Fashola, PenCom and the Nigerian debate…1

Last Friday, the Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola (SAN), was the keynote speaker at the Nigerian Pension Industry Strategy Implementation Roadmap organized by PENCOM. Titled “Overcoming the Challenges and Managing the Risks and Constraints that Inhibit the Investment of Private Capital and Funds in Nigeria’s Infrastructure Landscape in Order to Make a Visible Economic Impact”, Fashola’s intervention was on how we could deploy the Pension Funds as a catalyst for revamping the nation’s dilapidated infrastructure.

Fashola, who drew from his eight-year experience as Lagos State governor, said he would be empirical by adopting a case study discussion approach “where I will review some of the public infrastructures that have been funded by private capital, and I will do some comparisons of what the Pension Funds are achieving in other economies. In this way, I hope to highlight the differences between us and those economies, and in that way, make my recommendations about what we should be doing.”

After highlighting how Nigeria made so much money during the years of oil boom, Fashola then raised a poser: “What did we do? We went on a spending spree. Politicians promised everything free. Everyone got a wage increase, sometimes up to 80% (minimum wage from N7,500 – N10,000 raised to N18,000.00). Did our income as a nation increase by 80%? As we sought after free health, free education, free fuel, free housing and free everything, we refused to confront the reality that life is not free.”

Given such approach to governance, Fashola argued that “it was difficult to get private capital into critical sectors of our economy like infrastructure. Private capital and fund managers were not going to invest funds entrusted to them in infrastructure if we wanted to use them for free. As a people, we were willing to pay for these services outside our country but demanded that they be provided for free in our country. The new pension fund has shown what can happen if people resolve to contribute and pay their way.”

Fashola concluded by looking at where we are and what we can do, even in this most depressing period: “Put very simply, our main source of revenue has taken a big blow. This household has lost its bread winner. However, it is not without options. It has assets, it can raise money, it has savings such as the private money belonging to pensioners, but it cannot be used like oil money. Whatever is used must return. This calls for a new attitude. There is no free money. Ladies and gentlemen, I have news for you. After 3 (three) decades of prevaricating about diversification, diversification has walked into the front door of the Nigerian household. If Africa is poor today it is not because of a lack of resources; rather it is likely a poverty of ideas or the abundance of risk elevating attitudes, some of which I have alluded to, such as judicial and political, and these must change, as I will contend in my conclusions…”

Although a very long speech, I just could not put it down because of the breath of ideas about the endless possibilities for repositioning our country, even in these lean times. To be sure, I am well aware that Fashola’s options are not fool-proof, especially in a society like ours where just a few individuals (who are still flying private jets and living in luxurious mansions), could owe the Asset Management Corporation of Nigeria (AMCON) a whopping sum of N5.4 trillion. Yet, I nonetheless believe he proffered an option worth trying. At least, it is an idea we can debate.

Having enjoyed reading the speech, I felt I should share it with members of THISDAY editorial board. Under the headline, “I love this man! Fashola’s speech today on the way forward for Nigeria”, I posted it for the reading pleasure of members. Since it was not meant for discussion, I was not expecting any response. Besides, there are usually many of such postings as members just share anything they came across that was of interest to them. It was Waziri Adio who first made a terse comment, thanking me for posting the speech before he added: “There is an expression in Yoruba for someone like Fashola: Sui Generis!”

That apparently was the “provocation” that got the ire of Mr. Kayode Komolafe, otherwise known as KK, incidentally Fashola’s personal friend, who sent in a fiery post, dripping with ideological anger. He was very unsparing of Fashola and the endorsement Waziri and I gave the speech. After reading his comment, I immediately sent a terse reposte: “Well, KK, many thanks for the Communist Manifesto you just presented but there is no denying that the private sector is more suited to managing businesses. For instance, we may deride privatization, liberalization, deregulation and other market reforms but how many phone lines did we have in the days of NITEL?”

