opinion that to achieve this needed national renewal, we must as a people think through the strategic repositioning of our country, our politics, our socio-cultural attitudes (particularly our misuse and abuse of religion and promotion of ethnic identity) and our economics. A new national strategy is needed. Now, what does it mean to have a strategy? By strategy, we mean an approach, blueprint or a plan. If a particular plan isn’t achieving desired results, is not working, or is found to be defective, there is need then, for re-strategising.

Within the context of the lost opportunities referred to earlier, we must therefore ask: What went wrong? How did we get here? What is the situation on ground today, and what are the prospects? What do we want to achieve and what models do we need to adopt to succeed? Generating answers to these posers are fundamental to any attempt to successfully re-strategise. It is also important to accept that in every challenge, there is an opportunity. So while some Nigerians are lamenting the slide in the oil price, increases in prices of food and fuel, destruction of our oil production platforms, emerging insecurity in other parts of the country other than the North-East, and the fall in the value of the naira, smart businessmen and women will be exploring the economic terrain for opportunities. What are the alternative sources of foreign exchange? Where are the opportunities in economic diversification? What kinds of innovation are needed to maximise emerging potentials? The pursuit of new sources of wealth creation will hopefully spur innovation as key economic actors focus on agriculture, solid minerals, and the knowledge economy.

Some businesses are already answering these questions and more. My favourite example is Aliko Dangote who is investing even more aggressively now in new sectors than ever – particularly in import-substitution opportunities – (building the biggest refinery in the continent in the Lekki Free Zone) while expanding his philanthropic contributions to improving nutrition targeting infants and children in the poorest parts of Nigeria. Dangote is also building a tomato processing plant to be supplied by a 7,000 hectare farm and hundreds of tomato out-growers along River Galma in Kaduna State. Dangote is not the only smart investor. Olam is building the largest poultry and feed-mill in sub-Saharan Africa on the outskirts of Kaduna, while Flour Mills is diversifying into fertiliser blending, food processing and downstream production and aggregation of grains, soyabeans and the like! Vicampro plans to grow potatoes in Manchok, Kaduna State and process the output (and more from out-growers in Plateau and Kaduna States) into slices packaged ready for kitchens of fast-food outlets that now import such to produce French Fries.

For Dangote, Olam, Flour Mills and Vicampro, this is the time to seize opportunities and invest, not lament! The crisis is an opportunity that must not be wasted. All they require is for governments to improve security, create a supportive environment, provide fiscal incentives and protect them from dumping! The APC manifesto and governments at federal and state levels are committed to providing these minimums.

Re-strategising To Win In A Volatile Economy

Opportunities therefore abound in these and many other sectors but we need to unlearn many habits that impede economic dynamism. As earlier noted, governments at all levels have to embrace a friendly attitude to business, enabling and supporting them to invest, to create jobs and to boost revenues from taxation. Special packages should target vulnerable groups like youth start-ups, women entrepreneurs and farmers. Our business people must remain unrelenting in finding creative ways to fulfill the potentials that inhere all across this country. To re-strategise effectively, we must acquaint ourselves with all the relevant facts. Nigeria has a large population – some 180 million today and expected to rise to 450 million in 2050 – most of it is youthful, most of it now very poor and in need of jobs, and mostly requiring investments in healthcare, education and training.

Across our 36 states and the FCT, most predictable government revenues (from the monthly federation account distribution) are spent on public servants who often account for not more than one percent of the populations of these states, leaving little for sorely needed investments in public goods and social services like quality education and garbage collection that benefit the 99 percent. Changing this state of affairs requires the governments to take very hard decisions that are not politically easy, but economically inevitable. We all realise as governors that bailing the states out of their liquidity crisis by the federal government cannot go on forever.

One paradox needing debottlenecking is that our country is a high-cost location for business, even where wages are generally rather low. Even in the oil industry, Nigeria’s cost of production per barrel is one of the highest in the world. High costs amidst low wages are by no means the only anomaly. There are others needing resolution. It appears that much of local business is structured around facilitating or enabling predation from state coffers rather than single-minded focus on innovation and productive endeavours. The impact of the Federal Government’s successful adoption of TSA appears to have severely curtailed the availability of “free money” and began a recalibration of demand. Banks for instance, must now change their business models from a focus on hiring pretty young ladies to pursue public sector accounts and deposits to mobilising savings from individuals, households and business, thereby fostering financial and social inclusion.

In a way, property prices and the tastes of our elite have long been out of sync with sustainable economic reality. We need to immediately press a reset button to a position that realistically matches income and demand. After that reset, we then need to consider effective ways of implementing a sustained stimulus. Our economy needs to get out of the pretense of being the largest African economy that merely recorded years of jobless growth, import dependence and increased inequality. Statistics of air travel, signed up customers for e-commerce sites and bank account holders suggest that a majority of our people are out of, or are at the extreme margins of the formal economy.

No nation with billions of barrels of oil reserves, trillions of cubic feet of gas and only a third of its arable land under cultivation has any business spending between 60-70 percent of its foreign currency earnings importing the food and fuel it can produce! Sadly, that is story of Nigeria in the last five to six years. This inherited state of affairs limits our ability to attain economic revival in the short-term if we rely on the domestic market capacities alone. We need not only fresh import substitution investments (particularly in the agriculture and energy sectors) but also deliberate promotion of export-led industries to diversify our nation from its monoculture and oil revenue dependency. And if we let the income gains from such double-polled growth spread to large parts of the population, we may pull enough of our people out of poverty to imagine the domestic economy driving and sustaining growth. My view therefore is that these times call for rethinking and resilience. Only the boldest and the most innovative businesses will win big.

