:00:00. > :00:07.These are the bustling streets of Lagos, Nigeria, the heartbeat of
:00:08. > :00:10.West Africa and a strategic financial hub.
:00:11. > :00:14.But Nigeria is in the throes of a recession and young
:00:15. > :00:19.On this week's Talking Business, we ask
:00:20. > :00:45.what does Nigeria need to do to resuscitate its economy?
:00:46. > :00:47.Nigeria is one of Africa's top two economies,
:00:48. > :00:53.the largest producer of oil in Africa.
:00:54. > :01:00.It has a huge consumer market of 117 million people. But it seems as
:01:01. > :01:03.though right now none of that really matters because Nigeria find itself
:01:04. > :01:07.in the throes of an economic recession. It is not the first time
:01:08. > :01:12.Nigeria is in crisis. The question is, why does this African giant,
:01:13. > :01:16.that has the potential to rise and lead, find itself tripping and
:01:17. > :01:20.falling? And what is it going to take to make Nigeria thrive? Here to
:01:21. > :01:25.answer some of these questions, the chief executive officer of the
:01:26. > :01:28.Nigerian sovereign investment agency, effectively the country's
:01:29. > :01:33.sovereign wealth fund, and next to him, the chief executive of the West
:01:34. > :01:40.Africa vocational education and then we also have the chairman of the
:01:41. > :01:47.Nigeria mortgage refinance company. Thank you for joining us. It started
:01:48. > :01:51.with the ball in the international oil price and quickly thereafter,
:01:52. > :01:57.Nigeria found itself in recession. Why did those two things reinforce
:01:58. > :02:02.each other? Sure, first of all, I think the oil price recession came
:02:03. > :02:11.at the end of what was a stretch of eight years of oil price rally. It
:02:12. > :02:15.is a cyclical product. The last 30 years, we have seen nine major
:02:16. > :02:21.recessions, cyclical downturn in oil price. We were due for one because
:02:22. > :02:25.along the line of the rising oil price, the rising oil price, it
:02:26. > :02:29.brought in new suppliers, so fracking, you know, the United
:02:30. > :02:33.States went from an importer to an exporter. We also had alternative
:02:34. > :02:36.energy, electric cars. Quite a few things came together at the same
:02:37. > :02:43.time to lead to what was a significant decline. Also, if you
:02:44. > :02:46.looked at the important economies of China and Brazil, these economies
:02:47. > :02:50.also went through their own downturn at the same time. All of this came
:02:51. > :02:54.to a head and the oil price came from $100 down to as low as $27 at
:02:55. > :02:58.one point and so that lead to that and it also happened at a time in a
:02:59. > :03:03.new government was coming in. All of that put together was what led to
:03:04. > :03:08.the situation we find ourselves in. But oil is 13% of GDP and my sense
:03:09. > :03:14.is that it is important to the extent in that it is 70% of the
:03:15. > :03:17.government's overall revenue but there's enough resilience in the
:03:18. > :03:21.economy that we have start to come out of it and the oil price has
:03:22. > :03:26.picked up. Is the economy resilient? Ordeal being a small proportion of
:03:27. > :03:30.GDP but almost everything in Nigeria depends on it. Yes, it is to the
:03:31. > :03:34.extent that Nigerians are the resilient ones that make Nigeria
:03:35. > :03:40.resilient. We survive despite and in despite of government and in spite
:03:41. > :03:43.and despite of the economy. So Nigerians will keep going until they
:03:44. > :03:47.can't any more. I think that is what we need to put our bets on, what are
:03:48. > :03:50.Nigerians doing and how do we best in their productivity because that
:03:51. > :03:55.is the only asset we have and it's not going anywhere any time soon.