As it would turn out, KK was not alone in his line of thought as the speech instantly generated a debate about the economic choices available to the nation as Waziri joined issues with him. Then Dr. Chidi Amuta, Mr Sonnie Ekwowusi and Mr Femi Falana, SAN, also waded in. Even though I deliberately stayed out, what I take away from the exchanges is the assumption that only a school of thought cares for the poor whereas the opposite could indeed be the case, as we can see from the ongoing debate about the value of the Naira.

The Central Bank of Nigeria (CBN), after its Monetary Policy Committee (MPC) meeting on Tuesday, said it would not devalue in what is no more than a self-deceiving stance. Meanwhile, a Dollar sells for N300 and above in the open market whereas the CBN puts the value at N199 per dollar. Those who can get this dollar at the official rate are the rich and powerful while the poor people whose interest we pretend to be serving by such policy can only get their dollars at the black market. Even the goods being sold by the “manufacturers” who are given these cheap dollars are sold at black market rates as I explained in my piece of last week, “When Naira Catches Lassa Fever”. Yet, there are people hailing such a decision based essentially on some ideological dogmas.

However, I am already getting ahead of myself even though there is a way in which such policy choices connect with the interactions on Fashola’s speech. Having craved the indulgence of members, I am sharing some of the contributions before I now draw my own conclusion. I am of course starting with KK’s opening shot which more or less started the debate.

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Kayode Komolafe: It is intriguing how our petit-bourgeois intellectuals (and this is no slur, but a scientific description!) glorify privatisation, liberalisation, deregulation etc. without a tinge of self-criticism even when the reality suggests otherwise. To borrow Fashola’s own favourite phrase, my take-away from his statement is what he left unsaid for clear ideological reasons. Fashola’s interest in pension funds is primarily about how to take “risks” with workers’ money for “investments”. Well, the primary purpose of pension funds is social protection. Investing the funds is only a means to realise this end more efficiently and effectively. The corollary to that is formidable regulation, not adulation of deregulation. That point is missing in the minister’s reflection.

The pension reform by the President Olusegun Obasanjo administration is not strictly a success story of privatisation. It is a triumph of regulation. And more of that is what is needed. By the way, those who sold privatisation and other economic theologies to us are now talking of strong regulation having been shaken by the 2008 crisis caused by neo-liberal recklessness. It is amazing to observe a resurgence of these ideas as THE solution to worsening poverty and misery in the land.

Perhaps it is time a scientific audit of privatisation, deregulation, and liberalisation was done. Since the setting up of the Technical Committee on Privatisation and Commercialisation (TCPC) of the late Hamza Zayyad in 1985, many of the privatised companies have simply disappeared from the economic landscape despite phantom injection of capital, skills and technology. It would be interesting to know the volume of asset striping that has taken place. The National Assembly in the Obasanjo days looked into privatisation and the findings were not complimentary. It is not enough for lawyers and judges to be versed in the legal framework of PPP as Fashola suggests, it is also morally important to unearth the depth of rip-offs in the so-called PPP.

In addition, there should be a standard to measure the efficiency of its delivery. The question should be asked: how efficacious is the prescription for the social sector? After all, the argument in 1986 by Fashola’s predecessors at the federal level, Olu Falae and Kalu Idika Kalu, was that government-run companies should be privatised because government “has no business running business.” According to these pioneers of privatisation, freed resources could be concentrated on running schools and fixing hospitals. Today, the same social sector has become a big business in which quality education and healthcare are commodities available only to a few people who could afford them.

For how long will the elite remain insensitive to the growing inequality in the land? Can they see the frightening future of new class contradictions? You unbundled NEPA and parcelled up the public assets to businessmen. Public money was later injected into the private businesses. Yet all that the consumers have is darkness. And our privatisers have the temerity to talk of increasing tariffs. Our petit-bourgeois intellectuals are never horrified by this egregious violation of the socio-economic rights of the people enshrined in the constitution! Fashola is not happy that the increase in tariffs is being challenged in court. But the law provides for what should be done and the law has not changed.

