Home / Interviews / Nigeria moved from stagflation to recession and must avoid depression — Prof. Ekpo

Nigeria moved from stagflation to recession and must avoid depression — Prof. Ekpo

Full-time economist, former university Vice Chancellor and currently Director-General, West African Institute for Financial and Economic Management (WAIFEM), Prof. Hogan Akpan Ekpo takes us down memory lane with respect to Nigeria’s economy. While touching on salient issues currently bedeviling the economy, he proffers way out in this interview with Ofuma Agali, Patrick Aigbokhan and Yomi Oladimeji.

 Looking at all of the issues we have had in Nigeria – unfavorable forex rate, unstable forex rate, loss of jobs, high inflation rate and all of that – how did we get here?

We had sixteen years of the former ruling party. We had argued then towards the end that the economy wasn’t doing well, but they kept saying that we were growing at about 5.5%. The growth was not generating employment. If you look at the rate of unemployment, the lending rate, poverty incidence, all these things were in the negative. So it shows we were not doing well and we said this growth was not transforming into development. But we were not taken seriously.

Now, the new government came on board with the ‘Change’ mantra and we said we will give the new government a year and then look at the data. Unfortunately after a year, we are having the same problem in the sense that what we call the ‘misery Index’ is still rising.

Misery Index means you have unemployment still rising, inflation rising at double-digit, also the lending rate is rising, and poverty incidence is high, such that the Vice-President said in Rwanda a few months ago that over 10 million Nigerians are living in poverty. So nothing has really changed in that aspect and to make things worse, we are now having a recession.

In February this year, I gave a lecture where I warned that the nation was at the tip of a recession, what economists call stagflation, and that if the government does nothing about it in terms of fiscal policy, we will experience a recession. We have entered a recession because of the sharp decline in oil prices and we have to get out of it. Foreign reserves have gone down sharply and all other things. And at that time, only Central Bank was talking because of ‘multi-policy’ and it wasn’t effective because we need a tool; to a large extent it wasn’t effective.

We were concentrating more on foreign reserves in the exchange rate market because of the sharp decline in oil prices.

Now to summarize, the economy is not doing well, the misery Index has increased from what it was. We are in a recession and the GDP is now in the negative growth and once you have that in two consecutive terms, you are in a recession.

Now, can the economy get out of recession? Yes, it can. But it will take a long time because we lack structure and there is a delay in implementing fiscal policy.

Okay, there was a delay in forming the cabinet, there might be reasons for that. But the delay in passing the budget – because the budget was passed in May – has created a lot of problems. If the budget was passed on time and enough money was being pumped into the economy, in my own view, we would have averted a recession. But now it is tough because oil prices aren’t showing any sign of going up, so the revenue of the government is not increasing. In fact, it is reducing. Then more than that, the sub-national government is not doing well. Most of them are owing salaries to workers, so the recession now is the crucial type. It affects the demand side and the supply side because workers are not being paid salaries. This means that workers don’t have any money and therefore, can’t demand goods and services. So the situation is affecting the demand side.

It is also affecting the supply side because. As we speak in Nigeria, power is still epileptic. The government said it would change. Infrastructure, like roads and the rest, are still in deficit. Such infrastructure like the rail system, education and health-care are still in deficit. So the government has a problem because they don’t have the money now. They are borrowing. They are borrowing both domestically and externally.

I don’t see us getting out of the recession in a hurry because even as we speak, we don’t know how far they have implemented the budget. I read sometimes ago that they have pumped N400b into contracts. If that is the case, they need a strong monitoring and evaluation (M&E) to make sure that is happening. The labour market is also not doing well. A lot of people are not working. So there is a lot of output loss and we are not meeting our GDP.

Generally speaking, the economy is in a serious crisis. My worry is if nothing is done now, we might be headed for a depression. Because a long period of recession ends in depression, which is worse because once the Central Bank cannot meet its own obligations and there is a currency crisis, then there will be very serious problem. I pray we don’t end up like Venezuela.

