Prof. Sam Aluko on World Economic Crunch

Prof. Sam Aluko, renowned economist and chairman, National Economic Intelligence Committee (NEIC), under General Sani Abacha, has given another insight into the crisis that rocked the defunct Action Group (AG), in the early 60s.

Wild wild West
''In fact, it was we who caused the problem between Akintola and Awolowo. There was a group in the university then led by Professor Oyenuga as chairman and known as Committee of Civil Liberty. It had Professors Odumosu, Wole Soyinka, some Europeans and myself as members. We said the way things were going, we need to have an ideology guiding us'(Akintola had become the premier then).

''He said why should Awolowo be organising people to write philosophy for the party. That when Awolowo was premier, they were writing for him; and since he (Akintola) had assumed premiership, they should be writing for him. He felt that Awolowo was out to undermine him.''

In this concluding part of the exclusive interview with Aluko, he also spoke on how he first met Awo, his relationship with Awo and Shagari, how Abacha contacted him, Abdulsalami Abubakar, the Yar''Adua Government, and the global economic meltdown.

Excerpts:

How I met Awo
I once wrote that it was because of Awolowo''s interest in human beings that I came in contact with him. When he was premier, his government instituted scholarship programme and I was the only one in this region that had intermediate B.Sc degree. When we applied for scholarship to go and complete the B.Sc in England, I was not given, while somebody with school certificate was approved to go and study Economics in London School of Economics. This was because that person has a relation in the cabinet. So I didn''t bother. I wrote a protest letter but I don''t think Awolowo saw it.

I continued to study and I got a B.Sc honorary degree by private study. I was the secretary-general when we formed Ekiti Peoples Party and I contested election. I became chairman of Ado District Council. At this time, we defeated AG, but later aligned with AG. It was there that Chief Awolowo asked his Minister of Education, '%80%98this chap where did he get his degree?'' They later sent the form to me that I should apply for scholarship to go and do the M.Sc at the London School of Economics. And when I was there, I got a distinction and while I was at that school I was criticising Awo''s economic budget and some people were not happy about that. Before I even finished the programme, they said I must return to Nigeria to become a civil servant. That was a ploy to stop me from criticising government''s budget.

My scholarship was later withdrawn. But because I got a distinction, the school decided to give me a scholarship. When I told my supervisor that my government said I must return home, the school wrote them a letter that I got a distinction and that if they insisted that I returned home, they could hold their scholarship and send them the bill. I think that was what Chief Awolowo saw and he was not happy that such was happening in his government. He made them cancel the letter of withdrawal and in its place, they wrote a letter of congratulation and he (Awo) made a speech in Parliament in the House of Assembly at Ibadan, to congratulate me.

So when they came for the Constitutional Conference in 1957, he asked his secretary to write to me to have dinner with him. When I got to him, he said he was sorry for what government had done and that he was not aware of it and that when I finish my Ph.D, that even if I didn''t want to be a civil servant, he would allow me go anywhere I want. And that if I have any view about the problems in the country I should send him notes and memos. That was how we became friends till he died. It was through his initiative. I don''t know how many governors today, many of whom you cannot even reach, will invite a student to come and have dinner with him.

Experience with Awo
Economists do not have answer to everything. It is just that they have answers to some things. You cannot advise an empty mind. Somebody you want to advise must know faintly or clearly what you want to do, even if he wants to have a second opinion or additional opinion to add to what he thinks he should do. In other words, he is someone that has vision. This is one area that Chief Obafemi Awolowo excelled in. He would have done his homework, consulted widely and so on. It is very easy to advise such people.

Mind you, economists prefer the word '%80%98thank you''. Economics is a science of alternatives. If we do it this way what will likely be the results and if we do it that way, what will likely be the results. If we build a factory in my own village in Ekiti, instead of Lagos, what are the problems, what are the advantages? If we build in Ode, in Ekiti, we are going to provide a generating set, construct road because there is need for it to transport our goods, and we will need to provide market. But if it is Lagos, all these things are already there so no need to go into additional cost. So the cost of putting the factory in Ode vis--vis putting it in Lagos will be obvious. If the factory is in Lagos it can still benefit the people in Ode, but the reverse will not be so. And once they see that your advice is a bit better than theirs, they take it. These are the kind of people that are easy to work with.

