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INTERVIEW WITH:
MR. ALHAJI USMAN
FORMER MINISTER OF FINANCE
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Question 1: Nigeria has been making huge efforts in order to reach a sustainable growth of its economy, without significant help from the international community, which is reflected by the 3.8% growth experienced in 1997. What have been the main guidelines and priorities of your ministry in order to accomplish this growth?
Answer 1: Let me say that over the last 3-4 years Nigeria has subjected itself to strict budgetary discipline, the outcome of which is a relative stability in the macro-economic environment. However, the extent to which I think we had to exercise stringent budgetary discipline to a certain extent affected the growth aspect of the economy, because we have not really grown for the last 3 years or so.
However we have been able to stabilize the environment, the exchange rate, stabilize the interest rate and the money supply in the system. In such a way, we were able to bring down inflation from a high double digit to a single digit sometime in 1998.
So the main objective, I think we should try and maintain this stability, coupled of course with the political stability that is also more or less in place now in the preparation for the democratic government. I think we have succeeded to a certain extent in bringing this to1999 budget, operation and pronouncement. However we are against the background of all the economy that is changing towards recession in such Nigeria also has its own fair share of the suffering in the higher development in the economy field.
One of the serious effects of course, is the fact that the economy is largely dependent on a single product which is oil, which affected the international market and the prices have been on the decline for quite sometime now, so this has significantly affected our revenue inflow and also our ability to put up sufficient budget resources to address the budget in significant areas that we consider necessary.
Our main focus this year is to address poverty alleviation and social sectors. In particular to try to retain the budgetary discipline which we have maintained over the year. We are facing a deficit budget but I must expand on that later.
We are in the process of also trying to discuss with the budgetary institutions particularly the IMF as a means of facilitating openings up of discussion with our official creditors. The bank of the whole obligation seems to put away of the Nigeria economy. We have just recently concluded negotiation with the IMF for starting a program and as soon as the outcome of the discussions are reviewed by their management and also accepted by our own government we will then make arrangements to sit and review our debt with out creditors.
As I said we are addressing poverty alleviation with the social sector against the background of building up resources. We have not aimed at starting new projects this year we are continuing with on going projects and we will devote a great deal of our resources to alleviating poverty. And we will be waiting hopefully for improvement in the situation in the oil market so that additional inflow will facilitate our review of the budget sometime in the year. Right now we mean to concentrate our effort in alleviating poverty and trying to diversify the base of the economy. In the budget pronouncement, we have provided incentives towards certain sectors of the economy to enable us facilitate the diversification of the revenue base so that we can alleviate our total dependence on one single product-oil. We suffer through the purchase of oil which consequently affects our economy.
So we want to diversity the base of the economy to remove the total relevance on oil. Three sectors in particular are addressed in our budget for support i.e. Gas sector. From all indication we have more gas resources in this country than we have oil resources and we will look at the gas sector and see what can be done to improve revenue generation to diversity the base of the economy.
Another sector we have also to look at seriously, is the solid mineral sector. In this sector we have discovered quite a number of minerals in the solid mineral sector, such as gold, berate, coal, etc. We want to encourage investment to that sector, both local and foreign investment, while some incentives have been provided in the budget to encourage people to come and invest.
And then of course we want to also want to encourage agriculture which was very important before the advent of oil. Nigeria was largely agrarian and then the changes in the pricing of oil brought such a great deal of fortune to Nigeria as far back as 1973, that we abandoned agriculture. We now want to go back to agriculture. But the small scale enterprise is also being seriously addressed, because it is more or less the engine that would generate employment and improve the income of the rural areas. We are giving some incentives to enable financial institution to provide all credit for this sector. All these areas are actually addressed in the budget and every effort will be made even to increase revenues to channel more resources in that direction.
Question2: There is another aspect of the Nigerian economy that is becoming more important , which is the privatization process, and you have already started this as other African countries have done. Which sectors will be given priority and how could American investors participate?
Answer: Worldwide now there is a growing realization for government moving out of activities that are better performed by the private sector. And also there are some sectors that stand to benefit or are more keen to privatization than others. The telecommunication sector is one of them, power is another sector.
These two are very important for growth and for development. Everybody seems to look at these sectors with some kind of interest and enthusiasm and I think even here in Nigeria these are sectors where I think we can readily go into and privatize, because the telecommunication sector blessed by the system and we want to improve their efficiency, performance, and especially we want to open up the economy to the rest of the world communication. So the telecommunication sector is actually one of the most immediate moving on to the privatization effort. We have issued some private licenses but through the public enterprise. The power sector is another sector, this country is very large, we have the public power generating the transmission and distribution facilitating and the transmission and distribution facilities have been gradually aging and requiring actual capital development and the government has not got the resources to recapitalize and rehabilitate this industry.
| Question 3: How should American investors participate in this process and take advantage of all those new investment opportunities?
