Chairman of the Board of Directors and Advisory Board of the Africa Private Sector Summit, Prof Kingsley Moghalu, speaks on the African Continental Free Trade Agreement, which he said if properly implemented could create an additional GDP of almost $500bn by 2035 and take about 30 million Africans out of poverty. In this interview on Channels TV monitored by Linus Aleke, the former deputy governor of the Central Bank of Nigeria (CBN), also advised that instead of constantly borrowing, the Federal Government should embrace Public-Private-Partnership to develop infrastructures
Are you worried about what is going on at the Central Bank of Nigeria (CBN)?
Let me be very clear, it is not my impression that I am here to speak about the Central Bank of Nigeria (CBN). I am the Chairman of the African Private Sector Summit and when I was invited, I thought it was for me to speak about the business environment in Africa and intra-African trade. Therefore, I don’t want to get into political commentary about Nigerian institutions, including the Central Bank of Nigeria (CBN). Having said that the only thing I can say about what the CBN has done in the last few hours, in terms of sacking the boards of the banks is that the CBN has the power to do that if it presumes that the banks in question are not been well run. If they are threats to financial stability, or if they are not meeting the conditions under which their banking licenses were granted to them. As you know, the banking sector all over the world is about the most regulated business sector on the planet. And that is because banks trade and thrive on other peoples’ money. 80 to 90 per cent of the money with which banks do business is depositor’s funds, and only very little is the shareholders’ fund. So, it is a very different model of business, because it depends on the consumer who puts his money in the bank in trust that he will find that money when he goes there. That is why banks are heavily regulated and specifically on this particular action, I cannot speak to the merit but I can tell you that the CBN certainly has the authority and powers to do that. We did it during our time at the CBN for very good reasons too. So that is what I will say. But what I find a little odd is the context in which this is happening, because we have to understand that the CBN has to be independent, it has to be professional and the bank itself has the resources, and the authority to be able to investigate any deposit money bank in Nigeria and find out if there are infractions and if so take the necessary decisions. But this now seems to be happening from an external stimulus and that is a bit odd. The CBN is now in a position where it would appear, that its regulatory decisions are been dictated by some outside influence force or entity. I find that a little bit odd. As I said, the CBN has done this in Nigeria, time and time again, and it is not a new thing at all, but they did it independently, in the normal exercise of their banking supervision and regulatory powers.
Is the African Continental Free Trade Agreement working?
The Africa Private Sector Summit which is a continent-wide private sector-led organization that I happen to be the chairman of its board of directors and executive board, is concerned with the promotion of an enabling business environment for trade and investment in Africa and specifically intra-African trade which is the subject of the African Continental Free Trade Agreement. This is the chief obstacle to the 47 countries in Africa that have ratified the treaty. The African Continental Free Trade Agreement is spectacular for an African international law, but we cannot make it work underground if the normal businessmen who are trying to trade across the borders cannot carry out their business effectively because of the toxic business environment. If the businessmen cannot create wealth, it then means that the law is just theoretical. However, there is a potential that the African Continental Free Trade Agreement can create an additional GDP of almost $500 billion by 2035 and take about 30 million Africans out of poverty. For this to happen we need to have an enabling business environment in African countries and between African countries. So, the APSS is mounting a campaign for all African Heads of State and Government to sign, at the African Union summit in 2025, a charter on private sector bill of rights with 24 specific guarantees for businesses in African countries. If African leaders can do this, it would help a lot. As you rightly said, this year 2024 is the year of elections, there are 50 elections around the world this year and there are about 15 of them in African countries. If people who are aspiring to lead African countries do not understand the role of the private sector in creating wealth for the citizens of their countries. If they don’t understand that the private sector has to work and that the business environment has to be an enabling one, then they don’t know what their job specifications are. We then wonder what they are aspiring to do in the office that is what we are saying.
What does the proposed borderless and visa-free Africa portend to intra-Africa trade?
Amongst the 24 specific rights we are asking African leaders to sign and implement in practice is the right to visa-free travel across the continent. We are also requesting African leaders to understand that the private sector needs to be guaranteed the right to a secure and stable environment. So, security is number one, without an environment that is secure and stable, businesses will not be able to thrive. We have a situation for instance, where in the middle belt, people are been killed in hundreds, in the North-East and some parts of the southeast, and so on. These are disabling situations for people to do business. So, the right to security, the right to visa-free travel, the right to a legal system where contracts are sanctified and cannot be treated anyhow. The right to efficient importation and port administration, the right to infrastructure, and the right to an educational system that create the skills that the private sector needs in our continent to create and drive the fourth industrial revolution. The right of private sector companies to be consulted when laws and regulations are been made. This is very important, many times our governments have people who do not understand the private sector, and yet they make laws for the economy that impact the private sector and this sometimes turns out negative.