:03:56. > :03:59.How has Nigerian business responded to this? It is not just the
:04:00. > :04:10.recession. It is also the currency. Yes, we need to sort out the
:04:11. > :04:12.exchange rate. There is a problem there. We need to supply
:04:13. > :04:14.infrastructure and find a way to improve basic infrastructure, to
:04:15. > :04:16.enhance productivity. Those are the two key problems facing business in
:04:17. > :04:20.Nigeria right now. Explain the relationship between the economy and
:04:21. > :04:23.the currency right now. Most of the international investors are buckling
:04:24. > :04:27.under the pressure of this, should the currency be devalued or not? I
:04:28. > :04:32.think the problem with the currency is that it has been fixed and
:04:33. > :04:39.because it is not gloating, then people are uncomfortable about the
:04:40. > :04:43.ability to invest and then get their money is out because it is at a
:04:44. > :04:47.fixed price. That is a real concern. That relates them to the real
:04:48. > :04:52.economy because if it is fixed, then it is very difficult, unless you are
:04:53. > :04:55.able to get your dollars at the fixed price, to be able to
:04:56. > :05:00.repatriate your profits if you have any. And if there is a differential,
:05:01. > :05:07.if there is a difference between the official rate and the market rate of
:05:08. > :05:13.40%, you would have to make a return, an equity return in excess
:05:14. > :05:19.of 40% to enable yourself to be sure that you are making a positive gain
:05:20. > :05:22.on your investment. OK, so it opens the system up to what they call
:05:23. > :05:26.arbitrageur but this also impacts the ordinary man of woman. Almost
:05:27. > :05:30.70% of everything Nigerians use and consume, from food to petrol, is
:05:31. > :05:34.imported, so how are people really affected by what is going on? We
:05:35. > :05:37.work with a lot of small and growing businesses and they are affected
:05:38. > :05:40.because the cost of all the input has gone up but what is really
:05:41. > :05:44.disheartening and worrying is that the only thing that they can sit on
:05:45. > :05:47.his wages. So all my employer partners tell me they can't increase
:05:48. > :05:52.salaries because everything else has gone up. But remember, for the
:05:53. > :05:55.common man, coming to work every day, is transportation went up in
:05:56. > :05:58.March, doubled overnight and so people are really struggling because
:05:59. > :06:02.wages over the last three years have stayed the same if not the Clyde.
:06:03. > :06:07.The minimum wage is not a living wage. It never has been. -- is not
:06:08. > :06:10.declined. It is a challenge for the everyday man and for the small and
:06:11. > :06:14.growing businesses which are the backbone of the economy. I knew you
:06:15. > :06:17.don't represent the government body led up a government agency. What do
:06:18. > :06:20.you say to people who say there is too many inefficiencies in the
:06:21. > :06:24.Nigerian system and nobody is seriously trying to tackle them? I
:06:25. > :06:33.have seen significant efforts to make changes recently, also from the
:06:34. > :06:36.agency that I'm part. I will give you an example. Yesterday, we signed
:06:37. > :06:42.an agreement to invest in a exchange. Now, it may sound not very
:06:43. > :06:45.interesting to the ordinary person but the effect eventually, when we
:06:46. > :06:50.are up and running and we want to be up and running in six months' time,
:06:51. > :06:52.is we will bring transferrin to commodity pricing because there is
:06:53. > :07:00.so much inefficiency on commodity pricing. Others are able to price is
:07:01. > :07:03.much cheaper than small people can. We don't have enough transparency
:07:04. > :07:08.there. We are also investing in logistics, so ER looking to improve
:07:09. > :07:10.the movement of goods and agricultural commodities. We have an
:07:11. > :07:14.agriculture fund. There's a lot being done there. We have also made
:07:15. > :07:18.investment in creating an agency to help ease the cost of credit and
:07:19. > :07:22.bring in funds. We could go on and on, there are so many things going
:07:23. > :07:27.on which I think will eventually come to the surface. Let me symbol
:07:28. > :07:30.fight, simple question, here is Africa's largest oil exporter and
:07:31. > :07:37.it's probably Africa's largest importer of petrol. We should be
:07:38. > :07:41.refining it, not importing it. That is an inefficiency. I agree and that
:07:42. > :07:44.strikes and because I'm a chemical engineer by training and I worked on
:07:45. > :07:48.some of those refineries many years ago. It's unfortunate, the state of
:07:49. > :07:52.those refineries. What you may also have not noticed is that there was
:07:53. > :07:57.an announcement made last year and a request that went out for refineries
:07:58. > :08:01.and we are looking at some of these projects. It is not impossible to
:08:02. > :08:04.build a refinery, for goodness sake. We used to have four functioning
:08:05. > :08:08.refineries in Nigeria that could refine up to 2000 barrels a day. We
:08:09. > :08:11.can bring those things back. I think it goes to the heart of what you
:08:12. > :08:17.were talking about. 30% of African exchange usage is in finished
:08:18. > :08:20.products. You need to solve that very quickly by refining domestic E
:08:21. > :08:24.and that solves two things at the same time. What incentive is there
:08:25. > :08:27.to solve some of these inefficiencies because those who
:08:28. > :08:31.just look at the situation said, for as long as there is corruption, and
:08:32. > :08:37.as long as people thrive in the face of corruption, there is no incentive
:08:38. > :08:41.to address the problem for Nigeria? Absolutely right and there is a lot
:08:42. > :08:46.of corruption but I think this administration is working on that.