But if the person being advised is an empty mind and somebody comes to say don''t mind him, put it in Ode, and without thinking of the options, he goes ahead and follow the advice, well, we have a problem here. They can even tell him not to put it in either Lagos or Ode, instead let it be built by private people. That is why we say in economics that the empty mind does things of the last person that he sees before he goes to bed.

As an adviser to Awo, Abacha, Abudusalami, who among them took advice and who didn't?
The best of them was Awolowo, followed by Abacha. Chief Adekunle Ajasin, ex-governor of old Ondo State between 1979 and 1983, was good at taking advice but people told him, look, who is the governor here - you or Aluko? So, because of this, sometimes, he would say, 'well, Professor, I think what you have said is right but you see these people' Let me give you an example, when we were to build a glass factory in Igbokoda and the governor called me. The cost at that time was N65 million. Remember, the naira was still strong at the time. I think it was N1 to a dollar. So I said, Your Excellency, instead of investing N65 million in one factory, I would set up 13 with N5 million each.

These would be small industries. They would be in 13 locations in the state, and they would mean more employment that is evenly spread. Secondly, I said the glass factory you wanted to set up in Okitipupa, the demand and transportation were lacking. The factory was the old type. Glass changes from time to time. Initially, he was pleased with the advice. But later, some politicians went to him at night and said don''t mind him, he is a politician and has never been a businessman. That was how they killed the advice and built the Okitipupa Glass Factory. Today, the factory has collapsed and the technology of glass has changed. Thus, it became a white elephant project. They even forced the people to buy shares in the project, which all went down the drain.

The problem I had with Abacha was not the same as I had with Awolowo because Abacha did not pretend. He said, ''Professor, I am a soldier, what is good, we will try it. In 99 out of 100, things that I advised Abacha, he did. He told people that his committee was opposed to the increase in fuel price. If you remember, he only increased fuel price once during his time. I told him that since the Provisional Ruling Council has taken the decision to increase the prices of petroleum, whatever we get as excess, let us put it into a development fund for infrastructure. That was how he developed the Petroleum Trust Fund (PTF). People were able to benefit from this fund as it actually helped the country. This was the first thing that Obasanjo abolished when he came into power. When we came into governance the dollar was $1 to N60.

Then the naira had been devalued. I told Abacha that I don''t see what has happened to our economy that our naira has now devalued. I now told him that well, we should go back to parity. I agreed that we should peg the naira at N21 and said we must continue to peg it until we get to N5. Really, in fairness to Babangida, when he devalued the naira, they told him that it would not be more than N6 to the dollar. So when he saw that it rose above that, he called them and they told him not to worry that it would stabilise. It was Abacha who stabilised it at N21 to a dollar. IMF, World Bank and their collaborators tried to force us to devalue and he said, 'Professor, what do you think?'' I said, 'don''t listen to them.''

When we wanted to introduce VAT, we did all the stories and it was recommended that we gave it to a committee, which I didn''t support. The Federal Inland Revenue Service is already collecting tax, which we agreed was capable of handling the VAT. The people in the cabinet said, 'no, we cannot run VAT. People will go on riot, thinking that it is additional tax. We won''t get money. IMF has told finance minister that unless we make it 17.5percent like England, we will not make profit.''

All sorts of things were coming from the cabinet, led by my good friend, Prof. Jerry Gana. Abacha asked and I said, 'VAT at 5%, '- because I believed Nigerians are good consumers '- we will make profit.'' Abacha agreed and asked what we could get from it and I said about N8.5 to N13 billion in the first year.

He agreed that we try it for one year and that if it did not work, we could reverse it. You know that VAT is the second revenue the government gets apart from oil. Throughout when we introduced VAT, he did not allow World Bank to interfere because I told him that the greatest enemy of any country''s economy is World Bank and IMF. He did not see them till he died. When he died the same people came on and they misled the government.

Did you have such experience with Awo?
No, we argued and disagreed on certain issues but it was okay. You know he was a democrat. First of all he would have discussed it with his cabinet and if there was anything, he would call us. He would say 'go and get me a paper.'' We would discuss. Every two weeks I used to go to Ikenne. I criticised him and at times he criticised us. Some of us were in the UPN cabinet then even when we were not card-carrying members of the UPN. That was how some of us became members. We contributed to development. At times he would say, 'Sam and your group what do you think?'' When there was going to be a major decision on any issue, he would not take decision until we contributed.