We have to be honest, the data is there to show some of these things. So it’s not like we are being segmental because the data shows what we are saying. The government shows they are concerned with their pronouncement. But it is one thing to show concern and another to address a problem. How are they addressing the issue especially the foreign exchange market?

I see so much emphasis on the foreign exchange market. It is because the society consumes more of what it doesn’t produce. The appetite for foreign goods is high. Go to our streets, everything is Chinese, both the inferior quality and the high quality. And you don’t get them with naira, you get them with foreign currency. There is a high appetite for foreign goods and services and we have to cut down on the appetite.

We have to encourage an environment that produces and consumes locally-made products and services. If there is surplus, we export. We need to understand that the naira is not convertible. If you are German, American or British, you don’t have to convert your currency when travelling. Even as a businessman from any of these countries, you don’t have to because those currencies are convertible. But the naira is not. At every point in time, you must assume you don’t have enough because it is not yours. In that scenario, you don’t even float it, you don’t allow market determine the value. You do what is called a ‘manage float’. You manage it, you allocate it efficiently, you don’t ration.

Prof. Akpan Ekpo speaking during the interview with Business Eye team
Prof. Akpan Ekpo speaking during the interview with Business Eye team

If you want Nigerians to manufacture, you look for the real manufacturers. Give them foreign exchange to import machines. That is what you should do and that is why they have been complaining until recently when they said they will make sure that banks allocate 6% forex to that sector. So that was a step in the right direction, but we have to see whether it will be properly implemented and see the impact, because what we are saying today, people have said it twenty years ago that the oil will dwindle one day, that the oil is a wasting asset, don’t rely too much on it, use the windfall to change the structure of the economy. We didn’t do that.

If we go to Norway, Kuwait and other countries where they have oil, you won’t know they have oil. They have used it to structure their economy. But we didn’t do that and now we are paying the price and even now they are saying ‘diversify the economy’ but I don’t know how far we have gone in doing that. Luckily, we have a viable agricultural sector which we are not exploring.

For me, the solid mineral is not the way to go, because just like fuel, it doesn’t add value before it is exported. So it is also a wasting asset and that makes no sense. But agriculture is not like that. You can plant Cocoa again, you can plant corn and yam again and again.

So for me, I don’t see anything happening this year again in terms of recovery. If anything is in place, we should start seeing results next year and that may save us from going into a depression. Also, unluckily for us, the global environment is not helping matters. There is a sluggish recovery. The Chinese are also having issues in terms of recovery and since we are linked, even if we say we are doing things right here, we must be careful of what economists call ‘Client Recession’. In other words, because we are linked to China, UK, US and so on, if they have issues, it will filter to us whether we like it or not. So now, they are not doing well and it has worsened our case.

 

Like you said, it is not only Nigeria that is suffering what we are suffering now. Analysts have said there is cash crunch globally. But unfortunately, those who were not prepared like Nigeria are having it harder. From a global context, how do we explain what is happening to Nigeria?

In that context, those countries already have an advantage, they already built their infrastructure. If you go to Britain and US, their infrastructure is intact. Good roads, 24 hours power supply and all of that. So that helps them. They manufacture things and export. Like when I hear people compare Nigeria and South-Africa, I tell them not to compare because South Africa has a first world infrastructure and that helps. South Africa is industrialized, we are still at the rudimentary stage. The economists call it the primary stage of development where peasant agriculture dominates, not even mechanized agriculture. These guys have gone through a phase whereby they are already in the service stage. America and the rest have services. So once they have problems, they are able to bounce back almost easily because once you run a market economy no matter how it is managed, there must be a recession but the impact will not be so severe because you are managing it.

I am sure you have heard of something called ‘Great Depression’. It was called ‘great’ because that was the first time it hit the US market system. They learnt from that and put in some safety nets. In the US, if you are unemployed, you will be paid a certain amount of money so that you can keep requesting for goods and services, so the economy doesn’t shut down. They learnt that from the great depression. Then they have other social programmes in place. You see that they get into depression too but not as bad as the great depression. No two are alike. They have an advantage. They have safety nets to take care of their people when there is an economic downturn.

