Dr Reuben Jaja, the Chief Executive Officer, BFI Group Corporation, in this interview he said the implications of mounting pressures on costs driven by the depreciating naira will for now, has resulted to structural shifts in demand and competitiveness in favour of high local content as well as an erosion of profit margins across many sectors.Excerpt.
A new government formed by another political party (APC) has come on board after 16 years of PDP in power at the centre. What, in your opinion did Nigerians’ vote for during 2015 polls, taking cognizance of the fact that you got a Supreme Court verdict in 2012 to take over ALSCON, yet the Government never took the verdict serious? Sir, you can reframe this question?
After 16 years of PDP Administration, it was indeed a thing of joy for Nigerians to witness a peaceful change in government and we applaud President Goodluck Ebele Jonathan for making history in Africa.
Winning elections in Nigeria, often times does not necessarily translate to Change in Government or takeover of power, but today our country has demonstrated that our democracy is here to stay, and President Jonathan is today celebrated as the father of our modern democracy.
The 2015 elections that brought President Mohamadi Buhari to power was a hallmark on the continent. It was exemplary in all ramifications and the people demanded for a future with great promises for the nation in the areas of economic growth, national security, and good governance free from corruption but rooted in the rule of law. This must be so because Nigeria is globally regarded as one of the powerful and fastest growing countries in the world.
The previous administration undermined the rule of law in many respects, for instance on July 6, 2012 the Supreme Court delivered a landmark judgment on the privatization of the Aluminum Smelting Company of Nigeria (ALSCON).
The judgment rendered void the sale of FGN shares in ALSCON to Rusal et al, of Russia , and ordered that a mutually agreed share purchase agreement be provided to BFIGroup Corporation Of America who won the bid in 2004, but was denied the right to execute the Agreement . The judgment also placed an order of perpetual injunction restraining the government for inviting any further bid or handing over ALSCON to any other person.
As of today, and despite the enforcement order, the last administration failed to fully enforce and give effect to the meaning and intendment of the apex court. But in the interim, UC Rusal et al of Russia is still at the plant, sacked all workers, stop production, stripped the asset from $1.3 Billion in 2004 to $91 million in 2011 as reported by the company’s auditor KPMG. A loss of over $1 billion and the condition of the plant is worst than Ajaokuta Steel Company.
Furthermore, UC Rusal et al failed to pay the full purchase price of $250 million since 2007 despite House of Representative and Senate oversight committee’s reports demanding that the remaining balance of $120 million owed since 2007 to date be paid to the Federal Treasury.
How serious do you think the new administration would be able to accomplish its promises to the Nigerians, especially on the independent of the judiciary?
The new administration under President Mohamadi Buhari do have the confidence of the people , and the general perception is that the ‘change agenda’ seeks to build a virile nation with a diversified economy that will be an African colossus, able to robustly compete in the global economy.
The era of impunity is over, but whether, this administration will meet the expectation depends on the quality of it’s Ministers.
What is your dream for ALSCON?
My dream is to see ALSCON as the main aluminum company on the African continent and number one in 2020.
We plan to run an aluminium plant that will truly propel Nigeria into the global age that is so diversified and is the support base of Niger Delta’s industrial development and one that would boost environmental issues arising from hydrocarbon in the region by way of using gas to support aluminum production and end-products.
We hope to run a plant that will broaden employment by creating jobs for the teeming population of the Niger Delta area.
We will run a plant that will produce products with a unique Nigerian brand, and yet of world-class standard that we will all be proud of. What we should understand is that no foreigner will do these for us; no country can do it for us.
The Russians have made ALSCON part of their aluminium production around the world. Basically they have taken our aluminium manufacturing facility, add it to their own economic flag and then produce at their own will under their flag. Why must we be the one to build our facility and allow them use it to improve their prestige, and establish their image around the globe? Why can’t we have our own plant, run by us to compete against others and then create our own reputation as world-class aluminium producers? That is why I have invested over 10 years of my life pursuing this project.
