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‘Nobody wins a trade war’

‘Nobody wins a trade war’

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The Director-General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, speaks with COLLINS NWEZE on key developments in the economy, consequences of delay in the passage of the 2018 budget and implications of ongoing global trade wars on the Nigerian economy. He spoke at the sidelines of the just World Bank/International Monetary Fund (IMF) spring meetings in Washington D.C, United States.

We are in the second quarter of this year, still the 2018 Appropriation Bill has not been signed into law. What are your thoughts on this development?

To be honest, it is very embarrassing. When last year, the House of Representatives said they would not look into the 2018 Appropriation Bill till March this year, I couldn’t believe. See, when you delay the passage of the budget of any country, it has economic implications. We call it structural lag and the so- called private sector waits for the budget. So, I asked myself, ‘what do they do in the House?’ So, even if they are on recess, can’t they come back and discuss the budget? So, it is very embarrassing. Nigeria has what it takes. During the military era, even the Sani Abacha era, I remember that by January 1 of every year, the budget is out. So, it is very embarrassing. Then, they now shifted the goal post of the 2017 budget to May 31. So, it shows how unserious they are by not passing the budget up till now.

It has been a recurring decimal and it is unfortunate that it is only once or twice in about 20 years that we have passed the budget on time. One was to be during the time of Ngozi Okonjo-Iweala as Finance Minister. How can you go almost half of the year and you don’t have a budget? There are projects that need to be funded, some to be rolled over. You know we just came out of a recession technically, so this development makes a mockery of it. The budget is expected to power the fiscal policy. So, for me, it is embarrassing and disturbing. I hope that stakeholders in the country would put pressure on the National Assembly because the budget is very important. It has adverse impact on the economy.

Given that we are beginning to see increased political activities ahead of the 2019 elections, if the 2018 budget is signed today, do you think its implementation will still make much impact on the economy and lives of the people?

See, the announcement of the timetable for elections in a country like ours has its own effects because once you announce it, politics takes over and nobody will have interest in the economy any longer. The interest becomes how to be re-elected. But if they have people’s interest at heart, I am sure that if they pass the budget, there are expenditure items they would execute that would help them in the elections. There is what is called the election cycle, once you announce the date for an election, interest shifts automatically towards the election and economic issues become secondary. So, in view, the delay in passing the budget is because they no longer have interest on the economy.

One of the recommendations by the IMF is that Nigeria should increase revenue, especially by improving tax collections. What is your take on that?

I don’t agree with the IMF. Revenue in Nigeria is high enough. It is how you use the revenue. Tax to Gross Domestic Product ratio is low because unemployment is a problem. When people are employed and have a certain income level, they would pay tax. Corporate income tax in Nigeria is rising.  Personal income tax is linked to people working. I always say that people pay tax because they get service delivery. Nigeria’s oil revenue which has been trending upwards over the years, if well managed, can transform the economy. I am not saying people should not pay tax. But I am saying undue emphasis on tax to GDP ratio is not the answer, except you want to tax luxurious items. We have almost a dead manufacturing sector, so where will the tax come from? Our major tax is from oil and royalties. Again, if you look at the states, there are some that generate a lot of revenue through taxes. For example, in Lagos State, property tax gives the state a lot of money. If you look at borrowing, Lagos borrows a lot, but it has the capacity to pay because the state generates a lot of tax. Lagos State is Nigeria’s business capital. Again, if you tax companies too much, they would move away. Nigeria is not the only destination for investors. So, you must be careful how you do it. You can mobilise resources in several ways. Look at savings in Nigeria, what is the returns on savings? People that save in the banks, what interest rates do they get for keeping their money in the banks? Not up to four per cent in some places. But if you pay something reasonable on savings, a pool of that savings could be used to develop infrastructure in the country. I think the IMF has a problem of one-size-fits-all. Once an economy has a problem, they say the solution is to raise revenue. What about expenditure? Expenditure is the other side of it. Are we spending efficiently in Nigeria? So, a system where the salaries of lawmakers is unnecessarily high and there is a kind of fiscal rascality, you need to look at that side of expenditure and not just revenue?

The federal government collects the juicy taxes, they should let the states collect some of these taxes and run them efficiently if they can. So, I don’t think the issue is revenue. If people have jobs, they would collect salaries and they would pay tax.