:08:47. > :08:50.On the corruption aspect, that is not where I think the biggest
:08:51. > :08:54.challenge for Nigeria is right now. The big challenge for Nigeria is to
:08:55. > :09:03.create market systems and transparency that would reduce the
:09:04. > :09:09.ability to hide corruption. This is a process which needs to be done and
:09:10. > :09:13.can only be done if you free up the market and you have an appropriate
:09:14. > :09:16.management system. Everywhere I get interviewed, the first and second
:09:17. > :09:22.question is about corruption. It is real. It is not unique to Nigeria,
:09:23. > :09:28.by the way, and I say that because I've done business in places that it
:09:29. > :09:33.is more sophisticated. But I think one way to solve corruption, number
:09:34. > :09:39.one, is to minimise intervention by government that creates arbitrage.
:09:40. > :09:42.That is number one. And to see that happen. Obviously there are still
:09:43. > :09:45.issues with the exchange rate which was talked about but there are
:09:46. > :09:48.things being done to solve that. But I can also speak to this from the
:09:49. > :09:52.perspective of the organisation I run. You know, I hear of the
:09:53. > :09:55.transparency index which is interesting but there's also another
:09:56. > :09:58.index that measures the transparency and governance of sovereign wealth
:09:59. > :10:02.funds and the Nigerian sovereign wealth authority is in the first
:10:03. > :10:06.quarter, the top quarter, as of 82 sovereign wealth funds in the world.
:10:07. > :10:09.There are three ways we go about that. The first way is
:10:10. > :10:14.accountability. Accounts are published every quarter. The second
:10:15. > :10:18.wave governance will stop there is a process which drives to the heart of
:10:19. > :10:21.the organisation. The third way is the reinvestment, bringing
:10:22. > :10:25.foreigners into investments. The point I'm making is that, and that's
:10:26. > :10:28.just one, there are many other aspects to how this will be solved.
:10:29. > :10:33.It can only be solved through minimally dimension, do not create
:10:34. > :10:37.arbitrageurs and processes to solve it. Hold that thought because I'd
:10:38. > :10:42.like us to talk about solutions in a second. We will continue discussing
:10:43. > :10:47.what Nigeria needs to do to improve on its economic situation and get
:10:48. > :10:51.itself out of crisis. Right now, let's get a thought from Colm O
:10:52. > :10:55.Regan on this week's talking point. How difficult is it to rebalance the
:10:56. > :11:04.nation's economic model, to shift from being in thrall to or oil, to
:11:05. > :11:07.something more sustainable? Too much dependence on one area in an economy
:11:08. > :11:14.can leave the whole model skewed in that direction and vulnerable if
:11:15. > :11:18.something goes wrong. The Nigerian economy last year, in 2016, in the
:11:19. > :11:23.second and third quarters, we were seeing double-digit contractions in
:11:24. > :11:27.the oil sector, meaning that now, it only contributes around 8% of GDP.
