GLOBAL MELTDOWN, NIGERIA NOT PART OF GLOBE
'That is why our President was shouting that Nigeria was not invited to the G20 Summit. If they invite 100 countries, Nigeria is not qualified. Countries that were invited are democratic industrial countries. We are neither democratic nor industrial. So, we are not qualified for that type of summit. We are just big for nothing.'
He also spoke on meltdown, job cut, oil subsidy and other issues. Excerpts:
Yar'Adua's seven-point agenda
There has been some little improvement. In fact the years have been better than previous ones. Again, I think Yar 'Adua means well but when you are operating in PDP environment; he is in a gangster party and the people are so desperate to embezzle money and for him to be able to achieve his seven-point agenda, a lot of things have to change in PDP. I do not blame him because he never aspired to be President of Nigeria. When he finished in Katsina, he wanted to go and spend his life as a university lecturer; Obasanjo imposed him on Nigerians and he has to give them something which gave birth to the seven-point agenda; do we need a seven point agenda to develop Nigeria? He needs a plan, not just mouth. We don't run a country like that.
It is not Halliburton alone; even getting contracts here you know what you pay to get road contract. That is why our roads are not constructed because officials had taken too much money as bribe. You want to borrow money from the bank, you will need to pay bribe, you want to take contract from the local, state or federal government, you will be required to pay bribe; even to get admission into universities you pay bribe. It has become an endemic thing. Nothing will come out of the Halliburton matter. Look at the enquiries being carried out by the Senate and the House of Representatives, what has come out of them? The N120 million involved in Halliburton is even a chicken feed, it happens in every ministry. During the colonial period, if you were living above your income, you would be queried but if a civil servant buys a jet, nobody will query him. The President will go there to commission the jet. If he is building a house worth N100 million, nobody will ask him the source of his money, his Bishop will go there to go and pray. We are in a dilemma. They are now saying they are re-branding Nigeria when all the contractors handling government projects are foreigners because they are ready to pay bribe in foreign currencies.
Looted funds in foreign banks
Once the money leaves Nigeria , it will be very difficult because that is what those countries use to develop their economies. It has reached a level now that they no longer give the depositors name but vault without name; so when the man died, that is the end. One of the bankers in Canada once told me that there are eight Nigerians with plenty of money in his bank and he has been trying to get in touch with them for five years without success. I asked him if they were dead, what happens to their money? He said it becomes Canadian money. It is not easy to get the money back. When they talk of corruption, I said this does not prevent a country from developing.
All developed countries used corruption to develop their economies. America was the most corrupt country until recently. Corrupt money was used to develop the state. Even if we steal the money, set up factories; invest the money here so that it can multiply. All these private individuals including churches who are now establishing universities, where did they get their money? The churches take a lot of money from their congregation. Somebody who has no food to eat will be compelled to pay 10 percent if he does not want to go to hell. It is part of the fraud
Soludo's second term as CBN governor
I am very impressed by his performance although I do not agree with all what he has done. It is not possible to agree 100 percent with him but he has tried because when he was appointed, I was very pleased that for the first time, a non banker was appointed as Governor who could look at the economy from a neutral universal point of view, not just from the banking sector point of view; just changing money, buying money and setting up banks. He will be able to take a global and conspicuous view of the whole economy and I wrote to him that I am happy that he was appointed. But apparently, he has not performed as much as I felt.
He has allowed the exchange rate to devastate itself; there has been market force economy which is out modeled. There is nothing like market force in third world countries, that is why we have a government. No country allows its foreign exchange to be determined by market forces, not even America, not even England because the greatest symbol of a country is its currency, not the flag. If you give a flag to a mad man, he will tear and burn it. But if you give him one Naira, he will put it in his pocket because he knows that is more important. So the greatest symbol of a country is its currency and when you devastate it, you make it useless, it is very bad.
But I think that Soludo has done creditably well, he has passed and if he is to be re-appointed, I will support him. You see, one of the problems that third world countries face is this constant changing of people; you bring someone else and he will be worse than the one that was removed. Look at America, the chairman of the Federal Reserve Bank, which is equivalent to our Central Bank was there for almost 25 years. He was appointed by Republican government, Democratic government came, he was retained; he only retired last year at the age of 75. He was able to look at the economy over a long period; when he made mistake, he would correct it; the people looked up to him. He knew the economy and the economy knew him; he knew the banks and the banks knew him. I am biased may be because he is a professional Economist like me and I can talk to him, argue with him and dialogue with him. But with a banker, it will not be as easy. One thing I see that Soludo has not done is that he has not really curbed the banks. He has allowed the banks to pocket him because the banks really deal in foreign exchange.
