Interview
BABA Yusuf Musa, director general of the West African Institute for Financial and Economic Management, WAIFEM, has vast experience in economic and climate change issues. Musa for 21 years worked in the Research and International Economic Relations Departments, Central Bank of Nigeria, where he retired as an assistant director. Armed with B.Sc. in Economics, MBA and PhD degrees, he was the director of Debt Management Department at WAIFEM from 2006 – 2018, having worked in the Ministry of Education, Plateau State, Nigeria and the National Directorate of Employment, NDE, before joining the Central Bank of Nigeria.
Musa has been involved in capacity building in the area of macroeconomic management with emphasis on public debt management of Anglophone West African Countries. He specialises in Theoretical Underpinnings in Debt Management, Macroeconomics of Debt, Debt Sustainability Analysis, DSA, Medium Term Debt Strategy Analysis, MTDS, Debt Management Performance Assessment, DeMPA, Portfolio Optimization Analysis, Loan Negotiations (contracting and rescheduling; specifically, the Paris and London Clubs), and Debt Data Recording and Review using Commonwealth Secretariat Debt Recording and Management System, CS-DRMS. He has experience in Front Office and Middle Office functions in debt negotiations, Debt forecasting, risk management, analysis and techniques.
Also, an expert in public domestic debt management and subnational government debt, Musa, 2008 – 2013, was a member of the Technical Advisory Committee, TAC, of the World Bank Debt Management Facility, DMF; from May 2016 – January 2019, Musa served as chairman, World Bank DMF II implementation Coordination Group – (membership of the ICG consists of the International Monetary Fund, United Nations Conference on Trade and Development, UNCTAD, Commonwealth Secretariat, the World Bank, Macroeconomic Management Training Institute for Eastern and Southern Africa, MEFMI; Debt Relief International, DRI; Centro de Estudios Monetarios Latinoamericanos, CEMLA; Agence UMOATitres; and Japan International Corporation Agency, JICA.
The director general also served as a member of the Capacity Building Programme Committee of the Heavily Indebted Poor Countries, HIPC, Initiative from 1998 – 2006; facilitated several training programmes and participated in missions with several international organizations, including the World Bank, IMF, UNITAR, Commonwealth Secretariat, Debt Relief International, United Nations Institute for Training and Research, UNITAR, etc. He is an erudite scholar with several publications in peer-reviewed local and international journals.
His recent assignments in member countries of WAIFEM include the development of a medium-term Debt Management Strategy (Republic of Ghana: 2010, 2015 and 2018; The Gambia: 2011, 2017, 2018 and January 2019; Liberia: 2013 and 2017; Nigeria: 2010, 2011, 2013 and 2016; Sierra Leone: 2013 and 2015). Development of Debt Sustainability Analysis, DSA; for The Gambia: 2007, 2010, 2014 and 2018; Ghana: 2005, 2007, 2008, 2011 and 2017; Liberia: 2008; Nigeria: 2006-2017; Sierra Leone: 2003, 2005, 2007, 2008, 2011, 2015, 2016 and 2018). Over the years, he has helped to strengthen institutions by being involved in preparing Country Reform Plans and Debt Management Performance Assessments, DeMPA, for The Gambia, Ghana, Sierra Leone and Nigeria,
On the sideline of the African Development Bank Annual Meetings in Sham El Sheikh, Egypt, with the theme: “Mobilizing Private Sector Financing for Climate and Green Growth in Africa” Musa spared time from his busy schedule to grant an exclusive interview with Maureen Chigbo, publisher/editor of Realnews. His views on climate financing in Nigeria and what the government should do to shore up revenue, limit borrowing and boost the economy is a must-read. Excerpts.
Realnews: The theme of the 2023 African Development Bank, AFDB, annual meetings is on mobilizing private funding for climate change projects. What is the status of climate financing in Nigeria?
Musa: The arrangement for climate financing in Nigeria at the moment, if I am to give you a rating on a scale of one to 10, I think we’re far in the lower end, maybe around 1% or 2% in terms of financing for climate initiative if you want to compare Nigeria with the rest of the world. The reason for this low mark is that the capacity to understand that there are viable opportunities for financing climate-related issues is still very low in Nigeria, so we really need to educate Nigerians as to the kind of opportunities that are available globally which we can tap and channel our own resources to the external flows that we can get to address climate-related development issues in the country. At the moment, I think we’re in a low scale, so we need to improve on that.
Realnews: You talked about opportunities. What are the opportunities that Nigeria can key into to address this climate change challenges because we have drought in the North, erosion problem in the South, and flooding also which affects the entire country?
