As against the usual practice of limiting government financial interventions to few ‘privileged’ companies, frontline industrialist and chairman of BUA Group Abdulsamad Rabiu is pushing for the application of due process on such stimulus. In this piece, the Commander of the Order of the Niger (CON) believes equitable distribution and extension of such facilities to ‘smaller companies’ would help the economy better.
About a week ago, I published the first part of a series of essays focused on the grave and crippling challenges facing the Nigerian economy. I must say that I was surprised but gratified at the positive feedback that I received and by the interest generated from diverse stakeholders, both at home and abroad.
Many respondents were pleased that these issues were being addressed openly and objectively, contrary to the norm. Not a few expressed concern at the likely repercussions of spotlighting controversial subjects relating to powerful individuals and interest groups in Nigeria. My standard retort is that Nigeria is staring down an economic abyss that requires urgent structural reform and wholesale restructuring, backed by this administration’s anti-corruption drive.
Consequently, for the greater good, Nigeria needs genuine patriots to step up and confront the existential crisis that we are facing in our economy. Without sounding paranoid, we believe that our corporate stance will attract public attention and may well come at a price since these entrenched, ‘powerful’ interests will most likely come after us and our businesses at BUA Group. We know that they will not relent and, as such, we anticipate their pushback. Nevertheless, we realise that we owe it as a duty to our country and as responsible citizens to engage as many stakeholders as possible through this medium so that Nigeria may prosper and be better for it.
On interventions
Recently, there have been calls for new intervention programmes as a policy response. Whilst interventions, in my opinion, are an excellent way to stimulate the economy during a recession, my experience as the former chairman of the Board of the Bank of Industry (BoI) taught me that these intervention funds would need to be disbursed equitably to facilitate the desired outcomes. Not long ago, one such programme had about N200 billion disbursed at seven – nine interest rate with a tenor of 10-15 years to only three companies – a fertiliser plant in Port Harcourt, a sugar plant in Lagos, and a petrochemical plant and refinery in Lagos. Whilst these projects are no doubt highly commendable and may go a long way in promoting economic development, would the country have been better served if these cheap, long-term funds had been apportioned to dozens of smaller, viable companies or projects requiring venture capital, thereby impacting more sectors of the economy? I highlight this point because I also believe that some of the companies that have accessed these funds in the past did not need it as much as others.
Furthermore, monitoring and scrutinising of invoices of imported equipment and machinery related to these funds are also critical. One scenario which I remember vividly occurred in early 2015. To his credit, the former minister for Agriculture did his best to sanitise the agriculture industry in Nigeria, create more opportunities, and foster accelerated growth through the Agric Fund.
However, there were certain disturbing incidences which, if uncurbed, were capable of disrupting reforms. For instance, there was a request that came to the Board of the BoI from the ministry to open a Letter of Credit (LC) of about $85 million for the importation of rice mills from an Indian firm.
Subsequently, a pro-forma invoice was sent by the ministry to that effect. This money was from an Agric intervention fund for which BoI was a custodian on behalf of the ministry. When this was tabled before the board for review and approval, the board declined. As a board, we declined simply because I was privy to the fact that the costs of the mills in question were inflated by over $70 million.
Incidentally, I had in my possession a quotation from the same Indian company for a similar capacity rice mill at a cost of $1.2 million per mill, as against about $7 million in the pro-forma BoI received. I shared this fact with the board and, as a result, we held our ground even though the BoI was obliged to release funds to the ministry upon request.
Shortly afterwards, I met the erstwhile minister for Agriculture at a public function and brought up this issue. He showed genuine surprise and was unequivocal in his support of BoI’s due diligence necessary to protect government funds and to attain best value for money. We were yet to conclude this deal when the new government came into office, and all boards were dissolved.
After the new administration was sworn-in, but before the new ministers came on board, the then permanent secretary in the Ministry issued a directive that the pending LC be opened by the BoI. I got wind of the situation and immediately sought audience with President Muhammadu Buhari, to whom I presented the transaction with all accompanying facts and documentation.
In response, he promised to investigate and take immediate action. Within a short period of time, I was able to confirm that the President had directed that the transaction be stopped and the funds returned to the CBN- and that was exactly what happened. (I, however, understand that even though it was stopped, there are moves by certain persons connected to the previous request to revive the transaction at the same inflated price).
Had the President not intervened, then the LC would probably have been opened and Nigeria would have lost close to $70 million on that deal alone. Worse still, the off-takers of the mills; that is, the primary beneficiaries, were not willing to take the mills at that price from the government, yet the ministry still insisted that the LC be opened. This might have led to a situation whereby the mills would be left to rot in storage, and the nation would not have benefitted in any way from the purchase of those equipment.
As I stated earlier, I am in support of a stimulus package for key sectors of the economy but I also believe that the funds should be disbursed equitably and judiciously – targeted at the right sectors and the right people. Also, such funds should be used to encourage smaller businesses to grow, which will, in turn, lead to faster development and wider employment opportunities on the long run. This is because, if the larger companies like ours continue to be the biggest beneficiaries of these intervention funds – even where we may not really need these funds, then the big will only get bigger with the smaller companies unable to compete.
Appropriate mechanisms and processes must also be put in place to monitor the application of funds and to check over-invoicing and abuse.
Finally, on the issue of forex exhange (forex) which was largely covered in my last essay, I was astonished to learn, over the course of discussions with several stakeholders in the past week, that more than $2 billion had been remitted out of the country through Forms A over the past few years to establish cement operations in other African countries. For clarification, a Form A is used for invisible transactions that do not require shipment of any goods into Nigeria. It was further revealed that some of the transactions in question were traced to a company in Dubai with close ties to the Nigerian company. Whilst these allegations are difficult to ascertain without official confirmation, they are weighty and perplexing nonetheless.
If true, it represents a huge drain on our resources and it is my sincere hope that incidents like this are not allowed to go unchecked henceforth, as Nigeria can ill-afford to bolster other economies to the detriment of our domestic economy.
At this juncture, Nigeria literally needs all hands on deck – big or small, blue-chip or Small and Medium Enterprises (SME), private investor or public servant, young or old, to work together to secure our economic future as a nation.
Expectedly, this will be difficult to achieve as vested interests will most certainly fight back. However, we must work in concert – in an atmosphere of utmost integrity whilst we move ahead with purpose and a steely resolve to do right by our country – whether in our personal lives or in business. Nigeria can only come out better and stronger. Nigeria needs us.
This article is the second part of a series of essays by Abdulsamad Rabiu , a billionaire industrialist and chairman of one of Nigeria’s largest Foods & Infrastructure conglomerates, BUA Group.
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