Bankers risk job losses if govt doesn’t borrow – Fashola
Minister of Works and Housing, Babatunde Fashola, shares his thoughts with OKECHUKWU NNODIM on the nation’s housing deficit, roads and other issues
The unstable exchange rate has contributed to high inflation in Nigeria. Is this not undermining Nigeria’s ability to finance projects and repay the loans it acquired?
You say forex is the cause of inflation, but it is difficult to put one finger on the cause of inflation. It is a combination of many things. And you have to also be able to distinguish between demand inflation and cost inflation. So, where cost of service delivery is the issue, it may be cost-driven inflation. Every time I open a newspaper, it must not just inform me, it must educate me. So, let’s be careful about this. The other driver of inflation, of course, which economists have also pointed their fingers at, is the amount of money that was pushed into circulation in response to the economic challenges of COVID-19 as understood by different economies.
That was a lot of cash globally; people got money just to prevent social unrest, but that money was not immediately tied to productive activities. Suddenly when you opened back the economy, there was a large sum of global funds chasing goods that were just coming in. So, there was an excess demand and economists will explain this better to you. We just need to understand that there are many things that are driving inflation. That is why interest rate hike is only one of the things you can throw at it in order to reduce the amount of money and the cost of access to funds to slow down that event.
Now, I keep saying that we must be careful also in understanding what public finance and necessities are. First of all, don’t forget that there are local and global financial markets. What is their job? It is to lend money. If you don’t borrow, those people are going to lose their jobs. And that is why I’m talking about not just informing but also educating. Those people are going to lose their jobs because the major way financial services firms get money is through lending. You put your money in a bank, I put my own, she puts her own and we are already going to collect interests.
How is the bank going to pay that interest if it does not lend the money to somebody to earn income and pay its staff? Also, the figure I was trying to get for you is the number of people employed in Nigeria’s financial sector. I think it’s about 2.4 million people or so. Therefore, if people don’t borrow, including the government, there’s going to be trouble there. The balance that must be struck is that the government must not crowd out the private sector. I think we do ourselves a big favour by understanding these things. So, there must be some balance; if the government doesn’t borrow, banks won’t make money and they will lay off employees. However, the government must not over-borrow and crowd out the private sector.
Between 1999 and now, I’m struggling to remember one budget that Nigeria made that was not a deficit budget. That means that there is a gap that needs to be financed and the usual place is to borrow. Then let’s ask ourselves, where did all that money go because the Buhari administration still inherited debts owed state governments for federal roads that were done by them? We’ve paid over N700bn, that’s part of the debt. Lagos-Ibadan (Expressway) was not built, Second Niger Bridge was not built, and there was no National Housing Programme. These are all the things that people say they want. They are now being responded to. So, where’s the money going to come from? Are you ready to pay more taxes or is there a state that says ‘don’t do my roads’, so that we can reduce the debt by that amount? Therefore, I think it is important to have the next elections focusing on the issue of finance and public finance knowledge. This is because often, we have these elections, there’s no debate about funding and where the money is going to come from. Somebody has to pay for it and it is either debt or increased taxation?
Aside from the measures you’ve highlighted, are there other options?
There is also another option, of course, which is private investment. And we’ve done something in that instance. You know what the Dangote Group and the BUA Group are doing. You know what we are doing with tax credit schemes, the Highway Development Management initiative by trying to concession 12 highways. But how much money does the private sector have to build roads of N60bn at N200bn that’s not their primary function? And how many Dangotes do we have? The bulk of our economy is made up of MSMEs, small and medium businesses. That’s true of every economy in the world. The major companies are small businesses. So, the public assets, roads, bridges, highways, ports, dams are the social capital investments that the government must make for all those other businesses to be able to get on with their lives. If a one-hour journey takes four hours, that business can’t be effective. Its goods will reach the market at a very high cost.
So, you are going to have two bridges across the Niger at the end of the year. That’s a sign of imminent prosperity. You have a choice. All of us know the impact of choice in our lives. That’s what is being done now. So, let’s see first of all who does not want a road or a bridge or a school, or a housing project, then we will reduce the debt by that amount. We must not just write because somebody is saying something, we must really understand that this is public finance. The debate in the United Kingdom now is that they are already in excess of $300bn in debt. But that’s the place we fly to for holidays.
The government is projecting that fuel subsidy payment will rise to N6.7tn next year. Some months ago, you said if you had N10tn, it would help to significantly fix federal roads nationwide. Does the N6.7tn fuel subsidy not suggest wastage, because the World Bank, the IMF and multilateral agencies have warned against it?
