Nigeria in 2016 Special Edition
Professor Ndubisi Nwokoma is a seasoned scholar and a professional in various associations. He is presently the Head, Department of Economics, University of Lagos, Nigeria. He says Nigerians should be hopeful for the New Year in this interview with Boluwaji Apanisile.
The Uncertainty of 2015
I can summarize the state of the economy with one word, uncertainty, in 2015. One, we had no idea of the
government that was coming into power in 2015; the whole half of the year was full of uncertainty. Expenditure profile for the first half of the year was so high because no one knew what was going to happen; even the business market was affected.
In the beginning of the year the market reacted positively and after that it started going down. All over, the issue of crude oil price, corruption, devaluation of naira, inflation etc., all affected the variable in the economy.
Now we should expect certainty because we now have a new government with a new budget, I think we should begin to think of certainty in 2016.
Sourcing fund to finance the budget
If you ask me I think what the government did is the right thing. It’s a model that was adopted by the administration of Barack Obama when he took over a shaky economy from Bush, he had to stimulate the economy, borrowing from the future, because the government had to jump start the economy, contrary to what was done in Europe. What Europe did was austerity which was cutting down and European economy till today and it is still in problem. Borrowing from the future actually worked for America and as at today the American economy has survived. It is risky, but if properly monitored, with appropriately investment in public works and infrastructure, you can enable the other economic agents to actively participate in the economy.
Recession in 2016
There will not be any form of recession if the government can do proper implementation in 2016.
There is so much latent energy in the economy; we need to unlock them, to unlock the economy, with proper monitoring team and management.
Also we need to minimize waste, eradicate corruption, not that one side is corrupt and the other side is not, but a total eradication of corruption in the economy.
Another thing is that the federal government contribute about 50 percent, so the state and the local government, what they do or what they don’t do, contribute the other part of the mess. So we need to take it down the line, not only for the federal government but to close all the leakages in every levels of the government. If we are able to critically monitor the budget, the recession may not actually take place but if not, with the amount of budget we are having for the year 2016, things will be worse.
Financing the budget with non-oil sectors
Basically what the government was saying is using the non-oil sectors to fund the large portion of the budget, what they mean by that is that customs, taxes and other areas that are different from oil, and then the government will be able to fill up the gaps that were provided by the oil sector. The government promised to recover the stolen funds; I don’t know how they came up with that.
Several development points to likely economic reversal in 2016
Every economy will always have one challenge or the other; there is no economy without a challenge. But the problem is that, are they the ones they should have? Projection shows so many variables that could lead to recession in 2016, among which are crude oil price in 2016, global oil production and supply, government spending, exchange rates, power supply, banking and credits, capital market, jobs and so on.
In Nigeria, our structure is basically focused on oil, so to move forward in the economy, we need to readjust our structure, from the production to the consumption.
We need to structure all other non-oil sectors like in production for instance; agriculture, mining and some other sectors which we need to develop.
Agriculture has a lot of products that we are still importing today and we have advantage to produce. Take a look at rice for instance, this country has no business in importing rice. We should develop the production of our own rice and our solid minerals. For consumption, what do you buy? Where do you buy? And how do you buy? Those have their effects on demand. Nigerians don’t want to buy an Adire cloth or local attire; people don’t want to buy Aba shoes, so we import everything from toothpick, papers and shoes, virtually everything. Structure of our tariffs is also very important. The current president said he will make one dollar to one naira, but he has seen it that it’s not what he thought; it’s even worse now, we have not had it so bad. Therefore the structure of our demand and structure of supply of foreign exchange and the demand for foreign exchange is derived demand. Once we work on these, every other thing will adjust, inflation will also adjust because they react to the economy, inflation reacts when there is much demand for goods and services compared to the level of productivity, then it affect prices, it will also save the amount of money in circulation.
Government need to look at the Treasury Single Account, TSA, again and amend it. The last administration did the right thing by bringing TSA so this administration should look into it and amend it. If the government is wise, they should rather borrow money and not print because if the government should print money to finance the budget, this economy will be finished. Because if government should print and circulate around, then the value of money for those that have it will drop totally and if they borrow, they also need to judiciously manage it because if they do not, it will be worse. Government should stop blaming the past administration and take charge of the economy. The last administration is no more there, if you have been in power for seven months and still complaining about the past administration then I don’t know what to say. If there is fault in the economy, then fix it because you are in charge now.
Challenges of local production development
It’s all about the leadership; the person at the top has to insist that these things have to be done. In Singapore, someone said these things should be done and they are done. China for instance depends so much on its local production. Nigeria is the largest market in Africa, if we close our border, for instance, to foreign products and by that develop our local products, then the country will really change. Imagine if people are really buying Aba shoes? By now Aba shoes would have been better because if the shoes are not good and people complained severally, they will hear and work on it better. Taiwan products were formally bad, but after so many complaints they improved on it and now they are better. Same with China and Japan. Other countries turn our country into a dumping ground because we fail to do the right thing. Of course there are some things we can never do as much as those countries. Take for instance, if Nigeria and China are to produce an electronic remote controller, China will produce for two naira a better quality than Nigeria that will produce lesser quality for 10 naira, so who will see a two naira product that is good and now said he want the 10 naira product? That is not possible. But yet we need to start doing that, it will be tough in the beginning but later it will be better.
Expectation of the foreign investors in 2016
Well, Nigeria is a very strong economy. It also has a promising economy, so investors can take positions come 2016. For those who are into portfolio investment, the price of stocks in the market are very low at the moment, interest rates is still low. So investors should come in.
Nigeria in 2016
Well, everybody should go and buy belts, and tighten themselves, but not too much because many events will take place. Salaries will come in late, presently the governments at the state level are still proposing to slash down minimum wage. 2016 will be tough for many oil dependent states, unemployment may increase, but if the government can succeed on their plans, then things will normalize, I don’t have anything against the big budget, it’s a risk, but it is worth taking. It is like jumping into a sea to catch fish, you may succeed and catch a very big fish if your plans are well implemented but if you fail, the big fish may swallow you.
Published in the Business Eye’s print version, Jan 2016 edition.