Forget this sermon of PPP by our latter-day Thatcherites in Nigeria. Did anyone prevent the flow of private capital into the building refineries? In 2001, over a dozen licences for private refineries were issued by the OBJ administration. How many refineries were built until Dangote rose to explode the myths around private refineries? Instead of financing the building of refineries banks were doing smart business, funding importation of fuels. Is that what the private sector does in the metropolitan capitalist societies? The truth is that petit-bourgeois intellectuals such as Fashola and others on this board are only romanticising private capital injection into building infrastructure.

Until Chapter II of the constitution is expunged from the constitution, our neo-liberal ideologues would have to reflect on their argument. I am mortally worried that instead of fresh thinking, all we have on display are the same old shibboleths so far peddled by our privatisers, liberalisers and deregulators in the last three decades.

All told, given the structure of this neo-colonial capitalist economy, the responsibility of making accessible mass transit, social housing, public education, primary healthcare, social protection etc. will have to be that of the state. You cannot sincerely talk of tackling poverty when a majority of the people is too poor to access these basic needs qualitatively. So when politicians get into government they should be socially sensitive and make poverty the enemy to fight. They should think creatively about how to generate resources to do this rather than seeking phantom private capital in arrangements that could be ultimately inimical to public good. I love this Fashola too!

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Dr Chidi Amuta: I am with KK on this. As it turns out, privatization, PPP etc have become convenient catchphrases for an unproductive national elite to invade and sack public sector assets while adding no value either in capital or know-how to the sectors they invade. I like Fashola for what he did in Lagos and could do at the national level. I like him for humanizing governance and establishing a linkage between taxation and the responsibility of government. But we need to look beyond rhetorical flourish to unearth the long term ideological implications of what is being said.

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Mr. Waziri Adio: There are four issues here in my mind: one is a false dichotomy between regulation and privatisation. You can privatise and regulate, depending on the nature of the sector. Capitalism provides for regulation in situations where the market is likely to fail or be inadequate. Two, Fashola is advocating for pension funds to be invested in infrastructure; he has not legislated it. The fund administrators have a choice and can evaluate the risks and the possible returns and make their own business decisions. Should our govt provide infrastructure? Yes. Can it with the infrastructure gap and in a situation where government is borrowing to pay salaries? No.

Should we look for creative ways to fund infrastructure or continue to endure the limitation the deficit imposes on human welfare and wealth creation? I think so. And this leads to the third point: should citizen co-pay for certain services? I think so. Of course, there are those who might not be able to pay. The task is to provide alternatives for and give direct subsidy to such people rather than bring down the standard of living of everyone else. We get what we pay for and most have the capacity to co-pay than we readily admit. I will rather pay road tolls and travel from Abuja to Osun State in five hours not eleven. Buses should pay a fraction of what cars and SUVs pay. Mass transits should also be provided. And last is an ideological contest about how to tackle poverty. I believe that Fashola prefers the job-led approach.

The cake-sharing approach is okay, but it presupposes there is a cake in the first place. We have to bake the cake before we can share it. So sir, poverty and inequality remain the issue of our time and there are different conceptions about how to tackle them. But I don’t think the way to go is to keep dormant trillions of assets that could create further values for their owners and the larger society through jobs, infrastructures, improved welfare, productivity and wealth creation. There are risks of course. But the thing to do is to limit or eliminate the risks. Putting pension funds to create multiple dividends to society is a very viable way of reducing poverty in my view. Needless to add, I subscribe to both capitalism and the enabling/instrumental role of the state.

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Femi Falana, SAN: Chairman, KK’s timely and friendly reaction to Mr. Fashola’s lecture has nothing to do with any communist manifesto. The Nigerian constitution written by the representatives of the local bourgeoisie stipulates that the “security and welfare of the people shall be the primary purpose of government.” Pursuant to the constitutional imperative the State has, over the years, enacted a number of welfare laws. They include the Child’s Rights Act and the Compulsory, Free, Universal Basic Education Act (which provide for free and compulsory education from primary to junior secondary school to every Nigerian child), National Health Act, etc. But with the increasing abdication of the responsibility of the government to market forces the welfare laws are being violated with impunity.

