.Says Economy May Grow by 2% in Last Quarter if…
Akpan Ekpo is a professor of Economics and the current Director General, West African Institute for Financial and Economic Management (WAIFEM). In this Interview with Financial Business & Maritime he calls on President Muhammadu Buhari to implement a developmental-state economic blue print to rejuvenate Nigeria’s economy
Is Nigeria’s economy actually out of recession based on the statistics from NBS?
Yes, technically. With marginal growth rate in Gross Domestic Product, GDP, the economy has exited recession and now on the path of recovery. However, the challenges like unemployment, double digit interest rate, high lending rate, inflation and misery index have not decreased. The economy entered recession over a period of time and cannot bounce back immediately at the same pace. Recovery will set in when GDP growth equals the rate of growth or population. But the recent data from NBS confirms the need for aggressive fiscal and monetary policies implementation to sustain the recovery path. It is important to state that recessions are part and parcel (permanent feature) in a capitalist market driven economy. Therefore, there is no need to panic, but to put in place a strong team to manage the economy 24 hours daily. What is needed is macro management of the economy to minimise the adverse effect of a recession. Recession comes and goes. If this recession is finally over, another recession may come at some point but we don’t know when.
As economic expert, how will you describe this type of recession?
This is a short recession because it lasted just one year. The NBS is the authentic agency of government to provide us with data. For instance, the same NBS people are criticising now gave us data consecutively throughout 2016 and the first quarter of 2017 despite political pressure to show that the economy was in a recession. Now, they are reporting that the economy is out of recession and people are complaining. Why? 0.55 percent growth is very marginal and driven by crude oil export. I assume that the economy may grow at two percent by the end of this year if capital projects in 2017 budget are implemented up to about 80percent.
What do you think actually went wrong, to the point that the economy entered recession and no proactive step was taken to prevent it?
We must not forget that recession did not just happen suddenly. There were signs of economic down turn from 2012 and nothing was done about it. In 2015, I predicted that the economy was at the tip of a recession and nothing was done to remedy the situation, until 2016 when the economy finally entered full recession. So, for Buhari to success, he must implement a developmental-state economic blue print, where government sees development as its priority.
How can the economy exit recession with poverty rate of about 70percent and 30 percent unemployment rate in the country?
Growth is not development, meaning the economy can grow and not developed. Exiting recession does not mean an end to poverty, unemployment/under-employment and decay in infrastructure. The Minister of Finance said that N200billion was released for capital projects. So, we need monitoring and quarterly report on performance of the budget. Now that growth is coming, we need monetary policies from the Central Bank of Nigeria (CBN) to reduce interest rate.
With the assertion by NBS, does it mean the CBN has tackled the forex crisis rocking the financial sector?
In fairness, the CBN has pumped a lot of forex into the system, such that Small and Medium Enterprises (SMEs) can now have easy access to CBN forex window.
If the economy is indeed out of recession, why are many SMEs closing shop?
All the industries that went under during the recession may not come back. The manufacturers should be innovative. They should tap from the existing interventions from CBN and Bank of Industry (boI). If there are issues, they can confront the monetary authority. Also, the policy of buy made-in- Nigeria goods is very important and must be well implemented.
How can government minimise recession?
The only way government can minimise recession is to build a Market Socialist Economy in theory and practice. We must note that the GDP growth did not further contract negatively, if not, Nigeria would have entered a depressionary phase, which would have been much more severe that recession. This means government must implement a developmental-state economic philosophy for the economy to be public sector driven with private sector as one of the engines of growth. The ruling class (government) should have as utmost priority the interest of the working class, which includes the “bribed segment”of that class.
Which people belong to the class of bribed segment?
The top government functionaries, Chief Executive Officers, Managing Directors and others. In a Market Socialist system, surplus generated by companies is often used in the overall interest of the firms and the citizens. What we have now is that, the major aim of private sector is to make profit. This shows in the way they invest, as their dynamics of investment are not favourable to the system and sometimes result in a recession. For instance, the recession in Nigeria was not just caused by a sharp decline in oil prices as some people claimed, but by under-investment by private sector and decline in consumption by other economic agents, such as households and their families. Some people were owed salaries for over eight months and they could not buy goods and services, so they could not consume.
You said that the growth rate is so marginal. What can be done to increase and sustain the economic growth grate?
The economy now is more of consumption. Therefore the structure must change towards production of goods and services to be used within the economy and export the surplus to earn more foreign exchange. Government should open doors for employment and the economy has to grow at least at six percent for about three to five years for unemployment to be reduced. This growth must not be propelled by oil sector. This is because oil drives the economy but does not employ many people. Agriculture can create thousands of jobs, so government should make agriculture attractive, especially for those out of tertiary institutions. They should be able to access land and credit facility easily. Government has to provide them with extension workers. CBN has a lot of intervention funds for agriculture, people should get information on how to access these funds. Also, the sub-national governments must play their role well in creating jobs and growing the economy of their States. Those who want to be entrepreneurs should be encouraged. Most importantly, all tiers of governments need to examine our school system to make it globally competitive and of high quality because the school system now is in disarray.