Crisis of Command
America’s Broken Civil-Military Relationship Imperils National Security
Born to professors in what was then still a British colony, Ngozi Okonjo-Iweala was a teenager when civil war broke out in Nigeria seven years after independence, and she ended up working as a cook for the Biafran rebels on the frontlines. After leaving Nigeria to study economics at Harvard and then MIT, she spent two decades at the World Bank, eventually becoming a vice president. In 2003, Okonjo-Iweala returned to Nigeria to serve as finance minister in the administration of President Olusegun Obasanjo, but she resigned in frustration in 2006. (To opponents of her reform agenda, she had become known as “Okonjo-Wahala,” a play on the Hausa word for “trouble.”) After another stint at the World Bank, this time as a managing director, she was invited back to Nigeria by President Goodluck Jonathan in 2011 to head his economic team and once again take up the post of finance minister. She spoke with Foreign Affairs senior editor Stuart Reid in Abuja last December.
As a student in the United States, what did you find was the biggest misconception Westerners had about Africa? Where do you start? Then, you didn’t have the Internet. Many people didn’t travel to Africa. Some people forget that it’s made up of 54 countries. Africa to them becomes one large country. They don’t contend with the diversity of it. Within academia, it was a little bit better. People knew about the economics, maybe the geography -- but they didn’t know how people lived. They were not aware that African countries had an emerging middle class. There was just the image of a continent full of poor people who were not very educated, and beautiful scenery and animals. Now, I think, this has changed.
You were Nigeria’s first female finance minister. How much progress have women made in Nigeria, and how much work is left? Women are extremely active in the private sector, as entrepreneurs and in the professions. Nigerian women have been educated for some time. But we have a problem in the north, where not enough girls are in school and there’s early marriage. A law has just been passed against that.
In politics, we’re not making enough progress. Let me qualify that. Within the executive branch of government, tremendous progress has been made, because the president believes in promoting women and putting them into positions of responsibility. From having the cabinet be 16 percent women the first time I was minister, we’re now at about 33 percent. That’s unprecedented. But in the legislature, there’s still not quite the acceptance of letting women break through the glass ceiling. It’s clearly a man’s world.
What were the most important reforms you enacted during your first stint as finance minister? We started with trying to understand why Nigeria had been growing at about 2.4 percent for the previous decade, when the population had been growing at about 2.8 percent to 3.0 percent -- negative per capita growth. It was the first time I’d really thought through some of the fundamental issues of my own economy. We noticed that a big problem was volatility, and we needed to come up with a way to manage this. So we devised the oil-price-based fiscal rule, which delinks the budget from the international price. This is a huge achievement. It’s steadied the management of the economy so much, by making expenditure and revenues more predictable. At times of high oil prices, it also led to some savings, which we put in what we call the Excess Crude Account, and we eventually created a sovereign wealth fund. During the financial crisis, the money in that Excess Crude Account was used as a fiscal stimulus to the economy. Then, having a monetary policy in tandem with a tighter fiscal policy, we were able to begin to fight inflation.
Having stabilized the macroeconomy, I then put in an exchange-rate regime that was acceptable to the IMF [International Monetary Fund], with more flexible, market-determined rates. Then we moved on to one of the key fiscal issues in the economy, which was the debt. Many Nigerians think that the biggest achievement of the Obasanjo administration was clearing our debt of $30 billion from the Paris Club, because it was a huge overhang on the economy, had deterred investment, and was just not manageable. We had been trying for so many years to get rid of that debt, and it was like a miracle.
We also made inroads on privatizing our state sectors. Telecoms was liberalized, and it’s now the fastest-growing sector in the economy. We began the privatization of power. We concessioned ports. We didn’t do it all very nicely and neatly. It was a little bit messy. We tried to reform the civil service. We didn’t do that quite as well. But we unleashed enough sectors that the economy started to grow at six percent and has continued ever since.
What obstacles did you encounter? The obstacles were vested interests, because we needed to fight corruption within the economy. In every developing country, even developed ones, vested interests prevent sectors from being reformed. It was really fierce in the ports. With customs, we didn’t succeed. In every single sector, people who were benefiting from the way that it was were very resistant to the way we wanted it to be. It remains a problem today.
Why did you ultimately leave? At some point, with some of the reforms we were trying to do, I felt that I was no longer able to stick to my principles. The political atmosphere was just like now. It was heating up. When it comes to election time, everybody wants all sorts of things. The sensible thing to do was to resign.
Won’t politics always get in the way of technocratic reforms? It’s not insurmountable, but we need a social contract where everybody agrees that certain things have to be done. I don’t think we have that in Nigeria yet. Our politicians need to realize that you do not politicize the budget. In a developing country, that’s lethal. If developed countries are holding the budget hostage, well, they’ve already reached a certain level of maturity and of income.
