The Interview Editors
Development economist, Odilim Enwegbara, speaks on a bucket of hot-button issues from the Sovereign Fund to Nigeria’s debt and petrol subsidy:
The IMF just rated Nigeria as one of the worst countries in the use of Sovereign Wealth Fund. What does this really mean?
IMF has no reason to comment about Nigeria’s Sovereign Wealth Fund. In fact, IMF is supposed to be telling Nigeria to dismantle its Sovereign Wealth Fund and massively invest in infrastructure.
Nigeria has no reason to save. If you have a lot of infrastructure deficit, and Nigeria has over $300 billion deficit, you don’t need to save.
And whatever money you get in terms of revenue, you must wisely invested it in infrastructure to reduce the cost of doing business in your country and make all sectors more competitive.
And as a result, you create jobs and grow the economy. The IMF is always anti-development.
All its policies and advice to developing countries is contrary to the things they are supposed to do if they want to catch up with developed economies. So, I was not surprised to hear the IMF say that.
If Dangote could invest $12 billion in the downstream, why shouldn’t the government sell off the remaining refineries and allow foreign and local investors to compete and build similar refineries?
The Nigeria Sovereign Investment Authority has responded, saying the IMF has taken this position because the country was investing 50 percent of its fund locally instead of in foreign markets. Do you agree?
Both IMF and NSIA are not right. I am always against Sovereign Wealth Fund. It is right to the extent that IMF wanted it to use the little fund to speculate. But also, when you say 50 percent, now tell us what happened to the remaining 50 percent.
The overhead cost of NSIA is too much. That is why I am saying, why should we continue to fund the agency when we don’t need it in order to know where to invest our money.
Two, who controls the investment? Imagine $2bn to be invested and the president of Nigeria who has authority over this agency could insist that I want the money to be invested in agriculture or infrastructure in Katsina.
The board of the agency will do that. So, his preference does not go through the budgetary process that allow us to know the return on investment and prioritize future investments.
That’s why I continue to say we must dismantle our Sovereign Wealth Fund. We don’t have too much savings that we could play around.
We are not supposed to even save. Government is not supposed to save. Government is supposed to be an investment vehicle, not a saving vehicle.
So the Sovereign Wealth Fund of Nigeria in unnecessary. Those countries who create the wealth fund like Saudi Arabia, like Malaysia and so many of them is because they have excess funds to invest massively in infrastructure.
They have excess funds they could invest in strategic sectors or foreign economies. They use that to bring technology to their own economies.
If a Saudi company can invest in the technology industry in the US and be able to control it, it could equally ask the company to relocate to Saudi Arabia because it is almost wholly owned by a Saudi company, it will relocate.
So Nigeria has no reason to create the wealth fund in the first place. I was against it when Okonjo-Iweala was creating it.
I wrote extensively against and it was unnecessary. Let all revenue coming into this country in terms of oil money be quickly to nested in infrastructure. Buhari should quickly dismantle it.
The West has never given Africa loans for real critical infrastructure development
Is it a reasonable comparison to liken the Sovereign Wealth Fund to Pension Funds, something to fall back in?
Pension is a completely different thing all together. The wealth fund for so called rainy day is a mirage. If you are hungry today, you can’t think of tomorrow.
You can’t create tomorrow when you have nothing today. So, in what basis are you looking for what to fall back in? You have to massively invest in infrastructure everyday. If you are able to develop today, tomorrow will take care of itself.
But we continue to think that we to remain poor because tomorrow, you have to have money not to continue to be poor. That’s what you are trying to say here.
I want us to stop that concept of tomorrow. Pension fund is completely different thing because pension fund is from those who have contributed to it. They want their deposits to be invested so that there will be a higher return on investments.
The IMF has also warned Nigeria and other African countries against borrowing from China. From your perspective, is this sound advice?
Yes and no. Yes in the sense that Chinese loans, even though they are soft loans, concessionaire loans, but they are tied to infrastructure or projects that must be done by Chinese companies.
The problem there is that the cost of the project maybe bloated. A project of $1 billion could end up costing $1.5 billion. The Chinese raise the cost, bloat it and find local government officials to bribe in order to ensure that the cost is acceptable at all levels in the National Assembly and other stakeholders who will approve.
That is the problem. No in the sense that the West has never given Africa the opportunity to develop in the amount of money China is giving Africa.
And once they do, it is tied to good governance or such things. Also, they provide funds for white elephant projects. The West has never given Africa loans for real critical infrastructure development.
Their loans have been tied to so called human rights and good governance. And of course, they are mostly for white elephant projects that have no return on investment and have no impact on the economy.
The subsidy is a scam and I don’t know how we came about the subsidy. You have a raw material you must transform to finished products
The IMF has advised Nigeria to remove the existing fuel subsidy. What do you think?
I completely agree. The subsidy is a scam and I don’t know how we came about the subsidy. You have a raw material you must transform to finished products.
And you decide, through one way or the other, through corruption or through scam to transform that raw material into finished goods.
It is the greatest shame we as a country have to face. If we continue with the fuel subsidy, we discourage foreign investors and local investors because of what use is it for me to invest in the downstream when I can bring in the finished goods and ask for subsidy on it?
If Dangote could invest $12 billion in the downstream, why shouldn’t the government sell off the remaining refineries and allow foreign and local investors to compete and build similar refineries?
If Nigeria could have three refineries like the Dangote Refinery, Nigeria will not only be self-suffice, Nigeria will be exporting about 80 percent of its downstream petroleum products overseas. You make more money.
You cannot do that when all the people that man our downstream are just friends of those in government. I want us to privatise, to sell off all the refineries so that other people will compete with Dangote in the downstream sector.
Let other people compete so that 90 per cent of our crude could be refined, exported around the world at a higher value to our crude.
I agree with them. We must remove the subsidy. It is the subsidy that is discouraging investors. My concern is that Buhari is worried that if we remove it, the refineries will be set up in the south.
Now cost of transportation will make petroleum products more expensive in the north. That will affect the north. The rest of the country will suffer.
Government could insist on a pipeline investment so that the refined products could go to the north cheaply to the north. The early we do it the better. We don’t need the IMF to tell us the truth.