We don’t have safety nets here. The new government says we will have safety nets, but we are yet to see them. They said they will feed children a meal in school. The thing is if children eat one good meal in school, it will relieve the parents. Secondly, they won’t be malnourished; they can absorb, learn and become better citizens. They also said money will be given to the poor. They are yet to start it. Now, the question is: Will it be done? If it is started, I am not sure it is sustainable, because once you build your market system, there will be fall-outs and there are people who cannot compete. They are not stones, they are human beings and we have to care for them otherwise they will become a problem to the society. That is how our system is different from theirs.

So I don’t like it when Government officials say we are not the only ones going through economic problems, that it is a global thing. But the thing is we have to solve our own problem.

The China we are going to today was underdeveloped for a long time. But they then became strategic and closed their borders for a while and did what is called selective engagement. When they now opened up, the world was shocked. The same thing happened in Singapore, they were strategic. Singapore has no oil but she has oil refineries. Others take their crude to Singapore to be refined.

If Nigeria had not abandoned planning, it would have been better. But we abandoned planning sometime in the 70s. Nigeria needs to plan its economy.

 

Towards the latter part of the last government, there was this big news all over the place of how Nigeria’s economy is the largest in the whole of Africa and in less than two years down the line we are where we are now. So what kind of indices and what elements were used to arrive at that decision?

I was a consultant with the re basing team. Normally, every five years, you should rebase your economy. Re-basing means that you use the economy of a particular year to plan over time for that economy.

We were using 1990 for a long time. So we didn’t change the base. After 24 years we did that. Of course, the economy will be larger but that didn’t translate into anything serious let me be honest. The only thing it did was that it showed that certain sectors were now contributing more to the GDP than the others and the government has to look into those sectors in terms of policy.

For example, after the rebasing exercise, we saw that the entertainment industry was contributing a lot to the economy. We saw that the telecoms were also doing same, almost like 15% and we saw that it can be made to grow further. We also saw the housing sector was not contributing much but was growing so the government should pay more attention to that sector. We also saw that the sector was very dynamic and could be assisted to grow. All of those things are with their implications. It shows that the economy was now very large and Nigeria was becoming a middle-income country and once a nation is tagged a middle-income country, it can no longer access IDA (International Development Association) loans. It’s an arm of the World Bank and IDA gives loans on concessionary terms, low-interest rate and long-term repayment, if you watch before that exercise Nigeria was borrowing a lot. They were front-loading because they had the idea that if the economy becomes so large, they won’t let them borrow. But it showed that the economy is large, you can go there and invest and make money. That is one factor.

Another thing is that the economy is expanding every day. Nigeria is one country where every day at least in 37 cities, business activities is going on. We have a very large informal sector and that is what the economy keeps growing now. The informal sector is very large and they struggle every day to make sure that economic activities are going. Buying and selling take place, all of those contributed to making our economy the largest. The World Bank says the informal sector constitutes like two-thirds of the economy. It is a very strong sector and that is why States like Lagos have devised a means to tax that sector.

But now we are no longer the largest. South Africa is the largest now. We are the second largest and that happened because the Naira was devalued. Because when you measure the Naira, you have to also measure it in the foreign currency. The Naira depreciated and the Rand appreciated towards US Dollar so South Africa took over as the first position. But the position of the economy doesn’t really matter, it doesn’t matter whether you are number one, two, three, or four. Investors will come if the cost of doing business in your country isn’t too high. They will come if security is okay. They will come if there isn’t insurgency and too much of bureaucratic red-tape. They will not come because of the position of the economy.

 

If the economy is not fixed, more people will be corrupt........
If the economy is not fixed, more people will be corrupt……..

People are made to believe that government mopped up money, reduced stealing, blocked leakages and all other sharp practices that have bedeviled the public sector for a long time within the short time they have started. But then there is cash crunch and economy isn’t doing well. What do these all mean?

