President of the African Development, Akinwumi Adesina, tells OYETUNJI ABIOYE about his career, economy, family and other issues
Do you think the Nigerian economy can cope or survive with the current exchange rate of over N1,500/dollar?
No, it cannot. The slide of the naira is because people are losing confidence in the economy. That is why I was saying that the way to deal with that is to see if we can expand the inflows of foreign exchange into the country. And hopefully, I just saw what the Governor of the Central Bank is doing in terms of the Monetary Policy Committee, as regards raising interest rates. I guess that will work, probably for the portfolio investors, but again, there are other consequences it could have in terms of investment in the critical sectors that you need to grow to be able to produce more and have the kind of export-oriented-industrial manufacturing stance.
It is a balance between short-term solutions and long-term structural things that need to be done. I believe we need to deal with the short-term but keep an eye on the long-term structural things that must be done, and I will continue to maintain that. If you have an import-dependent economy, and you have a lot of forexes like we used to have in abundance, and we were using that foreign exchange to shore up the naira, we are killing ourselves.
First, that way, you are making imports much cheaper because of the overvalued exchange rate.
Second, you also have a situation that is killing the domestic economy, because the productions of other industries are negatively affected by that.
Third, the non-oil economy that you need to be much more performing requires revalued exchange rate, because they are not traded in dollars, but in domestic currency equivalent. That means if your currency was much more devalued but not collapsing, you would have had a lot more opportunity to be competitive in the export of other items. It is like a flood is coming and you are trying to use your hand to stop it. Eventually, the flood will carry you and your hand away. I think we need to take a very serious look at that.
Take the case of places like Netherlands for example. About a year or two ago, they were earning over $90bn a year from agricultural exports alone. Yet, how much land do they have? South Korea was earning about $230bn from exporting machinery and other electronics. We have top brains in this country. So, being competitive in the digital industry is important. Of course, we are doing well in the creative industry and others. We need to build those platforms that allow us to have that export-oriented manufacturing stance. I remember when I came to Nigeria a year or two ago, I gave a lecture to the Nigeria Manufacturers Association, and I remember they said that they liked the solutions I gave them and will like to turn it into a national policy.
If minimum wage is increased like it is being agitated, don’t you think that will lead to a crisis, because the private sector will not be able to match up?
As the President of the AfDB, I try not to get involved in domestic government policies, because those are domestic things government has to worry about.
But, I can only say in the general sense that simply increasing nominal wages in a high inflation environment is self-defeating, because at the end of the day, what matters is the effective purchasing power. So, keeping inflation down is the main thing. There are monetary policy issues that have to be taken. There are also a lot of other fiscal areas in terms of expanding access to forex and changing the mix of national instruments available to the government in terms of expensive commercial loans, which will also add to the problem. At the end of the day, a nominal wage increase in a high-inflation environment is going to run away from you. Keep your eye on just making sure that inflation goes down; and for that inflation to go down, a big part of what consumers are spending should be produced locally.
How can the issue of unstable power supply be dealt with to help manufacturers?
There is no reason Nigeria should have an epileptic power supply, simply because that is the cost of doing business. If you are not able to produce enough power domestically, and you are not able to be competitive in the local or regional markets, that is a problem. I think that Nigeria has a lot of potential for hydro and solar power across the country. In some areas, such as the Mambilla Plateau, there is even potential for wind power. As a country, we ought to be talking about having about 60,000 or 70,000 megawatts capacity, not 4,800MW that we currently generate. If Nigeria is to develop fast and grow in double digits, it must solve its power problem. But, more than solve it, it must accelerate it in a quantum way to allow Nigerians have low-cost power. I cannot emphasise it enough that if we don’t have electricity, the economy cannot grow. Running on diesel is not the way to run an economy. A lot more priority needs to be put on power; and it’s not rocket science.
At the African Development Bank, we are supporting 11 countries in the Sahel zone of Africa, and that includes the northern part of Nigeria, to develop 10,000 megawatts of solar power. It is called ‘desert to power’, and it is a $20bn investment that would provide electricity for about 250 million people. Basically, what I am saying is that there has to be a combination of thermal power, hydro power, solar power and every other resource we have, because the nation cannot develop in darkness.