The problem of Nigeria’s economy is about what the citizens would eat – Omotola

Lai Omotola is the Group Managing Director of CFL Group, a purely indigenous infrastructure development company with core interest in real estate, agriculture, oil & gas as well as media and publishing.
At an interactive session with select journalists in his Maryland office on Wednesday, Omotola examined extensively on challenges with Nigeria’s domestic economy; proposed what could be done to revive the troubled economy and unveiled a multi-million naira head office.
The interview is reproduced below:
With the state of the country’s economy, what does it portends for the real estate sector?
If the economy is challenged, the real estate sector is not left out of the problem. This is because the practitioners in real estate sector aimed to access fund from the banks. On approaching the lender, they demand for 37 percent. If that is included into the construction cost, it further increases the cost. For instance, if someone needs N1 billion to build an estate and on approaching the bank, they demand for 37 percent interest. If that money in added to the cost, the developer would ask any potential buyer to pay N90 million for a semi-detached duplex. Do not forget that the purchasing power of the people have declined since the 2015 election. It is hard to raise such fund and that is why a lot of estates are lying fallow because not everyone is ready to buy property. Do not forget that three things are important to a man, feeding, clothing and shelter. The last is optional because one could decide that he does not have the fund to build and opt for rent. That is why whenever you see anyone that cannot afford rent in Ikoyi leaves for Lekki and when he realized that the rent there is also expensive, leave for Epe and later for Shagamu to build his house.
Do you think that the present Administration, as constituted, could think out of the box to solve the country’s economic challenges?
To solve Nigeria’s economy, one does not need to think out of the box because the problems confronting Nigeria’s economy are mundane. Our challenges do not really require that one thinks out of the box. It is not Japanese economy or Chinese economy. The problem of the Nigerian economy is benchmarked on what the citizens would eat. All we are eating are 70 percent imported, too many people chasing the dollar. That is why dollar is high. Such arrangement must be changed. That does not require any special economic strategy. All that is required is old economics to solve. There is nothing serious about the Nigerian economy that cannot be resolved. From my research, I have realised that the economic team in any country is not about bringing crowd together. The thinkers for the economy cannot be more than four. Those are the like minds. But when you bring 36 governors together for them to discuss the country’s economy, what happens during that discussion would be quota system. But when the team has only four or five persons in strategic positions, things will change dramatically. In this session, there should be the Governor of Central Bank of Nigeria (CBN), Minister for Finance, Minister for Works, Power & Housing, Minister for Transportation and Group Managing Director of Nigerian National Petroleum Corporation. What they needed to turn Nigeria’s economy around is to create activities because there has not been any form of activities in this government. When I mean activities, it indicates the Ministries embarking on things that can stimulate the economy. For instance, if Minister of Housing says I want to build one million houses and I need 1,000 contractors. Through that, he will be creating activities through the length and breadth of Nigeria. But what you find is that all the houses would be built by two contractors.
If you do your research properly, for the past 20 years, in the Ministry of Works & Housing, if they have the Budget of N150 billion, the number of contractors working there are not more than five. They collect all the major contracts. For these contractors, whenever they collect any contract, they are not employing anyone new. They already have all that is required to complete the project. It is a chain. But if someone, who had not taken the contract before, handles it, he will employ more people. He will constitute a new team and the money will circulate. So if anyone throws in N100 billion, the money will circulate within their circle. Within that circle, you will see someone that has over 200 contracts in his capacity while his neighbor does not have one. Such cannot happen in any developed country. There is need for competition which helps to bring the best for the country.
If you are in CBN Governor’s position, what would you be doing differently to boost the country’s economy?
I need to tell you one thing: the CBN Governor is highly challenged. A lot of experts claim that the government has no business in business. But what happens when the businessmen fail is that the government must rise up and address the challenge. That is what we call intervention. The apex bank has been intervening in different sectors including real estate, manufacturing and others. The CBN has become the lender of last resort which should not be happening unless once in 50 years. It should be temporary. Perhaps after one year, the apex bank leaves the sector for the stakeholders. But the CBN has now taking that permanent role because the banks are lying prostrate. When the bank continues in that position, it would be difficult for the economy to come up. The CBN is the one giving the loans that the bank should have done. Do not forget that the banks too need the CBN to survive. You will remember the National Bureau of Statistics report that stated that the money already collected by the commercial banks to remain healthy from the CBN is alarming. That was the same window the former CBN Governor, Sanusi Lamido Sanusi shut, which led some banks to merge but has now been opened for the banks to survive. When the Federal Government does that persistently, intervening in every sector, one would not be able to really place such economy in capitalist or socialist.
The Federal Government claimed that Nigeria is out of recession, can you quantify what your business lost during this period?
Those who suffered tremendous losses were the importers especially when the exchange rate was high. They left for market at about N500 to a dollar. But before they returned, it has crashed to N360. Due to this, some who often import large containers have reduced it. When one embarks on research into markets, one would realise that we have serious challenges. I have ample knowledge of this because I also build markets. They are seriously complaining that Nigerians’ purchasing power have dropped drastically.
Why do you think the stakeholders in the power sector are not exploring the window of foreign investors to correct the challenges in the sector?
If this country is to get it right, three things has to happen. This country is under a serious spiritual siege. Someone must step up to do what I described as spiritual correctness. God does not talk to a group of people, but to someone who will be appointed to embark on certain activities. It must be corrected spiritually. Things are happening and all we do daily is exclamation. Second, we must get our infrastructures right. Third, the orientation of entrepreneurs must be changed totally. Recently, the Asset Management Corporation of Nigeria (AMCON) reported that about 250 business owners owe it N3.2 trillion. If that money had truly been pumped into Nigeria’s economy, things would have changed.