Musa: There are a lot of opportunities that are available with multilateral institutions and bilateral lenders, the G20, the International Monetary Fund, IMF; the World Bank; the African Development Bank and many other international institutions that have funding for green initiatives. There are some that have grant elements in them. When you take loans that are green-related or for green climate financing, you’ll get almost up to 80% or 90% grant element. So actually you’re paying only 10% of whatever you’re borrowing, as long as it’s a climate-related issue. There are others that are available for financing development, and industrial development that are related to climate initiatives. There are many of them that are existing right now, but when you check the statistics; did Nigeria tap from these available resources? You will find that the answer is no. Why is it that we have not taken advantage to tap the available resources? Many reasons. Basically, I can mention three. One is political in the sense that perhaps the politicians have not turned their eyes to that side. Secondly is the capacity to tap it. What do I mean by that? The capacity to tap means that you have to have knowledge of what it takes to access the resources. At the moment, if you take the statistics of the knowledge among those who are involved in new financing issues in Nigeria, I think the knowledge is very minimal, so we need to have a strategy to build our own capacity, to know the existence of that and to know the procedure, the modus operandi to follow to tap those resources. Thirdly, we need to have a policy also, that mandates as a nation to key into global initiative and force companies that are coming to invest to also reflect this climate-related investment. I think once we do that if we have the laws, the institutional arrangement, we’ll be good to go as a nation.
Realnews: Part of the problem with this climate financing is that the critical stakeholders at the Paris COP 27 pledged a 100 billion dollar yearly financing, but they have not redeemed the pledge. Is it part of the opportunities you’re talking about?
Musa: That is just one aspect of climate financing. But prior to that, there have been existing funds that are available to multilateral institutions. Of course, with the COP’s initiatives, the Western countries need to meet their pledges to provide financing for those ones. Those are additional financing that are coming. But I am talking about the existing ones. We need to even tap the existing ones before the ones you’re talking about. So, I think we need to have a national policy and national capacity-building effort, a strategy to build the capacity of Nigeria and Nigerians to access these resources. The private sector is there, there are funds that are available only to the private sector and the private sector is there to also take that advantage. So, I think as a nation, we have to have that deliberate policy, maybe through the ministry of Finance, ministry of Agriculture are key partners, but as a national development plan, that needs to be incorporated in as a national policy for the country.
Realnews: We are talking about drought and the effects of climate change, Nigeria doesn’t seem to be part of the African Risk Capacity, ARC, and every year we have flooding and drought, some of these ecological problems. Why is Nigeria just not there?
Musa: That question shouldn’t be directed to me because I am not part of the national think-tank that builds the policy for the nation. I am only involved in capacity building. That is educating Nigerians and of course, educating Africans in terms of what they need to know, but I think it’s something the attention of the government needs to be called to. It is not only drought, flood, and erosion that are the only climate-related things that Nigeria is facing. I think we have multiple climate issues that we face now as a nation which exerts a heavy toll on our fiscal position. We have rainfall that is unpredictable. Anytime it rains, we have flooding everywhere both in the east, the north, and the south that affects farms, and houses, and makes people resettle. They exert financial pressures on the government that are not foreseen. So we have to have some funds somewhere to finance the resettlement, to pay compensations, to give relief to the farmers; to do all kinds of things. So the fiscal position of government in terms of expenditure, how much is spent addressing climate-related things, they are so many and bringing a lot of pressure to government finances. We have a lot of issues to address in terms of development, but these are issues, and risks that come are unforeseen and take away government resources thereby preventing us from addressing other critical needs.
Realnews: So as a teacher, what can your institution do to help educate Nigerians on climate issues that show that the country is deficient and not doing enough?
Musa: We run an annual work programme of training not only Nigerians, but all of West Africa and of course, we rotate our training courses in different centres in West Africa. We’re taking on board the need for climate-related capacity building as part of Nigeria’s need. So we annually run training programmes aimed at building the capacity of Nigerians in that initiative. So at the moment, we’re building some critical mass, we haven’t reached there yet, but at least, the knowledge is being disseminated. But I think what we need to do going forward is not only target the middle and senior-level officials, I think we also have to target the executive officials. We need to build the capacity of even the parliamentarians in terms of these issues. We need high-level kind of seminars where we bring the ministers of finance, ministers of development and environment, highlighting these issues. Those are the programmes I think going forward we need to run and build capacity in these areas. The issue is the funding. Our funds come from member countries and they are limited. Of course, we see donor funds but the current challenges are so many, we need to prioritize them. I think going forward, we have to have some kind of medium-term strategies to address all these issues.
Realnews: Let’s take a look at the economy of African countries and Nigeria in particular. How do you see the state of the economy and what can be done to make it better?