Is Nigeria ripe to implement visa-free travel, considering our porous border?
When you say visa-free, it does not mean that we should just leave our borders porous. Countries still have to manage their borders. Every country does that but the challenge is with the administration of immigration. Rwanda has done something like that and I think Kenya is also doing that. You make that rule in favour, of people who are coming for business and investment purposes, but you still monitor them and enforce your laws. The problem with Nigeria’s border is not whether it is visa-free, it is actually whether we have borders with 80 per cent exposure to neighboring countries. Are those borders manned? Have they been policed and effectively administered? Are there proper security checks? That is the real issue. Nigeria is a major driver of the ECOWAS economy, at least 60 per cent of ECOWAS GDP is Nigeria. So, we have to make it work in practice that people can trade across borders.
Why is this very important?
Let me tell you why intra-African trade is very important and needs to be supported by enabling a business environment by the government. The reason is that Africa is the continent in the world today that has the highest rate of poverty. If we look at our trade patterns, we trade a lot with other countries outside of the African continent. We engage a lot in global trade, but are we competitive in global trade? No, we are not competitive because more than 60 per cent of global trade is in manufacturing and value-added products and that is not what we are exporting from Africa. We are exporting natural resources in their raw form, we are exporting agricultural commodities and these things make up less than 20 per cent of global trade. So global trade is structurally arranged not to favour Africa. Meanwhile, 70 per cent of all trade by European countries is within Europe. 60 per cent of all trade by Asian countries is inside Asia, and 30 to 40 percent of all trade by North American countries is in that region. In Africa, only 14 per cent of our trade is within our continent. The path to prosperity for Africa lies through intra-African trade.
What is your opinion on the export products that Nigeria has a comparative advantage over others?
Nigeria has many advantages but we have to fix the business environment first. If we don’t fix the business environment we are not going to be able to take advantage of those opportunities. The first thing about the Nigerian business environment is the problem of electricity because that speaks directly to productivity. If we have reliable electricity, then we can be a productive economy, then we can export goods that are manufactured in Nigeria across the African continent. We have advantages in the area of agriculture, we can process agricultural products, add value to them, and trade across our borders. We have advantages in the area of services. The service economy is growing very big in Nigeria and we can export services, not just in Africa but around the world. People can sit inside Nigeria and perform IT and other technological services and earn a lot of money, a lot of forex because their wages would be less than people who stay in London or New York. So we use the factors of lower wages to our advantage, which China used to rise economically and now some investment is going out of China into cheaper places like Vietnam and Bangladesh. These are how we can proceed. We no longer talk about comparative advantage in modern economics which is an archaic concept, we talk about competitive advantage. That is what drives global trade, the ability to use products that may not even be indigenous to your locality to manufacture things that are valuable at good cost and export them. After all, all the raw materials of the manufactured products that we are getting from the Western world are sourced from Africa. But because they have the competitive advantage they turn those raw materials into products and sell to us. They get rich, while we get poor.
How can Africa survive in the face of external debt to the GDP ratio?
That is a huge problem but that is the result of the weak economic management in African countries. That is why we borrow so much, it is not that debt is bad but why do we borrow? How do we borrow and what do we borrow for? As a general principle, we have to borrow if it is necessary if it is the best cause of action, and for productive purposes. We have to do a calculation of what the investment to put the debt fund in to drive up the GDP of the country. How the debt would be sustainable for repayment is how we borrow and why we borrow. We also borrow a lot because we don’t understand the role of the state in managing the economy. A lot of the infrastructure we borrow for or claim to borrow for can be done under PPP arrangements with the private sector. But many African countries don’t do this, they like to go around saying that they are looking for money. Meanwhile, they are been so wasteful inside their own country and people will lend them money because it is their business to lend money. They make money by lending money to us which is their business plan. If as a continent, African nations do not keep their debt very manageable, then it is going to be quite catastrophic and will not leave us with oxygen with which to breathe. But that is because many of the countries are not following the right models and there are a lot of corruption, of course we know that, it goes on in many countries. Africa’s debt sustainability, if we want to speak specifically about Nigeria where we are spending almost 100 per cent of our revenue paying debts and our oil revenue is increasingly being bonded for more borrowings. We are bonding our future oil revenues for debt. I find this very problematic approach and I think that we need to be a little more original in our thinking and we can do a lot better.