Sunday Magazine

Borrowing for consumption’ll stifle growth, says Peter Obi

One time Governor of Anambra State and vice presidential candidate of the Peoples Democratic Party (PDP) in the 2019 elections, Mr. Peter Obi in this interview on Channels Television, dissects some economic issues especially in relations with Nigeria’s debt profile and investment in this interview monitored by ANAYO EZUGWU reports

 

 

What is your opinion on the Value Added Tax (VAT) matter and the conversation that has been generated in the state of our federalism?

 

For me, you just mentioned my own stand on the issue of fiscal federalism and it hasn’t changed because if you make the country productive, whenever such controversies come up what bothers me is that the country is concentrating on sharing.

 

Every time it is about sharing and nobody is talking about how to generate income, how to make more money and nobody is talking about production

 

. The country is not productive and that is why we are preoccupied with sharing. If we are productive, it will be very easy for the country to grow, be able to create jobs and do what other countries are doing.

 

Every part of this country has the potentials to grow and compete with the other, but because we are not doing that, well I don’t want to make so much comment on VAT because it is a matter that is in court.

 

Do you think is it the right way to go when states challenge the Federal Government on capacity? Is it some kind of restructuring from your own standpoint?

 

 

Well, as you mentioned on Anambra State being admitted as an oil-producing state is good. But let me tell you, oil is a dead asset. With the plans we had in place even before I left office if it was followed till 2030, Anambra would probably be generating more money than Nigeria would generate from oil.

 

This is because when you talk about this oil, how much are we generating from oil? It is $18 billion. You can’t compare it with what other smaller states are getting from little or no investment. All they have done is to invest in education, information and communications technology (ICT), health and everything.

 

If you do these investments properly, pulling your people out of poverty, you will see that the money you are talking about in terms of what we are going to get from oil, I don’t see Anambra State generating from oil even in the next 10 years.

 

Assuming they start today, they will never be able to generate about half a billion dollars, but I can tell you if Anambra State is about to key into what we have started where we were targeting to raise about $1 billion to $2 billion by the year 2030 and be able to distribute and support Small And Medium-sized Enterprises (SMEs) across the state where there is massive industrialisation of the state and export we will be generating far five to six times of that. I believe in fiscal federalism because it will help the country to grow.

 

At this point, the country is not growing and productivity is very low.

 

You said the country is not growing economically but the Nigeria Bureau of Statistics (NBS) said the country recorded five per cent growth, which is more than doubled what the experts have predicted. When you said it is not growing its Gross Domestic Product (GDP), isn’t that a measure  of growth?

 

That is compared to a minus six per cent because that five per cent is being compared to minus six per cent of the same quarter of 2020. And if you look at that growth, it is driven by the transport sector because we had a total lockdown last year and there was no movement and transportation.

 

Now you are opening up there is transportation. If you look at it again, there is ICT because of issues of pandemics and everything, there is a boom in ICT because people are now using Zoom and everything for meetings.

 

It is not growth that needs celebration because it is not creating jobs; it is not increasing your per capita and I can say that it is not growth that added to your GDP or per capita.

 

For me, it is a growth that is coming from minus and you have been able to come to a level ground if you measure it.

 

If you look at what has happened in the country in terms of revenue for this year, look at your own ratios you will find out that you are not doing well. And it is very simple.

 

In essence you are saying you should not rejoice so much about this growth isn’t this sign or signal of better days ahead?

 

You cannot use one-quarter of economic growth to measure what is happening. I told you that this is a growth coming from a minus, so you have to wait till other quarterly reports and you can measure whether you are in a real direction. You have to look at it whether you are creating jobs; Are people living better lives? Are their lives better today?

 

These are the things that measure growth. Today, an average Nigerian spends over 100 per cent of his income on feeding alone. These are things that give you real growth; growth is measurable, growth that is creating jobs, people are happier and everything.

 

And the disposable income is increasing. This is how you measure growth. But just a  temporary growth in figures, whether it is by experts or by this is not something to celebrate. If you look at the real fundamentals of your budget this year, the amount of money you are borrowing and everything, you will see that things are still very dire.

 

So, what can we do and what would you advise we focus on right now to experience brighter days from the figure we have gotten and where we should be? What should we be doing as a nation?

 

It is investing because we are not investing in the right direction and I will give you what will show you the problems.

 

If you look at the first five months of this year, our revenue expectation was N2.7 trillion, but our actual revenue was N1.8 trillion. Our expenditure within that period was N4.8 trillion.

 

Our borrowing which was supposed to be about N2.8 trillion moved to N3 trillion to support that expenditure because we generated only N1.8 trillion and our expenditure was N4.8 trillion, so you borrowed N3 trillion.

 

Our debt servicing within that period was N1.8 trillion. Our income was N1.8 trillion and you spent N1.8 trillion on debt servicing. This is not debt repayment.

 

Within these five months, in our sinking funds, not one naira entered into it when we are supposed to have over $100 billion in the sinking funds. So, you are even putting away money to pay this debt and you are still borrowing more. And this money you are borrowing, nobody can say this is where we are investing it in order to be able tomorrow to repay or service this debt.

