Global Financial Crisis Will Affect Nigeria

Dr Ifeanyi Okafor is the Vice President, Manufacturers Association of Nigeria (MAN), Eastern Zone as well as the Chairman and Chief Executive Officer, Juhel Pharmacy Limited, a reputable drug manufacturing company that is based in Enugu, Enugu State.

As an entrepreneur and an executive of the body that regulates manufacturers and manufacturing in the country, he said that those who are rejoicing that the current economic melt down being experienced across the length and breadth of the globe would not affect Nigeria are only living in a fools’ paradise.
He said that those in the manufacturing sector as well as other businesses source their capital from the international banks through the local banks.

He argued that once the international financial institutions are affected by the crisis, definitely the local banks that are guaranteeing them for the loans would also be affected.
According to him, though the Governor of the Central Bank has assured the country that all is well, that he has no alternative than to believe him. However, he said that the governor should be aware that most of the capital being spent in Nigeria come from foreign banks and now that the Wall Street which most of the international banks have stake in is in crisis, the borrowing capacity of most Nigerian manufacturers and other business organisations would drop and that would invariably affect the economy.

On the conflicting reports about the health or otherwise of banks in Nigeria with regard to the global financial crisis, he said that people should leave the Central Bank Governor alone to do his job.
According to him, the conflicting reports are sending wrong signals to the manufacturers and other investors at large.

His words: “People should leave the Central Bank governor alone to handle the problem. The Central Bank governor is the key person to watch the banks. He is the regulatory agency for the banks as for now. He should be allowed to do his job. People should not be allowed to be saying that this bank has died or that one is just managing. That is not acceptable. The Central Bank governor has come out to say that the 24 banks are healthy.

We should take him by his words and if the reverse later becomes the case we will hold him responsible. If we begin to have conflicting reports about the state of the banks, manufacturers may be tempted to take a second look at their operations with the banks. So what I am saying is that Nigerians should be warned to allow only those vested with the power to make statements about the state of the banks in Nigeria and the right person is the Governor of the Central Bank”.
In this interview, he also spoke on what government should do to make VISION 2020 a reality, the local content policy and on other issues

Excerpts
How VISION 2020 can become a reality
I feel that President Umaru Musa Yar’Adua has mapped out a very wonderful strategy for VISION 2020. However, the issue now lies on Nigerians themselves to be able to target the year as planned and work towards it. You know that no economy is viable without the manufacturing sector. The manufacturing sector of any economy cannot be viable without the provision of essential infrastructure as well as funds. Of course without education, there will be no manpower to drive the sector. Indeed a lot of factors are involved in making VISION 2020 a reality but we believe that the areas mapped out by the president if well implemented in stages, it will come into fruition.

The past Visions that were not achieved
It is true that we have had so many Visions that ended up in the trash cans like VISION 1990,VISION 2000,VISION 2010, but the fact remains that the current president has a better planning strategy than the lot of them in the past. If you watch his relationship with the members of the National Assembly you will see that it is very cordial. For there to be any progress in the management of the nation’s economy, there has to be cordial relationship among the three tiers of government.

It is this cordial relationship that has resulted in the little improvement that we have seen in the power sector. You can also see that at the national economic summit, the participants were a lot more aggressive than ever. The global economic crisis is like opening Nigeria to the world and this is like a pinch to the economic controllers of the nation like the manufacturers and others. So, there is hope because people are becoming more realistic than they used to be.

MAN’s contribution to the programme
I will not say yet that we are not being carried along since the small and medium scale industries are the core centre of any economy. There is no other way we can get involved than government providing enabling environment for us to operate. You cannot operate if you don’t have the right environment and like I told you, the right environment is coming in very slowly. If not for the world economic crisis, I would have told you that the restructuring of the bank and the cordial relationship that exists between the Executive and the National Assembly will help the manufacturing sector to move to the next level.

Global financial melt down and Nigeria
The global financial crisis as the name implies is global and that it will not affect Nigeria is a serious joke. There is no way it will not affect Nigeria. We the manufacturers source our capital from the international banks through the local banks and if the international banks are affected, definitely the local banks that are guaranteeing us for the loans are also affected. The greatest problem that Nigeria has is our mono-economic system that is the oil. If government can streamline the tax system coupled with the availability of infrastructure they can be making a lot of money through tax. If government can also encourage local manufacturers to be exporting their products.