Awo and Shagari
We read economic trends, journals, market surveys etc. And with this, Chief Awolowo was always in contact with us. At that time, when the oil price fell in 1981, we wrote a paper for him. We used to meet every fortnight in my house in Ife. So we wrote a paper for him. We said, 'look, with the downturn in oil price, the budget of government was likely to be affected adversely and with the extravagant manner the government was being run then, where we had 62 ministers, the economy was doomed, unless he reverse a lot of things.'' Chief Awolowo, very impressed with what he heard, made a statement, that the way government''s economy is being run, we are bound to falter. We contributed an idea to him and he was bold enough to repeat what we said. You know that he also studied Economics. He was a graduate in Commerce.

The Akintola/Awo crisis:
In fact, it was we, who caused the problem between Akintola and Awolowo. There was a group in the university then, led by Prof. Oyenuga. He was chairman of the Committee of Civil Liberty at that time. We had Prof. Odumosu, Prof. Wole Soyinka, some Europeans and myself. We said, as a group, the way things were going, we must have an ideology guiding us. Some were saying at that time that what the people were doing was only to take care of the rich, giving them big cars, staying in government houses, enjoying themselves except Awolowo who was living in his own house. So, we thought we had to have a guiding principle.

One, to plan the economy. Two, to inform government what individuals in government must do. So, we had what we called democratic socialism, which now became the policy of the Action Group. So, Awo said this democratic socialism we must try it, which he did into concrete programmes like agriculture, health, roads etc.

So, we were writing papers for him in Oke-Ado, Ibadan every two weeks. So, those were the papers that Awolowo then took to the party and Akintola was opposed to it. Akintola said if a man had agbada, he must not have buba. If he had buba, he must not have sokoto. That was exactly what caused their problem. Akintola had become premier by then, so he said why should Awolowo be organising people to write philosophy for the party. That when Awo was premier, they were writing for him as premier and that since he (Akintola) had assumed the premiership, they should be writing for him. He felt that Awo was out to undermine him, and said no, things could not continue like that. The major thing that caused the rift was that Akintola didn''t like democratic socialism. We were not the main problem though, but we were part of the problem. He had wanted the NPC''s capitalistic elitist way of government, which we opposed.

How did Abacha get in contact with you?
One night in February 1994, the military governor of Ondo State at that time, Ahmed Usman came and was knocking at my door. My wife woke up and asked who the person was? He said he had a message for Prof. Aluko. My wife told him to come back the next day. When my wife opened the window he said he was Ondo State governor and that he had a special message for professor. The door was opened for him and they came to call me. He came in and said you have message from the Chief of Staff, Diya, that they wanted me to come and help them in economic affairs. Earlier on, Chief Ernest Shonekan, Head of the Interim National Government, (ING) had offered that I become a minister, but I said no, that if they get up any committee where I can be useful, that I would be ready to serve but not as a minister.

That was that. So when they set up this appointment. I said well, if it was purely economic affairs, I would not object, and that I would be willing to advise. Mind you, they had a very good budget that year, where they said government was going to intervene in the economy. I was pleased with that budget. After the meeting with the governor, he went and came back after a week and said that they had decided to set up an economic intelligence committee to monitor the budget until they handed over. I said if that was the case, who were the other members of the committee? They said no, that I was going to advise government on the choice of other members. I said no, that I didn''t want to advise anybody. They said okay, but that I would be chairman. They chose 14 of us. Diya and myself were very close when he was in government. He was a fine gentleman, fine officer, with good character.

Relationship with Abdulsalami Abubakar
Immediately Abacha died, I had already decided that well, I was unhappy about the plan to make him stay and I told him that the day you announce that you are not going to leave government, that I was going to leave government. Because when a head of state makes a promise to the country he is leading, he must keep it. Even some of our top men in AG and UPN came to me and asked why was I opposed to Abacha''s stay, that he was the only person that could handle NADECO. So, I said what if he died, would that stop the government from running?

