FT: What do you think have been your achievements in your first year since taking office?
YAR’ADUA: I think my greatest achievement is the effort to institute a strict culture for respect for the rule of law in Nigeria. All the problems this country is facing can be traced to breakdown of respect for the rule of law, regulations, procedures and due process in almost every aspect of our national life, including interaction between our citizens. Once you have a system, where law and order, established regulations and procedures are not being respected, you find even in personal dealings, business dealings in the market place, between individuals, there is no respect for decent dealings that are governed by civilised behaviour. Respect for the rule of law is the basis for civilisation.
FT: One of the things that investors have been asking about on this theme is very much the sanctity of contracts. A lot of privatisations that were conducted by the last government have been reversed or re-examined. What assurances can you give to foreign investors that Nigeria is indeed a safe place to invest?
YAR’ADUA: The effort by the government to ensure compliance with the rule of law, that will govern all forms of business relations…whether it is government or between corporations themselves…In the courts, whether it is business disputes, or arbitrations, everybody will know and be certain about their clear position. When people say that privatisations conducted were reversed, they don’t give examples.
Many privatisations have taken place in the past. When it comes to the notice of government that a particular privatisation has taken place in violation of existing laws, and other people who have competed now write petitions, government is duty bound to examine that particular transaction and find if they are correct and then take action…There is the case of Mittal, Ajaokuta Steel…If the transaction was carried out, in violation of due process, but even then this administration allowed the transaction to go on, until Mittal itself violated the terms of the transactions….If you take the asset and then violate the terms of the agreement entered, and this is brought to the attention of government, now government has the duty to look into this and see. If it is established that yes, truly the other party has violated the terms of the agreement, it should just not hold back and sit back, because we want to observe the sanctity of agreements; you observe the sanctity of all agreements entered if they are in conformity with the law and they are being implemented and executed in conformity with the lawful agreement signed. Where there are violations, government is duty bound when these violations are brought to its attention to look into it and take action.
FT: So what’s your message to foreign investors who may be feeling nervous about committing to Nigeria?
YAR’ADUA: I think they should disregard all negative propaganda. When people come to say that the sanctity of contracts is being violated because of a few reversal, let them check case by case. They will found out that in fact, Nigeria now, the efforts the government is making to ensure absolute adherence to the rule of law and to ensure that all contractual agreements and all covenants entered by government according to law are totally and absolutely respected. This has never happened in this country, and in fact it’s the greatest challenge the nation is facing.
By the time we succeed in ensuring this absolute respect for the rule of law in this country, Nigeria will be among the nations that will have the highest sanctity for investors, and it will be a nation where investors are certain of what they are doing, and there will be no uncertainty whatsoever. And they will know that if they do business they have to do business sincerely and honestly and in accordance with the laws. And they will know -- those who come to do business and would want to abuse the processes and the laws to get an advantage -- they will also know that will also not be possible in Nigeria. This is the greatest battle this nation is fighting today.
FT: One of the other issues that some investors are asking about is fiscal discipline. There’s some concern in the markets that the large influx of oil wealth coupled with the pressure from state governments to spend that money is going to put big pressure on inflation and threaten Nigeria’s economic stability. What are you going to do to ensure that Nigeria’s progress in managing it’s finances is defended?
YAR’ADUA: Sometimes I get amazed, I have heard some of these questions. Revenues and the sharing of revenues in Nigeria, like in any other country, are governed by laws. And the sharing of revenues is controlled by existing laws which are even constitutional, and some financial regulations. Now the way and manner we go about sharing this revenue, we follow the law, we do not violate the law. We are duty bound to observe and respect the constitutional provision, which we do. In terms of the management of the economy, because that is the case, the constitution of this nation clearly spells out in no uncertain terms, what to do with the national revenue, how to share it.