They buy cheap from the Central Bank and sell there. They are the people funding the black markets. When I was chairman, National Economic Intelligence Committee, (NEIC) I did a lot to ensure a law to be passed banning the sale of money in the open market. There is no civilized country you get to where people are selling the currency in the street; a man like Soludo ought to have prevailed on government to stop all these black markets. In fact, they use the black market as a yardstick to determine the exchange rate of the naira. By now I am thinking that he would have made the Naira convertible so that you will not be looking for the Dollar or Pound to buy things. In those days you could take the Naira to England to America to Saudi Arabia and you would get a change. So, nobody needed to go to black market to buy Dollar because that is not our currency. It is only occasionally that you would need the dollar. But now Dollar has become the real currency. You will get to the market, the pepper seller will say the price has increased because naira has fallen. This is dangerous and I think we should really work towards the convertibility of the naira so that it will become a trade able currency.
In those days, Naira was almost equal to two dollars; now we are having N180 to one dollar; has wages increased by 360 percent? Has our income increased by 360? Even the budget we have today in which they are talking of trillion is not as valuable as the budget we had in 1980 and our population in 1980 was only about a little over 50 million. We are now over 140 million and our budget today is less in value in real and purchasing value than in 1980. That is why poverty is in the land because we have several trillions which mean very little. This is one area a man like Soludo should look at and see what can be done about it. If I were the Governor of the Central Bank, I would have achieved that. When I was the chairman of NEIC, I told the military then that if the Naira was devalued, I would quit and we kept the Naira at N21 to the Dollar for the four years. In fact, if Abacha had not died, we were planning to bring it down to N15.
It was after he died that they started to pillory Gen Abdulsalam Abubakar and they forced him to increase it over the N21. I told him that the day he did that it could land anywhere. He told me that he made a mistake by agreeing with them to devalue the Naira and you see where we are today. You can get N200 you can get N1, 000. That was what Ghana did. Ghana 's Cedi was equal to Nigeria Naira and there was a time the Cedi was about 8, 000 to the dollar. What is saving us now is that we have oil to sell. If the price of oil goes down, they will say they want to monetize so that they will get more Naira I keep telling them that if you are to eat and you eat Naira, it is then you can say the more you get the more you will consume; but money is what money does. If your Naira is N180 to the dollar then what you are buying for a dollar, you will buy for N180; you don't gain anything.
I told them that instead of making one Dollar equals to N30, or over struggle to earn more dollars by exporting, by manufacturing, by selling things abroad; we are operating an import economy. So the less the value of our currency, the more difficult it will be for us to even import equipment. The budget of the Federal Government which was premised on N125 to the dollar is already now becoming difficult to implement. What they wanted to do before they can no longer do; so their budget is already destabilized. These are the implications of simple logic; and that is why I keep telling them that economics is common sense made difficult.
Way out for meltdown
There is nothing we can do because we are not an industrial nation. We are not even agriculturally self sufficient nation, we are not even commercially self sufficient nation. We are at the mercy of the world. We are not part of the globe at all, we are only incidental to the globe. It is like somebody who goes to the stadium and has no money to enter. He stays outside and when they say it is a goal, he shouts from outside. He is not part of the stadium but he is just joining them from outside to shout. We are not part of the world's economy as such, but the consequences affect us.
That is why our President was shouting that Nigeria was not invited to the G20 summit. If they invite 100 countries, Nigeria is not qualified; because countries that were invited are democratic industrial countries. We are neither democratic nor industrial, so we are not qualified for that type of summit. We are just big for nothing. We will continue to have the consequences and when the advantages come, we are going to have the disadvantages because we have not put our house in order. We have not strengthened our economy, we have not strengthened our people. In America now, Obama says he is going to create four million jobs, Nigerian government is retrenching people. Our boys go to America, they get jobs. We ought to be inviting people to come and help us work in Nigeria, but here graduate engineers are roaming around the streets because there is no job.
So if the economy does not improve and there is no money to create jobs for them, more and more of them will be unemployed. Whereas in America, they are creating jobs because they are industrial; they can say an industry that has been running only one shift should now work three shifts. There is no industry in Nigeria that can run three shifts. We are at the mercy of the world economy.