 

We need to be investing in the proper component of development – in health, education and pulling people out of poverty. And that includes tangible and intangible assets because you just talked about GDP growth and I told you that the components that will make it show that it is real growth is declining.

 

Our biggest GDP contributor today is agriculture. Go and look at that report and you will see that agriculture was not growing. People can’t go to their farms today because of insecurity.

 

Food items and everything has doubled in price; the people are getting hungrier; the salaries can’t pay for food items as I said before and Nigerians now spend over 100 per cent of their salaries to eat.

 

So, these are the important things we need to invest in. You need to look at the intangible assets, security, law and order and all these and deal with them. Otherwise, you are not doing anything.

 

It looks like you are not in favour of borrowings. Do you have a problem with borrowing?

 

I’m surprised you are asking me this question. Everybody knows my stand on borrowing because there is nothing wrong with borrowing.

 

If you look at all the G7, G12, G20 even call it any developing nation, they support their development by borrowing, even individual businesses but are you borrowing for productivity or are you borrowing for consumption.

 

My worry here is that we are borrowing for consumption and that is for me is a no, no.

 

What do you mean by borrowing for consumption?

 

I have done this analysis before. If you borrow money and you did not invest it, for example since you want me to explain, I have done this before and I can do it again. Your GDP in 2015 was about 500, your per capita was about 2,500 and as at that time, our debt was about N10 trillion.

 

Today your debt is about N30 trillion and your GDP is now 400 and your per capita now 2000. You are a businessman, you borrowed money and put it in business and the value of your business is collapsing, which means you borrowed for consumption, straightforward.

 

If you invested it, it would have changed. You would have seen growth in your GDP, growth in your per capita, create more jobs and everything.

 

If you look at some of the borrowings mostly the ones from China there are specific projects Federal Government said they are borrowed for. For example in the construction of the rail services in the nation and from what you have said some people will argue that the borrowing didn’t start today even from the days when your party was in power the borrowing had started?

 

I’m not talking about who borrowed the money because this is not politics. I’m talking borrowing for the wrong reason. If you borrow for consumption, it doesn’t matter whether it was borrowed by the Peoples Democratic Party (PDP) or the All Progressives Congress (APC).

 

I don’t want to go into that because if I go into that somebody borrowed more and wasted it but the borrowing for consumption is what’s wrong whenever we are talking about issues, people are putting it into politics. I am talking that the country as a nation is not productive and there is nothing wrong with borrowing.

 

And if you are borrowing it shouldn’t be for consumption. That is why more people are getting poorer. You just told me about GDP growth but the question is, GDP is growing but your people are getting poorer and more people are losing their job.

 

That means you are not growing. What I want to see is growth that will pull people out of poverty, growth that will make the people have disposable income and be able to feed themselves, growth that will educate our children, these are the growth that makes meaning.

 

The growth that would be able to provide primary healthcare for people in the communities and everything is critical areas we want to go into; not speculative growth that people are celebrating on television and everywhere.

 

I want to see it in communities when I visit them such that people are happy because they are getting more income and they are seeing their children and everything.

 

That is growth. I have served this country in my little capacity I could see what it means to be in a situation where they are being served well.

 

What would you do differently if you have the opportunity to be in charge?

 

I have told you that, it is investment and investment.

 

Can you give us specifics areas where the investments should go?

 

Where do you think you can pull people out of poverty from? The engine of employment all over the world is the Small and Medium-size Enterprises (SMEs).

 

That is an engine everywhere and it is very straightforward. That engine today is not being supported in Nigeria. Nigeria has a total of 40 million SMEs and there is no properly articulated fiscal and monetary policy to support this.

 

The entire loans or call it credit to the private sector in Nigeria now is about N30 trillion and less than N1.5 trillion is going to this sector. Less than five per cent of the entire loans, no other country that I have studied is that low.

 

That means you are not supporting the engine of growth. Go to any country even the developed countries like UK and America, the biggest employer of labour is this sector I mentioned.

 

Go to Bangladesh, India, China, Philippines, even in Ghana, they are all supporting it. We need to have fiscal and monetary policies that will invest and support this engine of growth in order to create jobs.

 

You mentioned the monetary policy, recently, the Central Bank of Nigeria (CBN) banned the sale of Forex to the Bureau De Change and there have been reactions to that. Since you mentioned the issue of monetary policy, I would like to get your view on that CBN’s action?

 

Let me tell you again, all this haphazard situation is not what the country is focused on. We should focus on generating more foreign exchange so we don’t start all these haphazard situations where we find ourselves. It is easy for us to organise ourselves to focus on this sector I mentioned to generate more export.

 

Nigeria can produce more and export more. It is easier for you to invest in education and have more Diaspora that will bring in more money. Let me use Bangladesh, a country as big as ours, Bangladesh generates from textiles about $35 billion.

 

That is twice what we earn from oil. They have about 5000 textiles companies that you can call tailoring companies scattered all over the place. And these are small and medium companies manufacturing garments for the world, $35 billion and we make from oil $18 billion.

