Most W/African economies are in recession- Prof. Ekpo
. Says African countries face leadership, governance problems
By Udeme Clement
Akpan Ekpo is a professor of Economics and the current Director General, West African Institute for Financial and Economic Management, WAIFEM. He spoke in this interview with Financial Business & Maritime News, on economic issues in Nigeria and other countries within West African sub-region.
Nigeria’s economy is still facing crises of poverty, unemployment, poor infrastructure and even declining standards in education, despite efforts to revamp the system. What are those things lacking in Nigeria, which other countries are enjoying that Nigeria can copy from to change its economic structure?
To start with, most economies within the West African sub-region are in a recession. What I mean here is that these countries are experiencing economic down turn, negative growth in Gross Domestic Product (GDP) for about four consecutive quarters, high and rising unemployment rate especially among youths and high rates of inflation. But there is slight difference in the Franco-phone speaking countries. They have low inflation rates partly because their currency, CFA, has a fixed parity with the Euro. So, that is the difference between the Anglo-phone and their French counterparts in the West African sub-region. Let me add that the economies of Senegal and Cape Verde are also registering impressive growth rates of almost 8 per cent.
Also, countries like Rwanda and Ethiopia are doing well in terms of growth and development. Rwanda’s growth rate is about 6 percent or more, while the growth rate in Ethiopia is about 10 percent. This is because in both countries, government takes development as priority, by implementing what is called a developmental-state-economic- blue print.
West African economies depend majorly on commodity exports. For example, Nigeria depends on crude oil and Ghana depends on oil, gold and cocoa; Cote D’Ivoire on cocoa So, when the commodity prices fall, they face declining revenues, inhibiting their capacity to finance development projects. Moreover, the revenue from these commodities are exogenous. The countries have no control over their prices and even output.
Notwithstanding the outcome of the last rebasing of Nigeria’s economy, many entrepreneurs are of the opinion that South African economy is far better than Nigeria. What is your take on this?
South Africa has first world infrastructure (good roads, a functional railway system) that is why it is ahead of Nigeria, in my opinion. In addition, it inherited relatively strong institutions and is relatively industrialised when compared to Nigeria. But all African countries face leadership problem and governance issues. For example, the leadership is either corrupt, not concerned about welfare of the masses as well as staying in power for too long. Africa needs visionary leadership. The African people when they are ready have the power to replace the bankrupt leadership in Africa. However, the people have to be organised to do so.
Why is the Federal Government paying so much to a Malaysian economist for the Economic Recovery Growth Plan (ERGP) 2017 – 2020 when we have competent economists in Nigeria?
It is not true, though I am not holding brief for the Federal Government. Government is not using a Malaysian economist for the plan.The ERGP was put together by Nigerian experts and I was part of the team. Even the implementation plan was developed by Nigerian economists. Infact, Nigerian experts developed both part one and two of the ERGP. Even the economic model government is using was developed by the Nigerian Economic Society ,NES, some years ago, and I was the lead consultant. Also, the current Minister of Budget and National Planning is very nationalistic. He knows that Nigeria has the expertise. So, he will not bring a foreign expert to develop an economic recovery and growth plan for Nigeria. Government can bring a foreign expert for exchange of ideas. We can tap from experiences of other countries. There is nothing wrong in exchanging ideas and experiences. After-all, many Nigerians admire the successes of Malaysia.
In that case, why do people have the impression that government is using a Malaysian economist?
That perception is not true. Government is not using a Malaysian economist. What government did was to bring in a Malaysian expert to assist in attracting foreign investors in agriculture, industry and infrastructure development. You may seek further clarification with the Minister.
As a professor of economics, what do you think are the economic implications of Non-Performing Loans on the banking sector?
In reality, Non-Performing Loans are increasing, not that the banking sector is in crisis. The issue is that Nigerians don’t like paying debts. It is worrisome because Non-Performing Loans are rising above the benchmark. The good thing is that the Central Bank of Nigeria (CBN) is doing something to ensure that the Directors of such banks are going to be sanctioned. The issue of Non-Performing Loans is not in Nigeria alone, but it must be addressed, it is not healthy for the banking sector in particular and the economy in general. As such, the companies and individuals involved must be sanctioned appropriately.
Does it mean the name and shame approach used by the monetary authority months ago was not effective?
I am aware of the name and shame approach, but the truth is that Nigerians don’t like paying debts. Also, some borrowed to invest in factories but ended up buying houses with the money, so paying back becomes difficult. Before now, such loans used to be written off as bad debts, but now you cannot write off billions of naira just like that. Such debtors should face Economic and Financial Crimes Commission ,EFCC, if after giving them sufficient time to re-negotiate and pay, they still do not respond.
The International Monetary Fund ,IMF, has warned Nigeria on the dangers of debt overhang. What are the economic implications of excessive debts?
IMF is right to caution Nigerian government to avoid debt overhang. It is normal and you do not need to hear from IMF to know that our debt profile is worrisome. For example, in every budget, trillions of naira is set aside for servicing debt. Government needs to borrow externally from multinational institutions like World Bank and African Development Bank, which have concessionary terms like long-term repayment and low interest rates. External borrowing from multilateral institutions allows for a country to re-schedule if there is crisis in the economy. Government should avoid domestic debt because it is not flexible and has short term payment period with high interest rate. Government should also look at the country’s revenue profile because revenue pays debt and not GDP. Government should only borrow to finance capital projects (hard and soft infrastructure) that can enhance growth and not for recurrent expenditures like borrowing to pay salaries.
Unemployment in Nigeria has reached a crisis level, what do you think government should do to tackle it?
In reality, unemployment in Nigeria is like a time bomb waiting to explode. Unemployment rate currently is about 35 percent and rising among the youths. The way out is for government to make agriculture a business for people to earn a living from. Agriculture can grow the economy because it is a renewable resource unlike crude oil. Government should also create jobs in the security agencies like the Police, Army, Customs, Air force, Navy and others. Now the sad thing is that, you have to be a graduate to be unemployed. Even PhD holders have entered the unemployment data in Nigeria. Some Universities need these PhD holders but have no money to pay them.
Another matter is for government to implement the Social Welfare Investment projects in the 2017 budget. It will go along way to address the unemployment crisis. In the short term, government should pay unemployment benefits to the unemployed. Government should encourage Small and Medium Enterprises ,SMEs, to thrive, provide at least 18 hours electricity supply for SMEs to grow. The sub-national governments must be involved in creating jobs to tackle the unemployment issue. We need to industrialise, expand and change the structure of the economy in favour of production to create jobs going forward.
We learnt that Nigeria’s economy is recovering from one year recession. What is the level of recovery now?
The economy is on the recovery path propelled by crude oil export. So, the Nigerian project remains the oil story. There is also evidence of fiscal policies beginning to work but the recovery is just marginal.