Nigeria has an ability to overcome adverse situations which I find mysterious – AUN don
Jean-Paul Cléron, a former World Bank consultant, an adjunct professor in the School of Information Technology and Computing (SITC), is known for creating system dynamic models of the economy in the Middle East and Nigeria. Cleron has been in Nigeria since 1987 and has studied the nation’s economy so critically as to predict almost accurately what may happen in the next ten years. In this interview with ZEBULON AGOMUO, Editor (who was in Yola), Cleron traced the economic problems of Nigeria back to the 70’s, expressing optimism that Nigeria could get out of the present economic recession if it applies the right strategies. He however, warned that further recession in the country could be very disastrous. Excerpts:
You have lived in Nigeria for some time now; may we know for how long?
I am a Frenchman. I used to say ‘I used to be a Frenchman’ because I have spent a long time here that sometimes I don’t know exactly what I am again. I came to Nigeria in 1987 for a consultancy project of the World Bank. If you remember very well, 1987 was the time Nigeria was still suffering from the Structural Adjustment Programme (SAP) and the project was a very large one. We were supposed to find a solution to a problem which was very similar to what is happening in Nigeria today. I spent five to six years with the World Bank and when the contract ended, I decided to stay back. At that time, it was not financially too difficult to establish a business, so I was lucky to find support from a businessman from South West and another from the North (who was a well-known civil servant). I had two persons on my board; and what I really wanted was to do consultancy for government, but I soon discovered it was too difficult to do because of corruption in the system. We did consultancy for the private sector and later did software development. I ran that company from 1992 to last year (2015); I closed last year because I wanted to do something a little bit less stressful. I am very happy that I am at the AUN because it is time for me to pass on my knowledge. I have been married to a Yoruba lady, Ireti, for the past eleven years; she is a very good wife and brings a lot of stability and wisdom in the family.
With your experience in consultancy, even though you didn’t consult for government … (cuts in)
Well, I can say we did somehow, to some extent, but it was very difficult because of the processes. I don’t know about now, but at the time I operated, government was very cautious about technologies that could clarify things, (I don’t want to elaborate on this). And this may explain why it took time for computer related technologies to penetrate in the system because people don’t just want things to be clear. You know with technology, you prevent the loopholes to operate. That is a major problem with Nigeria.
What do you think is the link between government policies and their implementation?
When I came to consult for the World Bank, my job was to understand how the Nigerian economy works; what are the impediments, etc. I am an economist and also a systems analyst. I tend to look at problems globally and I think it is a mistake to look only at one aspect. Let me give you a background. Let’s take a private sector as an example, if you want to buy a company, what is the document to look at? The balance sheet, right? And if the balance sheet gives a good impression you buy the company, if the balance sheet is limping you don’t. I am sorry to say, Nigeria’s balance sheet is limping. Now, we tend to be focusing on performances; for instance, the rate of growth of the economy, rate of unemployment, the production of oil; but what you must do is to look at what is the source of those performances- what I call the resources. I have spent a lot of time, studying Nigeria’s resources. If you look at it you’ll realise that they are basically three major resources. One is population. You know there is a lot of debate about Nigeria’s population; the fact that by 2050 you people will be the 3rd largest or most populated country on earth; and large population can be a blessing or curse; in fact, it can be both; because the resource can also become a liability. So population is one. Another resource is all the productive capitals you have built – your plants, your factories, cultivative lands you have developed, etc. and finally, your natural resources; and in Nigeria it’s oil and gas.