:11:28. > :11:33.It is what happens in the rest of the Nigerian economy that is much
:11:34. > :11:38.more important. The difficulty, of course, is that oil still plays a
:11:39. > :11:42.disproportionately important role in terms of generating foreign exchange
:11:43. > :11:49.receipts for Nigeria. Roughly 95% of its foreign exchange income comes
:11:50. > :11:52.from oil. So while it may not be the big driver of GDP, that foreign
:11:53. > :12:00.exchange, that oil generates is still quite crucial for allowing for
:12:01. > :12:06.activity in the rest of the economy. Bit of rebalancing or moving on is
:12:07. > :12:08.required. To vaguely reinforce the metaphor, I'm going to move on from
:12:09. > :12:16.this wonderful example of brutalist architecture... To this brand-new,
:12:17. > :12:19.swanky, 21st-century building. Central-bank aficionados among you
:12:20. > :12:23.will have spotted that the previous location was the old headquarters of
:12:24. > :12:27.Ireland's Central bank. They are moving to the soon-to-be opened
:12:28. > :12:31.building behind me. I like to see the move of Ireland's Central bank
:12:32. > :12:35.down to their brand-new headquarters as sort of a metaphor for the way
:12:36. > :12:37.Ireland's economy has tried to move on from it over dependence on the
:12:38. > :12:44.property bubble of the previous decade. But rebalancing an entire
:12:45. > :12:49.economy is not as simple as that. It's a bit more than a few grains
:12:50. > :12:54.and some energy efficient glazing. As a small, open economy, you are
:12:55. > :12:56.always vulnerable to market swings. Small, open economies tend to well
:12:57. > :13:01.when the business cycle is growing, on the upside but they are also much
:13:02. > :13:05.more vulnerable on the downside. Small, open economies like Ireland,
:13:06. > :13:09.heavily reliant on the inflow of capital in finance, particularly
:13:10. > :13:12.vulnerable. If your growth model is dependent on evangelisation, then by
:13:13. > :13:16.definition, to a certain extent, you're much more vulnerable to
:13:17. > :13:20.changes in capital flows. So if that is the outlook for small traders
:13:21. > :13:26.like Ireland, what about a big oil like Nigeria? Governments always get
:13:27. > :13:30.used to easy revenue and with the recent Opec agreement on production
:13:31. > :13:35.cuts that has created some support to the oil price, the fear is that
:13:36. > :13:40.this might weaken the reform process in Nigeria. If there were no choice,
:13:41. > :13:43.if governments had to move quickly, try to mobilise revenue from the
:13:44. > :13:47.rest of the economy, we would probably see a whole slew of
:13:48. > :13:51.enabling reforms taking place very rapidly. But for as long as there is
:13:52. > :13:56.the promise of perhaps more sizeable fiscal receipts from that
:13:57. > :14:01.conventional source, from oil, it slows the reform process. It slows
:14:02. > :14:05.the diversification process. There's always the temptation to borrow big
:14:06. > :14:10.because you'll be able to pay it off with future oil receipts. So as I
:14:11. > :14:17.suspected, rebalancing an economy easier said than done.
:14:18. > :14:25.That is, Regan and for more of his videos, log onto the website. --
:14:26. > :14:28.Colm O Regan. What is it that Nigeria should do to find solutions,
:14:29. > :14:33.not just for the economy but for entrepreneurs and also for the
:14:34. > :14:35.business community? You have got us talking about some of those
:14:36. > :14:40.solutions, better financial reporting standards, more
:14:41. > :14:46.transparency. What else can be done that will have an impact on ordinary
:14:47. > :14:50.people? Quite a few other things. I think the one area that I think we
:14:51. > :14:54.haven't truly addressed in the country is what it takes to
:14:55. > :14:59.strengthen the manufacturing, so we can actually produce what we
:15:00. > :15:03.consume. A country of this size and scale does not have a fairly
:15:04. > :15:07.functional fizzy chemical sector, for example, or metals sector, that
:15:08. > :15:10.is really functional. For the size of infrastructure needs that we
:15:11. > :15:15.have, we need to be manufacturing ourselves. There has to be a way to
:15:16. > :15:18.encourage entrepreneurs in this area so we can start to produce what we
:15:19. > :15:23.need. The other thing that I think needs to happen in the economy also
:15:24. > :15:28.is that while the economy itself, in my opinion, is diversify from oil
:15:29. > :15:33.gets all the attention but it's less than 15% of GDP, government revenue
:15:34. > :15:37.is not diversify. Tax as a ratio of GDP is under 5%. Most other
:15:38. > :15:42.countries in the world is between 10%, or 14 or 15% in some cases.