Exclusion of Nigeria from the G20 summit
Yes, Nigeria is not qualified and has never qualified. Before the G20 has 19 members plus European Union (EU) which has a convention with African countries, Pacific and Caribbean. So when the EU is invited, they can call us to be part of their delegation just to listen. But since 2007, when we had a foolish election, they rolled us out. That these people are not as good as we thought, they are not democratic, they are riggers of election. So our credibility has fallen. Before, they would have invited us as an addendum to the EU not in our own right but as a subsidiary of EU.
Meltdown and job cut
When you have a depression like we are having in the world, the most effective way to fight it is to put people on the job. Even in America, when there was depression in the 1930, the President of America was employing people even to dig hole while others fill the hole just to create jobs, give more money to people to purchase so that there will be demand which will create supply and vice versa and there will be a multiplying effect.
If during a depression, you continue to reduce wage, you continue to reduce employment, you are deepening the depression. That is a wrong method. Even the idea that salary of public officers will be reduced will not work. You are aware that these public officers are very extravagant. For example, we spend about N260million on each Senator today in a country like this. We spent about N135 million on each member of the House of Representatives. Even cutting this by 25 percent has no meaning because in the first instance, they ought not to be earning what they are receiving. To now cut salaries of civil servants or retrenching them is uneconomic.
It will deepen the depression, we should be employing people now. Putting them on the roads to construct roads, to build bridges and clear the roads. We can put five million people on the roads in Nigeria so that there will be no pot holes, people will be able to drive freely because our roads are so terrible now. That was what Hitler did, it was only that he was stupid to go to war, he put every German to work. When Roosevelt came to power in 1932, he was asked about his economic policies. He said I had only three economic policies; saying the first one is work, the second is work and the third is work. That he wanted every American to work. It is not the type of work we do here. That is what our government should do. The local, state and federal, even the companies. If they say they want to retrench people, the Federal Government should say look don't retrench, if you need additional money we will help you so that you can keep Nigerians at work. That was what I was telling them when I was chairman of NEIC and they listened. That was why they created Petroleum Trust Fund (PTF), you must create work. Why will some of these companies not leave Nigeria when there is no power, they have been leaving, it is not just happening today? Not only the power problem, what of the interest rate? Nobody can run business in Nigeria at 30 percent interest rate and make profit. You can't borrow money when you are competing with Japan which gives two percent rate of interest; small businesses there which attract zero percent rate of interest.
In China it is four or five percent rate of interest, Germany and England, two point five percent rate of interest. Even if we are efficient, we cannot compete favorably in the world market. That is why I keep telling them that we are not yet part of the world market. We are not yet part of the economic globe, we are only part of the world. Let us sit down here, plan and improve ourselves and make ourselves economically competitive. That is why our boys run away. If the embassies open their gates, there will be no single graduate left here. Why?
In those days when I was in London, I used the London School of Economics scholarship to do my Ph.D and there was nothing the school did not do to make me stay but I said no I was going home because it was better to be here at that time. We had professors here who were foreigners and they were happier here than in their countries. But today, Nigerians are smuggling themselves to Europe and America. That must change, no foreigner can develop this country. Every person is now building universities both right and center, no one is establishing new industries. Where will those children work? I envisage that they are the people who will destroy the system because the more graduates we produce; the more educated the citizens, the less we cheat them. It is very easy to rule educated people but it is very difficult to cheat them. With 95 universities and more are still being approved and the graduates will come out and see legislators earning over N20 million monthly, they will ask questions and it will destroy the system.
Withdrawal of oil subsidy
There is no subsidy on oil. From where did they get the N640 billion? Is it not from oil? How can you be using oil money to subsidize oil? The money is gotten from oil; so how can you say you are using it to subsidize. The government is just deceiving Nigerians. I have written that there is nobody subsidizing petroleum. The real thing is that the cost of petroleum per litre is only about N8. 05; that is the cost of mining, reprocessing and selling it and it is being sold at N65 a litre; how are you subsidizing? You can only subsidize if the cost is N30 and you are selling for N20. The cost of production to the government of this country when I was in government was about N8. 05 and let's say now N25 and we are selling at N65 per litre, so where is the subsidy? When oil is now being sold abroad or you import from abroad, 66 percent of it is taxed by the government of those countries. In other words, the cost of production there is only one third of what we are paying.
Why can't our own government here set up refineries and process so that we sell refined products? We created Bonny Export Terminal to export refined products, we have now turned it to import terminal. We are the only oil country in the world that is importing refined products, we are the fifth largest producer. Saudi Arabia, Venezuela Scotland do not do it. I have told them that we need between 10 to 20 refineries to take care of the needs of the country and export the surplus. I have sent many memos to the Federal Government on this. Venezuela is only 30 million people, they have six refineries and they are building eight more. Here we have four and they are not working. I wrote to former President Obasanjo when he was in government and told him that when he was military Head of State, he built three of the four refineries; now you were president for eight years, you cannot even improve one. This is because it pays them to export crude and import refined products.