Now, what is the story of Nigeria? The story of Nigeria is basically the story of agricultural economy that has suddenly, by a destiny of life, become an exporter of crude oil and gas. If you look at this story very well, you realise that Nigeria has not really been that master of its own destiny. Nigeria entered OPEC just a few years before OPEC made the big boost. In 1972, 1973 when the Saudis, the Libyans took a big, blunt move and were able to multiply the price of oil by 4 or 5. And from the sky and will of God, Nigeria suddenly became extremely rich. What then happened? Human beings (all of us) are looking for the easy way out; so this windfall allowed us to do anything. At that time government was saying the problem is not to make money, but to spend it; but all those developments were really happening outside of Nigeria’s control. Nigeria has a very little impact in the oil market; if it is not Kuwait, if it is not Saudi Arabia, Venezuela, if it is not Iran; and all those things were happening outside of the system. What was happening was that Nigeria was benefiting from the resource coming out from God without controlling it. And instead of realising this, Nigerian leaders started to enjoy and of course, when you enjoy today you might have to pay the price tomorrow. And this was how we slowly moved away from agriculture, which has its own problem, but at least, it was the resources that we were controlling, developing and managing even though not so well, but it was there. There was a time when Nigeria was a great cocoa producer; great groundnut and rubber producer but that is over. Then after 1973 another one came in 1979 but this one was different. This one was purely political. It flowed from the developed countries, from the fear of the west. The west was afraid to be cut from energy and it came at a time the world was beginning to react to the price of oil. It started to conserve energy. The oil shock was short-lived. In 1981, 1982 the price started to come very significantly, and Nigeria was stuck. I remember at that time I was working for a national organisation in Paris and my job was to follow the economies of OPEC member countries. I told my colleagues, my boss and my clients, “look Nigeria is not going to make it, it is impossible”. But you people have an ability to overcome disasters and adverse situations which I find mysterious. Then, you entered into a period of recession; it was tough at that time, and people were complaining as they are complaining now, then the World Bank, the International Monetary Fund (IMF), the European Commission came in and gave Nigeria advice and money. The essence was to liberalise the economy and develop industry processes, etc. I remember when I was with the Bank, we were visiting companies in the north, south, east and west and we were trying to find ways to improve their operations. I give you an example. I visited Peugeot in Kaduna, they told me at that time that they had improved their local content 45 percent and that if they continued like that, five to 10 years from now (that time) they would be at 70 to 80 percent. What is happening today? There is no more Peugeot; while we have failed to develop our agriculture to substitute for oil, of course, that was the hard way out, but we chose the easy way out. Let me give an illustration of this. In 2005, 2006, the World Bank in my opinion published an incisive study on what makes nations wealthy (prosperous) and Nigeria was one of the case studies they analysed. The World Bank said the following: ‘If Nigeria had followed for the period 1970 – 2000, in modest saving effort, and that saving effort had been supported by a rationale effective investment programme during those 30 years, Nigeria would have now a produced capital that would be five times higher than it is today. And the produced capital is the source of your performances. That means that even today if that had happened, Nigeria would not have been feeling any pain. But Nigeria did not do that; instead of reacting this way, Nigerians, as soon as oil price came up again, started to spend, enjoy, promote corruption, etc. Therefore, the assessment to make is that Nigeria has absolutely failed to develop the resources that can bring the desired performances. Now, the important question to ask is; we have a population that is growing at almost 3 percent net per a year; that means in another 20 or 30 years, it will be 350 or 400 million. What are we going to do with those people; is it possible to find a job for all those people? Now, when you do some calculations you’ll find out that yes, it is possible. I was very happy that it is not a confusing issue, so I developed some simulation models in the economy. I discovered that with persistent effort and capital accumulation in the right economic sectors you can boast of increase in standard of living. Right now, the income per capita (per head) in Nigeria is roughly $2,500, $3,000 per year, it is ridiculous; but it can grow, it can multiply by 3, 4 or 5. And the good news is that you can find job for everybody. But it will take 15 to 20 years to get there. When people are complaining that they do not see any effect of the Buhari programme now, maybe they are speaking a little bit too hasty; Buhari does not have a magic stick and he cannot just change things over night. Now, I do not have enough information or enough data to make assessment on the efficacy of government programme right now but I can tell you one thing. Since, I have been in Nigeria, it is the first time I hear a government say that they want to allocate 20 percent of their budget to capital expenditure, it has never happened before and this is the first step towards success. But I can only clap; this is very necessary, but it is not sufficient. What we need is that this money being allocated to capital expenditure is effectively and efficiently deployed into productive investments that are well maintained and managed so that over their life time they can deliver the performance that is expected of them. Now, what is the counterpart of this, psychologically? I believe you need three qualities- you need to be disciplined, patient and persistent. Nigerians are not disciplined, patient or persistent.
