Bold decisions next President must take - Obichukwu, Nairamatics Founder

In view of the level of poverty and hash economic environment in the country, the two most important things Nigerians expect from the next President are honesty and boldness, according to Ugochukwu Obichukwu, founder and Partner at Nairametrics Financial Advocates, and Chief Financial Officer, Ikeja Distribution Company. In this interview, Obichukwu, a chartered accountant and certified investor relations practitioner, highlights measures the next President needs to deploy in the first 100 days in office in order to make significant impact on the economy.

Excerpts:
Given the numerous challenges besetting the economy chiefly scarcity of fuel and cash, what is the prospect of achieving average GDP growth of 3.1% this year as indicated by various projections?

There are a number of things you need to consider.

The first is what drives economic growth in Nigeria? It is typically four key sectors which are crop production, trade, telecoms and financial services. So if you are trying to figure out where growth will come from or whether we will be able to hit those set of numbers that have been projected, you have to look at those sectors that I have just mentioned. All in all, it is very possible that Nigeria can actually hit those numbers.

The downside or the worries off course are the impact of the elections on economic growth. And typically, during election years you always have slowdowns that affect how businesses invest and how businesses decide allocate capital. So that can often affect growth but I don’t see that affecting growth in Nigeria that negatively. So, for me, can we do slightly above 3.0%? No, it also depends on two halves. What I mean by two halves, is the first half of this year and the second half of this year. So, in the first half of this year, we would probably see very slow economic growth. And this is because of the issues of fuel scarcity, scarcity of cash, and election is also a challenge. So, we would see slow growth in the first half of the year. |

Things might start to come back in the second quarter depending on who is elected, we could have what you call post election bounce. So we might see things slow down and then improve in the second quarter, and start climbing in the third quarter. So all in all I will think that a borderline of 3.0% to 3.1% is the sought of growth that we will see in 2023.

What is your view on the direction of inflation this year, forces that drive inflation in Nigeria, and the CBN projection that the Naira redesign will help moderate inflation in the country?

Inflation is either cost push or supply push inflation. Cost push is mostly due to increase in money supply. Now, traditionally or historically inflation in Nigeria has always been supply driven which means prices of goods and services are expensive because of inefficiencies in our distribution system. And you also have regulatory issues, taxes, too many inefficiencies, and of course power or electricity challenges. So that is why it is always supply side issues that cause high inflation in Nigeria.

But what has happened in the case of last year was a combination of several things. So we have always had supply chain issues drive inflation in Nigeria. But after COVID what the government did was to increase money supply in the country, and that is through the CBN. And the reason why they did it was that they were trying to reduce the impact of COVID-19. So, there were a lot of intervention funds that were pumped into the country, regulatory forbearance where interest rate was reduced, there were several incentives for banks to lend money.

The CBN was basically forcing everyone to increase money supply in the entire country. So, because of that increase in money supply, inflation started to creep up and, today, in Nigeria money supply is about N50 trillion. That is the highest we have ever seen on record. We have never seen money supply that high before. And so when you have money supply that high and economic growth is not rising, and the economy is not growing as fast as money supply, what tends to happen is inflation. And that is what we are seeing today. And that is why the CBN is fighting hard to try and cut back on the speed of money supply in the economy.

Bringing it to cash, like I said we have about N50 trillion out there, but cash that is outside the banks I think is slightly under N3 trillion. That is not enough to cause the sort of inflation we are seeing. However the CBN also needs to account for that cash as part of its monetary policy control measures. But it is not the direct reason why we have inflation. Like we have said, inflation is a combination of all these things that has happened. So, we have a record N50 trillion out there as money supply. We have record debt level, we have private sector record debt level, and these are all the reasons why we have a high money supply amidst the poverty that we are seeing in the country.

Given the level of suffering, unemployment, infrastructure deficit, and hash environment in the country, what measures will can the new government deploy to make Nigerians feel some sense of relief and hope that things will get better for the country?

I think the first thing for any government to do is to first reach out to whoever loses and try to build some sort of friendly coalition. This is because you have to embrace every single person. This election is a very divided election and so the first thing to do is to bring everybody home and try to be very welcoming, that is very important.

The next thing is that there is so much work to do and whichever government comes in will also need to focus a lot or will immediately need to set up their cabinet. We can’t wait for three or five months before setting up the cabinet. So, they have to set up the cabinet so that they can run the economy because there are so many things to do. The third thing of course is to make some very bold decisions from the very start. I mean this is no time to wait, I think Nigerians have suffered enough that they are willing to be told the truth. They will want to listen to you. And the truth is if you want to take away fuel subsidy please just take it away and tell us what taking away fuel subsidy means for Nigerians, the positives of it. If you want to increase electricity prices, just do what you have to do, just be very upfront. If you want to devalue the naira then go ahead and devalue the naira. So, take very strong decisions and make sure you tell Nigerians what the benefits of these decisions are and how we can measure how those decisions work. I think that is what the new government should start to do. It is a long process, it is not going to be easy for any of them, it is not going to be easy to turn Nigeria around in four years to be honest but if you have a very good start, then you have a very good chance of doing it.

What are the major challenges you encounter as an entrepreneur in the tech and media space?

The first is human resources. Human resource is a lot of challenge for entrepreneurs because you will see that we have had a lot of talents leave the country. What makes a small business unique, what gives a small business its distinguishing factor is human resource because that is what we rely on. So, a small business that just has five or ten employees will likely collapse if half of its staff leave compared to a company that has 500 or 1,000 staff and just 50 of them leave. The second challenge of course is money or funding. Funding to, at least ensure that the company stays afloat. Yes tech companies have found a way around it because technology is very attractive these days, so it is easier to raise money for tech based businesses. However the competition is a lot as well because when you raise money for tech based businesses, you are expected to grow rapidly and growing rapidly then means you start to spend a lot more and that makes you even vulnerable to dying or to have your business die. The other challenge is regulatory issues. Whether it is trying to get licenses or approvals, those things are incredibly difficult for small businesses to do. And small businesses don’t have the kind of capital or connection or network to get these things done in Nigeria. So it’s a big challenge and a lot of them are not able to cope. Then of course, the cost of doing business is very high in Nigeria. Whether it is rent or buying computers or setting up offices or keeping your staff safe, remember that, unlike most countries, small businesses don’t have access to capital, so you can’t have overdraft and, if you are going to have capital, the capital is not cheap. So that is the challenge. Speaking specifically about the media, I think the problem of the media is just the consumption habits of Nigerians. I don’t think most Nigerians take the media seriously as they do in other countries and what I mean is from a financial standpoint. People do not pay to read articles or stories in Nigeria unlike what you have abroad. And to be fair to the ones abroad they are also still learning to do that. So, what that means is that those media companies have to rely solely on advertising. And when you rely solely on advertising, that has a way of affecting your independence, because then you don’t want to sort of be in partnership that affects how you are able to cover the story deeply and impact the economy positively. That is the sort of economy we are in and you just have to balance both. For the media, it’s just talent. If you have good talent in the media in Nigeria, I think you will succeed because when you have over 200 million people there will be someone who want to read what you write or someone who wants to watch what you record or show. So, there’s always someone out there who will do that because the population is just huge but the challenge is having the right talent. Especially for the kind of media outfit that I launch, it is a business media outfit.