:15:43. > :15:46.There has to be accountability by the citizenship. People need to pay
:15:47. > :15:50.their taxes when they have to do. 90% of Nigerian adults surveyed
:15:51. > :15:55.believe that they have what it takes to run the red business. It
:15:56. > :15:58.reinforces this idea that Nigerians are self-starters, enterprising
:15:59. > :16:04.people. How can the country tap into that? That is always an interesting
:16:05. > :16:08.statistic. We are very entrepreneurial but at the heart of
:16:09. > :16:11.a lot of that is a lack of trust. Nigerians don't want to place their
:16:12. > :16:16.future in someone else's hands. So they work for themselves, as soon as
:16:17. > :16:20.they get in any classroom I walk -- Robidoux, and any of you want to be
:16:21. > :16:24.owning your own business in five years? 99 of ?100 will go up. To
:16:25. > :16:27.that end, productivity is going to be so important in this economy and
:16:28. > :16:32.getting us out of the recession. There's a lot of talk in investing
:16:33. > :16:38.in hard infrastructure. With a soft infrastructure, the education
:16:39. > :16:41.system, it's going to be critical. As small business struggles to get
:16:42. > :16:45.financing, but the only thing that gets harder across the world for any
:16:46. > :16:50.business as you progress is people. Its talent. You can raise your
:16:51. > :16:53.financing in year three or four but if you can't find good stuff, you
:16:54. > :16:57.will be running your own business by yourself or the rest of your life.
:16:58. > :17:00.Until we start to invest in people, increase our productivity, small
:17:01. > :17:05.businesses will continue to struggle. Lead's talk about
:17:06. > :17:07.solutions here. What could be done to incentivise the Nigerian private
:17:08. > :17:13.sector and indeed small and medium enterprise to take more of a leading
:17:14. > :17:18.role, to be part of the growth and the strategic direction of the
:17:19. > :17:22.country? They are trying but when all the inputs are, you know, import
:17:23. > :17:26.lead, it is hard for them. But I think what can be done, at least
:17:27. > :17:29.after government level, is looking at what people need right now. You
:17:30. > :17:34.are investing in hard infrastructure but in parallel, not waiting for
:17:35. > :17:38.another ten years to fix the education problem or the health care
:17:39. > :17:42.issues. A healthy populace and an educated populace is a productive
:17:43. > :17:46.populace. I think one thing that sometimes gets left out as well is
:17:47. > :17:50.if in the major megacities like Lagos and Abuja, people are spending
:17:51. > :17:54.four hours on average per day in traffic, you will be even less
:17:55. > :17:58.productive. There is some very low hanging fruit that we can put into
:17:59. > :18:02.place to start to help people become more productive and that is really
:18:03. > :18:06.what small businesses need. It is, give me access to the people, the
:18:07. > :18:10.capital and the markets so I can do my thing. Sort out infrastructure is
:18:11. > :18:14.what she is saying and it is not just the roads. It's the electricity
:18:15. > :18:18.supply, for instance. On the infrastructure side, yes,
:18:19. > :18:21.electricity wants to be realistic, we privatised it and it has not
:18:22. > :18:24.worked. The collections are very poor, the companies are not well
:18:25. > :18:28.capitalised, which I think major issue, to be honest. They need to be
:18:29. > :18:32.recapitalised. A lot needs to be done on the electricity front. In my
:18:33. > :18:36.opinion, I think it is the single biggest challenge we have in the
:18:37. > :18:40.country today. Small businesses, you look at a typical small business,
:18:41. > :18:44.the cost of production will be 20% higher than its peers just because
:18:45. > :18:47.of electricity costs. We need to solve that. There are programmes in
:18:48. > :18:50.place and this is not the forum to outline on this programme but I'm
:18:51. > :18:54.hoping that in the next couple of years, there should be some
:18:55. > :19:02.solutions there. Nigeria aspires to be edgy 20 economy. Yes. In the near
:19:03. > :19:08.future. Nigeria says it is a natural leader in Africa. Economically and
:19:09. > :19:10.on the peace and security front. For Nigeria to assume what it believes
