Professor Kingsley Chiedu Moghalu is a Nigerian political economist. He served as a Deputy Governor of the Central Bank of Nigeria from 2009 to 2014. He is the chairman of the Africa Private Sector Summit. In this television interview monitored by The Point, he speaks about the state of the Nigerian economy, some of the reforms carried out by President Bola Tinubu, why the banks must be disciplined to stabilize the financial system, among other issues. Excerpts:
What are your thoughts about President Tinubu’s economic reform?
Tinubu should have a council that should have the capacity internally to take a full spectrum of the issues. Such a council should address the question of how to structurally diversify away from dependence on oil, or agriculture or any one particular thing.
I also said that to restore confidence, President Tinubu needs to reshuffle his cabinet because one of the reasons investors’ confidence disappeared was the process of appointing his cabinet. It was too slow and when he made the announcement, it was largely a political kind of cabinet.
Investors were hoping for something more technocratic to deal with the crisis at hand. Everybody knows that he inherited a crisis. His government also made some mistakes that accentuated the crisis.
There was an opportunity to begin to address that crisis but the opportunity was lost by some of the actions and inactions of the present government as well. It took a long time to name a substantive CBN governor. It even took longer to form the Monetary Policy Committee, which is what the investors are always watching to take decisions. So, when you have more than seven months gap from an administration being sworn in to the first meeting of the MPC, it tells you something.
“President Tinubu needs to reshuffle his cabinet because one of the reasons investors’ confidence disappeared was the process of appointing his cabinet”
You talked about population control, can anybody stop Nigerians from procreating, because procreation is the best form of recreation….
Very good turn of phrase, procreation is a form of recreation, but that is very expensive, recreation. You should only engage in recreation that you can afford. I believe that Nigeria has a very high poverty rate and when we’re bringing a lot more children into the world in the current crisis in which we are, you don’t have the resources to take care of those children.
We are projecting that we will be 400 million people by 2050. Who will be those 400 million people? Will it be 200 million uneducated, unskilled, poor people? That is a crisis. So, the large population is helpful to you if it is a productive population, such as we have in China.
Even China had to control its population because in Nigeria today the population is growing faster than Gross Domestic Product growth and that is a disaster in the making. We don’t want to talk about population control because of cultural sensitivities, because of religious sensitivities and that is why I suggest that population control should be voluntary and shouldn’t be forced on anybody.
Through education and incentive for people to limit the number of their families, this is what is done in Brazil. For example, for people to be able to access social security, there are incentives. We want to be a prosperous capitalist state but also to have a strong social security system. But the problem with welfare and social security is that if you want to redistribute wealth, you must create wealth. We haven’t created any wealth in Nigeria. We are struggling, and this is the problem because we don’t think deeply in our country. It’s always as if thinking is an anathema. We like to flourish but that is not the substance.
You cited countries like Singapore, Taiwan, Japan, and the sense of the feeling of nation building is lacking in Nigeria. What is the road to building that sense of nationhood?
Thank you for raising that question, it is very fundamental. I gave an example with the United States as the most powerful economic country in the world, even in the military and how its prosperity was built on a world view of “exceptionalism” , freedom, liberty, and etcetera.
How its constitution played a very important role. America was founded by some very wise men who thought very deeply. They had to think whether it was a monarch and George Washington would be the president or would be the king. Or whether it would be a Republic, then of course George Washington became the first elected president.
If you go to the U.S constitution, you will see very early that the constitution gave very special pride of place to innovation, intellectual property, protection of intellectual property in the form of copyrights or inventions. You will see that it is already constitutionally provided for.
In Nigeria what I will tell you first of all is that the speed of the leader is the speed of the gang when you talk about the National Agency and the rest of them, we have all these programmes that can create jingles and all those things, that’s very good but it doesn’t go very far.
The reason it doesn’t go very far is because our leaders don’t show the example that the citizens can actually believe in, that is why there is no faith in the government. Very little trust in the government because it is not “Do as I do but do as I say” Nation building begins from the top.
The people who have been entrusted to lead must be seen to be not ethnic, not religiously narrow. They must be seen to be inclusive. They must be seen to be visionary. It is that sense of having a vision that they must communicate to the people. They must show by example in the way they appoint people, in the things they do, in the things they say, the company they keep. If you keep the company of Nobel laureates, people will have an aspiration to be like those people. If you keep the company of funny people, you make funny people, legit. We have to look at our constitution because we don’t have a proper federation in Nigeria.
In a sense of nationhood you must first create a sense of fairness, a sense of equality of opportunity, a sense of common destiny and shared purpose. The first place to begin is our constitution because this country has several thousands of ethnic nationalities. You need to recognize that reality and they need to see how they are represented and how their future is in the Nigerian project, and then you will know that you have a genuine Nigerian project.
It is not to talk about it and be doing something else. It must come from the top, it has never been a business of the masses to put up a world view for any country. The only possible place that it happened was in France. It was the revolution against the monarchy. Generally speaking it is leaders who set the pace.
You talked about $30 billion from the IMF, you also said that we’re already doing what the IMF said we should do….
No, we’re not. We’re back to paying fuel subsidies. We’ve reneged on those policies which is why I say that we don’t even have policies. There should be a clear policy guideline. I’m looking at the inflation that will come with your kinetic model. I guess that you are fiscal conservative but you are still going to have problems with inflation and if the money is not properly appropriated, expansion in the economy will bring those attendant effects.
You also said we should put N20 trillion into rail lines, I guess that you are going to target jobs because of your fiscal conservative nature. Let us look at the holistic effect, will it bring us out of the crisis?
I was called and asked to provide a way forward and I think I tried to discharge the responsibility that was given to me in terms of thinking outside the box. For example, I’m not proposing any helicopter money, I’m not proposing any continuation of ways and means, I support that it should be stopped and I did say that in my presentation that one of the major problems with Nigeria’s economy is the failure of fiscal policy.