Do we put the blame of the challenges we have in the country on leadership or on the process of leadership recruitment?

Both. The country has not had in my view what we call visionary leadership for a long period. There were some attempts when we thought the country was about to make progress and suddenly, it was truncated. The process itself is a problem. The masses are not properly conscientised.

But some have argued that the first set of leaders in this country was not prepared for leadership when the country got independence?

Yes, there was that argument. But for me, it is never here nor there. When do you define when you are ready to ask the colonialists to leave? We have seen that in some places they went, they refused to leave, and they became settlers. There, the indigenes became more revolutionised and fought for the colonialists to leave. We have also seen where after fighting for the colonial masters to leave, in some countries, those that took over never did better. My own argument is that there is no time to be ready. You seize any opportunity that you have. People forget that agitations led to the negotiation for independence. People died in Enugu coal mine riot in Jos and workers revolted in almost all the states. So, the military incursion into politics was the problem. Maybe if the first coup had succeeded, Nigeria would have been a different country. Again, at the time Nigeria got independence, countries such as Singapore, Malaysia, Indonesia and the rest, we had almost the same macro-economic indices and we were even doing better than them. Even China got it independence in 1948 and today, everybody agrees that within a short time, China moved 700 million of its population out of poverty.  Others have said that eventually we would get there, but I am saying that we have the advantage of seeing what other countries had done and fast-track our development. So, we need the right type of leaders to transform this country. In term of blueprints to change Nigeria, we have lots of well-written documents by everybody. But implementation is the problem. So, Nigeria needs visionary leadership at all levels.

Do you think the trade tension between China and the United States will have any impact on trade in Nigeria and what is your take on decision by Nigeria not to sign the Continental Free Trade Area agreement?

In terms of the trade war between the United States and China, first, what President Donald Trump did was to challenge liberalism. For him, there is no longer free trade. Each nation should determine its own fate.

But nobody wins a trade war. And no US President has done negotiation without putting the US first, even though when you are negotiating you must put your country first. In my view, President Trump has taken on a wrong country by challenging China, which is an emerging, if not, a world power. Most of the important Chinese imports like vehicles come from the US. So, the US will not win that war and China too will not win the war. So, at some point, you must close ranks. Either way, it has an implication for Nigeria.

We know that our major export is oil and we import almost everything from China in particular. So, if Chinese had to pay more to trade with the US, they will pass it on to us. So, Chinese goods in Nigeria may also go up and may result into what we partly call imported inflation. So, it means that we must strategize in Nigeria and that calls for Nigeria ensuring that its economy is diversified.

We must industrialise to fight what is happening between the US and China. We cannot continue to depend on the export of crude oil. We import virtually everything and don’t add value to anything. Granted we don’t have to manufacture the entire things we need, we can add value to some of our natural produce. So, I think that for what is happening, we should start to strategise on how to deal with this matter because Trump is taking it very serious and same thing with China. And others are involved.

The Continental Free Trade Agreement (CFTA), to me, I had thought that by the time FEC approved it, they had done wide consultation. So, from my thinking, President Buhari is not saying he will not be part of it. I think, he is playing to the fact that the labour leaders and the Manufacturers’ Association of Nigeria (MAN) said they were not consulted. So, he wants to hear their views. But, let me tell you, the African leaders are jokers. They have signed many of those things and they never translated into anything. But if it is done, it will be a large market to negotiate with rest of the world. What Nigeria should have done was what South Africa did – attend the signing ceremony. From what I learnt, South Africa signed the document symbolically. As Africa’s largest economy, Nigeria should have attended the event, then go back later to sign the document. But I suspect that going forward, there may be a way out of it because Nigeria is planning to have the headquarters, which should have created a lot of jobs for our people.

And Nigeria has that size and market to do same in Africa, by giving conditions before signing the CFTA. So, eventually I am sure we would be part of it, but I will not condemn the president for saying he wants to conduct.

So, let them consult properly and let MAN tell the government what it wants because you must put down conditions. That is what China does. China dictates what it wants to the world and it says take it or leave it. Facebook and other social media tools, Uber are not in China because they have their own.

The post ‘Nobody wins a trade war’ appeared first on The Nation Nigeria.

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