Well for me, the idea of a Treasury Single Account (TSA) was good but poorly implemented. And that is in the sense that you don’t ask all government agencies to do TSA.

For example, Universities generate their own revenue and they keep records. It is the same thing for some other agencies. Having said that, if the money sits in the Central Bank and it is not being used, it is useless. The money should be used to finance certain things or else it makes no sense.

People are complaining that when they opened the TSA, they moved all accounts there including monies from donors. Those monies from the donors are tied up in TSA and if you don’t use donor monies, they blacklist you. So they didn’t implement it properly.

As for blocking leakages, we have been hearing that. We all appreciate that we need to fight corruption. But now that we are in a recession, that is not the only thing to do, because the corrupt ones are just a tiny fraction of the population. Their lifestyle will never change. You can’t recover all the money, but keep fighting them. Let’s see results but first of all, fix the economy.

If you fix the economy, you are indirectly fighting corruption. If you don’t fix the economy; more people will be corrupt, except blocking leakages becomes a permanent feature in our economy. Fighting corruption is not the only thing you do as a government. You need to fix the economy. We have serious economic problems now in Nigeria, to create jobs shouldn’t be the work of the private sector. The private sector can’t create all of the jobs we need in Nigeria now because the private sector is an engine of growth not the engine of development. Their bottom line is profit. That is why banks are making profit at a reduced rate and laying off workers. The crises we have now, unfortunately, only the government can fix it. So block the leakages, get the money and use the money to fix the economy.

The government should also get the power sector fixed. If that is done, factories will emerge. More small businesses will emerge. They should pump money into the housing sector at all levels. Go to a typical building site, you will see the number of people getting the work done.

Look at the economic crises of the US in 2008/2009, their forex interest rate was brought down to almost zero and yet there was no growth. Nothing changed until Obama started doing fiscal stimulus, pumping money into the economy and the economy started recovering. That is how it should be. This has to be done both at the federal and state levels because we assume that it is only the federal government that should do this.

Personally, I think the state governments are more affected than the federal government because states are closer to the people. You wonder why states can’t pay salaries despite collecting allocations but for now, we are in a crisis where we have to sort things out.

My worry is the issue of unemployment. That issue is a time bomb. So we are not against blocking leakages but those funds should be used to solve other problems. The looted funds that have been recovered, utilize them. Concentrate more on the economy because Nigerians are expectant and you can’t blame them because for over 50 years now, it has always been one issue or the other.

Someone was asking me during the last year Independence celebrations how I felt. I simply told him I don’t feel happy about the state of things. As a 6-year-old boy, I marched during the 1960 Independence Day celebrations and I can remember that the government then promised us water, constant power supply, good roads and all those things were available at the time here in Lagos. So many years after, we are still saying the same thing.

Every country has poor people but you as the government gives them hope. Every country has its own slums. But you encourage them and give them hope. You make sure that even right there in the slum, they have water, they have light and some other basic things that give them hope and they aspire to get out of the slums.

So they should block all leakages but spend more time fixing the economy. That is paramount.

 

Coming to the issue you threw up about planning and  coming back to the private sector, there has also been a lot of complaints about inconsistencies in government policies that are now making the private sector investors and the rest of them to be confused, to lose focus and not to know which direction to go. What is your view on those policies?

Actually, in a way, they are right. There has been a lot of inconsistencies and policy reversals in government. You put into place a policy that favours private sector. You say we are banning import of vegetable oil as an example. They now go to banks, get loans and start using our palm oil to make vegetable oil. Then after three years, you say you have unbanned it. You have a floodgate. People who have already taken loans, what do they do? They can’t pay the loan, what do they do? You get my point? A lot of government policy reversals, overtime. Not just PDP, it’s been there even before PDP. They were doing that all the time and you cannot run a country like that. If you do a good analysis of how a policy stays with you for a long time, you say you want to encourage local furniture making, you say that and you ban import of furniture coming into Nigeria. But you the president, your furniture is not locally made in Nigeria. Nobody takes you serious.

