Mr. Ubani Uchechukwu Ubani is Chief Examiner for The Chartered Institute of Bankers of Nigeria (CIBN) and the Managing Consultant, BVL Investment Trust Ltd. He is also a former National Auditor, Committee of Chief Inspectors of Banks in Nigeria; former Chief Inspector, Capital Bank International Plc now merged into Access Bank Plc during 2005 consolidation, and former Managing Director/Chief Executive Officer, Peniel Microfinance Bank Ltd. In this interview with EMMANUEL KEHINDE, and in his new books: Breaking the Shackles of Poverty: Foundation and Building Blocks for Lasting Wealth; and Internal Controls in practice: Armour against frauds, business and financial failure; he addresses monetary and fiscal issues and other financial concerns in Nigeria.
Excerpts:
Nigeria’s foreign reserve has been depleted to $39.98bn; as a finance expert, how do you feel about this development, what is the impact of this development to Nigeria’s economy and the solutions?
This is an aspect of our economy that people read a lot of political meaning into, but we have a body or institution charged with the responsibility of managing our foreign reserves and that is the Central Bank of Nigeria (CBN). The Central Bank Nigeria is not operating in isolation; it must work hand in hand with the fiscal policies of the Government. The government provides the fiscal policy, while the CBN come up with the monetary policy. The two must have a firm hand shake for the economy to run smoothly. When we talk about foreign reserves, we cannot remove the extent of our foreign reserves with the productivity of the economy.
A lot of instability is impacting negatively on the productive capacity of the Nigerian economy. Major among these are insecurity problems are Boko Haram, herders/farmer conflicts, banditry, kidnappings etc. Agricultural production has been drastically hampered.
Nigerian economy is import dependent. Major foreign exchange revenue earning product remains the crude oil. There has been a fluctuating fortune for the oil industry due to unstable international oil markets as well as the impact of the COVID 19 pandemic. Since the government is not generating enough revenue locally, that is why they are depleting the foreign reserves on a consistent basis to remain afloat.
The consequences are what you are seeing in the value of the Naira and the level of inflation in our economy. So because foreign reserves are maintained in United States Dollar and our foreign exchange which will go to fund the imported goods and services is nose-diving. That is why cost of goods that are being imported are also rising and we are suffering from imported inflation coupled with low level of local productivity.
So for our foreign reserves to rise there must be efficient management of the local economy.?
There must be adequate revenue or income to fund the government. As long as there is not enough revenue to fund the economy, the government will have to continue to borrow and dip hands in the foreign reserves. That is why we see that the rate of Naira to a dollar has been on the increase or that our Naira depreciated or practically been devalued because our foreign reserves are still being depleted. So if the Government continue in the present trajectory, it will even go down further and the value of naira will fall further and there may be a run-away inflation whereby you have naira and you will not be able to buy goods and services because the naira will become worthless. But by the grace of God, I believe we will not get to that point.
Are you saying that the current monetary and fiscal policies being applied if they continue, the naira will depreciate further?
Yes Sir. That is very true, except there is a drastic change in the way the economy is managed, the foreign reserves will continue to go down, and the value of naira will continue to fall. People are even complaining bitterly that vegetables such waterleaf and pumpkin leaf (ugu), they used to buy for between N50 – N100 is now going for about N1000.00 to 1,500.00. That will tell you how far the value of naira has sunk and it is the consequence of lack of accrual of foreign reserves and it is being depleted for non-productive purposes. If the foreign reserve is being invested in productive ventures that will bring in growth in the economy then we will be seeing positive trend but because it is for consumptive and most of the government expenditures are recurrent expenditure which are consumptive, they are not impacting on the economy positively.
Nigeria has been rated as the world poverty capital, meanwhile your new books: Breaking the Shackles of Poverty: Foundation and Building Blocks for Lasting Wealth; what is the message of your book viz avis this ugly position of Nigeria as the world poverty capital?
When we look at the negative description as the World Poverty Capital of the world, it is very unfortunate because looking at the circumstances of this country, Nigeria, indeed, has no business being referred to as the poverty capital of the world. This is because we have everything to make this country, one of the richest and happiest places in the world that people should live in. But, it is unfortunate that leadership has been the bane of this country. We have not been privileged to have leaders who are selfless. We have rulers that are very selfish and that has led to mismanagement of the national resources. People do not go into government or even some public offices with service to the people in mind, people with go into government with their selfish interest, not the good of the majority. That is why Nigerians are suffering and Nigeria has now become the poverty capital of the world. It is completely a problem of lack of focus of the leadership and mismanagement of the national economy. Of course that mismanagement has impacted negatively on the citizens. When we look at Nigeria today, we see that the challenges we are facing: whether Boko Haram, out-of-school children, Yahoo yahoo boys, insecurity of any type such as kidnapping, banditry, farmers/herders ‘clash etc all of them boil down to the fact that people are desperate for resources and they are ready to do anything to make money. And more so because the poor masses now idolize those who have stolen, mismanaged or diverted our resources for their personal aggrandizement. That is why Nigeria today is in a very sorry state because the leadership has lost control of whatever is called governance.