Though we have been lamenting for a long time now about the type of environment we are operating in Since we are not operating in the right environment, our neighbours who don’t have the problem of power will always run us out of the market. But if we can start exporting some of our products, our economy would stabilize a little bit.

Then concerning the global economic crisis, it is important to note that Central Bank is the key institution to assist in this matter. The Central Bank governor has told us that there is no problem. But he should also know that that most funds come from foreign banks and now that the Wall Street is in crisis, most of the international banks, have stakes in the Wall Street and since they are affected, the borrowing capacity of most Nigerians will drop and that will affect the economy. Therefore, we should be looking at the ways to stabilize our economy and that is by encouraging manufacturers so that we can have many other sources of economy in the country.

Government intervention through CBN
I feel that Federal Government intervention through the Central Bank was wrong use of money. You don’t just throw money at a system. America can afford to do that because they have a well-established structure. Theirs is only to have money to move the structure. But for developing countries like Nigeria, instead of throwing money at the system, the right thing is to use the money to develop the necessary infrastructure, provide stable power supply, provide good roads, make petroleum products cheap and available and use the make to make sure that there is security. Once you can do all these, the economy will sit up. In the developed economies, they have solved all these problems. What they therefore need is to have cash in the system and that is the whole idea of bailouts.

Conflicting reports on the global financial crisis with regards to Nigerian banks
It will definitely affect the manufacturing sector if information concerning the stability or otherwise of the banks are coming from those who have nothing to do with banks. If the CBN governor tells us that the banks are okay, we should take him by his words and if the reverse becomes the case, we will hold him responsible. For now he is doing the right thing and I want to believe that he will not let us down. Afterall, he was the one that restructured the economy by recapitalizing the banks which has made it possible for the few manufacturers to be able to borrow money from banks outside the country because the international banks trust the local banks. Most of us manufacturers are operating with foreign companies and when they begin to hear conflicting reports about the state of the banks in the country, they will begin to run back

Local content policy
The issue of local content is what government really need to look into. If you go to the Asian countries, they are progressing because they handed most of their projects in their countries to their local engineers. For instance, if you see a fly over in India, it may not look beautiful but it will be very strong and will stand the test of time. And you know as they say practice makes perfect.

By giving the projects to their people the firms are empowered, jobs are created and the money revolves in their country unlike in Nigeria where jobs are given to multi-nationals who remit the money to their country’s economies. My thinking is that government should encourage local firms by giving them jobs and assisting them in getting the necessary machines to do the jobs. Government should not because local firms don’t have the machinery to execute contracts as excuse for not giving them jobs because as the saying goes, Rome was not built in a day. The only way they can get the machines is by getting jobs. If they are encouraged with jobs then they have been empowered to get the machines to do the jobs

How Nigeria can shift from an import dependent nation to a manufacturing and exporting nation
What I want to say to that is that without government encouraging manufacturers, we will continue to be an import dependent country. There must be some restriction on the style of consumption in this country and until that is done, we will keep on importing. While in the manufacturing sector we are trying to meet up, government is not encouraging us. Nigerians as a people are also not helping matters. They go for the things in vogue.

But if government decides that what we are going to use this or that thing and it must come from indigenous manufacturers and they enforce it to the fullest, we will be making a head way. This has been done in China and India as a way of encouraging their local manufacturers. Government may say for instance, this brand of car that is locally manufactured should be the official car for government and any body that imports car abroad should pay extra money. That will encourage the manufacturers of the cars. Then our taste will come down.

We will stop going for Lexus and Rolls Royce. And the money for those cars will remain in our economy. Government should compel Nigerians to make do with what is available in the country. If government decides to be making use of only made in Nigeria cars or drugs, the money will be revolving within the country and with it we can develop more petro-chemical industries like the one in Port Harcourt and with that more industries will come up because over 50 per cent of the raw materials used in pharmaceutical and plastic industries come from such company.

Today a lot of people have developed confidence in made in Nigeria drugs because the regulating agency, that is NAFDAC, has made them to understand that what we have here is better for us. What remains now is for government to encourage the agency to continue with its good work. Government can insist that any drug that is being produced in Nigeria should not be imported. Once they can do this then there will be no problem. The job that NAFDAC is doing is making drug manufacturers in the country to keep their heads above the waters but they need government assistance.