The Registrar and Chief Executive Officer, National Institute of Credit Administration, Prof Chris Onalo, speaks with Nike Popoola on how to judiciously manage Nigeria’s debt
How can the mounting debt profile of Nigeria be efficiently managed to avoid negative effects on the economy?
When we look at the modern economy, vis a vis the need for strong infrastructural development which promotes business growth and encourages people to invest, you will see that investors are coming in, and new ideas are taking place in research and development.
Also, new technologies are being discovered, leading to product creation and service innovation. So, we will need a lot more of funding. Even developed governments have not stopped borrowing. So, the government must borrow. But the problem we have in some countries, including Nigeria, is that when we borrow the money for some identified infrastructural development, that fund must be used for the purpose for which it was borrowed. When that happens, we will see the impact of the loan on the economy. But we have not been so lucky to have this borrowing over time, which is why there is apathy on the part of the citizenry to express concern that we borrow but are not able to pay back.
Before now, there wasn’t a very strong voice that the government would have loved to respect or to listen to or invite to ask for their opinion. I believe that since governance is based on the rule of law, the government will, from now, respond to calls by the National Institute of Credit Administration on the propriety of borrowing in order to fund development projects. And so, I believe that with the new status that the institute has acquired, it places it on a very, very veritable position to relate to the government and ask questions, make blueprint report, give it to the government with respect to the propriety of borrowing. This also includes the parameters and the assessment of conditions attached to any form of loan or borrowing that the government might want to take either at the federal or the state level.
Must the country continue to borrow amid dwindling revenue challenges?
There’s also a concern about how we are going to pay back. The industries are in comatose. What we have in Nigeria, most countries in the world don’t have it. We appear to have everything complete in terms of rich mineral deposits, which can be transformed into a series of products and services that will make this country one of the strongest economies in the world. We have all the mineral deposits and I think the concern is legitimate, that governments should do what is needful to discover those mineral deposits in order to create industries, turn the country into an industrial giant by encouraging manufacturing, production and things that will create jobs and wealth for the people. Nigeria pays its dues for membership in the World Bank, in all the development agencies and partners. So, if Nigeria does not borrow, Nigerians are losing. We should also raise the question, what is the need for our membership if we are only paying our annual dues in institutions like the World Bank, the World Health Organisation and the rest of them? If we don’t borrow, we lose. But the question is, if you borrow, you must pay back. But Nigeria hasn’t yet been able to utilise the funds borrowed judiciously. From what has been invested into the infrastructure, the project should be able to pay back. The revenue coming from them should be enough to pay back to service the debt and both the interest and the principal ultimately. It doesn’t matter how long it takes. So, that is the concern. And that is challenge to the National Institute of Credit Administration that we need to develop a new thinking, a new strategy by which we can get to the government and constantly have them on the discussion table. This is the way to go.
If the country is unable to utilise borrowed funds judiciously, is it a concern for international bodies giving out the loans?
Nigeria has the right to borrow and if we are not able to utilise what we borrow, that is our domestic problem. The international lending institutions will only be a bit sceptical. You know, if we come to ask for a certain line of credit as a country, they may be reluctant to give us because there will be straightaway a pointer to the credit taken previously. What has the country done with it? In fact, they are on debt recovery mission that unless you keep to the terms in relation to the one we gave to you, we are not going to release further credit to you. And that slows down economic growth and cripples economic prosperity. So, I do hope that future governments will look at this very critically, that while it is good to borrow, the important thing is to really commit what we have borrowed to the very purpose for which we borrowed the fund.
Should there be a serious concern that the country has continued to maintain monthly fiscal deficits when there are worries that loans are still spent on recurrent expenditure?
Everybody is concerned about the rising debt profile. And the reason it is going in that direction is because first, our recurrent expenditure is too big. When you borrow the money, you don’t borrow to pay salaries. You don’t borrow to finance recurrent expenditure. That is where we have the biggest problem. The size of our civil service needs to be trimmed down. Some of the ministries have to be allowed to go. And then, we need a very serious audit of the Federal Government’s workforce. And until we do that, we will not be able to run the civil service system transparently. The government expenditure profile needs to be streamlined very seriously. Secondly, there is no production.