Musa: Well, just like any other country in the world, you know, we are in an era of post COVID-19 as well as a situation where we’re just coming from other shocks beyond the COVID-19. So countries are in critical financial positions in Africa. It’s not different in Nigeria. At the moment, we’ve had several physical challenges, the government had to come out with a lot of stimulus packages to address COVID-19, but beyond that, the issue of erosion came, the crisis that came and we’re all facing it now. These problems combined with other external shocks, brought about increases in prices. You can see that, globally, inflation is at a level where it was never seen in the last 20 to 30 years. In Nigeria, it’s the same situation and almost all African countries. Interest rates are at their all-time high, which makes debt repayment extremely difficult, and we have very limited fiscal space, you’ll see that what we are paying as debt service is extremely high. So the government is coming to face this situation of lots of fiscal pressure, that’s the situation in Nigeria. We’re experiencing high depreciation of the Naira as a result of all these unforeseen shocks. This is the situation we’re facing, but I do hope that the new regime will have strategic policies that will address all these global issues. The good thing is, in terms of food security, it appears that Nigeria is in a comfortable position, at least with a moderate level of food prices, compared to the rest of Africa, simply because we’re producing what we’re able to consume. If you take rice, for instance, I think now, we have more made-in-Nigeria rice than the ones that are imported, I think it also reflects in other grains. So really, we’re able to have some sufficiency in food. But that’s not enough, our industries have to import raw materials from abroad and of course, they’re also importing inflation, so that also reflects on industrial prices of goods and services, so that’s the challenge.
Realnews: How do you see the debt issue in Nigeria? Right now, the last figure we heard was a 77.7% debt ratio to GDP. Is it not going to be a burden for the new government?
Musa: In Nigeria, we have a revenue problem, not a debt problem. Our total public debt as of the end of December 2022, was about I think 103.4 billion dollars of which we have about 69.1 billion dollars in domestic, and about 41.2 billion dollars externally. If you check the ratio of external debt or total public debt against GDP, it is just about 23.1 or 22.1% of the GDP, but if you check it against the revenue, this is where the issue is. It is almost 89% or close to 90% of the revenue. In effect, what we’re saying is that we have more of a revenue problem than a debt problem, if taken against the GDP, we have huge borrowing space. The total public debt for a poor country like Nigeria, when you take out the threshold on average, it hovers around 48 to 50%, but right now, we’re at 23%. You see that we have a huge gap to meet, but it is not the GDP that pays the debt, it is the revenue that pays the debt. Now what do we do to mobilize more revenue? I think it’s a challenge, on average as I mentioned earlier, the revenue-to-GDP ratio for Nigeria is about 6.5% or 7% at most, compared with our peers which are about 18% or 19%. You could see that Nigeria is among the countries that have the least revenue to GDP ratio. We need to increase our revenue. We need to increase our domestic revenue. We need to find a way of turning the informal sector into a revenue net such that we multiply. We have room to expand our revenue. If we expand our revenue base, we wouldn’t have the need to borrow, because whatever we have right now can be quadrupled. We have to have policies to address the revenue challenges in Nigeria. What are these policies? Reforms from both the institutions that are responsible for collecting revenues, and reforms even in the way we collect the revenue. Right now in 2023, you’d be amazed that in many places you go to in Nigeria, they still collect revenue where people pay cash with receipts in an era of digitization. Those things need to be greatly improved and it will get to a point where the moment you pay your revenue it goes straight to the treasury if we digitalize our revenue collection system. So we have a window, we have a big opportunity to increase the revenue base for Nigeria, so in actual sense, we do not have a debt problem, rather we have a revenue problem and so we need to find policies to mobilize revenue and pay our debt, and of course, reduce our borrowing.
Realnews: What would you advise the new government to do immediately?
Musa: I think if the past is within the future, the President is someone that uses technicians. My belief is that he’s going to use the technicians to address the current challenges that we have, starting with the revenue. We recall during his tenure as the governor of Lagos, he made magic; made Lagos the best revenue idea producer. So we believe that the coming on board of the president-elect, the same thing will be repeated at the federal level. You can say that Lagos is one state, now he has 36 states. But I think he’s a man with a vision and we believe that if he uses the right people, we’ll address the revenue challenge that we have as a nation. But not only the revenue, the infrastructure deficit. Look at his policies in Lagos when he was there, he initiated the lite rail system in Lagos, expanded the port, initiated the building of a new airport at Lekki, developed Lekki itself, built private roads, and all initiatives that came from him. We could see expansion in the roads of Lagos, in the buildings, coming up of BRT and so many other infrastructural developments. We do hope he’s going to reflect that at the centre and I think that once we have this kind of policies in the centre, things will be optimistic for Nigeria.
Realnews: Any last words on expectation, and what’s your advice to Nigerians given the challenges we’ve had?
Musa: Well, the advice I could give is to caution that going forward as a nation, we should cut our coats according to our sizes. In other words, let’s spend only what we can afford. Let’s not over borrow to spend. We’ll rather borrow to build infrastructure that will lead to development, not borrow to consume. If you look at all the borrowing that is reinforced, we see more impact on them. An example is a school, any funds for school are reinforced, and anywhere you go, you’ll see the sign boards where school funds are used. What we need going forward is to ensure whatever borrowing will be for a purpose and ensure that the money is used for that project. If we keep doing this, we’ll build up infrastructure stronger.
A.
– June 29, 2023 @ 16:55 GMT |
Tags: AfDB BABA Yusuf Musa Central Bank of Nigeria. Maureen Chigbo WAIFEM
