Former Chairman, Nigerian Economic Summit Group (NESG), and current President of the Pharmaceutical Society of Nigeria (PSN), Mazi Sam Ohuabunwa, has warned that the piecemeal management approach of the containment of COVID-19 spread, whereby some states are locked down while others are not, would take a longer time to solve the problem.
He spoke on some other national issues, including the fate of the country’s economy with regard to the International Monetary Fund’s (IMF) prediction that it would shrink by 3.4 percent this year following the outbreak of COVID-19.
Nigeria, like the rest of the world, has been battling to contain the spread of COVID-19 pandemic; do you think government is doing enough in that regard?
My assessment is that government is trying. There is no gainsaying that it is trying. However, it is not doing enough; there is yet much more that can be done. It is actually trying but it could do better.
After the initial two weeks lockdown in Lagos, Ogun and Abuja, residents of these areas practically found it difficult to survive the period. But on Monday, April 13, the lockdown was extended by another two weeks, fuelling pockets of violence in Lagos where some bandits resorted to breaking into people’s homes and shops, looting here and there. What should government do to contain this ugly trend and ensure that the additional two weeks record some level of success?
I believe that government has all that it takes to make rules and enforce them, especially in partnership with the state governments. Nigeria has police, army and other security forces and virtually all state governments have different security outfits, like Amotekun, vigilance groups and others; so they should mobilise and ensure that the decision that has been taken is enforced. I personally believe that the lockdown is essential. And, if I were the president, I would have locked down the whole country. India has locked down the whole country. America is almost fully locked down. We are all seeing the growing cases in Kano; we are seeing the spikes here and there, and if we continue with this piecemeal management approach, we may never come out of this problem for another one year. I was thinking that in this second mandatory lock down, the government would have included more states or made it national. It would have been better if the whole country is locked down for a given period and the problem dealt with once and for all, so that we can resume our normal lives. But, this piecemeal method will take a longer time for us to solve the problem. So, my take is that government did well by locking down but it could have done more. If I were the president, I would have locked more states or even locked the whole country; at least, all the states where government has received reports of incident cases would have been locked down. I know that there is the problem of hunger but that is not beyond government. Government can lock down and still provide food and food banks, using the state and local governments. Government will provide food bank in every community and those who want to collect food will go there to collect food from time to time. My point is that we need to be much more serious in what we are doing. The evidence is that we are not enforcing the quarantine appropriately and it is not extensive enough. It should have accommodated more states, if not the entire country. That’s my take.
The IMF has just predicted that Nigeria’s economy would shrink by 3.4 percent this year due to the COVID-19 pandemic, and possibly pick up by 2.4 percent in 2021; what is the implication of such prediction to us as a country?
First, I think that the decline may be worse than 3.4 percent. If you watch well, you will find that we are just trying to come out of recession. The growth has been fragile and on top of that fragile growth, we have this lockdown which has brought economic activities to a halt. So, that alone, will take us to a recession. Then, you now add crude oil prices that have crashed; so, considering that our economy is dependent on oil, I believe that the recession may be worse than IMF’s prediction, except of course, the government adopts more bullish measures than it has currently adopted. So, the implication is that everybody will gear up because we are going to have a rough patch after this. But, what choice do we have? We want people to be alive first. If they are alive, then we can deal with the economic issues, which is secondary. The primary consideration is to be alive, before the secondary consideration which is economy. So, we cannot avoid the recession but we can limit it by being more bullish in the way we provide stimulus to companies and organisations.
When you said being more bullish, what do you mean? Can you expatiate?
If you ask me, the Central Bank of Nigeria (CBN) has said there is N50 billion that is provided for Small and Medium-scale Enterprises (SMEs). Now, can you check to know how many SMEs have obtained this loan yet, or how many will eventually access it? The CBN has put down N100 billion for pharmaceuticals for example, but the same condition you will use if you are borrowing money from a commercial bank is the same condition that applies except lower rate or may be, longer tenure. So, I have not seen anything that will make it easier for the SMEs or other companies to borrow money differently from the way it used to be. That is what I mean by being bullish. Being bullish means that we need to find some other more proactive ways, and not using the same old method; like going through the same evaluation, risk assessment and all that we normally do that takes time and many SMEs can never ever be in a position to meet the expectations of the commercial banks. So, we need to be more creative. Let it not just be that we are doing things but that at the end of the day, we actually get things done; that is what I mean by being bullish. Government needs to make some more exceptions, and go out of its way to implement some of these policies. Look at what Lagos is doing today, that is what I call being bullish. Lagos today, is not only waiting for people to come to the testing centres, they are going to people’s houses to do investigation themselves; that is the way to be bullish in things like this. Government needs to go out of its way to go to companies, and businesses and find out what issues they have accessing these funds, and not to sit down in Abuja and issue instructions to commercial banks and micro-finance banks.
