Outside Ngozi Okonjo-Iweala’s office at the World Bank, a cardboard manikin holds a placard reading “Put Food First.” Food security was among her priorities as a managing director of the bank, a position she left recently to take over this week as finance minister of Nigeria – her second time in that role. Agriculture will still be among her top concerns. But in a recent conversation she spoke about the much broader problems faced in managing the finances of Africa’s most populous country – the tension, for example, to control government deficits that have become unusually large for an oil exporting country, while also making the investments needed to encourage a more diversified economy.
A rebellion in the oil-producing region waxes and wanes – calmer at the moment after a recent amnesty for rebels, but hardly gone. Growth is strong, but so is inflation. With its oil wealth and population, Nigeria could be an anchor for African prosperity, but has challenges to overcome. With expanded powers over the economy, Okonjo-Iweala sketched out some of her ideas in a recent interview:
The last three years have been consumed with the developed world’s problems – rescuing its banks, propping up its governments, rewriting the rules for financial regulation. What is at risk of being overlooked?
“The financial crisis and this maybe double dip that everyone is looking at has turned attention quite a lot to the developed world’s problems. It used to be the developing world that was looked at as the source of problem. We do need the developed world to perform well. Problems in the developed world hit the entire globe…So it is appropriate that we get growth back and recovery in the developed world. That should not shift attention away from actually some good signs from emerging market countries. The growth coming out of emerging markets – all this is helping to keep the world from tanking. We need to keep a balance on these other economies and see how we can support them to accelerate and grow. If we find ways to keep up growth in these parts of the world, that is ultimately helpful.”
Nigeria is benefiting from high oil prices. As the incoming finance minister, do you feel the money is being used as efficiently as it could?
“The biggest challenge we have is creating jobs for our youth. Twenty-five percent of the working-age population is outside of the labor force. Youth unemployment is rising. The priority is, how do we take care of that problem? We need several things to happen. We need to maintain macroeconomic stability. We could run a tighter fiscal policy. We have a serious power problem, which is a binding constraint on economic growth.”
We have seen countries before with a stable resource base struggle to translate that into development and job creation. How do you avoid the trap of just using the money to create a welfare state?
“One of the exciting things is the potential to spur that. Agriculture has been growing at seven to eight percent. And we have the ability to assure our own food security as well as develop a value chain for exports. But we need to do agriculture differently to create jobs and make it attractive to youth. We need to modernize agriculture. We need to take a value-chain approach going form farm to market and giving them access to improved technology in terms of seeds, fertilizer, water management. We have cases of things going to waste – tomatoes, potatoes, all sorts of products. If you modernize agriculture, it is much more attractive for youth to stay than the old subsistence hoe and machete approach. That is one place where we can create more jobs.”
“Two, we have 34 unexploited minerals quite apart from oil and gas – many of them in commercially exploitable quantities. It is an amazingly rich country. We need the infrastructure to make exploitation possible. And if you do that from a value-chain approach – not just mining the thing but transforming it – that can create jobs.
“The entertainment industry. ‘Nollywood.’ Forty movies a week. $250 million per annum. They employ our young people, so it is perfect. The appeal is worldwide. Where you have people of African descent they love this stuff. I was in Belize and people stopped us on the street and they said, ‘Are you Nigerian? We love your movies.’”
So how do you encourage that?
“The thing is not to interfere – it has grown on its own. To help it improve two thing are needed. Improvement in quality: That takes building capacity, access to finance. And second is intellectual property. We need to regulate. Because part of the problem is they are not realizing value because things are copied.”
You here this from the U.S. in regard to China, and the argument is that China will eventually regulate when they have things to protect…
“This discussion is very alive [in Nigeria]. The industry is asking for help protecting them from piracy – that we need to build the capacity of our intellectual property committees. It is very difficult.”
Is the court and regulatory structure there to back it up?
“We have the elements of it. We should look at what to strengthen. We need to work on that.”
When you look at agriculture and mineral exploitation, what are the common needs? Access to capital? Infrastructure?
“The binding constraint is infrastructure. Power, roads, ports, rail. All these things are constraints. The president wants to focus on improving the power situation. That is probably number one. We need to work on our investment climate, and access to finance is an issue for our SMEs [small- and medium-sized enterprises]. Taking a value-chain approach to whatever we produce. We really need to change our thinking about how to transform the materials. That is what crates jobs.”
So coming into your job how do you make sure Nigeria does not miss the moment? We have seen both extremes: countries that sell off mineral rights, let the matrerial go out the door and take the cash, and others where there is such intent to maximize value locally that nothing happens. They hold onto things so tightly no concessions are granted.
“The trick is finding that proper balance so that we make sure we are not just shipping raw materials. And we realize that we have to solve some problems. If we solve some of our infrastructure problems, it will enable us to exploit the product while keeping as much of the value. If we don’t solve it, it will stymie the development.”
Do you have a target list?
“We know sectors that are sources of growth. Even manufacturing. Nigeria is a large domestic market: 150 million people. Our aim is really to provide the right environment. When the environment is right, the private sector invests. We are walking about with a list of constraints that we have to lift one by one, so that if an investor wants to exploit a mineral, if it is commercially viable, we make sure we have the legal framework for them to do it so that they have a certainty. These things are longer-term endeavors.”
Some investment will come for commodities, some will come for the size of the market, but there is a whole tier of capital that can locate anywhere and be anywhere. Are you competitive for that and how do you make the case that Nigeria – Africa – ought to be a place to consider?
“Africa is the next BRIC – a billion people, and a rising middle class that is interested in spending on consumer goods. Ask investors who have gone in. People perceive it as high risk, but the returns are quite rewarding. Given what is happening in the developed world, the risk appetite for some other areas is improving. There is value in Africa for those who have the appetite to look in new directions.”