The agricultural value chain is awaiting a burst of entrepreneurial energy. Going back to agriculture is not about just growing more maize, rice, soyabeans, tomatoes or ginger. It is about the value-addition that accompanies higher yields, the income that accrues to farmers and the nexus between rural agriculture and urban industry. The mining sector has not yet attained infancy with our unexplored reserves of gold, nickel, tantalite, iron ore, tin and rare earths in the ground awaiting extraction and beneficiation. The abundant talent in our youths has already manifested in sectors as diverse as athletics, soccer, basketball, literature, music, movies, branding and marketing, software development, design, engineering and fashion. I hold the view that with a little incentivising here and there, continental and global champions in the mold of Mikel Obi (soccer), Aliko Dangote (cement), Olam (agribusiness) and IHS (telecom towers) and some of our commercial banks (UBA, Zenith, GTBank and Access) – all of them Nigerian-born and nurtured persons and firms – can emerge out of these sectors within a decade to compete with the Samsungs and GEs of today.

What We Are Doing In Kaduna State

Incidentally, and based on the foregoing postulations, one area I think women in business should focus on is agriculture. The African Development Bank recognises that Nigerian women contribute close to 70 percent of the agricultural workforce yet get less of accruing returns. In Kaduna State, we are exploring options of empowering women in agriculture by easing access to credit and inputs and their active participation in agricultural value chains.

The land reforms we initiated, resulting in the creation of the Kaduna Geographic Information Service (KADGIS) also aims to ease the ownership of land and finance. The service is in the process of digitising our land registry to facilitate quick grants, alienation and search of titles. As we seek to raise more revenues, we are assiduous in blocking revenue leakages, while creating opportunities for the new economy. It should come as no surprise to anyone here that the ADB’s ten year strategies (2012-2022) has placed high emphasis on gender equality and mainstreaming as prerequisites for African economic transformation and plans to proactively support women by developing unique tailor-made projects for women-led and women-dominated businesses in agriculture.

We recognise that women are the cornerstone of agricultural production, processing, marketing and utilisation in Kaduna State and that we would be unable to achieve any meaningful development without women. Women provide 70 percent of agricultural labour; 50 percent of animal husbandry related activities and 60 percent of food processing in Nigeria, yet have access to only 20 percent of available agricultural resources. In Kaduna State, almost 100 percent of all ginger farms are cultivated by women but not owned by them, and when owned, not in possession of statutory title. We hope to change that with KADGIS. Rather than seeing these statistics of women in agriculture as a reason for complaint or despondency, I urge you all to see them as opportunities for strategic repositioning; an example being the interesting ancillary of our Primary School Feeding Programme that has empowered tens of thousands of women entrepreneurs in various levels of the agriculture value-chain involved in the feeding of nearly 1.8 million pupils every school day.

Also in Kaduna State, we are courting investors assiduously. We passed a law to create the Kaduna Investment Promotion Agency (KADIPA) in December 2015. KADIPA is a one-stop shop to help investors establish in their business in Kaduna. We recognised that we needed to create or strengthen institutions to buoy our credentials as an investment destination. We have a new Tax Code that lists in one document all taxes and levies payable in Kaduna State, that appoints the Kaduna Internal Revenue Service (KADIRS) as the sole collector of all government revenues, while criminalising any form of revenue collection in cash. This tax regime is intended to assure certainty to investors, eliminate multiple taxation and make internal revenue generation less prone to leakages. For the first time in the history of the state, KADIRS raised more than N1.6 billion as IGR in both June and July 2016. Our target is N4 billion monthly from 2017. These coping mechanisms for a state government are intended to allow us provide a modicum of public goods and get more of children into decent schools, reduce maternal and infant mortality and leverage on our comparative advantage in agriculture.

In Conclusion

On a final note, I wish to reiterate that though Nigeria is facing very challenging times, the difficulties we all confront daily – from the federal, states and local government councils, as well as small and big businesses and individuals – represent an opportunity to refocus, re-strategise and reposition our social structure, political system and the economy for greatness. And I am convinced that Nigeria will emerge stronger, more independent and more productive if not in the medium but on the long run. And that all this greatness will certainly be visible in my lifetime, by God’s Grace.

Let no one doubt that Nigeria has the capacity, competence and mindset to achieve success. If we make the right, even if sometimes tough decisions, there is no doubt that the lessons learned from today’s numerous problems will form the bedrock of a great country of the near future. And I have no doubt at all that to a large extent, women – whether in business, at home, in the farm and everywhere are the backbone on which that transformation and growth will be based. That is why I have been positively biased in appointing women to senior executive positions in all my public service positions, from the BPE, the FCT Administration to Kaduna State government. All but a couple of the ones I had the good fortune to appoint and work with, met and exceeded all expectations in their focus, execution, dedication and integrity. I believe strongly that Nigerian women are our future.

Nasir El-Rufai is Governor of Kaduna State.

This is excerpted from the Keynote Address of Mallam Nasir El-Rufai at the WIMBIZ Special Edition Roundtable in Abuja recently.