Virtually everything is imported into this country. It was not so in the 80s. In the 80s, industries were springing up left, right and centre. We have lost all of that, and then how are you going to generate revenue? Revenue comes from Value Added Tax, not just oil. We have to look beyond oil to export products and services. So, if we don’t wake up for industrialisation and increased production, the government will not be able to rake in enough money to be able to generate money and service debts. But frankly speaking, the government needs to take a very pragmatic step to cut down on recurrent expenditure. That is where the money is going. And then, alongside that, you will see the question of corruption. Some people divert funds. The system operated by the government needs to be rigorously redefined so that it does not give room to people at certain levels to undermine the financial practices that are transparent and helpful to the government.
The Institute of Credit Administration just got its chartered status to become the National Institute of Credit Administration. How will this new status impact the institute?
That is a milestone- a legacy achievement. It means that we are nationally recognised unlike what we were before for more than three decades. We were operating as a body registered under the normal laws that allowed professional bodies to be established – a group of people coming together to establish a professional body under a given name but was not through the Act of Parliament. So, the difference is that the Act of Parliament has made it a country affair. It is an institute that is credited to Nigeria as a country, hence the signing of that enabling law by the president of the country. So, it gives us a sense of fulfilment. It gives us recognition that members of our profession can now practise following the recognition that the enabling law has given to the institute. It is now a national body recognised by the law. And this means that whatever we will be doing, going forward, will be in accordance with the provisions of the enabling laws. That makes us well recognised and we can now have dealings with equally recognised professional bodies around the world who were also created through the instruments of laws of their own countries. And then, still, we are now on the front burner to be able to
partner with the government, organised private firms, business institutions, on the basis of the law that established us. We will now be taken much more seriously than ever before as a body with a statutory power to regulate standards, control credit management profession in Nigeria and to decide what the people working as credit managers and credit professionals should do in their places of work. This is in terms of ethical behaviour, ethical attitude to job, ensuring that whatever they are doing is under the strict guideline of the law. Nigerians can now move out of the country and choose to work anywhere they want, believing very strongly that they have the qualifications that are recognised all the way from their home country. It is a huge milestone for the country. Nigeria has, by the Act of that law, joined the league of nations of the world with national bodies recognised by their governments.
Who are the people recognised as members of the NICA?
People that are recognised as members are those who have filed in as members of the institute. Those who are yet to file in as members have three months from the date of the signing of the bill into law by the president. That is to say, it involves anyone who is working as a credit trainee, credit analyst, credit officer, credit supervisor, credit manager, credit controller, credit chief risk officer, general managers in charge of credit, their deputies, assistants, executive directors, among others. People who are looking at credit or working to make sure that credit extended to customers comes back are to be members of the institute as they are involved in the process. Ultimately, looking at everyone that is in an organisation, whether it is private sector organisation or public sector, so long as what they do has to do with either getting credit to be accessible, creating process for credit to be available, are involved. And then, those who take it, those who receive it, those who manage it, those who prepare the process for decisions to be taken are all involved. So, it is a whole gamut of people. They are to be individually enrolled as members of the institute. So, if you sell today on credit with the expectation that the receiver of that credit will have to pay back, the money is expected to come in. And that is why it is called receivables. And everybody in an organisation, including the government and traders, sell what they have, either strictly in cash or on credit. This means that the money is to come in and it is everybody’s responsibility to see that the money comes in. So, credit affects everybody. Therefore, individuals who are working in the organisation controlling credit, managing credit, taking decisions to approve that credit line or not are to be members of the institute’s individually. And this credit is in every sector of the economy, every industry. So, of course, it makes the National Institute of Credit Administration everybody’s pride because credit is everywhere in the economy, including consumer credit. Individuals buy some household appliances, cars, computers and so on and so forth. Corporate organisations that are extending credit to the customer are also required to be corporate members of the institute. You will find all these in the enabling law.