The plant is supposed to hire about 2400 workers. We know that the staff strength should grow, and this is something that is very important. I am far more interested in getting our youth to be employed; job creation is my number one goal, because that is where I come from. I know the challenges there.
My involvement in ALSCON is designed to see what we can do to broaden the employment base in Akwa Ibom State, and even beyond. So I will measure my performance based on the number of people we employ on annual basis.
We will take the best and the brightest. Our goal is to make sure that we have a place that any young child who has competence in the area we need him will never wander in the street.
What are the opportunities peculiar to Nigeria, which you think the Buhri led government, can take advantage of?
First of all, to succeed, the Government has got to forget this business of waiting for oil revenues to survive the economy, but should take a low threshold of oil prices as our first savings to drive things forward. I am of the view that the Government should also take the many other factor endowments Nigeria has, for instance, rubber, gum Arabic, mineral resources, sesame seeds, cocoa, ground nut and the like, and determine which of them in different geographic locations around the country we can develop to become the best, or leading producers in terms of their entire value chain all over the world.
The Government should also educate Nigerians to the best level to be able to develop those products as raw materials to the manufacturing industry. And when these happens, Nigeria will emerge an economy with sustainable fiscal growth, so strong that it will make the rising of the Rhine Valley in Germany seem like child’s play.
The ground nut pyramid in the North, Cocoa in the West and oil palm in the East has been forgotten by successive governments in the country to take advantage of to survive the economy by deepening their revenue base.
Are you suggesting deepening revenue base would do the magic?
Yes. A period like this calls for economic stimulus to reinvigorate the economy and expand the frontiers of the non-oil economy.
We share the concern of the government on the need to diversify and deepen its revenue base because the Government and its agencies should refrain from policy choices that could further stifle investments.
The Government needs to intensify efforts in the following areas: remittances by MDAs (Ministries, Departments and Agencies) to federation account; improving tax administration to enhance compliance; addressing fiscal leakages and corruption and reducing the cost of governance in all tiers and levels of government.
We suggest that more emphasis should be on efficiency of tax administration, not imposition of new taxes or fees on investors; taxation should reflect the ability to pay in order to meet the desired distributive role. We advise against imposition of excessive fees and charges on businesses in the name of expanding revenue from non-oil sector of the economy.
Are you saying these policies would lead to fiscal sustainability?
Yes. Do not forget that Fiscal sustainability calls for a review of expenditure at all levels of government. It is easier to cut spending than to raise revenue. And, when the Government looks inwards to generate revenue by cutting expenditure, especially on export, then the theory of fiscal sustainability follows.
We implore the National Assembly (NASS) to take a critical look at the following areas in order to curb leakages and ensure cost reduction in government spending: fuel importation and the inherent subsidy issues; total eradication of kerosene subsidy will bring a saving of N91billion; rigorous review of budgetary provisions for instance; service wide votes, pensions, capital supplementation, gratuity administration, presidential amnesty budget, catering and allied procurements, welfare packages, travels, honorarium and other overhead expenses.
We affirm that there is a need to proactively restructure the appropriation bill to reflect the true spirit of austerity and prudence
How do you see the current challenges of global and domestic economic conditions on the private sector?
We have made comments on the implications of the unfolding scenario. It is, however, worth repeating that the current global and domestic economic conditions portend profound challenges for the private sector.
It is obvious the implications mounting pressures on costs driven by the depreciating naira; there will for now, continue to be structural shifts in demand and competitiveness in favour of high local content. There will also be erosion of profit margins across many sectors.
The emerging weak public sector cash flow will also continue to affect general liquidity condition in the economy, but the segments driven by public sector patronage will be more impacted.
The economy is inherently resilient by virtue of its size, but the very creative and resourceful informal sector, the enterprising nature of the citizens, the large market and the huge natural resource endowment.
We hope that this would have a moderating effect on the current macroeconomic shocks. The investors are already complaining, but we suggest that the robust internal dynamics of the domestic economy should be harnessed to mitigate the current challenges. It is a great opportunity to reconstruct the economy to be more inward looking and more resourceful. It is also a great opportunity to curb leakages, rent seeking opportunities and create an environment that rewards value creation.