Our fiscal policy has to be completely and utterly revamped. It is so weak, it doesn’t even exist. If you look at our budget every year, a lot of it is just a scam, unfortunately, I am sorry to use the word. The corruption in Nigeria governance architecture is so endemic. It is so structurally rooted. One of the ideas that I have, I think what I mentioned at the lecture, is that every budget that we have must be subjected to a forensic audit by the president before it is presented to the National Assembly, because civil servants in MDAs bury a lot of dead bodies inside those documents.
Who do you think should be responsible to do that job?
Of course, yes. It will be a good idea. We can reform structurally so that we can become more efficient and more effective. So, the office of management and budget will be a very good idea, so long as it is manned by professionals, and not by party men, that is the problem.
The mixture of politics and governance has done Nigeria so much harm. When you think politically first of all, you are not thinking merit, you are not thinking competence, you are just thinking about a narrow interest and that is why the job doesn’t get done.
We can look at the possibility of floating N20 trillion bonds backed up with land. It is not a marshall plan, it is a bold possibility. We look at it in detail. Now, the IMF proposal is a very different kind of possibility. The asset sale possibility is a different kind of possibility.
The problem that we have in Nigeria which we must address is the inability to work on the basis of strategy. We are so ad-hoc and short term that that is why things don’t happen the way they ought to. It is not like there is a crisis, create another committee, no.
We need to sit down and think about Nigeria 50 years from now. We should have a plan, have an execution plan. We need to develop the organizing principle that is how the societies that succeed, succeed. Let us borrow some things and use some of our own local value systems to drive real transformation.
We need knowledge. Nigeria’s economy is oftentimes not run by people with deep knowledge. Knowledge matters. Let me give you an example, in Nigeria economic policy there is always an emphasis on the macro economy. Like I always say, every economy that is successful is run at four levels, there is the philosophical level, there is the institutional level, there is the macroeconomic level and there is the human development level. The other three are completely ignored and people focus on the macro economy, is it any wonder that we always get into a crisis?
Among the solutions you said that the government should clamp down on banks, what exactly is the problem with the banks and when you put all of these together you are also saying that for us to be able to make progress it will take up to three to five years, and this administration is saying that the economy is not in distress, and that by the end of this year all of us will be jubilating?
We have a situation in Nigeria where we have consistently over the decades “de-industralized” Nigeria and “financialized” our economy. We have 200 million people and we have a small set that has money which they starch in the banking system. If you go to the bank system, less than 5% of Nigerians have more than N500, 000 in their bank accounts and that should tell you something.
They are making money out of it because we are a resource extractive economy but in the matter of forex there have been reports that some of the banks have been hoarding forex. I think we have $7 billion in the bank and there was a regulation put up by the CBN on that position. So, it is very clear that there are many aspects of speculation that have driven the Naira down. One is in the crypto market. It doesn’t push to bring the banks under discipline.
If you cannot discipline the banks you cannot stabilize the financial system. Am saying to the CBN to investigate the banks thoroughly, if you find that any one of them has infractions of the forex guidelines, clamp down hard, sack a couple of CEOs and everybody will sit up. We did it, so I am not talking about theory. We did it and it worked. Somebody talked about Ikoyi economics and Fadeyi economics; I like the article very much. It is a combination of the two raising MPC rates. I support that, though it is belated, it should have happened before or at the same time as the Naira was being floated or the rates being merged.
We have a monetary loose environment and that is why the Naira has dropped so much. So, that is why I talked about knowledge. If you don’t have the knowledge, you will be sub-optimal in your performance.
We need to focus on the banks and we need to crack down on the banks. They are part of the problem.
“We need to focus on the banks and we need to crack down on the banks. They are part of the problem”
You said it will take three, four or five years before we get out of the crisis…
Yes. You must differentiate between objective analysis and politically inspired optimism or what some people call hope. It will take time for us to come out of the crisis and anybody telling you that by the end of this year that it will be Eldorado, that person is just promoting some partisan interest. He should not be taken seriously.
You spoke on the need to cut the cost of governance. This administration has talked about a move to implement the Oronsaye report. We cannot be talking about implementing the Oronsaye report even at the government levels; they are not cutting the cost of governance. Can you also speak about the roles played by sub-nationals as well?
This is going to be the third time the Oronsaye report is going to quote, unquote implemented. We had newspaper headlines, “Jonathan Orders Implementation of Oronsaye Report” We also had newspaper headlines, “Buhari Orders Implementation of Oronsaye Report” Now we have the current government ordering implementation of the Oronsaye Report.
I say, it is hoped that this will be the last time the Oronsaye Report will be quote, unquote implemented for real and for good.
The masses of Nigeria are bearing the brunt of the austerity measures and the reforms. Politicians are not feeling it. Any reduction of the cost of governance that doesn’t begin with the elected political class and high level appointed political class is not real. That is where we must begin.
So, to the sub-nationals, the governors, many of them are like emperors in their states must also make this cutting the cost of governance real. If you say that you are cutting the cost of governance but have 500 or 1,000 special assistants, are you for real? No.
They do that as a way to reward their political supporters and they will tell you that they have to create jobs for their supporters, but the man on the street has no job. So, to try to restructure or reconfigure the federation is very important.
When you bring down responsibility and authority to the sub-nationals, you also increase the chances of accountability. When a Governor is messing up, when a local government chairman is messing up, it is easier for the people to reach that person or take steps when the Federal Government is not doing the right thing.
Abuja is too far for many people. It won’t be Eldorado when you reconfigure Nigeria. Nigerian politicians will be Nigerian politicians but over time accountability will evolve, because it is closer to the people.