Our economy is in recession…
(Cuts in) More than recession; it is in trouble.
But we are not yet in depression. America had suffered depression before and came out of it. What must Nigeria practically do to get out of the recession?
You see, it is difficult to say. We have scarcity of information about the Nigerian economy. The data that are published, which we get are not really reliable. You ask Nigerians, for example, something as basic as population, some people tell me, I don’t believe we are 170 million; some say may be 150 million. Some say 182 million is the official figure, but in fact, there is a remarkable inaccuracy over the data coming out from government. It is not only on population but in all economic data. We are trying to develop models in which the structure will be more important than the data. If you have a reasonable description of the economic structure of Nigeria, we can use data even if they are not up to the quality, to get idea of the economy and that is how I work. I think it is very important that government utilize more of technology. One of the hopes I had when I came to the AUN is that because of the name the university has and its influence we can convince government to use these types of tools to support their policy decision. I think it is very important to have serious tools to access whether we are making the right decisions or not. For example, you have a problem now –an economic recession, people are hungry and have no money – you can distribute money but if you distribute money you are going to take care of people’s problem only for today, you have not solved the problem and you are not going to train people to solve their problem in the future if you choose to distribute money.
Amid all the criticism that this present government is receiving they are investing the resources that we have now for future wellbeing, they cannot distribute it today. Of course people are suffering, it is terrible to suffer but if you decide to distribute the money today, those who will suffer the most are those who are least prepared to cope with the situation. In my opinion if you want to be sure of your economic development in Nigeria, you have to go through a phase of suffering
But what do you think government can do in the interim to lessen the pain of the recession?
There is only one thing to do; there is short term and long term measure. Someone asked me, “Is it good or bad for Nigeria to take a loan?” My answer to that is, there’s nothing wrong with Nigeria taking a loan, everyone takes a loan, all companies, and governments take loans and are indebted. What is critical is what you do with the money. First thing, if I read in a paper that Nigeria took a loan of $29.9 billion, the first thing I would say, is why not $50.3 billion or $14.2 billion? So, I assure that the way government thinks (I have no idea and I have no contact with them) they must have looked at what they need to meet their targets, and of course to balance the difference. If you go for a loan; I think it’s important to know very precisely what the loan will be used for. Although I am not very informed about the nitty-gritty of the problem; what the issue is that the Senate was complaining that there is not enough information on what the loan is meant for or what they want to do with the money. The really important issue here is why do you borrow and for what? If you borrow to invest, and your investment is successful, you have won because you have made enough money not only to pay for your loan but also to take care of your people and to create employment. If you borrow to consume then you put yourself more in trouble.
To what extent should Nigeria deploy technology in solving its problems?
Technology should be deployed at many places as possible. There’s absolutely no doubt that if Nigeria should actually develop and prosper it has to encourage massive entrepreneurship and you have a lot of Nigerians with bright ideas. I’ve never stopped being amazed at the level of resilience and optimism of Nigerians.
You cannot discourage them. They will always tell you tomorrow will be better than yesterday- that is the attitude- but you have to give them the right environment to do so. Unfortunately so far the right environment has not been given. I have been in business for the past 25 years and I can tell you the problems I had with tax office, immigration officers is that of employee loyalty. You have to overcome all these. I used to say there are three types of environment; you can work in a friendly environment, in a neutral or a hostile environment. Nigerian environment for a long time has been hostile to business. We have to encourage entrepreneurship, but what kind? It is extremely difficult today for Nigeria to become an industrialised country because the way the companies and industries are interconnected in the Western World is extremely difficult to irritate or compete with them. But with technology, a machine as small as a phone, you can operate from your own office and develop applications that people will buy- you don’t need to invest much. Technology can bring a lot of help to growth, development process, and also in my opinion should penetrate government because it hasn’t yet done so. Government now collects a lot of data with technology but does not use the data to make better decisions; it is not yet happening.
