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Government will bring down interest rate — Aganga

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IMAGE: The Minister of Industry, Trade and Investment, Mr. Olusegun Aganga »



The Minister of Industry, Trade and Investment, Mr. Olusegun Aganga, in this interview with IFEANYI ONUBA, speaks on Nigeria’s investment climate, the Sovereign Wealth Fund and why he dumped the private sector for public service

You had an impressive career at Goldman Sachs in London, why did you decide to dump it for public service in Nigeria?

I didn’t decide to come to Nigeria, I was invited and I think that is the biggest privilege one will ever have. It’s a wonderful opportunity to serve my country. I spent 20 years at Ernst and Young, which is one of the top four accounting firms in the world, and 10 years at Goldman Sachs, which is number one in the world in terms of banking. I’ve had the unique privilege of working in top financial institutions in the world. I gained a lot of knowledge and experience working with some of the brightest minds. Goldman Sachs taught us to make money and also to serve our communities and that is why the most senior people in Goldman Sachs end up becoming central bank governors, state governors and the like, serving their countries.

How would you describe the journey so far since you ventured into public service?

It’s completely different from the private sector. But I think my knowledge and experience over the last 30 years actually prepared me for the work here. People tend to say the higher you go, the cooler it becomes. But at Goldman, the higher you go, the tougher it becomes. Goldman teaches you not only to be a sprinter but also a miler. It teaches you a lot of versatility, in terms of ability to do things.It gives you the energy and conviction that you can deliver anytime and anywhere.

So, it has been a very good experience that is very different from the private sector, but I must say that I’ve enjoyed it. The officials in the ministry have been cooperative and this has made my job easier.

For the second consecutive year, Nigeria has been rated as the most preferred investment destination in Africa, despite obvious challenges. What is responsible for the sudden interests?

I think there are a number of things. Nigeria always has the potential, but the story of Nigeria has never been told before from the eyes of Nigerians. It had always been said and understood from non-Nigerian perspectives; from the eyes of the British Broadcasting Corporation, and other foreign media.

And Nigerians were not very good at telling their stories as well. So,we embarked on crafting out the real Nigerian story, and we made sure we shared them with the rest of the international investing public.

That meant that in my first year, I went to close to 30 different countries and everywhere I went, it was obvious they knew nothing about Nigeria. It was obvious that everything about Nigeria was negative. In every country, after that story had been shared and told with facts and figures, investors started looking at Nigeria. They were convinced about the country and most of the investors told us, ‘We’ve never heard this kind of story before.’

We were able to showcase what Nigeria was, and is today, as well as the many investment opportunities in the country. We have been able to tell them that there is a lot of money to be made in the country and that even the richest man in Africa today, who is among the top 25 richest in the world, made every penny in Nigeria. The richest woman in Africa made every penny in Nigeria and that tells you that there are things happening in the country and this has been supported by the United Nations Conference on Trade and Development report which showed that Nigeria is ranked number four globally in terms of return on investment with an average return of 35 per cent, compared to a global average of about 6.6 per cent.

Secondly, for the first time, we have an administration that knows where it wants to take Nigeria to. For example, one of our objectives is to industrialise the country and we do that on the premise that no nation has managed to move from a poor to a rich nation by relying entirely on exporting raw materials as we have done for decades. We don’t have any strong industrial sector and Nigeria is blessed with so many natural resources that we can play on areas where we have competitive and comparative advantage.

What that means therefore is that we’ve been able to come up with investor-friendly policies in each of these sectors. When you come up with those policies, it will attract investments.When you look at investors, they take medium- to long-term views and we are doing far much more for sticky money. When I say sticky money, we are looking for investments in the real sector of the economy to support our industrial development, economic diversification and the diversification of our revenue sources.

Is the security challenge in the country not a threat to investment inflows?