When India banned foreign cars, they were all driving their own cars there, including the president. Supporting the reversal is a big problem, I agree. If you look at even the monetary policy, every week, the Central Bank issues new directives. One day you say, Bureau de Change should no longer be given dollars to sell. The next time, you say you’ve banned them. Now, you say they should come back and you would give them dollars to sell. All you send are wrong signals. Sometimes, you put a policy in place and people have started following that policy, even if later you find out that there are some mistakes, you don’t change it immediately. You allow it for a while because some may correct itself. Especially when it involves the private sector when you have to go and get money from somewhere. And that is another issue because some private sector people who are big get loans at preferred rates. So, if they take loans to put in place a business based on government policies, and you keep flip-flopping, you put them into trouble. It has happened a lot of times. Like farming, they said they wanted to encourage Nigerians to export wheat some years back, then they banned import of wheat. Then after two years, they unbanned it. I’m using this example because that is how China made it. They closed their borders. When you ban those things, you have to make sure that your borders are not permanently closed but the people must monitor that those goods don’t come in. When CBN listed those 41 items, people were complaining. I wasn’t complaining because, that is the way we should go actually. Why should we import toothpicks? Maybe from the beginning, we can import the machine to produce the toothpicks. But then we should ask our research institutes to study the machines and do a prototype, because that was how others learnt. They steal it or adapt it. If you go to China now, you will find turbines. They don’t even hide it. You will see General Electric and all of them. They copy and improve. But why should somebody take funds to say they want to go and import toothpicks, sardines, matches, pencils? So it is a good policy.

And then under the 41 items, if you look at it, petroleum products top the list. So if you fix the refineries, you conserve foreign exchange, because you encourage local entrepreneurs. The problem is that there are all these intervention funds, they are in banks, but no access. People don’t have access. So that’s the way I see it.

And the issue of lending rates is very crucial to the economy. As long as our lending rates remain 25%, the real sector will never grow. They will never grow. Our market forces will not bring it down because the banking sector in Nigeria is oligopolistic. There are few banks, about 23 or 24. We have branches but few banks. So if you wait for the market to bring it down, it won’t come down. We need deliberate government action. In fact, the CBN through its monetary policy rate should have brought down that rate drastically and see whether it will have an impact on lending rates. Who will borrow at 25% and invest, make profits, pay back? It is not possible. So those are some of the problems of the economy.

 

With the high inflation rate, job losses, high cost of goods and services, unfavourable forex rates, what would you predict for the future for Nigeria?

Well the point is that inflation, officially, is about 17% or so, which is not too good because it is a double digit. But then, there are countries with higher inflation rates and they are doing better. But in Nigeria, it may move to what we call runaway inflation, because, once the naira keeps losing value, it will affect the inflation rate. You know why? Let’s say I’m a business man for example. Today, I buy dollar at N400. Last two weeks, I bought it at N380. I don’t know what it will be next week. So I increase the prices of my goods so that when I sell, I can buy the dollar even if it is N500. So the flux in the same market is affecting inflation. And you know, when inflation is now high, it affects the poor more. They can now buy very few goods, if they don’t have the money. The rich can draw on savings to maintain his or her lifestyle. So what you are seeing will keep happening. There will be more speculation and uncertainty. It will happen until we go back to a managed float. Or we create an environment that is productive, because the economy is not producing anything. And we hope that they will do it. In my view, they should do it fast, to avoid a crisis – a social crisis. Already, we are in economic crisis now – recession. We want to avoid a social crisis – a social upheaval. For example, I have an old mother I take care of. Now a bag of rice is around N20,000. It used to be N6,000, N7,000, N8,000, N9,000 or N11,000. I hope that the government is seeing these things because, sometimes, in Nigeria and African countries, the government is far away from the people. They don’t experience all these things. That is part of the problem. But when you experience it, you might want to find a way to solve it. Some are not detached. Some are detached. So, for me, until you put in place a policy that allocates foreign exchange to the sectors that will use it properly – like manufacturing sector, potential small-scale businessmen, or small-scale entrepreneurs – and monitor how the funds are used to revamp that sector, we will have this problem. Government has to intervene to bring down the lending rates. It has to, it is important. To bring it at least, for a start, to 10-12%. It is now 25%.  If you are a big business man, they give you preferred rates, say 15%, because, in the supply of floatable funds, every point is a price. So you will come and I give you a price, and I make sure I make profits. So, they can do that.