In advanced capitalist societies it is not uncommon to provide subsidies to address challenges in critical areas of the economy. For instance, subsidies are provided to encourage food production. There is an effective social security system in place to take care of vulnerable people. But in peripheral capitalist societies it is said by neo-liberal ideologues that governments should not waste money on any form of subsidies for the poor. But at the same time the CBN is manipulated to bail out the comprador bourgeoisie, from to time. In 2008, following the ruination of the capital market and the threat to collapse the banking industry by the private sector people through unpaid loans the CBN bailed out the commercial banks to the tune of $7 billion. As if that was not enough, AMCON was established to take over the toxic debts of the pampered members of the ruling class while all manners of intervention funds were made available to out the private sector to the tune of over N 7 trillion.

However, I agree with Mr. Fashola that the pension fund ought to be invested in the economy. But since the pension fund belongs to the Nigerian workers the decision cannot be taken on their behalf by the government. The Minister’s suggestion to invest the funds has to be discussed with the contributors through their trade unions. Contrary to Waziri’s suggestion, the pension administrators lack the powers to invest the funds without the consent of the contributors. By the way, the Minister may also want to discuss with the contributors to the national housing fund with a view to investing the huge fund in mortgage institutions.

In commending KK for his auspicious intervention in this debate it is pertinent to draw the attention of all neo-liberal ideologues to the inaugural speech of President JF Kennedy delivered on January 20, 1960 when he said that “if a free society cannot help the poor who are many, it cannot save the few who are rich”.

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Waziri Adio:  Do we help the poor with bad roads? Do we help them with totally collapsed public schools? With public hospitals that are as good as morgues? With epileptic electricity supply and lack of access to clean water? In my view, we help the poor by making those who can pay to pay user fees for roads, hospitals, electricity, water etc. Then we can have life-line rates or subsidies for the poor. It is not everyone that cannot pay tolls on roads. So why do we continue to insist on an approach that has not worked and will disproportionately affect the poor, who have little options?

Let’s take electricity. Everyone, including the poor, now self-generates at a level that is twice or thrice the real market rate. Who suffers the most from this? The poor that we think we are trying to help. My wife runs a small bakery. On the average, she spends about N400,000 on diesel every month. She pays about N20,000 to AEDC for on-grid electricity. With a doubling of tariff and more constant light, she won’t pay more than N75,000 for electricity per month. This also means she didn’t have to buy two generators, fuel and maintain them.

If light is more constant, the cost of doing business will come down, many more people can start businesses, and they can employ more people. This for me is how to sustainably tackle poverty, not through an unsustainable ideological approach that will end up impoverishing all of us and put the extremely poor at greater disadvantage.

Higher tariffs will be necessary to improve electricity supply, and a doubling or even tripling of tariffs is still much cheaper and safer than self-generation, which everyone, including the poor, now does. As things stand, lack of infrastructure further puts the poor at a disadvantage because it limits their productive capacities, narrows their chances of accessing opportunities and further constrains the options available to them. Building and maintaining infrastructure will create jobs and expand opportunities and expand welfare for everyone, including the poor. I will like to see your arguments against that.

If we are really bothered about the poor, our task is to identify the poor and accommodate their interests, through life-line tariffs, ensuring that people pay for only what they consume, lower tolls for buses, alternative routes for those not capable or not interested in paying tolls, mass transit or even transport vouchers etc.

I believe that poverty and inequality are major issues in our society today. However, our point of departure is how to tackle poverty and inequality. Contrary to your claim, I am not ideologically neutral. I believe in the Market. I believe that the best way to tackle poverty and inequality is by using the instruments of the market to create jobs and improve the productive capacities of and expand opportunities for our people. However, I also take the ideological position that the market doesn’t deliver optimal outcome all the times, as made clear by classical economics, and therefore I see a role for the state in correcting market failures and in intervening in strategic areas like tackling poverty and inequality.