For instance, when an average Nigerian wins a contract, what he does is to first buy a car and not equipment. The difference between indigenous contractors and their foreign counterparts was that while the former does not have, the latter bought the equipment. It is easy to get foreign investors. But one must understand that the foreign investors are very meticulous in whatever they do. An average entrepreneur in Nigeria does not aim to go through the rigorous path. An average entrepreneur that had bought the power assets does not want to go through any thorough exercise. Corporate governance is very huge. Many of the entrepreneurs do not want to pass through corporate governance. An average entrepreneur in Nigeria takes from funds release for contract to fund other things. But the foreign investors, if involved, would never allow such.
Report put the amount of money spent on flour and wheat importation to N3.9 trillion. This figure is higher than money spent on petroleum importation. So, what is the federal government not getting right in the diversification process?
Do not forget that wheat and flour are used to produce bread and other things we consume daily in Nigeria. Do you know that in Lagos alone, we slaughter about 4, 000 cows daily. One may be wondering how. I know one big retail outlet that slaughters 400 cows daily. They do not have enough to service their customers. Do not forget that the cow cannot produce more than two litres of milk daily while other nations have cows that produce 15 litres. If the government decides to concentrate on feeding its citizens, more money will remain in the economy. Consequently, income would be realised more from other sectors than crude oil. But the challenge with agriculture is that it does not involve in deals unlike the real estate where deals are completed less than six months. Agriculture often requires patience because whenever one plants cassava, he must wait for six months before harvest. Not many will want to wait and that is one of the challenges facing the sector in Nigeria. Another issue that affects the agricultural sector is access to capital. That is why many are not looking at investing into the sector especially Nigerians. But the foreigners in the country are investing massively in the sector. They are taking over the economy. Our own manufacturers are shutting down, leaving the stage for the foreigners to manage. The reason is that Nigerian manufacturers have no ample access to funds unlike their foreign counterparts. The Chinese came into Nigeria with funds from the Bank of China.
Although you said that the banks are lying prostrate, some banks declared profit recently. How does this justify banks’ assessment?
I have been thought in accounting classes that accounting is the matter of opinion. It is half full and half empty. Profitability is all about opinion. I can declare profit does not translate to Naira and Kobo for the shareholders. And the logic is this. Rather than give the investors profit in cash form, banks asked them to plough it back through increase in shares. Because accounting is an opinion, it is responsible for some banks that ran into crisis in the United State. They juggle the numbers and present the statistics to the shareholder and customers. One needs to understand that the main source of income for any bank is to sell money. They do that through issuance of loan. When the banks are not lending, how are they making the required profit? They can also make the profit through investing in government bonds that is zero risk than do otherwise.
Nigeria’s ease of doing business has improved by 24 steps compared to 2016 rating. DO you think this is justifiable?
The new ranking is justifiable but the mistake many often make is that the purpose for ease of doing business is different from the Fitch Rating. The reason for this improvement was that the World Bank has realised that what is important in every economy is job. That is why any politician that campaign more about job creation has ample chances of winning election. The bank realised that the sector that creates employment more is the informal sector. The informal sector players do not need to employ large number of workers. So, the rating does not include the multi-nationals but the informal sector actors that are affected drastically by any government policy and now the government is making things easy for them to embark on their business. They brought nine criteria which anyone must meet. After examining the country, the bank realised that the present administration’s economic team led by the Vice President, Yemi Osinbajo, has changed the strategy previously adopted at the airports, collateral registry, that is, the CBN assisting the small businesses to grow in the country. It is different from the Fitch rating which stated that the credit rating of commercial banks in the country is moving towards BB- (minus). The reason for this was that they discovered their revenue could no longer support their liabilities.
How then do we get out of the woods?
The media has to come to the rescue. Sadly enough, the media has failed because every knowledgeable person in Nigeria relies on it for information including President Muhammadu Buhari. When anyone makes allegation or claim, they all refer to the media as their source of information. That is why the solution to Nigeria’s problems is with the media. So, it is only the media that can change the narrative. The media has the power to set the agenda for the public. Though the media is facing its own challenge, theirs is not as bad as other sectors in the country. Men and women of goodwill can still do something about the media.
For the 2019 election, it is the media that would set the agenda. Every politician’s chance relies on how best he has been able to use the media to his advantage. It is the media that can ask the right question, set agenda for the country and change our ugly narrative. If the media fails to rise up to the occasion in 2019, another election will come and pass. Like we have witnessed, it has often ended worse. One can imagine when we were complaining about the Shagari Administration. But if they give us all the indices we had during the Shagari Administration today, Nigeria will become a miracle centre. The reason is not far-fetched. If the exchange rate we had during that Administration and fuel price at that time is brought back, the country will become a wonderland. Everyone would rise and state that the country’s messiah has arrived. The media must go into in-depth research and begin to challenge the status quo in order to end the problem confronting the country. This is because the country’s economy is troubled. Presently, different unions in the country are preparing to go on strike over one issue or the other. If anyone takes time to catalogue these unions’ demands and know what the apex government really owes them, that is when we can know if the Federal Government should be given 10 years to meet their demands. Because they may not be able to meet it, the problem would linger. The Federal Government has always been quick to sign a memorandum of understanding (MoU) with labour unions, creating the problem for another government. After the tenure of the Administration that signed the agreement with the workers, the union returns to demand for their claim.

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