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The CGD Podcast
Six Questions for African Policymakers – Ngozi Okonjo-Iweala
00:19:26
Ngozi Okonjo-Iweala served as Finance Minister of Nigeria from 2011 to 2015, and as Foreign Affairs Minister before that – the first woman to hold either of those positions. This week she visits the CGD Podcast to discuss her recent essay, "Six...
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- [00:00]
A
Foreign. Hello, I'm Rajesh Merchandani, and thanks for joining me for this edition of the CGD podcast. Now, my guest today is another of that rare breed of person known just by one name. No, it's not Bono nor Malala, although I do hope one day they will both be on the podcast today. You can hear her laughing. My guest is Ngozi. Ngozi Konjewala, more correctly, formerly Finance Minister of Nigeria and Foreign affairs minister, the first woman to hold either of those posts. As finance Minister, she oversaw a plan to reduce Nigeria's debt burden by some $30 billion and so help Nigeria's economy grow. She's celebrated at the highest levels now as a leading figure in development. Incidentally, that debt reduction plan in Nigeria is something that Ngozi got CGD to work on, too. And our mutual admiration society has continued. Not only is Ngozi on our board, she also a distinguished visiting fellow. Ngozi, great to see you. Thank you.
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B
Well, thank you, Rajesh. Happy to be here.
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A
We wanted to talk to you originally about an essay that you wrote for us in your capacity as a distinguished visiting fellow, about six questions that African policymakers must answer. It's been getting quite a lot of attention around the world. I want to come onto that in a second, but first, I just want to understand, how did you get started in development?
- [01:22]
B
Wow, that's a good question. I think it's something that happened when I was growing up. I grew up with my grandmother in the village in a developing country, Nigeria. So I think I lived some of the issues that people are concerned about in development. I lived the issues of what it means to be in a village to see and live poverty, even though my parents were where I was there with my grandmother because both my parents got scholarships to Germany after the war as students, and they didn't have enough money to take me, so they left me with my grandmother. But in retrospect, when I was growing up, I said, why couldn't I have been with my parents? But it was a good thing because I had a chance to see what it means to fetch firewood, to fetch water, learn how to be resilient at an early age. So I lived it, and I think trying to struggle as I was growing up with issues of how can we make things better now this whole thing was compounded, and I must give my father especially, but my parents, tremendous credit. My father is an economist, and his whole focus was on development. How are we going to make things better for others? So I think that also really interested me and he was a father that insisted that as I was growing up, we must go back to the village. Every summer when I was in school, even when I was in university at Harvard, he insisted I come home, we go to the village. So that interest in, okay, you are doing better, but how do you make it better for other people? Broadly, what are the policies that will make the country better? Used to listen to him, and that's how I got started, that it's not good enough to just go to school, get degrees and better yourself. That privilege, because that's what it is, must be used for something larger than you.
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A
Well, that experience, those experiences that you had firsthand, and the sense and the values that your father and your parents instilled in you, you took them, you worked your way up in Nigeria to the highest levels of government finance minister. And that has given you this unique viewpoint, a kind of macroeconomic expertise. And you've used that to write this article. Six Questions African Policymakers Must Answer now.
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B
The first question that I address in the six questions that I think African policymakers must answer is how are, are they going to finance development? How will they finance the SDGs, the Sustainable Development Goals?
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A
This is like the fundamental question, the.
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B
Fundamental question we have these global goals, universal, that the whole world has adopted. And if you look at some of the numbers, you know, the World bank, all the multilateral banks, I think, banded together to do a paper called Going from Billions to Trillions. So everybody agrees it's going to cost more than 2 trillion for everybody to be able to attain this goal. How will our countries. But what made me look at this issue is the new climate economy, of which I'm a member, did some work saying that more than 50% of the financing for this has to come from countries themselves. In fact, in some cases 50 to 80%. And so that made me start looking at the issue of financing. And that's the first question I address, that we must do more to get our own domestic resource mobilization going. Now, coming from a country where I was finance minister and where the revenue to GDP ratio was relatively low at 12%, non oil GDP to revenue to GDP, even lower, about 4%. And I was struggling with that issue of how can you as finance minister have these kinds of ratios? After we rebased our GDP and became the largest economy in Africa, the ratios looked really poor.
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A
Even more.
