Financial intervention in various sectors of the economy since 2009 is aimed at empowering operators to cope with the competition that comes with liberalisation. But how has this helped?
Correspondent SAM NWOKORO reports.
The objective is to moderate with some doze closer to state supervision of a free market economy many nations embraced at the turn of the century by way of interventions.
Many in the less developed and developing categories had been enticed by the allure of standard of living, productivity, and acceptability of the products of the Asian Tiger economies (Thailand, Indonesia, South Korea, China, India, Singapore) and Brazil which began to develop from the 1980s.
This made laissez-faire very appealing.
Most states in the Southern hemisphere, African nations inclusive, let loose their economies into the hands of private operators. A wave of state divestment and sale of equity holdings in government enterprises followed at the entry of 2000.
Thus, these states embraced free market from the wrong lane without the tutelage and institutional and regulatory reforms required for success.
The result was that capitalism, or more loosely, liberalisation, was given a bad name, for it was creating yawning gaps between the haves and the have-nots as well as social classification that failed to testify in terms of prosperity for the majority.
The UN’s “Inclusive Growth” mandate sought to compel states since 2012 to moderate this “fake capitalism” with measured interventions.
The Nigerian government of former President Goodluck Jonathan did well in this aspect under the supervision of former Finance Minister and Economy Coordinating Minister, Ngozi Okonjo-Iweala.
The former administration, aided with improved inflow of oil receipts from 2005, instituted a series of bailout roadmaps for some sectors of the economy.
Even an informal sector like entertainment received recognition and Gross Domestic Product (GDP) reckoning via these interventions.
The aim was to make the players widen and modernise operations and services, get exposure to global markets, be competitive, employ more proficient labour, transform into transnational status, employ foreign expertise and capital, as well as develop value chain core competencies and contribute to the tax basket.
However, these interventions seem not to have added much to economic growth as anticipated since the first wave of bailouts around 2009.
Those who benefitted from the interventions, most of whom bought government enterprises, were not equipped to develop those businesses or might just have done something else with the easy money they got, or the little or no monitoring of their expenditure made them do whatever they wanted other than investing.
Below is a review of the status of the sectors against the backdrop of discovery that most of those who bought the dismantled Power Holding Company of Nigeria (PHCN) – the successor six generation companies (Gencos) and 11 distribution companies (Discos) plus one transmission company – may have duped Nigerians.
President Muhammadu Buhari, nudged by the National Assembly (NASS), may clamp down on operators who have abused their bailout.
Power Reform Act 2004
No sector of the economy is as dear to members of the public and policy makers as electricity. The National Electric Power Authority (NEPA) was scrapped in 2004 and replaced with PHCN.
But that privatisation was the political cost of free market as the operation of PHCN did not show that private individuals can increase power supply.
Thus, PHCN was dissolved when Umaru Yar’Adua became President. But nothing tangible could be done in the privatisation of PHCN until his successor, Jonathan, came on board.
PHCN and its assets were split into six Gencos, 11 Discos, and one transmission company known as the Transmission Company of Nigeria (TCN). There was bidding for the unbundled entity. And by 2013, everything about PHCN had gone into private hands.
A revolving fund of N213 billion was set up by the government to help the new buyers improve generation and distribution.
But reports on the fund has not been encouraging. On August 13, 2015, the Senate set up a 13-member committee to investigate the management of the amount disbursed from the fund.
Senators were alarmed to discover that more than 10 years after the unbundling of NEPA with a similar revolving fund, and nearly three years after Jonathan set up the N213 billion fund, not much power has been generated.
Former Power Minister, Chinedu Nebo, recently disclosed that the Jonathan administration realised late that those who bought the Gencos and Discos did not have the capital to generate electricity as they claimed during the sale, and this was why the intervention fund was set up.
Efforts by TheNiche to get how much has been drawn from the fund and the account balance was not successful. A wall of secrecy shields disclosure by the banks where the money is kept.
Agriculture Guarantee Scheme
Another bailout that has not improved its sector is the N69 billion Agriculture Guarantee Scheme (AGS).
Farmers are to be granted loans to encourage large scale farming, mechanised agriculture, purchase and hiring of tractors, seedlings, and fertilisers under an arrangement that eliminates middlemen who make this essential inputs scarce and unaffordable by rural farmers.
The focus is to increase food production and reserves. The fund also envisages the establishment of cold rooms, warehouses, and silos to preserve agricultural produce for the next planting season.
States are to appropriate from the bailout on behalf of farmers who form cooperative societies.
However, most farmers complain they get the money late from their state governments, and most times not the amount requested.
Also, like the power sector bailout fund, disclosure about how far the N69 billion has been appropriated and how much remains is shrouded in secrecy.
Commercial Agriculture Credit Scheme
Apart from the AGS, there is the octopus N200 billion Commercial Agriculture Credit Guarantee Scheme (CACGS), which came into being at about the same time the power sector bailout fund was created.
Disclosures and even reports about the CACGS have also been scanty, except that the government has reported an improvement in food security and reserves compared to what obtained before 2010.
Under the CACGS, businessmen and women are to be encouraged to go into corporate farming to add value and develop the agricultural chain – mechanised farming, large scale production of food and cash crops, animal production, agric industries, and export.
But not many Nigerian businessmen and corporate organisations have taken to agriculture. A few companies that use agricultural produce have obtained the loan to beef up operations, but there are no new set ups in large scale and integrated agriculture.
The major complaint here is the land tenure system which makes land acquisition difficult across the country.