I will submit that looking for innovative ways to provide infrastructure that will make life easier, put people to work and improve their productive capacities actually advances the much referenced Chapter 2 of our constitution. This however does not mean that targeted subsidies could not be provided for the poor. But a system that aims to subsidise everyone can only deliver the kind of outcome that we have now.

I think the remaining Marxists can help their case by moving beyond class analysis to concrete policy prescriptions. We have the challenge of collapsed/non-existent infrastructure. We also have the challenge of shrinking revenues. The budget might be difficult to implement and the scope for borrowing might be limited. I am interested in how we can fix our infrastructure problem, which limits both productivity and welfare, in such a context.

Sonnie Ekwowusi: I applaud Femi Falana, SAN, for drawing our attention to the complex interplay between economic freedom and democracy or political freedom. Greater economic freedom-lesser tax or tariff burden, rule of law, trimming of government, fiscal freedom, business freedom- is strongly correlated with human development which is the epicenter of all development. That is, if the people cannot sleep at night; if they do not have a roof over their head; if they cannot drink water, then the rationale for the existence of the State is indeed questionable.

KK is right in submitting that government cannot abandon its social responsibility in meeting the basic needs of the people. Why this should be trumpeted to the rooftop in Nigeria is that government hardly lifts a finger to provide the basic things such as housing, health care, road infrastructure etc. So, we admit that successive governments in Nigeria have been failing to live up to their obligations.

Having said this, we should take away the argument from confrontational stance. Government is not a magician that is capable of providing everything for everybody. In reducing poverty, there should be roles for all players NOT just the government. This is where we talk about the principle of subsidiarity which supports government-private partnership in reducing poverty. And I think this is the principle Fashola was trying to refer to. The people should pay a certain price in poverty alleviation. Everything cannot be free.

Kayode Komolafe: Dear Segun and Waziri, The point of my humble intervention, which you seem to miss, is as follows: In our socio-economic environment plagued with mass poverty, the basic needs of the people are not going to be delivered by market forces. So we should stop hailing those who say the state should abandon its social responsibility to the people.  The state has to ensure a judicious mix of policies to deliver the basic needs of the poor majority of the people. Here I am talking of basic education, primary healthcare, mass transit and social protection of the most vulnerable etc.

That is what the United Nations Social Development Goals are all about; so there is a universal consensus that you cannot seriously talk of tackling poverty when you leave the basic needs of the people to market forces as you Nigerian petit-bourgeois intellectuals are insisting. This not a Marxist position, it is approximately a social democratic argument. By the way, as a Marxist I adopt this social democratic position out of a frustration that a Marxist revolution is far from being imminent in Nigeria; this is because the subjective conditions are not matching up with the ripe objective situation.

My real dream is a revolutionary transformation of this political economy to create a just, humane and progressive social order; but I am not naive to think that it would happen soon. It is insensitive and cynical for Fashola, as a minister in a government elected on social democratic platform, to say inter alia in his statement that: “As we sought after free health, free education, free fuel, free housing and free everything, we refused to confront the reality that life is not free.” Even a minister in a Republican government in the U.S. or Tory government in the UK would be more socially sensitive. The petit-bourgeois intellectuals should be wary of the spectre of mass poverty haunting Nigeria. And this is no Communist Manifesto.

END NOTE: The foregoing is just an abridged version of a conversation that continues even till now but the fascination for me is that the contributions represent the dominant schools of thought on the direction Nigeria should take. However, the point being missed by the “Marxists” in our midst is that there is a presumption that Nigeria has the resources to meet the obligations that are in the much-touted Chapter 2 of the 1999 Constitution as amended. We don’t! So, in such a situation, what do we do? Should we, because of ideological fixations and sense of entitlement, continue to ignore the fact that our economy will benefit greatly from market reforms? And going back to the particular case that started the debate: Can we really take a risk with the Pension Fund to drive development, as suggested by Fashola, even with all its implications?

Next week, I intend to draw my own conclusions.