Ojowu has equally held positions at the International Monetary Bank (IMF), the World Bank, and the United Nations Development Programme (UNDP). He is a member of the Expert Advisory Panel (EAP) of the Nigeria Natural Resource Charter (NNRC).
In the ensuing interview, Ojowu bares his mind on the state of the Nigerian economy and why the recent passage of the Petroleum Industry Governance Bill would serve as a sound legislative framework for restructuring the oil and gas sector in Nigeria. Excerpts:
What is your perspective on the Nigerian economy since return to democracy in 1999?
At the point of the handover from military rule to democratic rule in 1999, the economy had suffered a long period of stress justifying the imposition of the Structural Adjustment Programme (SAP), from 1986 in particular. The price of oil had declined to single digits and there was severe shortage of foreign exchange. And because the economy was heavily dependent on foreign exchange earnings, there was a considerable slowdown in the growth of the economy. SAP worsened the structural defects in the economy. Credit must, however, be given to the Abacha/Abubakar regime for the maintenance of foreign exchange stability in spite of the acute shortage of foreign exchange at the time.
As from 2000, the policy initiative of the Obasanjo administration saw to the modest growth of the economy within the first three years, but this growth was marked by high inflation rates. Within this period, there was also a significant improvement in the price of crude oil combined with the focus on agriculture. From 2004, there was a rapid deceleration in the inflation rate and the economic growth picked up significantly. The combination of the policy initiatives of the administration, especially the National Economic Empowerment and Development Strategy (NEEDS) and the Strategy on Debt Relief that took advantage of the burgeoning oil revenues, had crashed the inflation rate to single digits and raised the growth of the economy to the upper single digits. The growth of the economy was sustained for the next decade to 2014, not only because of the policy initiatives but also largely due to the improvement in the prices of crude oil to between $80 and almost $140 per barrel. In addition, the relative peace in the Niger Delta sustained uninterrupted production of crude oil that took advantage of the rising price of crude oil.
It is important to provide this background because the immediate impact of the economic recession may distract attention from the overall trend in the growth of the economy. Since 2015, the economy started experiencing deceleration in growth which coincided with the decline in the prices of crude oil, the disruptive effects of electioneering campaigns, the restiveness in the Niger Delta and the general collapse of commodity prices worldwide. The economy is larger now than in 1999, but there is an underlining weakness that had been plaguing the economy before 1999 and has continued to plague the economy to date, that is, the fragility of the economy in terms of its total dependence on primary production. The fragility in growth occasioned by the dominance of crude oil production and dominance of crop production in the non-oil sector ensure that the economy does not have the dynamism and needed diversity in value-added production to withstand external shocks.
What is your take on the Economic Recovery and Growth Plan (ERGP)?
My assessment of the growth of the economy under the ERGP, for example, shows that the recovery is driven largely by primary production in both the oil and the non-oil sectors. Growth in crop production, for example, does not translate to significant increase in investment in agro processing; and we are still import dependent on petroleum products. That portends danger to the objective of economic diversification and the associated employment generation. The projected employment generation of 15 million under the ERGP will only materialize if significant attention is paid to the policy on value added production in the economy.
To what extent would you say the economy has been better managed in a democratic government than under military rule?
This is a tricky question to answer. The evidence of good management should reflect in the attainment of a robust economic growth, employment generation and poverty reduction. Under the military regime, the World Bank was very prominent with particular reference to the Structural Adjustment Programme (SAP). Both the World Bank and the military administrations gave the SAP a high score card in terms of turnaround of the economy. But many analysts at the time condemned the introduction of SAP as an experimental policy that led to the destruction of public sector institutions such as the marketing boards, the suppression and repression of the academia and intolerance to alternative viewpoints that led to massive brain drain from Nigeria. To many Nigerians, the SAP as the high point of economic policy and management under the military regime, simply deepened the structural crisis and value disorientation of the economy and society that Nigeria continues to grapple with to this day.
With the return to civilian administration, we identify the policy and management tools of government to include the NEEDS/SEEDS that attempted policy coordination between the Federal and State governments and thus recognizing the autonomy of the states that was denied under the military. The introduction of the Agricultural Transformation Agenda (ATA) took the essential elements of NEEDS/SEEDS by emphasizing the same sectoral priorities. The attainment of certain policy targets such as the reduction in rice importation and the policy change on fertilizer subsidy that have helped to reduce the fiscal burden of government, are evidence of some element of policy and management continuity from one government to another that was not present under the military regimes. Even the agricultural policy of the Buhari administration takes its impetus from the previous policy of ATA from the Jonathan administration.
Though the ERGP is a policy and management tool to grow the economy out of recession to higher levels of growth, the priorities of the previous administration in broad areas of economic diversification and the attainment of food security still reflect the desire to sustain continuity in policy and management from one civilian administration to another. So, I would say that the potential for better management of the economy in a democratic setting, that promotes stakeholder participation and some degree of inclusiveness, is much higher than that of the military. And it is expected that if this element of continuity is sustained, followed by robust policy of economic diversification, improved outcomes in terms of employment, income generation, poverty reduction and wealth creation would be better achieved in a democratic setting.