If they are subsidizing, then they are subsidizing the importers not the users, because most of the importers are fantastically rich. One of them has been declared as the richest in the world, where is the factory? The factory is the importation of fuel because he makes so much profit. When I was chairman of NEIC, we did a study and got to know that every ship load of oil whether kerosene, petrol or diesel imported into this country, the importer gained one hundred thousand dollar. This was as far as 1996 you can now imagine what they gain today. Now they are suppose to secure the pipeline. When a marketer goes to the Ore depot of the NNPC to lift 15, 000 litres of diesel, he pays N15, 000 for the security of the pipeline but government does not want people to know that.
When I see a marketer now building a new station, I feel sorry for him because I know that there is no way he can break even with the type of system we are running. The hassle, the problem, the amount of torture you go through, the cost of transportation, there is no way he can break through. In other countries government supplies direct to marketers. So all these talks of subsidy is a farce, it is a deceit; you cannot use oil to subsidize oil.
When I was in government, I knew that the importers would never allow the refineries to work. I told you somebody is making one hundred thousand dollars on a ship load with several million galloons of petroleum products, now he will do anything to subvert any attempt to cut that off. When Obasanjo became the Head of State and as a friend of mine, I spent an evening with him during which I told him that for as long as we are encouraging importation of fuel, the refineries would not work and he promised to stop it because the alternative was so much in favor of the importers. He told me 'Sam trust me, I will never allow a single litre of fuel to be imported to Nigeria. The refineries must work and we would build more, after three months, he said it was an open market, meaning that we should import more than before; then he said my economics was out-dated.
After the 1999 general elections, I wrote to all the governors along the coast, from Lagos to Calabar and advised them to build refineries along the coast. If you cannot do it alone, join the neighboring government to do it. None of them replied up till today.
N200m to boost food production
There is nothing too late to do if you do it honestly and with integrity. Four years ago, Obasanjo set up N500 billion agricultural development fund and made my friend, Nyako who is now governor of Adamawa state chairman of the committee to disburse the fund. I wrote to the Federal Government advising that the money should be put into the banks and let the people go there to access. If you set up any committee to manage the fund, the money would go to private pockets. They used the money meant for improvement of power generation in the country to obtain political power. The same is happening to agriculture; not one billion naira of that fund was spent on agriculture. My own junior brother left here and said he was going to the village to start planting cassava in anticipation of getting part of the fund. I advised him not to go because the money would be used for elections of 2007.
Another election is coming in 2011 now; that is why they said they are putting up the fund. When Awolowo was in power in those days and Sardauna, they set up Agricultural Credit Corporation, Industrial Credit Corporation, Commercial Credit Corporation and people went there and borrowed. But now a committee will be set up made up of hungry people will go there and share the money. They will take different types of allowances, they will say they want to go to America, China to see how people are farming. I told them that all of us had been to these countries you don't need to go there again. When I was chairman of NEIC, my members said now we should divide the world into three, north east west and we go there to see what they were doing and I said India has similar committee and members have never come to Nigeria.
We were supposed to be knowledgeable, that was why they appointed us, nobody was going anywhere. During the four years, I did not allow any of them to go to Benin Republic, but we went round almost every state in Nigeria because we were here. But today, they move around like locusts, civil servants they are never on their seats, ministers are roaming around, advisers are going around. If well implemented it is not too late. The land is there, how long does it take to grow yam, maize, cocoyam? It is not late but we are not serious. Again you cannot have credible agricultural development result without an industrial base because we cannot use hoe and cutlass to feed modern people. We have to use caterpillars, modern equipment, fertilizers which we should produce because by the time we import all those things again, we will spend more money. So we have to get an industrial base and stable power. You cannot run the poultry without power, you cannot use generators to run an industry, you cannot use generators to run a farm. Agricultural products are seasonal, so it is not too late but we are not serious.
I wrote to my friend here, Dr Agagu, very intelligent and I like him very much; I wrote to him about bitumen and the letter was delivered in his office. There was no reply. I went there and saw him and told him I wrote to you about bitumen that we are the third largest depositor of bitumen in the world, United States, Canada and Nigeria and we are the only one importing bitumen. Kaduna produces a little bit of bitumen from imported heavy oil from Saudi Arabia, why must we be importing from Saudi Arabia? Now Kaduna refinery is not even working, it cannot refine petroleum products not to talk of bitumen, no one is thinking of that. The bitumen office here in Akure has been disbanded because the importers of bitumen are making fortune and those who import are the people who are financing their election.