For me, the World Bank doesn’t run this economy, we do. They don’t run the economies of other countries either. The World Bank is owned by all of us and so, it is only a bank. They are not more than that; and a development agency, that’s all. They are my bankers. What the nation wants to do is determined by the leadership of the nation. I agree that the amount of money that is committed to a single product in terms of subsidy is a matter for concern. But it is a debate that I think we have stayed away from if it was my call to make.
Meanwhile, sometimes, policy and economics cannot be separated and that’s why you have a field of knowledge called political economy. If it was simply an economic decision, the subsidy would have gone by night. The administration before us had that problem. They tried to take it out, they back-tracked and everybody knows that it will have electoral consequences. That’s the issue. For me, the place where the Nigerian people are is in the National Assembly. Every senatorial district of this country is there; all the federal constituencies are there. That’s where the debate should happen. What are the people of Nigeria going to do with the subsidy on petrol? That’s where the debate should be. It’s a decision for the people of Nigeria. If they take that decision, their government will implement it because there are other things that can be done with that money and I’m not going to go into that debate.
But in making that decision, understand that fuel can go to seven times, five times or four times what it is currently, because the price of the basic input, which is crude oil, has risen. So, if the price of beans goes up and you want to produce akara, it can’t be cheaper. Let us be clear, the price (of petrol) will go up and that will have a cost push effect on inflation; transport cost will go up. So, it’s not an easy place to be. It looks easy from the outside. Do you want social unrest like the type of Sri Lanka in your hands? All of us know what the economic issues are. But if you take that political decision, the people who agreed with you inside are the first who are going to call and say they are fighting on behalf of the poor people. The question to ask ourselves is this; is it the poor people who are using the fuel? This is because the bigger product, the un-subsidised fuel, which is diesel. It is the one being used for manufacturing, transportation in the big buses and all of that. But we need to have this conversation in the National Assembly.
Based on the country’s current high rate of inflation, is there any plan to increase the N15m threshold that can be borrowed from the National Housing Fund for the construction of buildings?
I am not the managing director of the Federal Mortgage Bank of Nigeria. As you know, it’s a statutory corporation that has its CEO and has a board. My work is to provide policy oversight for that institution to do its work. Of course, if there’s a need and a case to review the threshold, it will be initiated by the management of the company, presented to its board for approval, and then referred to me and the Minister of State and the permanent secretary for concurrence. So, I’m not going to get ahead of myself, I have my own full time job. That’s a full time job of the managing director. My job is to call him back when he’s doing the wrong thing, and not to teach him how to do the right thing.
The government recently asked interested persons to apply online for the completed federal housing projects. Have people started taking possession of the buildings based on the widespread interest online?
Interest is not enough to buy a house. You have to follow the process. It is interest and process that culminate in payment. We have several hundreds, if not over a thousand applications, but not all of them have paid. Quite a number of people got onto the site out of excitement, but they didn’t complete the process. Some of those who have completed the process have paid and there has been handing over of properties at the various sites where the inauguration is taking place. What we do is that not only do we hand you your title documents, we hand over to you the key to the house on the site. You have no business with us again. That is what we did for all members of the 1994 Super Eagles, who were promised houses many years ago. That process is going on. But that is only one aspect of the housing initiative. We just talked about people who are getting mortgages and that’s another set, in which case we are not building but financing.
We also have people who are applying for title documents to houses that they have bought and not been able to get the documents. So, I’m proud to say that we’ve signed over 6,000 C-of-Os. Just this morning before I came to work, I signed about 40 and over the weekend, I signed close to 150. It is a record that I am proud of, for we have cleared the backlog that we inherited in that respect. We are also discharging the obligations of all other acquisitions. I think there are about another 6,000 housing units that are undergoing development by the Federal Mortgage Bank of Nigeria. That again will come to the market. Very soon, you will see the completion and inauguration as we roll down. There’s a lot going on. But you know where the real deal is, the real deal is still in the private sector. We’ve done some things right to encourage them to go and develop because the private sector has been the largest supplier of housing in every economy in the world, except for communist societies.
Now, for the figures that you wanted, as of June 1 this year, we had 11,508 people who applied through the website, but they are pending applications because they didn’t go to the next step to complete. So, out of those over 11,000, only 31 finally submitted their formal applications. We have a total cumulative of 755 applications that were approved. But even after the approval, how many of them have paid? We have pending applications – 11,508 people who indicated interest but didn’t go to the next step. For that period of reporting, only 31 people submitted, that was in June alone. Cumulatively, we have approved 755 applications after they finished anything. But out of that, not all of them have paid off. This report was for the second batch of approvals. I will have to get updates again. I’ve been on the road for almost two weeks.
The International Human Rights Commission says Nigeria has about 28 million housing deficits. What is the country’s actual housing deficit?