We hope that the economy will also benefit from lower energy prices as being experienced in other parts of the world. It is a great opportunity as well to liberate the downstream oil sector from the shackles of oppressive regulation, corruption and patronage. This is the time to allow the private sector to take full charge of the sector and unleash the huge potentials that exist in the sector.
The Government should use these scenarios as an opportunity to move the economy in the right and a more sustainable direction through agriculture.
There is an urgent need for government to redirect its focus to the agriculture sector by exploring the numerous mineral resources for alternative source of income.
Agriculture and solid minerals should be a major area of focus by Government for alternative income in the face of the declining revenue from the oil sector, because the slump in global oil price since June last year, calls for the diversification of the economy of the nation. The fall of oil prices means revenue available to the government will be minimal to the extent that the country can no longer meet its obligation to the citizens.
The government should look at solid minerals, emphasize on agriculture to cushion the effect of the continued fall in the price of petroleum products. The labour force should be well trained.
There is need to improve educational standard so that graduates from higher institutions are well prepared to drive the economy.
As we think of diversification, it may be imperative whilst investing in other sectors to dig deeper into the oil and gas industry. We can exploit further the potentialities of the natural resource endowment which we currently depend on and get more out of it.
Let us imagine these simple scenarios. First, Nigeria, through the private sector or public private partnerships, invests in boosting local petroleum refining capacity. New refineries spring up and the ones operating as state-owned enterprises are privatised. We will stop spending money to import refined petroleum and the quantum of resources spent as subsidy will diminish. Thereafter, we double or triple that capacity to produce enough refined products to sell within Africa and other regions.
This becomes another source of foreign exchange earner for the country. By stopping our fuel import bill on refined products and creating a new revenue stream from export of refined products, more resources to fund economic growth and development will be available.
What, in your opinion is the way forward to over-coming the nation’s economic barriers?
Overcoming geographical and socio-economic barriers is central to achieving inclusive growth and sustainable development. This could be done by addressing rural-urban differences to ensure more balanced development through job creation and societal transformation will be critical for Nigeria’s future.
This , the Government need to do in all the six geopolitical zones, in addition to addressing inequalities across these zones. Though there are other policy initiatives aimed at territorial development in Nigeria by Government, but limited success has been achieved in addressing the fundamental causes of unevenness.
The problem often lies with a structure of governance that gives room for developmental policy implementation at the federal, state and local levels of governance but not at the regional level.
Let me be more specific. With the terrible condition of the economy, and the high expectations of Nigerians on the new government, what practical steps should Buhari take to create jobs speedily?
I am of the view that massive job creation should be the focus of the new post-oil economy because Nigeria certainly needs a Job Manifesto policy, with a target of 10 – 12 million jobs over the next four years. This is easier said than done, but it could be achieved through diversifying the economy by supporting the manufacturing/industrial sector as well as the tertiary sector (services) with an enabling environment to thrive.
The Government creating value-adding jobs in the economy with one of the highest rates of urbanization in the world will task our creativity to taking a front stage in industrial revolution.
The agenda of the Government will require a kind of coordination between the federal and state governments in a manner never seen before.
The prospects of the solid mineral sector, for instance, will depend on the Government policy framework and even legislation, the dynamics of commodity prices especially given the apparent end of the commodity super cycle, and the nature of forward and backward integration with the rest of the industrial structure. I suggest these policies should be in government’s agenda.
The National Bureau of Statistics recently came up with a revised methodology for calculating unemployment, with the claim that unemployment now stands at about 6%. Are you as concerned as many Nigerians who believe that claim is baseless?
I have not scrutize the veracity of the report and so, I do not comment on statistics without serious scrutiny.
The government must support NBS to be independent and do its job without interference.
It is on record that the NBS and the immediate past government have created the baseline data for the performance evaluation of the Buhari administration in the areas of poverty and unemployment.