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Published On: Sun, May 13th, 2018

Nigeria must not borrow for consumption-Tony Elumelu


Tony Elumelu

, Chairman UBA, one of Nigeria’s strategically important banks (SIB’s) and founder HEIRS foundation has insisted that Nigeria should not borrow to meet its local consumption needs. In a detailed discussion with global journalists at a recent World Bank/IMF meeting in Washington DC, United States of America, Elumelu stated that if Nigeria truly hoped to meet its aspirations of food security and sustained economic growth it must concentrate on developing domestic productive capacity through indigenous entrepreneurship.

Elumelu’s foundation is the largest philanthropic initiative in Africa devoted to entrepreneurship and represents a 10-year, $100 million commitment to identify and empower 10,000 African entrepreneurs, create a million jobs, and add $10 billion in revenues to the African economy. Business Hallmark’s Okey Onyenweaku presents excerpts of the interview.

You were with the IFC, where you discussed the issue of de-risking the environment to encourage inflow of funds. The major challenge is de-risking the SMEs and getting banks to release funds for seed capital, what is happening to banks?

First, I was a bank CEO and today, I am an investor in a bank and I continue to have interest in that sector. Two is, I don’t speak for the banking sector; but it is so easy to blame banks about lending to SMEs but if banks go under, the same public will say the banks were reckless, that’s the dilema. Nobody will say this bank went under because it tried to support SMEs. SME is a difficult sector to fund but those who have managed to develop the skills to support that segment are doing so. I speak from a personal conviction that we need to support the SMEs and that is why the Tony Elumelu Foundation has put aside $100 million to support entrepreneurs. And I just spoke about the fact that 2000 of them are from Nigeria and if I didn’t say it today, you wouldn’t have known that I was with the IFC and not just the IFC but also the CEO of IDA talking about how to support entrepreneurs in Nigeria and other African countries. We spent hours theorizing about risk mitigation, risk guarantee so they can come into the sector. I do hope that all these efforts will yield the desired results to make sure that money gets to the small and medium scale enterprises. The government has a role to support this initiative with incentives and policies that will make SMEs grow because if SMEs grow, they will attract more capital funding but if SMEs die, nobody will want to invest in SMEs. One thing about SMEs is that they don’t have enough collateral to provide banks and if they go under, what will banks hold on to? We need to see more successful SMEs. All of us need to work together to make them succeed.

What can Africa do to move from digital consumption?

We have young Africans who are intelligent who can do great things but if they don’t have internet connectivity, there is a problem for them. If they don’t have access to electricity, they cannot make it; so if we can create the right environment for them, then they will come with ideas that will reverse the trend of things happening in Africa. There is no two ways to that. We need to prioritize this, we need to create the right environment. Let me say that the press has a role to play in calling of all stakeholders to see how they can play their own role in creating the right environment for people to succeed. Unnecessary taxation, tough operating environment kill these companies, we need to encourage this sector, and they are the ones that create employment not the big companies. In your writing, let’s keep calling on the relevant parties to create the environment for these entrepreneurs to succeed. Imagine you were in an environment where you don’t have to worry about electricity, water and other infrastructure; then you can do things. Then you can manage to get by without being slammed with policy oddities like multiple taxations.

What is driving the Elumelu foundation? Are you getting support from anywhere?

What we are doing is private sector driven and our own contribution to the development of our country and continent. We don’t carry government along by way of information but like I said in the session, we can’t keep depending and relying on the government to do the quota that we can do. Since we started, the Tony Elumelu Foundation has supported young Nigerians. Every year, we have 50 percent of the 1000 we select from Nigeria. Not by design, but somehow due to the energy and entrepreneurial spirit of our people. This is the fourth year; this means that we have 2000 Tony Elumelu entrepreneurs across Nigeria in every state. People that I don’t know are put through the seed programme. I am happy that Nigeria is well represented in the programme and that they are doing well. It’s only a matter of time before we begin to feel the impact of what they are doing. The International Red Cross has come in, they have now committed to support 200 people, 100 from the Niger Delta and another 100 from the North Eastern part of Nigeria so that increases the participation of Nigeria from 500 to 700. The UNDP has also committed to support another 40. Collectively, we are making progress. This is how the private sector and development partners can play their own roles.

Why do you think it’s hard for African countries to invest in human capital development?

I think it’s about alignment of interest, I think it’s about understanding. We need leaders who are focused on results who want to make a difference, who understand how the system works. Just like the question they asked me before about the challenges. Some people will look at it from a different perspective but for me, internet connectivity is a major issue also, electricity; you can’t fix connectivity without electricity. Leaders who understand these things can connect the dots and then know what to tackle and do it in a transparent fashion. For me, poverty does not have any region or colour. It affects everybody. So, we need to fix issues so that our continent can make progress. Like you said, it’s something anyone should be able to understand.

How do we align with the direction that the world is going?

Follow your passion, I think people who have made great strides in life are people who follow their passion and anything you do, do it very well. Oprah Winfrey became a billionaire just by talking, organizing people and having fun, so to me, it doesn’t matter what you do because passion makes you keep improving at anything you do. If you are not passionate about a cause, you can’t make progress. If Oprah Winfrey regarded the talk show as something to get by and make a living, she wouldn’t have refined and made the kind of improvements she made. I’m sure my grandmother sang more than some artistes today like Beyonce who would want to go on stage and the whole world would stand still. She’s passionate about what she does, and she keeps improving.

You said Africa should stop going cap in hand that Africa must develop Africa, how is that playing out?

In my closing remarks, I said African private sector leaders should invest in Africa, mobilize resources that we have a lot of resources. I also called on development partners, I said please don’t relent, keep engaging in areas of advocacy and channel more resources to Africa. It is more about Africa, we should play a role in Africa, we won’t say no to people that want to help us. Just sitting down with mentality that you owe it to us to help us should go. The countries that are helping us did not have the kind of resources we have when they started. That mentality is one of the reasons we are where we are. One time I travelled to the UK and visited the town where Shakespeare was born. What you see there, you’ll see it in Africa like benches and kitchens with old steel pots, they still dry meat and I was surprised. But that environment is a cold environment, so I am not surprised that they made progress faster than we did. If we don’t help ourselves, nobody will help us. So its not that we don’t need help, we just have to do away with that mentality thinking someone will come and change our situation for us otherwise why are some leaders succeeding and some are not. It’s that mindset.

How do we get funds to build infrastructure in the face of rising debt risk?

The key thing is that, are we getting funds for consumption purpose or are the funds for investment purposes so we can use the return on investment to offset the debt? People who take loan for consumption purposes almost go bankrupt in life and it applies to countries too. If Nigeria as a country wants to borrow, debt to GDP is okay but there are other indices people look at not only debt to GDP. If those indices are okay, no problem. Then they look at your revenue and the sources of revenue. Is it revenue in local currency or foreign currency to be able to offset your liabilities? Leaders must borrow for sectors that are productive and you must honour obligations to attract more borrowing because you need capital and you must be credit worthy to attract it and have the discipline to meet obligations and the purposes for which you are borrowing is fulfilled and not that the funds are diverted.

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