Then, more importantly, you must fix power. It is important. The countries we all admire, they operate three shifts so, people can work. Companies here can’t even work for six hours on national grid. Recently, we read that Accra is now hub for aviation. Even the airline industries are getting hit because of the dollar hike. So Nigerians are now going to Accra to fly out, because the Cedi is stable. So government should not act as if this is a normal situation. That is the point I am making. It is a crisis. Government should work 24 hours plus to get this thing sorted out. And it can be done.  And that was why I was opposed to this foreign exchange market where if I want dollar next three months, I lock up the dollar today. What they call ‘spot and future’. If I say, I want $100 for example, next month, I will say I will give you that dollar at 241. When the next month comes, and you open it and it is now 400, I don’t have to build a factory, I will just roundtrip. I will go and sleep.

 

Now we have come to that; recently it has been all over the news about how some people can get USD at low rates and sell at high rates. How come we have such loose gaps? The business people are suffering from high rates, some people are assessing it at lower rates.

The reason is, they brought a model that is applicable to developed countries that are industrialized. If you are an American as I said earlier, you don’t need to change your dollar to travel. If you are a businessman doing business, the dollar is convertible, the naira is not. We all copy, but sometimes we need to look at our own circumstance. We have to adapt to our own. We don’t bring in everything that you see abroad. You bring the good things that can work, others you adapt. I would have thought since they see that in Britain and Germany and the rest, power is 24 hours, they will bring that here. It is no longer rocket science. The foreign exchange market that they are introducing will not work. That is why you are seeing this crisis. Every day it will be gyrating and that is why it is happening. I monitor it. N385 at some point, N405 at another point and so on, while the interbank rate is around N340 something. With that gap, you can guarantee I can go and sleep, because the demand outstrips the supply. It’s a supply problem. So, they should have consulted widely before putting that new framework in place. For me, as an economist, I have found some faults in floating the naira, in allowing the market determine the value. When I say that, I do so with due respect. I’m not being arrogant, I’m an economist. All my degrees are in economics, in all the relevant areas. Not banking, not finance. The market forces we teach in school is a benchmark for comparing others. It is not sacrosanct. If you say the market determines the value of the naira, how come you announce that you have given one man $50m at official rate? Why do you announce it? Why don’t you let him go to the market? So you announce that you’ve floated the naira but you are now intervening. You are now saying the banks should give one sector 60% of the dollar rate. That’s intervention. Why don’t you allow the market? Our economy is different. We have structural problems here. We are not US. We are not UK. We are not Japan. That is the crux of the matter. And people see it the way I am seeing it. I am not the only one, in fairness.

In fact, about a month ago in the University of Uyo, they had a national seminar on the management of the naira. It was well-attended by economists, and they had a different position from what is happening now and what they predicted is what you are seeing now. It is like the oil, you depend on oil to build your economy. You can’t do that because you don’t control the price. The quantity, you don’t control. OPEC gives you a quota. So if you make the money, it is a windfall. Save some for a rainy day. We are not doing that. Botswana was doing well in diamonds. They were saving. I love one good thing that Ngozi Okonjo Iweala did as finance minister with the Sovereign Wealth Fund. If they will allow that, that was saving for rainy days. But they kept fighting. Thieves kept fighting over it. I don’t know where they are now. They said they cannot save for them. Now we are in crisis. Now we could have gone there and take some money from there to use.