We meet with all stakeholders, I meet with the governors, all those who have a stake in the federation account, the minister of finance and the governor of central bank, and try to agree. Because where the law says this is what you do, you cannot do anything outside it unless you reach an agreement with all stakeholders, because any one of them who disagrees with what you are doing will go to court and get a ruling…For this year, for example…we determine the minimum amount, or the maximum amount, that will go to the tiers of government to provide a balance between keeping inflation low, interest rates low, having a stable macro-economic environment, and also providing funds to go into infrastructural development, because you must strike a balance…One of the problems the nation is facing…is the serious gap in terms of infrastructure. And without some critical infrastructure, power, and energy, mass transportation infrastructure, railways, waterways…the cement sector…iron and steel, these are critical infrastructure.
Without actually sorting them out there is no way the nation can develop and the economy will grow at a rate we are targeting, above 10 percent per annum.
FT: But you’ve got senior officials warning that this pressure for spending is imperilling the reform process, isn’t it up to you to really rein in those demands and protect what’s been achieved?
YAR’ADUA: This is what I am telling you, that we are striking a balance. Inflation is still at single-digit. There has been no time during this administration that inflation has risen above a single-digit. That is because of the tight monetary control, that is because we strike a balance between spending by governments and the macro-economic stability. This is what I am telling you…We are not sharing all the revenue. In fact, we have a benchmark (oil price). We have said ’okay, above the benchmark, all funds go to the excess crude account.’…From the excess crude account, for the entire year, we saved one trillion naira from it. We take one trillion naira out, this is a figure we have determined for this year, that will ensure macro-economic stability.
That amount will not be pumped into the economy. And the remaining excess crude funds we keep it to stabilise the budget. If the benchmark for any reason in a month becomes lower than that budgeted, we take from the excess crude and then balance it, so that for all the budgets in the federation, there will be no shortfall. At the end of that, in case for instance crude price has not fallen, that means the volume will be more than we anticipated, then all stakeholders will now meet again. Apart from the one trillion naira, this is what is left in the excess crude. What percentage of it can we share without affecting macro-economic stability?
When that is determined, then the rest joins the savings. We are now trying to establish a national reserve by law, and this we are doing to ensure that we always have this balance, and build a national reserve. All these things are being done as a mechanism to stabilise the macro-economy. At no time during this administration has the macro-economy been out of gear. This is because we keep the spending within limits not to affect macro-economic stability…We sent a budget to the national assembly, a benchmark of $53 dollars, and we had serious quarrels with the national assembly when they hijacked it to $59 dollar a barrel. The benchmark we have is now the current going price is about 50 percent. The remaining 50 percent goes into the reserve.
FT: So investors can be confident that you will take every action to ensure macro-economic stability?
YAR’ADUA: Yes…At no time have we allowed the macro-economy to get out of gear. Discipline has been brought in to the pattern of spending. For example, throughout this year from the time we took over, new projects are not being awarded, efforts are being made to complete ongoing projects, that is what caused a lot of fiscal indiscipline. When you have ongoing projects, and then you start giving projects everywhere, until actually your capacity to spend is over-stretched, and then you even begin to borrow to put more funds into the system.
Since then we have never borrowed, we have never raised a bond, we have never put extra funds into the system, and all this is to maintain the macro-economic stability. The measures we are taking to keep macro-economic stability are more stringent than they had ever been, and we are infusing a greater discipline in terms of fiscal management and fiscal responsibility.
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FT: In terms of managing the economy, there’s a lot of speculation about a rift between the presidency and the central bank. How do you assess the performance of the central bank governor?
YAR’ADUA: I think the central bank is okay, there is no rift between the presidency and the central bank. The central bank reports what it does to the presidency. There has been talk that central bank independence is being eroded, when I hear those talks, again, I become amazed. Actually the act, the law, that gave central banks the powers to be almost independent was enacted and signed into law precisely on the 25th May, 2007, so under no government in Nigeria has it ever enjoyed these powers, it has only under the current administration that it has enjoyed those powers. So to say that the powers are being eroded by this administration is really amazing. Because before this administration they never had these powers…Because it is a new act that gives the central bank much, much greater independence.