Answer: Well I think American investor have been a little reluctant coming in to Nigeria except in the oil sector. In the oil sector there is Chevron is there is Mobil, there is Texaco and Shell, Elf, Agip and the rest are all there. But Chevron are around and they have been around for long and are very active in the oil sector also developing interest in the gas sector. And also in the power sector Mobil is already putting up a power project which will be generating the city using gas. Apart from various gas wealth and then transporting this to power generation plant which in turn produces the energy they use. So they have invested a lot.
So I would like to interest the Americans who hold interests particularly in these two sectors, the telecommunication and power industry. Nigeria is more or less a gateway to Africa.
So we certainly provide an opportunity and a rare opportunity for more investor to come in and to reap the benefit of their investment.
Question 4: The banking sector is now under restructurization, what are the main aspects of those reforms?
Answer: The banking sector has recently gone through significant reform and restructuring. It has experienced such level of distress over the last couple of years and this review is seriously addressed, we had to cancel a number of banking licenses of distressed banks, we had to restructure the pay due capital for banks, we had to improve the capital base and we had to encourage them to adopt international guidelines. We have had also to compel the bank management to improve their capacity and management capability so it has been a real transformation.
And now we are opening up more to the rest of the world, we tend to issue out new banking licenses to investors who develop interest in our financial system, who want to contribute to the development of this country.
American companies have been here for a long time and they participated in the Nigerian banking system. Some years back, when there was privatization and indiginization from institutions, some American companies came back from here. They would have preferred ownership or significant large portion of ownership of the institutions.
Some of them had to withdraw, because the level of ownership was being reduced. That legislation, that precise legal regulation has since been removed, and investors can now invest on large percentages in institutions of Nigeria, if they so wish, or they can start local affiliations or open up branches of their own institutions in this country. Investors have been showing interest and they will feel more comfortable coming in through their local banks or banks they are familiar with that can provide for their banking facilities and credits to participate in the economy. So we encourage investors developing interest in that sector. So as I said, yes we are just distressed we strengthen the capital base of the bank and we have insisted on increased capacity building and management ability and means of legislation which address distressed banks and penalize prosecuted erring bank managers, and bank management even bank customers. The system is now stabilized and ready for take off for competition.
Bank of Boston was here also Chase Manhattan bank , we will be glad if we see them come back. Bankers Trust was here indirectly of course to invest in one of the banks, ownership of the banks they had also some representative offices here. So there were all these banks and some of them are now showing interest in coming back. Some of them did not quite leave completely and they were partly around and there are now attempts for them to come back and we will be glad to receive them
Question 5: The stock exchange is also developing itself quite quickly and the Nigerian stock exchange is one the most active in Africa. What do you expect will further booster its development?
Answer: Yes the capital market is controlled through the Nigeria stock exchange and has been around for quite sometime now. They are now also experiencing the new transformation, the new revolution and they are opening up to the rest of the world which is being expressed by other stock exchanges across boarders. We are making some significant effort in trying to do that and they are also getting on with the use of high technical operation, computerization, putting up a new capital market institution here in Abuja which will be competing of course with the one in Lagos called the Abuja stock exchange. And that will stretch into real time computer and transact business that are all the latest gadgets will be there Nigeria stock exchange also has gone through some serious transformation and its doing very well. Capitalization on the exchange is high and is about the highest in Africa and probably is about the best in terms of performance and compares well with others around the world except that the economy is down. When the economy was booming a lot of capital was generated
I believe those of them in that were here earlier or before probably have no cause to complain or to regret except that the indigenization exercise sort of reduced their holdings. Those in financial banking institutions in particular know that these legislatures have been significantly modified to accept high call in investment and now that the system is a little bit more stable now we are saying that they are free to come. And they are opportune to come; the sky will be their limit. But given with the new areas, we are open, the oil sector is already well developed the gas sector is in the developing stage, solid mineral sector has a great deal of potential and opportunities.
Agriculture is a very much an open field for people to come in to invest. We have a well educated work force with about 30 to 40 universities in this country and together I think we have other tertiary institutions of higher learning technical colleges that are generating a work force that is well spread into the various businesses; lawyers, accountants, engineers all these sorts of people so I think their future is there. |
© World INvestment NEws, 1999.
This is the electronic edition of the special country report on Nigeria published in FORBES Magazine,
May 31 st issue.
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NIGERIA
Nigeria