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B
Well, no, before that we were almost at 20% of GDP, which at least is above the average for low income countries and for low middle income, which is what we are low but after the rebasing we looked really bad. And I said as Finance Minister, I've got to do something. In any case, my country needs to diversify its sources of revenue. It already has a diversified economy. How do we do this? So that whole issue of domestic resource mobilization was key. And I set about with the support of the President and other members of cabinet to reach out. And then we invited McKinsey to help us do a diagnostic and then begin to implement some measures that would increase non oil revenue. I saw the potential. So what I'm saying here is we are already most African countries are financing their own development for the how do we do better? There's an opportunity there that we can exploit. The IMF estimates that we can get 4 percentage points more of GDP in revenues if we work hard. The OECD estimates that for every dollar that donors put into supporting improved domestic resource mobilization, they can get $10 back. That kind of return is fantastic.
- [06:53]
A
And one of the things that you've said before is that poorer countries, middle income countries, low to middle income countries should not expect that richer countries are going to stump up the extra money it needs to pay for the sdi. So that's another reason why they have to find it for themselves.
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B
Absolutely, Rajesh. Now I'm not saying that richer countries should not on some of the issues. I actually believe they should like climate change because developing countries were not the perpetrators of where we are now in a high carbon environment. But I'm just facing reality. From what I see, you know, AADS is at a high level, but to sub Saharan Africa is actually declining. I'm not sure that given issues of the refugee and migrant crisis and so on, that they'll do much more. So even though I think they should, they may not. So the issue to us is are we going to allow some critical developmental issues like immunizing children to sleep because we can't mobilize more resources for ourselves? So that's really a key point.
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A
Other points that you made in this article, you posed questions about how to truly diversify Africa's economy and related to that, how to create quality jobs and to make sure that people have the skills for those jobs. So what are the problems here and what solutions do you see? Are there models that Africa can follow?
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B
Well, you know, the thing is that I have to tell you, virtually every African policymaker is talking about diversification because of the commodity crisis, the falling in the price of commodities across globally, which has challenged emerging markets and developing countries. And in my country we talked a Lot about it. But I just started thinking, we have been talking about this for so long. We only actually started doing it during my last time in government. We working really hard at diversification. What does it take?
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A
It was hard for you as well.
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B
It was hard. And I have to say that I think the talk is talk and a little bit lazy. If you truly want to diversify, you need a plan. And this is why I look to countries like Singapore that have. With no natural resources, they have a diverse economy. You look at Dubai that over 30 years methodically introduced one idea or the other, particularly in the area of services. That has now made it one of the hubs not only for business, but for leisure.
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A
Yeah, but it had 30 years of oil revenues to pay for that.
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B
Well, it started the thinking when it still had oil revenues. No, I'm not. You know, and they started thinking, how do we do this? So my thought for us is, yes, we all want diversification, but until we sit down, down and we have consistency now to achieve it, there's something that I think is missing. In our countries, you need a social contract. If you have a benign dictator who has a vision like in Singapore, and stays on and drives it year after year, it works. But in a democracy, which is what we want and what we have, you also need some other approach. That means you need a social compact where the population agrees that no matter who takes over government, they are going to continue developing certain things in certain ways. That's not happening in many of our countries. What you find is a new government may come in and they may go off the things that were there before. They may not continue them. They may decide to put in their own ideas across many countries.
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A
Okay, but how do you change that? How do you make the. Those governments stick to the.
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B
No, that is why I think you need a conversation country by country. That's why I'm putting it on and saying that we cannot just take the lazy attitude of talking about it and not really actually sitting down in country across countries to have a conversation about what does this really mean? What did those other countries we admire so much? So, you know, many African countries run off to Dubai now for holidays, for business. You run off to Singapore. So many missions going there to see what they've done, but when seeing it, but internalizing that, it took consistent effort. So I think we need to start a conversation about what does it take? And that's why I'm excited as cgd, because CGD tends to kick off these kinds of sort of difficult conversations. For ministers and policymakers to realize that they actually need a plan and that they need a social compact. They need to discuss it in their countries and say for the next 30 years, this is what we are going to do with this sector and everybody should stick to it and be on board. No matter the government. The population has to demand it. But to demand it, they need to talk about it. They need to know about it.
- [11:58]
A
What were some of the problems that you experienced in Nigeria when you were in government in terms of diversifying and creating quality jobs and training people for those jobs?