What is your take on the recently passed Petroleum Industry Governance Bill (PIGB)?
The PIGB is one of the Petroleum Industry Bills (PIB) which passage will serve as a sound legislative framework aimed at restructuring the oil and gas sector in Nigeria. Its passage by the National Assembly after multiple attempts over the last decade, is applaudable. It is imperative that Mr. President assents to it without further delay. The importance of the PIGB is measured by the fact that the existing laws affecting this very critical sector of the economy have been in operation for decades. This is why the bill will be a major step forward for the oil and gas sector, which for now is the major source of both government revenue and foreign exchange earnings. The non-signing of the bill into law has heightened investment uncertainty in the sector though.
To what extent will the PIGB help reposition Nigeria’s oil and gas sector for transparency and productivity?
The PIGB proposes key structural changes to the manner of regulation and operation of the oil and gas sector. When eventually signed into law, the PIGB will be able to propel the oil and gas sector to global industry best practices in terms of transparency and accountability. However, the PIGB is not a stand-alone as already noted above. Therefore, the commitment to its implementation, the passage into law of the Petroleum Industry Fiscal Bill and Host Community Development Bill will enhance public sector revenue, generate confidence in the investors and promote community sense of participation and ownership. It is these elements put together along with global industry best practices that will ensure productivity in the sector.
You are a member of the Expert Advisory Panel (EAP) of the Nigeria Natural Resource Charter (NNRC). How best can the NNRC get the stakeholders to embrace the precepts in their activities within oil and gas sector?
The stakeholders in this context are the governments, the regulators, the operators, the host communities and the general public, including the academia. The NNRC should sustain the current engagement with the stakeholders, publish and distribute their precepts and their associated reports, host enlightenment workshops for host communities involving the government, the operators and regulators so as to, among other things, guide the host communities as to who and where to direct their demands and grievances.
What is your overall take on the NNRC precepts?
The existing precepts have been created by the Natural Resource Charter (NRC) and I think they are well thought out. The NNRC has domesticated their use in terms of the studies and reports conducted and using the precepts as a guide.
There seem to be relative calm within the Niger Delta which has helped boost oil production. But many say it might be calm before a storm. How best can ‘permanent’ peace be achieved in the region?
An important step towards, “permanent” peace is good governance that may come from the implementation of the PIGB. The second is the passage of the Host Community Development Bill that promotes inclusiveness. The third is the commitment of the state and local governments within the region to the proper use of the oil resources to benefit the community. I refer in particular to the need for the economic empowerment of the host communities that gives them skills diversification to operate in areas other than the oil sector. Such diversification of knowledge and skills will provide as an exit strategy to the cash transfer aspect of the amnesty programme, as well as keeping the youth fully engaged in other productive employment away from criminal activities.
You have been vocal on issues relating to the management of the Excess Crude Account over the years. What are your key concerns with the ECA?
My concerns are with the process of determining when to save, invest and make withdrawals. Both past and previous use of this account suggests the need to share responsibility with the relevant stakeholders to address allegations of corruption and illicit withdrawals in order to build confidence in the sustenance of the account. This will promote effective oversight by the relevant agencies of government and minimize inefficiencies in the management and operations of the account.
Many say the Excess Crude Account is an illegal entity, thus should have been abolished long before now. Do you share similar sentiments?
The ECA is not backed by law, but it is a good idea that provides a cushion for the rainy day. If confidence is built around its management and operations as already suggested, it is an exercise that should be sustained and eventually legislated.
The Petroleum Equalisation Fund (PEF) which was supposed to be a temporary measure has become permanent. What is your take on the PEF?
The PEF is a form of subsidy that breeds inefficiencies. Its continued existence is at variance with the deregulation of the downstream sector and might be contributing to the fuel crisis through the policy insistence on uniform pricing of the petroleum products across the country. PEF should be eliminated so as to encourage private investments into the downstream sector, especially in product distribution such as construction of pipelines. A differentiated pricing regime that ensures regular availability of petroleum products is superior to uniform pricing and the associated hardships caused by shortages.
From an economic point of view, what in your opinion are the disadvantages of the federalism being practiced in Nigeria?
This is a very contested issue which is accelerated by poor level of transparency and accountability. My suggestion is that the Federal Government should take ownership of the agitations and demands and guide the discussion towards an acceptable solution.
Considering the economic needs of the country, what is your assessment of the 2018 Budget?
The critical factor is not how much is allocated to a sector, but the degree and effectiveness of implementation. Two things stand out since the return to democracy: the delay in the passage of the budget and the consistently low level of capital budget implementation. These two areas should attract our attention ahead of the size of sectoral allocations and allegations of budgetary improprieties.