The investors we are looking for are those that will buy into the Nigerian dream, who see the security challenge as a temporary challenge. You don’t make investment decision on a temporary situation. You make investment decision based on a medium- to long-term situation and I think that has assisted us in a way.

You spoke about sticky money. Specifically, how much has the ministry been able to attract into the country since 2011?

It is difficult to say. Anyone who tells you a certain amount is guessing. He is not telling you the right thing and I will tell you why. In the investing world, there are commitments made. We call those ones pipeline investments and those commitments do not come in on day one. It takes some time. For example, I signed a Memoramdum of Undestanding with the President of General Electric to invest $1bn over the next four years for the assembly of turbines in Nigeria. For now, $250m has come in. So, when you look at that, you will say we have a pipeline investment of $1bn of which $250m has come in. You need to do that for every investment. If you look at China power, they said they want to work with our government to invest and build 20,000 megawatts plants and that translates into $20bn over the next 10 years. So, until that money starts coming in, we will still have that as a commitment. There is pipeline commitment and there is actual commitment. When you talk about the actual commitment, there are different sources. UNCTAD that is globally recognised gets their data from central banks and from interviews with potential investors. So, their numbers, which are actually net investments, are what they tell you have come in. Those numbers cannot be so accurate.

When you look at the Central Bank of Nigeria numbers, they are based on cash inflows but that is not in itself the real amount because a lot of investors also come in, not by bringing in cash, but by bringing in capital equipment which is part of their investment. I have a department within my ministry called the Inspectorate Department and part of their job is to check the equipment before they get their capital allowances.

If I look at last year for example, close to about $6bn came in as capital equipment and that will not be captured by the CBN or in UNCTAD’s books. It is always difficult but you can see the momentum. What we are doing is just to acquire a system from the United Nations Industrial Development Organisation, where we are now trying to centralise and put all these things together in a way that we can accurately see the investments that have come in. For now, we just rely on what the international investors look at, which is the UNCTAD numbers. But the investments are huge. If you look at petrochemical for example, the pipeline investment is $12bn. If you look at the telecoms, almost all the telecommunications companies have announced between $4bn and $6bn in terms of new investments coming into that sector. If you look at sugarcane to sugar, we have about $3bn coming to that. If you talk of automobile, we have Nissan coming into the country, TATA, Volkswagen and others are coming into the country with investments.

If there are huge investments coming into the country, how come unemployment rate is still rising?

You know that some of these investments are for three to four years. Because these monies are going to the real sector of the economy, they are sticky money; not hot money, which goes to the capital market and which is also good, but that is something that can come in and go out. And so, it takes time when you invest to get to where you see the critical mass employment.

What you need to do is to first look at  if  the country is moving in the right direction. When you look at the areas we are emphasising on in terms of transformation of the economy, industrialisation and development, you see that we are targeting areas where Nigeria has competitive and comparative advantage; we are targeting areas that are labour-intensive. If I use sugar cane to sugar for example, today, maybe the largest employer there employs about 2000 people. But because of the policy, we are going to invest in six or seven states of the country. So, over the next four years, they will be employing 180,000 people. You can see it is moving in the right direction.

The point I’m making is that it is unlikely for you to see that impact today, but you can see it gradually overtime. Government is putting the foundation in place in sectors that are going to be labour-intensive and this will have a big effect on job creation and employment within the next two to four years, not when they are making the commitments or just starting to put money into investments.

Some people are of the view that the current policies of this administration are capitalist and elitist in nature. How do you react to this?