 

Look at your overseas Diaspora, how many people today that you can say that are living in the Diaspora? Maybe about five million because officially, United Nations said it is 1.2 million but I say it is about five million. And they are repatriating or remitting as you call it about $25 billion.

 

So, they are even giving you more money than oil. We have a population of 200 million. Egypt with half of your population is already receiving over $30 billion. The Philippines with half of your population are already generating about $40 billion.

 

Even Bangladesh has overtaken Nigeria in terms of Diaspora remittance. Educating people and put money into education, they can go all over the world and we will double our remittance.

 

Nigeria can easily in the next 10 to 15 years with proper investment in education double her Diaspora citizens and be able to double its income.

 

It is clear now that you know the world is going to be a shortage of 10 million nurses and midwives in the next 10 years. We are going to have 25 million ICT workers in the next 10 years and these are well-established facts. Why don’t you invest in these areas?

 

That is what Bangladesh and the Philippines are doing. Invest there and make sure we get at least 10 per cent of this number of people. If we are able to get 3.5 million in Diaspora today remitting an additional $5000 every year, which some of them would do more, you have $17 billion.

 

What don’t we look at how to generate money for the future rather than stay and looking for people who want to buy Personal Travel Allowance (PTA) and Business Travel Allowance (BTA).

 

These things are pedestrian and most countries have passed this stage. We can do better.

 

You touched on the issue of health, which I think is very critical. I was reading the other day that you donated some money to some nursing schools, but beyond this handout doctors in Nigeria want to go to Saudi Arabia. How do you stop this brain drain and how can we improve our healthcare system in this country?

 

One thing is that I didn’t donate money, I invested. I told you there will be a shortage of nurses and midwives in the next 10 years. So if the country is serious it is a very cheap thing to do and the money is there. We can decide to have one school of nursing, midwifery and technology per senatorial zone.

 

It is only about 109 and it will not cost us more than maybe N500 million to establish these schools I’m talking. It is as simple as A, B, C and D. you have said that you are going to give people who are bringing dollars and for every N1billion, so if they bring $25 billion you are going to invest N125 billion in servicing them.

 

If you spend N50 billion of this, you will have 100 new nursing, midwifery and technology schools that can give you 300 graduates every year. Imagine this for 10 years, you see the number of people you are going to get from those 100 schools and you will have enough to compete. In terms of brain drain, all we need is to invest more in education.

 

There is no brain drain, these people are people who came out of school and are not employed. Those who are employed are not paid or paid well and they are looking for where they will be able to earn a better living. I’m even sucked that somebody is trying to stop them.

 

We should invest and educate more doctors, allow those that will leave to go out and earn the foreign exchange we are looking for and let the ones here be paid well.

 

A councilor in Nigeria earns more money than a professor of medicine in Nigeria. It does not happen anywhere in the world. This is the only place in the world where a lecturer is not paid but you hear that a House of Assembly member is buying cars and dashing people and they say he is doing well.

Where did he get the money from? So, our priorities are wrong and that is why people are leaving. There is nothing called brain drain.

 

You mentioned education as one of the areas of getting Nigeria out of poverty and the issue of unemployment is double-digit now. How do we stem that tide of unemployment?

 

The more you invest in education the better the economy. This is known everywhere.

 

The growth of your economy is dependent on education. The three measures of development HDI revolves around education because of life expectancy, education and pulling people out of poverty, the more people have been educated especially today that education is the new oil.

 

I just said it that Egypt, I’m not going out of Africa, Egypt now generates more money in terms of Diaspora remittance and even Foreign Direct Investment (FDI) than Nigeria because they have bettereducated people.

 

The same thing is happening in Ghana, just our neighbours here. I’m just using these two countries to show you what is happening. Egypt now gets over $30 billion in Diaspora remittances.

 

Egypt has now become a medical tourism centre in Africa. And see what is happening in Ghana. Nigerians are now educating their children in Ghana and are receiving a lot of FDI because they will tell you they have educated skilled labour better than Nigeria.

 

All these banditries you are seeing all over the place, if you educate your people you will reduce it because today someone can stay in Nigeria and he is employed anywhere in the world.

 

That is what is driving India. They have put money into educating their people especially in technology and today Indians are all over the place running technological companies. And in India, they are doing everything to support companies.

 

The next general election is in 2023. Are you running for president?

 

You see, let us not be preoccupied with 2023; let us deal with this country first. There are 7000 schools that are closed in the North. In the entire Zamfara State, nobody is going to school and we are talking about elections. We are preoccupied with issues that should take a back seat.

 

Does it make a difference if I’m running or not running, would that make schools open in Zamfara? Would it reduce the insecurity? Would it bring about the needed peace and would things be better in Nigeria if I’m running?

 

The answer is capital no. Let us focus on pulling this country out of its current position. Let us focus on creating jobs. Let us focus on pulling people out of poverty and putting food on their tables.

 

Let us focus on their healthcare and forget who the president is. We are consumed by this sharing mentality.

 

 

 

 

 

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