In 2012, you became a candidate for president of the World Bank. Yet the position ultimately went to Washington’s pick, Jim Yong Kim. Is it time to end the gentleman’s agreement whereby the United States gets to pick the head of the World Bank and Europe gets to pick the head of the International Monetary Fund? Absolutely. The boards of these institutions had said previously that it should all be done on merit. I think people took them at their word. When the position came open at the fund, obviously that wasn’t quite followed. There was a contest, but I think the Europeans jumped by selecting and pre-anointing a candidate -- who is actually a great friend, great woman, fantastic mind -- Christine Lagarde.
When it came to the World Bank, I had just been in office as finance minister for eight months, so it was not in my mind. But the other African presidents all called President Jonathan to tell him that they had come to a meeting of minds and that Africa wanted to put forward a candidate and they wanted it to be me. My president thought about it quite a bit. He told me, “Look, it’s been almost a week, and they’ve been calling me and saying I must allow you.” Of course, he was reluctant, because it had taken quite a bit of persuasion for me to come here. But he agreed to it. The long and short is I feel very honored that Africa could produce a candidate, could think that we have something to give the world. I think things will never be the same again, because it was a credible contest.
Should developing countries have more influence in these institutions? I think they should. The world has changed since Bretton Woods. Fifty percent of the world’s growth and trade at some point was being provided through the emerging markets. During the height of this economic crisis, the emerging markets were the engines of growth for the world. No matter how you look at it, the dynamics have changed. The low-income countries in Africa and elsewhere are some of the most rapidly growing economies in the world. These countries ought to be given more of a voice. If the whole idea of Bretton Woods is to assist developing countries, those being assisted also ought to have more of a voice in how that assistance should work, don’t you think? That kind of paternalistic relationship can’t obtain.
Back to Nigeria: How can you diversify the economy away from oil to prepare for a world of lower energy prices? Nigeria has always talked about diversification, but we actually have to deliver it, and that is what this administration is doing. We’ve completely revamped the agricultural sector. Young people are now all trying to be in agriculture. There’s a program called Nagropreneurs -- not a very pretty name -- for young agricultural entrepreneurs, who are being supported. We are almost the largest rice importer in the world, and we mean to be self-sufficient by 2015.
Housing: we’ve never seen housing as a source of growth in this economy, as it is in the United States. The housing sector has never really been unleashed and unfettered, and we are going to do it. We will announce in January a program for a Nigerian mortgage refinance facility that will put more liquidity into the economy. We have only 50,000 mortgages in this country of 170 million. Everybody tries to save over their lifetime to buy a house. There are no affordable mortgage rates. That’s not acceptable.
Manufacturing: Nigeria is the largest recipient of FDI [foreign direct investment] on the continent. A lot of companies are coming in to invest. Procter & Gamble invested $250 million in baby products in the southwest of the country, and they’re adding another $50 million. Indorama invested $1.2 billion in fertilizer and petrochemicals plants. [Aliko] Dangote, the richest man in Africa, who is Nigerian, is putting $9 billion into a series of refineries and petrochemical plants. These are just a few examples.
We privatized the power sector, and investment has come in -- over $2 billion -- to purchase our power plants. Power is the single largest constraint on investment. A survey done by the World Bank shows that power and access to financing -- it’s not even corruption, that’s a little bit lower down -- are the top two constraints that businesses cite. Government has not been able to manage the power sector. And to diversify the economy, we must have power.
Since 2004, Nigeria’s GDP has roughly tripled, largely due to oil. At the same time, by many measures, poverty has actually gone up. Nigeria seems to be suffering from the resource curse, whereby a tiny elite benefits from the oil wealth, but the mass of people don’t. Why? We do have an issue with poverty, but it’s not that poverty has been going up. The World Bank and [Nigeria’s National] Bureau of Statistics survey actually show a small shrinking of the proportion of those living in poverty, even though the absolute numbers may be higher. But perceptions of poverty have gone up, because there’s been rising inequality.
The pace of growth should be faster. We should not be content with growing at an average of seven percent. In order to make appreciable inroads into poverty, like China did, we actually have to perform like China and grow at nine to ten percent a year. Because everybody else is growing at one percent and some are contracting, seven percent looks pretty good. But with the poverty problems we have, we actually have to grow faster.
The quality of growth must also change. It must not come with rising inequality, which is what has happened; our Gini coefficient has been going in the wrong direction. We don’t need the bulk of the growth being captured by a smaller segment of the population. We have to correct that by precisely pursuing growth in sectors that create jobs. That’s why agriculture is enormous.
And we haven’t got good safety nets. Even if you grow, there are always those who will not get jobs because they don’t have the right skills or because they happen to be in a difficult geographic place. We’ve just started building a conditional cash-transfer program linked to education, and it’s working very well at bringing girls into school. We are piloting that for maternal and child health in eight states, and it’s delivering results. We have one of the biggest maternal mortality rates, and we’ve now cut it from 545 per 100,000 women to 350.