On the 11th of February, 2012, Mr. President officially launched two programmes. One was the industrial revolution plan, which seeks to diversify the economy and the source of revenue to government. That programmme will focus on where Nigeria can have competitive advantage, where Nigeria can be the number one in Africa and among the top ten globally. That is for the big industrialists. The second programme is the National Enterprise Development Programme, which is focused on micro, small and medium scale enterprises. You cannot call that programme elitist. Any government that does not focus on that sector will not have an inclusive economic growth, because that is the biggest sector in the country. In that sector today, based on the 2010 survey, there are about 17.25 million of them. They employ 32 million people. So, this is the area this government is focusing on. And what NEDEP does is to look at all the barriers that have been stifling the growth of that sector like access to finance; access to business support services; access to skills; access to market, and address them.We are also bringing all the agencies of government to implement that programme. Small and Medium Scale Enterprise Development Agency of Nigeria will help with the creation of cooperatives, business plan preparation; the Bank of Industry will help with providing support in terms of finance, the Industrial Training Fund will help in providing skills and we are leveraging the private sector to do this.

Before the official launch of the NEDEP and NIRP programmes, we had begun implementation about two years ago and we were getting results before it was officially launched by the President on February 11, 2012.

In accessing finance, the issue of interest rate has been a big problem to businesses. Why is this so and what is being done by the government to address this challenge?

The issue of interest rate is a major challenge to anyone in the economy, whether they are SMEs or people you regard as big players, and until that is addressed, we won’t achieve the potential we have in the country and this is something the government has realised and that is why the President directed the Honourary Investment Council meeting, which we had in November, focused mainly on the financing value chain. So, there is a project team working on that now, to see how we can address the whole financing value chain; how we can leverage more on access to finance to support the economy; how we can look at the risk premium or the issues that affect the interest rates with the commercial banks, so that we can bring down the interest rate; how we can create and develop other sectors of the economy in terms of finance. We are talking about the venture capital, the private equity sector; support that sector as they will bring in equity capital and they can also bring in debt capital as well as businesses support services. We are looking at how we can take some of the SMEs to the stock market to raise capital. We are looking across the whole value chain to bring down the interest rate.

As a temporary measure, the government has increased the level of support to the BOI, for example, and they are giving out funds with maximum interest rate of 10 per cent and that is the window that will be supporting the NEDEP programme for SMEs in the country. There is a temporary solution already through the Bank of Industry and we are looking at the medium- to long-term solution through this financing value chain which a team is working on.

What led to your founding the Nigerian Leadership Initiative?

There were a number of things that led to my founding the NLI. As I said, Goldman is very good and strong and they play a big role in transforming societies and countries. I was part of a Goldman initiative working with the Aspen Institute in Colorado and they were sponsoring some leaders in South Africa. They had four classes and nominated four of us to be part of it. I was part of the South African class. And I could see the determination and commitment of the average South African to play a big role in transforming their country and I felt that it was important to do the same thing for my country. And that is why I entered into partnership with Aspen Institute.The second thing that motivated me was when I saw the direction the government in the country was going. Nigerians in the Diaspora were very encouraged with that administration and that was the second term of President Olusegun Obasanjo. I felt there was a need to have a group of Nigerian leaders, who would support that programme and those leaders. And lastly was the fact that I had been privileged to travel around the world; anywhere you go to, whether you like it or not, you will always be referenced back to your country. And the more they respect your country, the more respect you get anywhere in the world.  For me, it was important to do that as well. Those were the three main reasons that motivated me. I want to see change in Nigeria when I’m alive, not when I’m gone.

You started the Sovereign Wealth Fund. What were the objectives when it was started?

Oil is a depleting asset, it will go sometime and as you can see, so many people now have the same oil that we have. In most countries, when you have one major commodity especially in Nigeria where you have the opportunity to diversify, you use the resources from that one commodity to help diversify your economy.

You can determine the number of barrels you get out of the ground, but you cannot necessarily determine the price. It was susceptive to price changes, which meant it was important to have something to protect the country, so that when there is sustained fall in oil price, it does not affect our budgetary allocation. And it was important to realise that this is an asset for Nigerians and we need to provide for the future generation. You can’t spend everything you have now and leave nothing for the future generation.