 We talked about 2016 budget before. As a matter of fact, many people don’t know where we are in that regard and they’ve already started discussion on 2017. And then we are entering the last quarter. People are counting their losses, people are counting their gains as the case may be. So, from a business point of view and from an economic point of view, what do we really need to expect in these last quarter?

Yes, we don’t know where we are. We are entering last quarter. I think we would see government effort to reflate the economy especially towards recovery and especially to give some businessmen hope. If they do that and that continues, I see next year – first and second quarter – as bringing better things for Nigerians and for the private sector. If there is a lull again, if there is a lag structure, then we are going to be in trouble. I think they should do more of walking the talk. There is too much of talking. They should walk it, walk the talk.

Then the benchmark, the oil sector, I think it is about time to began to demystify the oil sector. In the ‘90’s when I was Chairman, Ministerial Committee, Ministry of Finance, Abuja, I advised that we should do a budget without oil. Yes, after all, look at the GDP. The non-oil sector contributes more to the GDP than oil. Why not do a budget without oil? So if oil now comes, it becomes like a boom, a surprise. For the first time in Nigeria, to be fair to them, this is the first budget where the forecast for non-oil revenue exceeds oil revenue forecast. Whether they will realize it, I don’t know. But I think we need to look in that direction of demystifying the oil sector because that sector itself is not even diversified. We are just exporting crude. It is not linked to the chemical industry. It is not linked to the agricultural sector. It is not linked to the pharmaceutical industry. It is just mere crude. How can a country export crude and then import refined products. It is like something is wrong with us. But this same country in the late ‘70’s and early ‘80’s was refining products here in the refineries, even exporting some. So, what happened? Why did it collapse? I don’t know whether you get my point? We are behaving as if we are crazy.

So, if government begins to not delay, they act on what they say they will do now, reflate the economy, pump in money into the economy, you may see signs of recovery. But I see it happening more of second quarter next year. For the rest of the year, they should just plead with Nigerians to be patient, because if you pump in money today, nothing will happen tomorrow. It takes a while because of the mistakes we’ve made and the delay begin to ease out. First, delay in having a cabinet, delay in the budget and the fiscal policy. That’s what you are seeing now. Because when it drags for long, monetary policy becomes ineffective. The central bank can’t do much. What they’ve even done now, you can see the impact, in terms of the exchange rate. Government should do what they say they want to do now, and stress more on agriculture. And when I say agriculture, I don’t mean peasant agriculture. I mean more hectares, I mean modern agriculture, where it will be attractive for people to be engaged in that sector. Right now when we say agriculture is making progress in Nigeria, we are referring more to nature, more rainfall or we’ve acquired more acreage. It is not technology. But they say they are doing more of that now. At least the agriculture minister informed us that is what they are trying to do. The former one also made the same statement, but he has left for the AfDB now. That is where to target. And then when you are doing that, the economy must move towards being industrialized. That is the only way you can become a modern economy. That is the only way.

 

Prof. Akpan Ekpo
The Nigerian Government must put safety nets in place………

So in summary, what must Nigeria do to get out of the recession and to avoid depression?

Reflate the economy. Spend money on capital projects. Get contractors back to work. Put money in the housing sub-sector. And advise state governments to do the same, because you can only advise state governments. Spend money on fixing power. Those are quick things you have to do. Others are revive our school system, especially the primary school level. Bring back professional education, not everybody must go to the university. Bring back the technical schools so people can get skills. And these things can be done in a zero period of time. In fact they don’t have a choice, they have to borrow to do these things. And borrow externally, because domestic borrowing is very expensive. They don’t have the money now. They can borrow to do these things. If they do these things, we would avoid a depression. We would get out of the recession but don’t forget that recessions are part and parcel of building a market system. It will come again, but not in the same manner and not with the same adverse implications. It will come when we won’t even notice it. But your social safety nets must be in place. It is in the budget. The budget says they will employ 500,000 teachers. That is part of it. It is the government that will do that.

Published in the Business Eye’s print version, September 2016 edition.

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