Nonetheless, the 9 per cent interest rate of the CACGS makes it very attractive at a time when interest rates at commercial banks hover between 21 per cent and 24 per cent.
Incentive-based risk sharing system for agric
This bail out is another $500 million facility supervised by the Central Bank of Nigeria (CBN) aimed at encouraging corporate farming and agro processing.
It has an interest rate of between 7 and 9 per cent. But not much has been heard about its status report.
Small and Medium Enterprises Credit Guarantee Scheme
This fund is meant to incentivise small and medium enterprise (SME) operators.
But there are reports that the target group, small business operators, are not benefitting much from it because of the corporate governance of banks.
Adebayo Adebisi, a fresh graduate of electrical engineering from the University of Ibadan, says his effort to establish a refrigerator repair shop has not been successful as banks toss him around.
His words: “I had a small savings which remain in my account as a National Youth Corps Service (NYSC) participant. I finished the youth service in 2012.
“I approached my banks requesting a loan under the Small and Medium Scale Industry Scheme. But they always have something to complain about my proposals.
“When they don’t complain about my residential address, that they are not sure I would be there in the next three years, they would say I have to set up the shop first.
“How can I raise money to rent a site before I come to borrow? Am I not supposed to fund all the things I need for that project from the loan?”
There are no disclosures about how many people have benefited from this fund. Enquiries through telephone calls and emails did not yield result.
SME Restructuring and Refinance Scheme
In 2013, the CBN also invested N500 billion debenture stock to be issued by the Bank of Industry (BoI).
Out of this amount, another N200 billion was mapped out for SME restructuring and refinancing to fast-track the manufacturing sector.
The intention is to improve access to credit, improve the financial position of banks to be able to lend, increase output, generate employment, diversify national revenue base, increase foreign exchange earning, and provide inputs for the industrial sector.
Those qualified to benefit from the facility are those involved in actual production and processing of tangible goods, fabrication, deployment of plants, machinery, and equipment to deliver goods or provide infrastructure to facilitate economic activities in the real sector.
The facility cannot be used as a long term loan to acquire plants or refinance existing loans or resuscitate ailing industries or refinance existing lease.
These conditions are intended to tailor the facility only to startups.
However, investigation showed that the objectives are not followed by banks as the fund is drawn by established businesses. There are no disclosures about its status.
TET Fund
The Tertiary Education Trust (TET) Fund was set up in the 1990s for research and development in tertiary institutions.
But like other bailout packages, dispute has dogged it, with the government making one controversial law or another regarding qualification to access it.
The TET Fund was created when tertiary institutions were owned and funded by the government.
However, since the advent of private schools, there has been clamour by private universities to have access to the fund. Public institutions oppose this.
The government has not come clear on the matter, thus leaving much of the fund in the banks where they are domiciled.
Public tertiary schools also complain that remittances into the fund are not sufficient to meet their needs in the face of low government funding.
Airlines Intervention Fund
In the wave of plane crashes, especially the Dana crash of 2013, the government established an Airlines Intervention Fund of N300 billion. It was rushed. Many airlines sprouted.
But when banks published the list of their debtors last month, it was discovered that most of the owners of one-aircraft airlines are heavily indebted to banks, raising questions about what they did with the loan.
Most of the borrowers are top personalities who diverted funds for other uses because they believe that venturing into airline business is too risky, especially as regards procuring aviation fuel, spare parts, doing checks, and maintenance.
Some reportedly used the loan to buy private jets.
“The government is thinking of a national carrier because of the failure of the intervention fund bailout,” said Sunday Odion, an aviation expert.
Textile industry fund
The textile industry bailout fund of N100 billion is for cotton producers and textile printers. It was set up in 2010 to resuscitate over 20 textile firms in the country.
However, unstable power supply, smuggling through porous borders and other factors affect the good utilisation of the fund.
A textile workers’ leader, Ibrahim Ezekiel, argued in Kaduna that “unless the federal government improves electricity supply, reduces tariff, protects the borders against contrabands, and encourages cotton farming, its N100 billion intervention fund cannot revive the moribund textile industry.
“Our company has sent us away. We are now on three weeks’ compulsory leave.
“Our company was re-opened for business in 2010 by Vice President Namadi Sambo. Since that time, the company has not attained optimal capacity.
“What we are doing here are spinning and weaving, while the final printing is done in Lagos. There has been storage of cotton and the situation in the country is so bad that the only option left for our management was to send us on a three weeks’ compulsory leave.
“We are on holiday because the company can’t produce anything now in spite of the intervention fund.”
None of the textile firms in the country has been revived through the intervention fund.
Automobile, BoI, Cabotage, NIRF
It has been discovered that like others, the Automobile Fund has been diverted by hosting banks to other industries not strictly categorised as automobile.
One factor responsible for this is the low interest rate and the need by banks to make quick money.
Cost of transaction (COT) charges have led most banks to circumvent the lofty intentions for which the government initiated the bailout funds.
This poor handling may spill over to the new bailouts such as the Nigerian Industrial Revolution Fund, the Infrastructure Bank floated with N780 billion, the BoI, and the Mortgage Refinance Scheme.
Human rights lawyer, Femi Falana, said at a recent forum organised by the Nigerian Institute of Quantity Surveyors that the “past PDP government under Jonathan has already set up sundry bailout funds for the private sector.
“What is needed for the Buhari administration to do is only ensure those funds are adequately monitored and implemented to achieve the objective of the bailouts.”