Last week, the IMF granted debt reliefs to other African countries, leaving Nigeria out; what do you think made IMF not to consider Nigeria for that?
Well, IMF debt relief always has some conditionalities and if you are willing to meet those conditionalities, they grant it to you. I think Nigeria is not ready to meet those conditionalities and that is why IMF may not have extended such debt relief to Nigeria. That is my thinking and that’s one. Then, the other one is their own appraisal of Nigeria’s situation. If they feel that Nigeria’s situation is not as bad as those other countries, they probably, would be discriminatory in dealing with those other countries. That’s one possibility, but the thing is that Nigeria or any country needs to first agree with the IMF’s conditionalities, because it doesn’t give you money without conditionalities. So, maybe, Nigeria is not willing to accept or negotiate those conditionalities now.
Last month, the Federal Government reduced the petrol pump price, first from N145 to N125, and then to N123.50 per litre, even though, petrol stations still sell at N125. Do you think the reduction is commensurate with the fall in crude oil price at the international market?
I have no personal way to measure it, but I think that is the right step to take. We have long argued that the price of fuel should be deregulated in Nigeria. I have always been surprised that government has failed to do that for reasons they know better than those of us who are either in NESG or other private sector organisations that have recommended total deregulation. However, this is an opportunity they have used and it makes sense to me. Whether it is actually equivalent, I don’t know, but I will like to believe the Petroleum Price Regulatory Agency (PPRA) that says they have now introduced some mechanisms to adjust the price to be in tandem with the global crude oil price. So, I want to believe them and I think it is the right thing to do. The only thing we need to start preparing is how to defend the increases when the crude oil prices begin to grow again. They will grow up again; that’s when the challenge will come. Everybody has accepted the decrease now with equanimity at a tough time like this. The challenge is when the oil prices begin to go up and prices of Premium Motor Spirit (PMS) begin to go up, using the same protocols. That’s when we will test our resolve and Nigerians’ understanding of what we are passing through and what we have adopted. But, this is the right thing to do at this time.
With the continued fall in the price of crude oil, which is the main foreign exchange earner for the country, shouldn’t we as a nation begin to pay more serious attention to the diversification of the economy that has been a subject of public discourse for some time now?
Well, there are two sides to diversification. There is diversification of our Gross Domestic Product (GDP) and there is diversification of foreign exchange earnings. On the GDP side, we have done a great diversification. At a time, GDP was actually contributed largely by agriculture, oil and gas and trading, but now GDP is diversified. Oil and gas have come down to about 10 percent; agriculture is under 20 percent. So, you have better growth in manufacturing. It used to be three percent but now it is about nine percent. There has been a diversification of GDP in telecommunication, mining, services, banking and others. That’s one diversification that we have achieved. But, where we have failed is diversification of our foreign exchange earnings. We are still a mono economy when it comes to foreign exchange earnings. We are still dependent on oil to give us up to 80 percent of our budget and up to 90/95 percent of our foreign exchange earnings. That’s where the risk is high and the way out is to become an export-driven country. We must introduce export policies that will make our industrial outputs, our agricultural outputs and other outputs to be exported. We need to start producing and exporting. Until we get to that level, we will depend on oil which is the only commodity we are exporting and for which we are globally competitive. Our local manufacture is not globally competitive, so that’s the problem. And agriculture is so certainly labour intensive that it cannot compete with where you have industrial agricultural outputs or commercial outputs like you have in the United States and elsewhere. Nigeria is just waking up in trying to ramp up its local production. But, we are yet not able to meet domestic demand as to have excess to supply. It has to be a policy of government to say we want to do an export driven economy. That is the way we diversify economy. Right now, no government has been able to come to this decision. They say it by word of mouth but there is no action.
Our budget benchmark was $57 per barrel, but now the crude oil price has fallen down to below $20 per barrel. What is the implication on our economy?
Well, they have done a budget review where they have brought the benchmark down to $30 per barrel.
Yes, but you know that this is over a period of time; one year period. It may be below now but we are hoping that it will go above $30 with the decision made by Organisation of Petroleum Exporting Countries (OPEC) to reduce oil production by about almost 10 million barrels per day. And, we also hope that COVID-19 pandemic will stop, resolve or diminish, to allow economic and industrial activities in China and other parts of the world to begin, so that, demand for crude oil will go up. We hope it will go above $30, so that by the time it gets to average, we could be close to that benchmark.
Are you saying there is no cause for alarm?
Yes, there is no cause for alarm. I think $30 is reasonable.