In this interview, Muda Yusuf, Director General of Lagos Chambers of Commerce and Industry, LCCI, speaks on salient issues affecting the industrial sector of the economy. He also noted that foreign investors are having a better advantage here in the country. Excerpts:
The LCCI has been an ardent critic of the ‘tight monetary policy’ stance of the Central Bank of Nigeria (CBN), why?
You have a situation where it is very difficult to assess credits first because of the tight monetary policy that is in place and second, because of the high risk management condition. So all this and other factors has made it very difficult for business operators and entrepreneurs to get credits for their business.
Like I said, first the interest rate is very high. It is about 25 percent and by the time you sum up all the charges and the main interest rate, you will discover that it will come close to 30 percent and for somebody who is into agriculture, it is going to be almost impossible for him to survive with such rate of interest.
So the source of fund is a big issue basically arising from the tight monetary policy and of course the channel of fund is also very short because you cannot get long term loan in this economy. The longest you can have is maybe six months or one year. And for the real sector, investments or production investments you need long term loans. Let’s say five years, ten years and preferably at single digit, that is the way we can get domestic entrepreneurs to be actually productive.
If you are not having long term loan at an affordable rate, you cannot operate in the real sector, and we need the real sector to transform our economy because what we are seeing currently is that our economy is short of production. Not with goods mainly, trading or what we call rent-seeking to act as a broker, make your money through the bank or fly to China bring in some consumer goods, pay the custom and get it into the market, make your money and go away.
But the economic indices indicate that there is a tremendous growth?
All these activities are not adding much value to the economy and even to the life of the people, that is why despite all the good economic fundamentals that are mentioned, we still have a very high rate of unemployment. We still have a very high rate of poverty because we have an economy that need goods in the face of it.
In terms of GDP ranking,our economy is ranked the 36th in the world; this is not a bad ranking because the economy is worth over $270 billion. We are the second largest economy in the African continent. We are next to only South-Africa which is about $400 billion.
So it is a very big economy but the citizens are not in the main stream of the economy because they don’t have what it takes to be there. So you have a big market only in the face but you cannot take advantage of it because you are not having the resources. The resources in the country flows from the government, either the state or at the federal level and also to the hand of the people who are not having much knowledge about investment and that is a major issue for the economic effect.
So the economy is viable and attractive to foreign investors?
The structure of investment is now such that foreign investors are taking better advantage of the market than home based investors. So we have a situation where Nigerians have been turned to spectators in their economy because people come from all over the world and they come with very cheap funds and many of the foreign countries are encouraging their citizens to go invest and sell their products in other countries.
As part of incentives, they even get grants to embark on such investment. So as a local investor, even if you try to raise some fund from the banks, you cannot compete with those who have access to offshore funds, so that puts the domestic investors at a great disadvantage.
We are not so much present for instance in oil and gas, and that is because that is highly capital intensive.