The idea was to take part of that because we have a benchmark price and so the difference between the benchmark price and the price is packaged into the SWF. The way we structured it was to make sure we have three boxes. One was for the future generation fund, which means that could go into medium- and long-term investment, the other was to support the budgetary allocation so that if there was a sustained fall in oil price, you could hedge against that to support the other one. And the third one was an infrastructure fund because that is the major thing that is holding part of our economic development. It was a tool to help sustain the budgetary allocation in terms of when we have sustained fall. It was a tool designed to help invest in the future generation and to help with our economic development. If well implemented, it’s a game changer and it is also a transparent vehicle that could lead to accountability of the resources we are getting.

If the fund was established to achieve all these, why were the governors opposed to it?

We went through a rigorous process to get it approved. I appeared in front of the National Economic Council several times to make presentations. Issues were raised and we addressed those issues. By the time it got to the Attorney General of the Federation and all the state Attorney-Generals to look at the prospectus and our proposals, the consensus was that it was okay and we should go ahead with it.

It was the NEC that approved it; it was the NEC that put in the $1bn as the seed capital and it was the NEC that first announced it to the world.

I think there was a strong support for it at that time. But of course, there are other factors that come into it. When you have a new government and new governors came on board, I think it was just important to start explaining and making sure they fully understand the premise under which it was set up and the big advantage for the country that it was a major game changer. I think it was natural and expected that at the change of government you have some challenges. But I think over time, when they see the value of the Sovereign Wealth Fund and see what we are getting out of it, more and more people will support it and actually make sure it works well.

Some of your colleagues in the Federal Executive Council have left to contest for governorship or National Assembly positions in 2015. What is your plan as far as politics is concerned?

Well, if you are asking me whether I’m leaving to go and contest, the answer is no. Don’t forget that some of us came in as technocrats but it doesn’t mean we don’t understand politics, it doesn’t mean we don’t know what goes on around and all that, but we just feel it’s time for us to focus on certain things in government. I think for now, my ambition is to do everything, to spend every minute of every day doing what I can do to help transform the economy of this country. And to make sure that the average Nigerian feels, sees and gets it. That is all I want to do. When I leave, I don’t want to look back and say I had the opportunity to do this thing and I didn’t do it. The only motivation to me is the opportunity to help transform the economy of the country and transform the lives of the average Nigerian in line with the transformation agenda of Mr. President. That is my only motivation in government.

The automotive policy has taken off but there are fears being expressed by Nigerians about the quality of made-in-Nigeria vehicles.

Every country that started this had to go through some sacrifices here and there.

What we should be looking at are the end game and what the benefits are for the economy. The benefits are immeasurable. If you look at what this policy has done to South Africa, it’s the second largest employer of labour. We feel we are a growing nation with 170 million people, so we need to create jobs for our people. The policy is a right thing for the country and as we are doing it now, it is important we get it right which is why this program is very different from what we had in the 1970s. It is holistic and very comprehensive. The automotive policy is not just about car assembling. We want to be able to produce a lot of the cars and that’s where we can create jobs because we have the resources to do so. To make sure we have the right quality, we are encouraging all the Original Plant Manufacturers to meet with both local and international standards and you can easily do that in the auto sector because any international OEM that is coming to partner with a Nigerian firm will make sure that the car they produce matches what they produce elsewhere, otherwise there is a reputational risk. Part of the policy is that you will have people in place and you will comply with international standards.

The Standards Organisation of Nigeria is going to play a big role in it, working with the Nigerian Automotive Council. They are undergoing training now so that they can understand what is required and ensure that international standards are complied with.

I think it’s just a matter of time. The first car may not meet our expectation. I drive an Innosson Sports Utility Vehicle in Abuja and it was one of the first SUVs they produced but the new ones that are coming out now are better than the one I’m using, because they are taking into consideration all the comments that have been given and they are going to make changes.

I think we will get there faster than most people think. We will be pleasantly surprised with what we see in the future and we will be proud of ourselves

Article Credit: BiusinessNews

Updated 5 Years ago

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