Because of the insistence of the government on the rule of law, wherever the central bank governor acts in a way that violates the law, he’s called to order. It’s just as simple as that. For instance, while there is a reported action which violates the law, going beyond his authority, to do anything, then he is called to order. So because an act gives you greater independence, you cannot act to stretch that independence outside the law.
I will give you two examples, and these are the two ones people are pointing at – the issue of the redenomination of the naira. He cannot do it without approval of the president, he went ahead to begin to announce the policy, to begin doing it, and he was stopped, because he was violating the law. He needs approval of the president. It’s not for myself or any president to give approval as we wish. The essence of the law is that when it comes to the president for approval there has to be various processes and consultations and meetings and the proposals have to go to various bodies, federal executive council and so forth, before a final decision is taken.
Some people are claiming that the independence of central bank is being eroded is the case of Africa Finance Corporation. The Africa Finance Corporation, which is supposed to be a financial institution, which is supposed to be an institution which is contintentally based, now for Nigeria, and even the central bank to go into it, there has to be approval by law, by the federal executive council, and by the senate of the federal republic, this was not done. So because this was not done, independently, unilaterally he went ahead to do it, without getting approval of the federal executive council, without getting approval from the senate. Even when he brings it to the table of the federal executive council, I have to go to the senate of the federal republic by law, because it is a treaty…Whenever there is a new law, there are likely to be mistakes committed there. For instance the new CBN act, which gives it a lot of independence and autonomy, just came into effect at the end of May last year…(gazetted in July)…Because it’s a new act…so there may be mistakes.
FT: Given that you’ve mentioned these various violations of the law, how much confidence do you have personally in Governor Soludo’s helmsmanship of the central bank?
YAR’ADUA: As far as I am concerned, I don’t have much complaints about governor Soludo. My assessment is that he’s doing well, but just like any other person he can make mistakes, genuine mistakes, out of maybe misunderstandings of the ways the law should be applied…You have to note that in several of my public pronouncements I have insisted that everybody in Nigeria in positions of authority, including the president, must conduct themselves in conformity with the law, and wherever there is a breach, it has to be corrected.
FT: Does the governor have your unwavering support for his reform programme?
YAR’ADUA: Yes…He has my support…Take any institution, do your work, that is what I insist, and do your work according to law, that is what I insist. I insist on this absolutely. Do your work according to the law. Where you now go outside the law, you’ll be corrected.
FT: There’s obviously been very rapid growth in banking sector in the last couple of years since the consolidation exercise, there’ve also been several scandals involving different banks, and concerns about the stability of the banking sector. How much confidence do you have in the stability of the system at the moment?
YAR’ADUA: I have full confidence in the stability of the system, because the sector has been growing, and there is a lot of investment coming into the banking sector, and that is an indication of the confidence investors have in the banking sector in Nigeria today.
FT: Given recent scandals, is there a need for tighter supervision in Nigeria?
YAR’ADUA: I think so. We have a much, much better situation than we had before. Before in fact we had cases of a lot of the banks going under, because there was no effective supervision. Now you have a few problems today, and you cannot expect 100 percent compliance with the existing regulations, even in the most advanced countries you find sometimes a few banks, even big ones, having problems here and there. I think the banking sector is doing well.
FT: What about the Niger Delta? There was a lot of optimism when you came in to power that there’d be a rapid resolution of the conflict.
YAR’ADUA: There still is. When people thought a rapid resolution, I think they were expecting me to wave a magic wand, which I don’t have. The Niger Delta problem has been a very protracted and old problem, and the important thing to note is that we are determined to resolve this problem, and we have been working day in, day out, to resolve the problem and we have been reaching out to stakeholders including the militant leaders. In fact, we are just at the stage of holding a comprehensive summit of stakeholders of the Niger Delta region.
FT: When do you think that will be?