They said, no, he could not die and I said how could you say any human being could not die? I told them that I was only opposed to his insincerity, and that I told him that these people were going to kill you by saying you are the only person who could run the government effectively. He said, '%80%98Professor, I won''t stay.'' But they kept on deceiving him. Oh, it''s so sad, really sad, but when he died, I was a bit relieved, though I didn''t want him to die. So, I packed my luggage and left.

It was after that, that Abdulsalami called me on phone. Then I was with Bishop Gbonigi when the call came in that he wanted to see me. He said that I was not going to leave government until he left. So, he said I should come back to Abuja immediately. I told him that I had a meeting and couldn''t come immediately. I added that I could only make it on Tuesday following the weekend. So, he said okay. He said when I came on Tuesday that I should meet him at the Presidential Lodge and I said I don''t know where it was. He was shocked. He said so all the time I had been coming to Abuja, I had never been to the Presidential Lodge? He then said he was going to send his private secretary to come to my house in Abuja and bring me. That was the first and the last time I visited the Presidential Lodge.

I didn''t know Abacha''s wife. I never met her. I only see her on television up till now. Our appointment was strictly to forge an economic master plan to set the national economy on an even keel. There was a time Abacha said I should not be coming to Abuja by road from Akure, that he was going to make his jet available to me and I said what would I be doing with a jet? I am not a soldier, please leave things as they were and I''d be just fine. So, that is how I stayed till 1999 when Abdulsalami left.

Global economic crisis
When the Soviet Union collapsed, the Western economy was very happy. They said that was the end of socialism, end of state intervention. They said it collapsed because they didn''t allow the private people to do business; that they used government intervention in the economy. All sorts of things were said. They even said that the private people were the engine of growth, which was what Obasanjo got from them. The private people are getting richer and richer, the banks are getting bigger and bigger. The only thing the banks do is to lend money.

They don''t lend money to build industries or develop agriculture. Rather, they lend you money to buy house and oil your credit cards, thereby helping you to live above your income '- clearly potent economic crime. Someone, who has no job, they give him loan to go and look for job. They buy big cars, saying they want to use the cars to be looking for job. If you continue to do that, the economy will burn.

China took over. They did a lot of construction during the sports competition. When it ended and they stopped construction and expansion of hotels and stadia and so on, we knew the price of oil was going to fall. America was engaged in a foolish war in Iraq, spending billions of dollars daily and government was pumping money into war. Of course, America was the world economy, but they were living on a bubble. So, they continued to give money to people who could not pay back. They later discovered that these people could not pay back to the bank. In Nigeria today, all nooks and crannies of the city have one bank or the other. They no longer finance industries or agriculture. The bubble has to burst. People they lend money could not pay back. Banks collapsed. That is why most of our investments abroad have collapsed. You will see some people who will travel round the world on credit. So, the banks became over-capitalised, over-managed, over-lent. They became so big that they could no longer be managed.

That is why Germany was the least affected of them because the country allowed state banks. So, when the big banks in Germany collapsed, the small banks were able to survive. If Obasanjo had continued his third term, he wanted only 10 banks. We are not yet in the global economy, we are only peripheral to it. Let us develop our industries, agriculture and other yielding ventures. Let us plan our economy. You see, when they say government should not interfere, it is the same government that is now bailing them out. The way out is to have a nuclear economy. Government cannot run it alone. Private sector cannot run it alone. All this public-private partnership, how do you partner with somebody and you want to force the person to do what he does not like? The best thing is to have more efficient government to establish more efficient economy and allow private persons do what they want to do and control them. You can see America is now regulating the private sector.

Effects on Nigeria
When the CBN governor said there was no cause for alarm, it is good to say that because part of the problem we have with the economy today is fear. You see, when you have a factory, fear doesn''t affect that factory because you see it. But when you go to a bank, unless you have no trust in that bank, you go and withdraw your money from there. If you have to do that, then something is wrong with your bank. So you quickly run to take your money from the bank because you have no confidence in that bank. So, fear is one of the things that destroy the financial bubble. So, it is your duty to convince the people that the financial system is okay.