The school of IT and computing of AUN is passing information to the youth on how to leverage technology to create wealth for them. You said you shut down your business and admitted that the Nigerian environment is hostile for business. How would these youth survive in the hostile environment?
If I knew the answer to that question, I would be a very rich man. The truth is that first you are not going to solve this problem overnight. Nigerians have to learn that no matter how difficult it has been, you have to go through that process because you have wasted a lot of opportunities in the past. When I came to Nigerian we were supposed to advice on technologies, methods and policies to adopt for the crises of 1982, 1983 to be overcome; today what is happening is exactly the same reason. It is quite interesting that the person that was called to solve the problem is the same that is here; it was Buhari in 1983, 1984; it is Buhari in 2015, 2016. May be, it’s just a coincidence but we haven’t learnt anything. We haven’t learnt because… Buhari said it that we need a cultural shift in Nigeria. It must happen. That cultural shift means – becoming more disciplined, patient and more persistent in our efforts. During the time of difficult, when you are suffering, you try to develop alternatives, and with time, you forget everything. All efforts must be geared toward developing agriculture. In 1988 to 1989 we did a study on sugar industry and Rubber industry; we produced papers for government, telling them what can be done to develop those areas. There was money at that time to do it. All those studies and recommendations were never implemented. Government is starting again now, and we have wasted some 25 years. My fear is that we’ll get out of the problem we have now, but if the next one happens it is going to be very disastrous. It may be a lot more difficult to resolve because the more we wait to resolve a problem the more difficult it becomes to resolve. We must pay the price today in order to benefit tomorrow.
At the time you came to Nigeria, there was SAP, what really happened to that programme?
It faded away. But if you look at it, we are still not diversified away from oil and still have a high level of unemployment. We failed to grow resources; the only resource on which Nigeria rests now is oil and the oil is not being controlled by us. We do not control the price, the buyer, and it is even under threat by the activities of the militants. What we should have done is to develop another resource which should produce capital resource – agriculture is a very good option but we should not make the mistake of making agriculture a monopoly; there should be other aspects. For me, the programme of the present government is a good programme whether it is going to be implemented; I don’t have enough information to answer that question. I pray it will be and the problem is if this administration leaves in 2019, and is replaced by another administration that resembles what we had in the past, there would be serious problem.
The foreign exchange policy of the CBN is really stifling businesses and manufacturing is the hardest hit; where did the CBN get it wrong?
You see, let me tell you, Nigerians are quick to criticise. Compare your country with Venezuela and look at the exchange rate in Venezuela. You have done much better than them; they are richer than you are in terms of oil, but they have a disastrous policy. The disastrous policy is that the government of Venezuela allowed everybody to get food free of charge and of course, when there is no more money to sustain that policy there is problem. Their currency now is 1,500 for a dollar, yours is only 450 or thereabout. It seems now to stabilise. Now, let me speak as a theoretical economist, the last thing for Nigeria to do is to let the exchange rate fall because this is a country that depends enormously on imported inputs; on imported goods and therefore, you need dollar to get that. And if you need dollar to get that, you should be able to buy it as cheaply as possible. So when you let your exchange rate collapse, you are paying the price. Now it will be good for us to have an exchange rate that is depreciating if we were selling abroad, but we are selling very little. And to encourage companies to develop in order to sell abroad, you have to make it easy for them to buy the inputs they need and you have demonstrated it is not the case; so what do we do? On the other hand, when your government’s commitment is on the naira, when the dollar appreciates you can get a lot of naira, and it eases your public finance. You know economics is just trying to keep the balance between good and bad. Sometimes, what is good for one is bad for the other, so it is very complex. But I think it would have been difficult, not impossible for the country to have a better result. Let me add something here, the depreciation of the exchange rate didn’t start with Buhari, it started before him. Remember that when the election took place, the Jonathan government spent a lot of money on election process. That contributed to weakening the naira. We have accumulated quite a number of mistakes as a result of economic choices we have made. My view is that we in Nigeria have accumulated a lot of mistakes. However, the game is not lost, but if you want to win, you cannot afford, again, to make mistakes, you have to be very careful because if we continue to make mistakes, it is going to be very disastrous.