YAR’ADUA: I think the summit will be within the next eight weeks. One thing you would note, that actually there has been some progress, in terms of the militant activities in the Niger Delta, since we took over. I can assure that within the next few years we’ll make tremendous progress, because it’s a problem that cannot be solved overnight. It’s a problem where there a lot of interests, there is a lot of criminality…The central interest in the area is the issue of bunkering (ed: theft) of crude oil. It’s not an easy problem to solve, and we are working out serious measures to deal with the problem comprehensively, and I can assure you it is not an easy problem because of the vast criminal activities taking place, and in particular because of the huge interest, and huge activities regarding bunkering of crude oil and petroleum products in the area.
FT: Another very complex oil-related problem is of course reforming NNPC (Nigerian National Petroleum Corporation). There was a lot of talk about breaking up NNPC. When do you think that process will be complete?
YAR’ADUA: I think two days ago, Dr Rilwanu Lukman, the chairman of the (oil and gas reform) committee, told me that their report is virtually ready, I am hoping in the next twelve months we should be able to accomplish it. When he submits the report, we will study it, and then one thing we have to do is to take it to the national assembly, bills that will amend the existing structure of the NNPC, that I think will take time, because the national assembly is a very important national institution. I am sure they will take time to hold public hearings, seek expect opinion and so on. I am hoping that within a year, all these processes will be accomplished. The restructuring of the NNPC, is a major challenge…As you are aware, there are a lot of interests, that would like to see the present structure, the present situation and practices going on, but it has to change.
FT: What else do you think we’re going to see in terms of economic reforms going forward into your second year? What’s next on your list of priorities?
YAR’ADUA: Power. We are working out, I have said we will declare a national emergency in the power sector, which we are working out the programmes to do that. The restructuring of NNPC, which is aimed at making NNPC a national oil company that will go out and compete with another oil companies like IOCs, use its assets to access funds from the capital market, it is going to be quite a major shift in policy and restructuring. This will mean that the national budget will be freed from the joint venture cash calls, which will make funds available to put into security, which is one of our key agendas, into providing adequate security, maintenance of law and order, education and health. The other thing that we are doing is ensuring that we bring in the private sector to invest in infrastructure. We are working out the regulatory framework so that major infrastructure, private sector can come in and provide infrastructure, railways, waterways, take over the running of airports, sea ports, major trunk roads, so that they provide services, they charge for these services, and that will relieve government from heavy investment.
FT: When do you think we will see these regulations?
YAR’ADUA: They are almost completed. Since we came we have been working on hem. And I think we are almost finished now. Next year will be really a very, very interesting year for this country, very interesting.
FT: It’s interesting you say that. A lot of Nigerians I speak to say you have been very slow in your reform programme? What do you say when you hear Nigerians saying that you are moving slowly?
YAR’ADUA: I smile, because I know, I have been a governor for eight years, I have also had some challenges to sort out, some problems. Because I know the quality of what you can achieve depends on how you plan a programme. You cannot make major achievements by just trying to rush things. The quality of your planning, the quality of your programmes, determine the nature of their achievements…What we have to learn to know is that you cannot achieve anything without planning, and planning is a long-term process. That is why I am saying that we need to produce a national plan to the year 2020.
FT: Do you feel that in this planning process, your team is working together. It seems that you have probes being launched, panels of inquiry, ministers doing different things. Do you feel that your team is really working together?
YAR’ADUA: The executive arm of government is concentrating on planning. All these probe panels is being done by the national assembly. I know as a government the disadvantage of having to go into probes, because it takes your time. Since I came here on May 29 last year, I have not taken any step to probe any sector. If you see the government looking into anything it’s because we have received a petition.
FT: Isn’t the problem that the perception of your tenure is that Nigeria’s looking backwards, rather than taking steps forwards. How concerned are you about that?
YAR’ADUA: That is what the national assembly. I told you that we must respect the law. The national assembly is empowered by the constitution to do what it is doing. Now, I cannot tell them what to do, I can only advise when I think really there is a need. As far as possible, I try as much as possible not to interfere in what they are doing.
FT: But isn’t Nigeria designed though to have a strong central president. Shouldn’t you be a bit tougher on your government? Aren’t you delegating too much?