It is not possible to determine the actual number of houses that we have a deficit of at this moment. The easy way by which we can do that is through a census. So, we have already sent questions to the National Population Commission that we want them to collect data for us about who they will be enumerating living in their own homes, rented homes, wants to buy a house and cannot get one. That’s the only way we will have data. So, all of these characters who are giving out figures, asked them to say where they got their figures from. For the 17 million housing deficit figure or whatever I found in 2005 housing policy written before I came, it was in the minister’s forward. I called that minister and he said, sorry, they just wrote it for me. That is what we have been quoting because it is a negative sound bite and we like negatives sometimes.
But despite that, we can be logical. If you drive through this city (Abuja) today, you will see empty houses. There’s no major city in Nigeria that you will drive through that you will not see empty houses. Even without the numbers, let us just be logical, it is until we have used up those houses that are empty that we can realistically begin to talk about deficits. How can you have buckets full of water in your house and say you have a water shortage? The housing shortages are largely an urban issue. They are not rural. Most tenants in urban centres in Nigeria are landlords in the villages and communities and many of those houses are empty, while the owners are here in the cities.
There are concerns about the delay in the pace of construction work on some federal roads, for instance, the Lagos-Badagry Expressway. What is the cause of this?
I was there about four weeks ago. But first of all, let us understand; that road is about 60km plus. So, before you start validating what people said, how much was budgeted for it? I don’t make the budget, it is what we put in that we will use. It is important for us to understand how democracy works. The executive proposes the sum, parliament approves it. If the parliamentarians decide that it is their constituency that takes pre-eminence over the state, so be it. You are complaining about debt, where do you think money is going to come from to build the Badagry road?
That is why there was no progress on it in the past. But the reason why there has been progress now on that road is because we got a tax credit for it, I think N16bn. But the total contract price is about N20bn plus. However, with N16bn, go and see what has happened there. The Lagos-Ota road, I think the contract is about N50bn plus, but go and look in the budget and see how much is there (for the road), maybe N200m. It is us that got Sukuk this year of N7bn, and so they are working as the money allows them. If we go and borrow, you will complain. That Sukuk is debt. On the Second Niger Bridge, we are using 19 million litres of diesel supplied by Nigerians. That is how infrastructure enriches the nation.
You just mentioned the Ota road. Some days ago, the Ogun State Governor, Dapo Abiodun, gave an ultimatum to the ministry to fix the road or the state would take over the project. What is your response to this?
I don’t take an ultimatum from any state. I take an ultimatum from the President, who is my employer.
What is the update on plans by the government to introduce toll gates on some roads?
The major roads that will be tolled are not fully completed. We’ve completed some sections and the toll is a user charge. We want to ensure that your experience is pleasant enough for you to feel comfortable to be able to pay for it. We have done the tolling policy and it is widely published. As we finish the roads and they are in reasonably motorable condition, then we will deploy a toll service. There are some to be tolled by concessionaires under the HDMI (Highway Development and Management Initiative). So, it is work in progress, we have set the policy, we have set the rates, now let’s finish it and then we will do the tolling.
You’ve been in politics for some 20 years. Why did you decide not to contest for President, because your name was mentioned many times?
I told you I’m contesting for the presidency of my home, I’m going home. You see, next year, it will be 35 years since I left school, 1988 to 2023. So, if I took a public service career, I will retire next year, because the rule is 35 years of service or 60 years of age, and coincidentally by next year, I’ll be 60 years. We are talking about young people, is it not time for us to leave the space? I came in at 39, I’m going at 60, let some 30-year olds too come and start their journey. It’s time to go.
But your party has produced a 70-year-old as a presidential candidate. One would have thought he would support someone younger for the position. What’s your take on this?
I’ve answered you about myself and that’s my own decision. The candidate also has his own decision to make that he wants to lead the country in an elected capacity. He has been playing his leadership role in an elected and unelected role and he says, ‘Look, I want to take some elective role now’. That doesn’t mean I will stop serving my country. I just don’t need a title to do so anymore.
So, if your predecessor as governor, who is now the presidential candidate of your party, wins the election and asks you to come and be part of his cabinet, will you tell him no?
When we get to that bridge, we will cross it. Don’t misunderstand me. I said I will serve my country but I don’t need a title to serve my country. I don’t have to be a minister to serve my country. What you people don’t know is that there are many people who work with me here and then in Lagos, but are not in government, and they are contributing immensely to whatever we are doing here. They are not in this government, they were not in Lagos State but their value is unquantifiable. You see that place at Muson in Lagos, where you can make a U-turn, the person who designed it was not in government. He is Prof Odusanya, an architect from UNILAG. He helped us solve about 22 traffic gridlock areas and there are many others like that. So, I don’t need a title to serve my country. That’s my position. PUNCH