This is terrible and we are one of the most intelligent people in the world. I go to Germany, Canada, UK and America where I lecture and I use to tell them that they are not better than us. We come here, study in your language and still beat you, you come to our country, you cannot even speak our language. I was in the London School of Economics, in my year, I was the only student that got distinction in MSC; THREE OTHER Nigerians that year got first class degree in the same school, where an Oyinbo man will fail. So it is not that we are dullards here, we are very clever and endowed both in human and material. If a Nigerian is asked to run the Bank of England, he will do it successfully but the system here destroys initiative and captures you into redundancy.
I do not pray for Nigeria because God has given us everything, intellect, natural resources. Do we now want God to come down and set up industries for us here? We should pray for Nigerians themselves not the country To pay ordinary salary here is a problem; some civil servants have not been paid for months; my pension has not been paid for 10 months. I wrote to the President and told him I don't want to die and you will come and be talking rubbish on my dead body; how Aluko was wonderful. Now that I am still alive, pay my pension and let me enjoy it. Some of my colleagues are being owed 24 months pension arrears.
Those are the things called economics because when you pay people, they will spend it in the market, generate demand and this will increase supply and it will multiply. When you retire somebody, you are not retiring him alone, you are retiring his family. It is terrible but they don't understand all this connectivity and that is what people abroad understand that make their economies grow. We should continue to drum this into their ears. I can see all governments are deaf but some deafer, we should not give up. I don't pray for them but I advise them; in a month I will write to them. I just wrote about 30 pages of letter on how they can raise money.
Before now if I had written to them, they would not take it seriously because there was more money then as we were getting 137 dollars and above as price of crude oil in international market. When we had 147, I wrote to them and say this thing will crash because there was no basis for oil to be 147 dollars in the world except that China was hosting the Olympic and they were building more stadium and hotels. After Olympic the price would fall. Is it not true? We do not need any prophet to tell us that. It is just a simple economics sense.
First of all Nigerians don't pay tax. Rich people don't even pay tax. Only those who are earning income pay tax in this country. The richer they are in Nigeria, the less tax they pay. Two, why did Obasanjo cancel toll gate? I traveled from Washington DC to Boston, a day's journey by bus. I counted we paid tolls 22 times. That is what they spend on the roads. The roads are perfect; but here where we do not have money tolls are not being paid. Why?
Before we introduced the Value Added Tax, (VAT) it was by faith. In fact, it was late Gen Abacha. All the ministers were saying what is this but Abacha said let's try it for a year, if it does not work, we will abolish it; we are government. Even at that, we can still double what we are getting from VAT because the lawyers, the accountants, surveyors, all the professionals are not paying. VAT at present is paid when you go and buy things and services contribute more than 40 percent of the earning. I wrote to them and said services and hotels are not paying VAT. They are not even aware. We created VAT directorate, one woman was appointed to head the directorate; the directorate was cancelled saying there was nothing special about VAT. Now they are saying they want to increase the percentage from five to 10 when they have not even implemented the five percent to the maximum.
There are so many private employers who collect tax from their employees and nobody goes there to demand for this. There is no proper monitoring of the process. Customs! They say one officer was arrested for fraud. If you know the amount of waivers they give to these fish people and all the rest is running to billions of naira. I was appointed as one of the consultants to Federal Inland Revenue to monitor collection of VAT on imports. The first year, I discovered that over N48 billion was being given as waiver to each person importing. By the time I was removed from there because I was insisting this was not right, almost about N314 billion of custom's money was lost to waivers. Then after sometime, they deviced a system that if you import for industrial purposes, the duty will be deferred so that you can pay later. After four years I asked one of the Custom officers how many of these people had paid? None.
There was somebody from Oyo who wrote to me that he imports iron rods and his competitor who is a big man in government is not paying duties while he was paying. I sent the letter to Chief Obasanjo; in fairness to him he promised that nobody would be given a waiver unless it was approved by him. It was from then that it became a racket. They would now go to him telling him they are leaders of PDP how are we going to get money for election? It multiplied. I pointed out all these and suggested other ways and what other countries do. This so called small tax in America is not small at all if well monitored. There are other suggestions like sales tax, income tax, excess profit tax, debt duty. A lot of rich men died and their children are fighting over their property; what debt duty do they pay? I have sent the memo to the Revenue Mobilization and Fiscal Commission and I have received a reply from the body thanking me for this.