But on the basis of that, we discover that if someone is determined and disciplined, one can make a difference in his life and in the life of his family. While we blame the leadership for putting the country in this present predicament, any individual or family that is poor will also have themselves to blame for not doing what they are supposed to do.
Why I wrote this book: Breaking the Shackles of Poverty: Foundation and Building Blocks for Lasting Wealth, is because I discovered from personal experience that no matter how much somebody earns, no matter the circumstances of your birth, if you are determined and disciplined and you are ready to make necessary sacrifices, you can build wealth from ground zero to the top.
While many people are poor today is simply because of lack of discipline, to discover the information that will liberate them from poverty. People are very lazy in reading or searching for information and some people will search the information and but lack the discipline to apply the information.
In this book, there is a place I said, that for you to make effective use of the information provided in this book, there is a formula that has been provided. It is information plus action equal to wealth. So the essence of this book is to arm people with relevant information that will liberate them from poverty, if they are willing to apply these information. These are universal principles. Everybody that has followed these principles or pattern has always come out from poverty into wealth. A principle can only work for somebody that applies it. And you cannot apply what you do not know. So there is the need for people to be disciplined and determined and be willing to apply or make use of available information to save them from poverty.
Corruption and fraud seem to be setbacks to Nigeria’s development, your book: ‘Internal Control in Practice: Armour against Frauds, Business and Financial Failure; how do you respond to allegations of monumental fraud and corruption in Nigeria?
Corruption has become very endemic in the sense that people enter into position of authority or leadership and not being selfless. For anybody to make an impact whether in a family, community, local government, state or the nation, that leader must be selfless. Selfless in the sense that he or she has the good of other people at the Centre of whatever action or decision he/she wants to take. Corruption is as a result of selfishness. People want to amass wealth which they cannot even eat because we have seen situations where people gathered billions and millions of money and put it in a safety tank and buried it. At the end of the say, some of them got bad. So of what use is such money.
Corruption or fraud is both in the government and in the private sector as well because of selfishness and lack of integrity. But the book: ‘Internal Control in Practice: Armour against Frauds, Business and Financial Failure; is situated within the financial services industry whose services can be regarded as the life blood of the economy. Their services are built around money and this is what everybody is looking for and some people are ready to get this money by all means. That is where fraud comes in.
If you look at the preface to the book, I wrote that “a vehicle without good steering and breaking systems lacks control and would, for certain, crash. The consequence would be serious harm/damages to lives and property”. That is what has happened to our nation Nigeria because it is being handled without good steering and breaking systems. Most times, lives are lost and the vehicle might become a write off. God will not allow it. Nigeria will not be a write off. In the same vein, business organisations or Nations without effective internal control systems along with strong proactive risk management processes in place are like a moving vehicle without steering and breaking systems; and they are disasters waiting to happen.
If the principles that have been enunciated in this book are applied, both in the private and public sectors of the economy, we will be able to control the magnitude of fraud and corruption. But with proper control, management, and monitoring, some of those frauds and corruption can be nipped in the bud with the right tone from the top. Whether in the private sector or the public sector, if the head is rotten, the body will ultimately be rotten but if the head is sound, it will send out the right message and actions and everybody within the system will imbibe the habit of integrity or practice of monitoring and be able to safeguard the assets of the company or the nation.
The book is aimed at curtailing fraudulent activities and making businesses run safely and profitably, thereby perpetuating the productivity of the economy.
Nigeria’s debt profile is considered too high. As at September 2021, Nigeria’s total debt stock (both federal and states) amounted to N38. 005trillion. How do you respond to this Nigeria’s high debt profile?
When a man is living beyond his means of income, the person will keep on borrowing to remain alive or devise means of earning more revenue. In fact, as at end of 2020, Debt Management Office (DMO), reports that Nigeria’s revenue to debt ratio appears to be the worst in the world. Its revenue ratio stands at 10.39% out of its total public debt of about N32.9 trillion.
This figure has increased to N38.005 trillion or $92.626billion as at the end of Quarter 3 of 2021.
In fact, as at May, 2021, the Federal Government of Nigeria had spent N1.8 trillion on debt servicing in the first five months of the year, representing about 98% of total revenue generated within the same period.
What this 98% implies is that for every 100 Naira earned, we spent N98.00 on debt servicing; leaving only 2kobo for the running of the Government and you will agree this is impossible. That is why borrowing will continue to rise, thereby worsening Naira devaluation and inflation in the economy as well as the poverty situation of the citizenry.
In this situation, how can the nation survive?
My problem is not that we are borrowing but that we are borrowing for consumption and not for productive or capital projects that we can see and would yield revenue for the economy or that can pay back itself. All these are predicated on the oil revenue. That is why our foreign reserves will not rise because as the foreign reserves are coming in, we are using them to service the debt we have borrowed. If we continue with the present trajectory, the future looks very bleak. In fact, the future of the generations yet unborn is being mortgaged by this current practice of consistent borrowing without adequate revenue or adequate income-generating projects that will pay back those loans.