:19:11. > :19:20.is its rightful place in Africa and in the world, what does it need to
:19:21. > :19:24.do? I think it is quite simplistic approach, to say so, but if we
:19:25. > :19:28.improve the productivity the average Nigerian to $5,000 per head, for
:19:29. > :19:32.example, that is when you get a dividend in this large country that
:19:33. > :19:36.we have and we will catapult us into a G20 country. Does that mean the
:19:37. > :19:39.life of the average individual is higher? Maybe not. A lot needs to be
:19:40. > :19:43.done, health care, education and all that needs to be dealt with. But at
:19:44. > :19:48.the moment, I think the most important thing we need to do in the
:19:49. > :19:50.country today, and if I can add maybe one or two things, the
:19:51. > :19:55.electricity infrastructure needs to be solved. The production and the
:19:56. > :20:00.manufacturing sector needs to be fixed. You cannot build a strong,
:20:01. > :20:05.sustainable economy if you don't manufacture enough to be
:20:06. > :20:10.self-sustaining. What do you think? Whilst we still have this position,
:20:11. > :20:16.which crowds out, really keeps out investment, whilst business is
:20:17. > :20:20.unsure about whether the currency will be 500 this week or a thousand
:20:21. > :20:28.at the end of the, I'll give you an example, if you invested in Nigeria
:20:29. > :20:34.in 2008, the Nyro was 120 to the dollar at that time. If you had made
:20:35. > :20:38.an investment then, even if you had made a 10% return every year, you
:20:39. > :20:45.have still made a loss in dollar terms. It is against this backdrop
:20:46. > :20:49.that they needs to be clarity. The differentiation of the currency is
:20:50. > :20:52.not necessarily a bad thing if it is going to lead to an improvement in
:20:53. > :20:56.the terms of trade. If it is going to lead to an improvement in the
:20:57. > :21:02.level of growth if it means that domestic business is going to
:21:03. > :21:06.actually benefit from that differentiation. But the absence of
:21:07. > :21:09.good and construction, electricity done a proper education system, all
:21:10. > :21:16.of these make the current position that we have and the monetary policy
:21:17. > :21:21.framework ineffective. No nation can rise above the education level. I
:21:22. > :21:24.was working with a 25-year-old yesterday, trying to assess his
:21:25. > :21:31.basic arithmetic skills. This is someone who says he wants to earn
:21:32. > :21:35.50,000. It could not do 696 divided by 12. We worked on it together and
:21:36. > :21:38.he still couldn't do it and this is a 25-year-old who had been
:21:39. > :21:42.short-changed by the education system. If you don't have the
:21:43. > :21:46.competencies, you will not get the productivity. You can build all the
:21:47. > :21:49.roads in the world and fix all the electricity, but if we show up at
:21:50. > :21:55.the office and we don't know how to divide 696 by 12. So, you know,
:21:56. > :21:59.everyone, all of us, not just the president, everyone needs to get
:22:00. > :22:02.back to the basics which is skills. I'd like to thank you all for taking
:22:03. > :22:06.time to help us understand the complexity of Nigerian economy. The
:22:07. > :22:16.chairman of the Nigerian mortgage refinance company, the CEO of the
:22:17. > :22:21.West Africa location and education and the chief executive of the
:22:22. > :22:25.Nigerian sovereign wealth authority, or sovereign investment authority in
:22:26. > :22:29.the country. Some of the problems we have discussed here are not unique
:22:30. > :22:34.to Nigeria. They are African problems. They are problems that
:22:35. > :22:37.affect oil producing nations. But the solutions need decisive
:22:38. > :22:40.leadership on the part of the Nigerian government, innovation on
:22:41. > :22:43.the part of business, and consideration for the potential of
:22:44. > :22:48.the youth. You have been watching this edition of Talking Business
:22:49. > :22:52.from Lagos, Nigeria. Tune in next week when the programme will come to
:22:53. > :22:56.you from Washington, DC, brought to you by Michelle Fleury, as she
:22:57. > :22:58.discusses the industry of fake news. From myself and the team, thank you
:22:59. > :23:18.for watching and goodbye. I have got some hit and miss showers
:23:19. > :23:19.out there