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B
Well, you know, I think we've been talking for a long time in my country, and so people are very up on the diversification issue. But I think what we do not have is a social compact that agrees these are the key elements and that everyone, every government that comes should stand, stick to that, no matter how difficult, and just persistently pursue it, because if you don't, it's not going to work. I think that on agriculture, that kind of consensus is emerging now that agriculture is it and that every government has to put in effort into making agriculture the center of diversification in the country. But agriculture, as my colleague in the cabinet who is now president of the adb Aki Adecino, used to say, agriculture as a business, so that young people will find it attractive. I think some consensus is emerging around that. So that's what we encountered. I think my biggest issue is that I don't see the kind of social compact that for the next 30 years, no matter what government, we are going to work on these issues, and here is a specific pathway to doing it. So I think that's the main difficulty. And we've got it now going in one area, which is agriculture. I'd like to see it in several others.
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A
You've talked a lot about how African countries can work to grow trade, to diversify their economies, to ensure their financing in coming years. But there's a subset of African countries, the fragile and conflict states, the poorest in the world, for which those things are not necessarily the kind of prime concern. And for them, aid is going to be increasingly important or it's still going to remain important, even though for other developing countries, aid is a declining proportion of development finance. What should happen to those poorest countries? How should they be helped?
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B
Well, you know, I think There are about 12 countries on the continent now. Most of the fragile states fall into this world where aid as a percentage of their budget is 40% or more, and so many of the fragile, but 12 in the whole of Africa. I think that we're beginning to see progress. So I think that as other countries generate more resources and revenues, perhaps that will release more of the aid to focus on these countries as well and help them do some of the things that they may not be able to do because of the fragility, but creating a platform where eventually they can begin to take over things for themselves. My thesis is that if we can get other countries functioning better, that can actually release more resources for the fragile states. But we should not just treat them, their fragility, as a permanent thing, and therefore all we are going to concentrate on is getting more aid. We should also help them to begin to get on their own footing with.
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A
All the kind of issues that African economies face with falling commodity prices and uncertainty about future financing. And as you've laid out very clearly a lack of diversity in what they produce and the jobs they have. How are they going to be able to meet the SDGs? Especially if you think about all the kind of indicators that they now have to measure, the 230 indicators that the UN says every country has to report on every year for the next 15 years, how are they going to do that?
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B
Well, it's not just African countries, by the way. I mean, one good thing about these SDGs is they are now universal. There was a feeling among developing countries, not just Africa, that the MDGs seem to be designed for developing countries. No, now we're into universal things. I mean, on gender, for instance, there's no country in the world that can claim they've got it all right.
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A
Sure, but at least.
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B
But okay, coming back to African countries, yes, there may be very many measures, maybe too many, maybe we have too many measures. But African countries made some progress with the MDGs and the measures that we are looking at at the sdg, I think are more owned.
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A
Can the world meet them?
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B
Can the world meet them? The answer is yes. If the world works hard enough, they can meet them. They're not unattainable, many of these goals. And I think that the fact that every country has to report, not just developing countries, not just African countries, not just emerging market, even developed countries should report on how they're doing has galvanized attention. And I think the world can meet then why not? Why should we not be able to meet goals on creating good jobs for our young people? I mean, it's natural when you grow. Why should we not care about inequality and, you know, trying to make the world a more equal place as we grow? I worried about that when I was finance minister in Nigeria, that we were growing, but we're also becoming more unequal. And what do we do about it? Why can't we meet goals on gender? Why is it right that the pay gap between men and women is so large in many countries and that economically you are leaving behind a segment of your population that could contribute so much to the economy growing and to closing the inequality gap? Why shouldn't we worry about including financial inclusion for men and women? What about our children? You know, making sure that children are immunized and that we do not allow pandemics and health deficiencies to totally wipe out any of the growth and development that we are seeing, as happened with the Ebola pandemic that threatened Liberia, Sierra Leone and Guinea so much. So some of these goals and objectives are smart, sensible goals that a country should be worrying about anyway, as it does its development. And that's why I think it is not strange. I think I'm confident that it will help focus the minds of policymakers more on what they have to deliver and it will help our youth focus on what they need to monitor and hold. Policymakers are accountable for a singular name.
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A
And a singular intellect. Ngozi, fantastic to talk with you on the podcast. Thank you very much for being my guest.
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B
Thank you, Rajesh.
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A
Don't forget, you can find out much more about everything that CGD is doing. And you can read Ngozi's essay that she wrote for us, six questions African policymakers must answer now on our website, cgdev.org and please do join me, Rajesh Merchandani, for the next podcast from the center for Global Development.