Otherwise, people will run to their banks and all the banks will collapse. Let us use our money to build industries, agriculture, roads, instead of putting the money in foreign banks, which as we can see now, when they collapse, it affects us. Not only the financial system has collapsed; the world price of oil has collapse. So, what Soludo is doing is good. You have to encourage the people that everything is okay. The income of Nigeria is derivable 75 per cent from oil, which is not supposed to be. The common man doesn''t pay tax; even the rich people don''t pay tax. What we get from tax is little. During the good years, we should have been building industries, refineries. Today, we need at least, 10 to 15 refineries in Nigeria. No private person would want to build a refinery because he would not want to tie down his money. It is only government that can build refineries because they get money every year. We are a global economy, so there is no way the crisis would not affect us, and it is not only going to affect us, it will actually affect the government budget.

And that is why the government will have to tighten its own belt. Extravagant spending is over. If this is not taken seriously, you find more riots, armed robbery because we are not generating employment. They talk of poverty alleviation. They want to convert everyone to entrepreneur. You give money to an unemployed graduate to go and do business. What skill does he have in running a business? Government should have been creating employment. It is not possible to make everybody an entrepreneur. If you give somebody N2 million, he would go and pay his children''s school fees, buy a new car. They are not realistic and when you tell them, they say, your economic policy is old. You can''t buy experience.

Yar''Adua government
I have been away for six months, so I have not been in communication with the Yar''Adua government. I was in America and I gave a talk. I said the clich, 'In God we trust,'' has now become, 'In gun we trust.'' You are fighting too many wars, living above your income. You are bound to crash. I think the president means well. You don''t use a 7-point agenda to move the country forward. Awolowo went for one particular programme '- Free Education. He had a four-cardinal programme, education, health. Yar''Adua didn''t plan to be president.Obasanjo forced him on Nigerians. There is nothing in that 7-point agenda.

It is better to have one or two things and do them well. Even, if it is power alone and he says I am going to make sure that we have regular power supply. That alone would be something. If he takes care of power, every other thing will follow. If there is power, industries will spring up. Apart from the 7-point agenda, they have NEEDS, MDS, and NEPAD. Now, which do we follow? I told them that in order to harmonize all these programmes. You need a development plan. When I settle down, I will send my own idea to the president, because he means well.

The president''s Supreme Court victory
It didn''t come to me as a surprise. After the first appeal by Awolowo in 1983, I told him, I said, don''t go to any court because once election result is announced at the federal level, it is dominant. The same thing happened in America between President Bush and Al Gore. So, I wasn''t surprise that they gave it to Yar''Adua. In fact, I was even surprised that it was 4 -3. I was expecting that it would be unanimous. Once the opposition cannot prevent rigging at the national level, I don''t see how it can win. In the election of Ajasin, we prevented rigging at every level. That was why they had to go and announce on the radio. If the election were free and fair, the PDP could still have won, but not at the level they won. I don''t know why they went to that extent, because they did not need to win so many states to get 60 per cent of the votes.

Ribadu
I am quite unhappy the way Ribadu put it on himself to just behave like a dictator when he was EFCC chairman. There is a saying, which says, 'On your way up, be nice to people because you may meet them on your way down.'' You cannot just be taking governors who were elected and putting them in prison. He was not elected, mind you. He was behaving like a czar. This will teach others that when you are in a position of authority, you must use your authority with discretion. You can still be firm and fair. He was firm, but not fair. He was not fair. I wish he had spent a lot of time in reforming the police system because the problem we have today is the police.

And there is a lot to do in reforming the police. He would have done this rather than harassing the politicians. There is nothing you can do. The politicians will always be corrupt. They spend money to contest election. There is no way you can remove corruption from the Third World countries. Don''t let us deceive ourselves. When I was in government, I used to tell them. I know you will steal because everybody comes to your house to eat, but when you steal, invest the money in Nigeria. That is what we call in economics, productive corruption. When you build a factory, nobody will say the factory was built with corrupt money.

Don''t go and put the money in America, in Europe. They steal there too. They loot and invest it there. The governor of Massachusetts, when I was in America in 1962, he took a bribe in an underground garage and when he wanted to seek for second term, the attorney general who was a woman said, 'Don''t vote for him because he took bribe.'' The governor said, 'No, I didn''t take bribe; I took a gift''. $6million. He invested it back into the American economy. Did you know that he won the election for a second term?