YAR’ADUA: We have a federal constitution, a federation of states and three arms of government at the federal level, and three arms of government at the state level. Because of our history, the long time we have had in our history of military government, which is really a centralised, and unitary form of government, so we are used to that culture of centralising power. I have also directed that all laws be examined that go against the federal system so that they will be amended to be in conformity with the federal system of government. See the federal system of government does not centralise power like the military government…It is for me a great achievement to recognise the federal system, and have the patience and the restraint not to interfere with other arms of government. Now look at what is happening in the judiciary, look at what they are doing, because there is no interference from the executive.
FT: Will you step down if the Supreme Court overthrows your election?
YAR’ADUA: Of course, I will, willingly, and without any qualms at all.
FT: You’re not enjoying being president?
YAR’ADUA: It’s not I’m not enjoying, it’s a great responsibility. But I am aware, and I believe passionately that in this country we must respect law and order. And that having allowed respect law and order to break down is what is responsible for most of our national problems. No president should come here and do what he likes, the president should come here and conduct himself according to laws, to the constitution, governing the conduct of this office. Unless we have that, we can never progress as a nation, there will always be corruption, there will always be indiscipline, we can never have the discipline to plan, we can never be able to develop as a nation, and we can never create the right environment for investment to take place.
FT: You were obviously in Germany recently. There’s obviously rumours about your state of health. What can you say to allay rumours that your state of health could impair your ability to do the job as president?
YAR’ADUA: When I hear these rumours, I always feel more elated, they confirm to me that I am not what those peddling the rumours want to believe I should be – I am an ordinary human being, I am not a super-human being, I don’t know one yet, but certainly I’m not one. I am a normal human being who can fall sick, who can recover, who can die, who can have feelings, who can be angered, who can laugh…
FT: And who is fit enough to be president?
YAR’ADUA: Yes, and who is fit enough to be president, and who can have headaches, and can have fever. You see…all my medical records are in Germany, and I have been going to Germany since 1986, and I do my check-ups in Germany every year. In fact sometimes every six months, and this has been going since 1986…Now the fact that I’m president today, doesn’t mean that when I feel there’s something that I think is wrong and needs to checked I shouldn’t go to my doctors, where all my records for the past 22 years are there. It is the most practical things to do…They know the background of everything about me medically.
FT: So what’s your message to Nigerians who are concerned about your state of health?
YAR’ADUA: They should be concerned about Nigeria itself, and that they should rest assured, working, carrying out responsibilities of president, I am fit and able to do that, and I’m doing it, in fact, at times, even over doing it. I hardly have more five hours, four hours sleep a day, and…I believe the kind of work and do, it has to be because there is an inner energy propelling me to do it. Sometimes when I look back, I just wonder that I’m able to what I’m doing, and I believe Nigerians should have confidence in their leaders, and they should not gullible to all kinds of rumours. When I was going to the hospital, I had malaria, for four days, it never stopped me from doing anything. And then I took a new drug, which of course treated malaria, but then it gave me an allergic reaction. And he announced it.
The day before, when I got the allergic reaction, it was a Sunday, that Sunday I spent over eight hours in my office in my house working. The following day, I signed the budget, and before I left I spent time in my office working, because there was nothing wrong with me except allergic reaction…Politics in Nigeria is very interesting, and we can see that people enjoy fabricating stories, falsehoods, getting their way to get them published…but gradually, once we continue to develop as a nation, and then respect for the rule of law begins to take firm root, even the attitude of people to be sincere and honest in what they do, will now continue to develop, that is why it is very critical, and very important, to establish respect for the rule of law. It’s not a small challenge, because it is the greatest challenge this nation faces. But I assure you, once we are able to achieve that, as we achieve greater respect for the rule of law, you’ll find that positive attitudes and values will begin to take over negative attitudes and values in Nigerians. And that is when you see that even the practise of politics and opposition and so on will now be based more on sincerity.
Copyright The Financial Times Limited 2008
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