When it comes to fighting corruption, how do you pick and choose your battles, given how deeply corruption has infected the political system? The second time around, the political atmosphere is so poisonous. It was not like that the first time. Everything has become politicized, even corruption. People throw out corruption charges, numbers of missing income, that are untrue. So much energy is spent debunking that the actual energy devoted to the problems that exist is dissipated. We have oil theft leading to production losses. We are losing income. We need to focus all energies on fighting that, not on spurious battles.
But corruption is still a real problem. You must be frustrated. Yes, absolutely. But I’m also frustrated by diversionary attention. This is not to say that corruption is not a problem. Of course it is. But it’s not good enough to just talk about a problem. The question is, what are we doing about it? We had pension fraud, and we have totally revamped the pension system. Because we didn’t have a biometric system of checking, you could get phantom people put onto the pension roll. We had different pension offices, so the police, immigration, customs, all had pension offices. We totally revamped this. Some people we arrested and prosecuted. We’re unifying all the pensions. We are working with the Bill & Melinda Gates Foundation to digitize the whole thing and put people on biometrics. It’s beautiful. And no one is talking about that.
We cleaned up the oil subsidy. When the oil subsidy phaseout happened and we had all those demonstrations [in 2012], a presidential committee was set up. They discovered that some companies had fraudulently taken subsidy money. We published the names of the 25 companies that did this. Some we arrested. We have cleaned up the system, reduced the amount of money disappearing. You have to track the big sources of leakages and corruption and then try and deal with them. Oil theft is one. Pension fraud is another.
Turning to security: in the north, there’s Boko Haram; in the south, kidnapping is a problem -- a personal issue for you, as your mother was kidnapped in 2012. When people talk about my mother’s kidnapping, I want to be crystal clear: It was not a criminal kidnapping. It wasn’t for money. It was related to the fight against corruption. So in terms of fighting corruption, I don’t need to prove anything. I paid a personal price. My 83-year-old mother was kidnapped and kept for five days. It’s a miracle she didn’t die. She said, “Why have you taken me?” And they said, “Your daughter. It’s about the oil subsidy and about SURE-P [Subsidy Reinvestment and Empowerment Programme]. She’s not releasing money.” We have this subsidy reinvestment program, and they thought I was in charge of it (which I’m not) and I wasn’t releasing money from it. They thought I should resign publicly and leave the country.
It happened around Christmastime. You can imagine what a tense, terrible period it was. With the support of my family, I kept going and praying to God that my mother would not pay the ultimate price because I came back here. There was such an outpouring of support from every quarter. Some people hired their own private agents to look for her. There were prayer circles all over the country in mosques and in churches. The president went all out -- police, secret service, military, everybody.
How worried are you about the general security situation? It was very worrisome about a year ago, when there were a lot of incidents in the northeast. But the president took a number of measures that are working in the sense that the problem has been isolated to Borno State and Yobe State. And there’s a three-pronged approach. There’s a counterinsurgency with the army, with the help of outsiders like the U.S., France, and the U.K. This has been coupled with a political approach. A committee has been formed to talk to these people and find out what they want. The problem is that it’s not very clear what they want. And the third angle is inclusion. We have to admit that the level of poverty in these two states is among the highest in the country. So the issue for us is, what are we doing to solve that problem?
Like many countries in the region, Nigeria suffers from something of a split between a Muslim north and a Christian south. Is that the inevitable byproduct of colonial borders? I’m one of those who subscribe to the view, “OK, that was in the past; let’s get on with it. We’ve had 60 years now.” People like to focus on the things that divide Nigeria, forgetting the things that hold the country together. It will not be as easy as people think for the country to be divided. Too many southerners have a stake in the north; too many northerners have a stake in the south. It’s so complex now. In church two Sundays ago, they announced that the pastor was grieving because his brother, who is Muslim, died, so he’ll be leaving for the seven-day du’a rites. His brother was a Muslim, and he’s a pastor in the Anglican Church.
What do you hope Nigeria will look like a decade from now? I’m very excited about Nigeria, and that’s why I’m frustrated and irritated by all these diversions. We need to focus on turning this country into the powerhouse that it can and should be. My vision is that ten years from now, Nigeria will have gotten it right on so many fronts. First of all, the economy will be growing at a very reasonable rate, anywhere from seven to ten percent. I hope it will be growing at nine to ten percent, because we would have sorted out the power-sector problem.
You see, this is an entrepreneurial country. Everybody’s hustling. In ten years’ time, the housing sector, the manufacturing sector, agriculture, creative arts, and the solid mineral sector, which we have not even started to exploit, will be leading the economy. We may not have solved all the problems of inequality and poverty, but we will have made a significant inroad. We will have built a social safety net for those at the bottom, and we’ll be creating many more jobs. My vision is that Nigeria will join the group of large emerging markets.
I also hope and think that democracy will have matured a bit more, a responsible democracy with freedom of speech, which we have now in spades -- actually, there’s so much freedom of speech, it’s not funny -- and with a more educated, literate, and consuming people. And an enlightened civil society that will push the government in the right direction.
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