Nigeria is reputed to be the largest economy in Africa. Yet all is not well with her economy. Unemployment and poverty rates in the country have remained high; the productive sector of the economy has remained comatose; uninterrupted power supply has remained a mirage; and social indices have long taken a dip, all resulting in a poor standard of living of the people. Akpan Ekpo, Professor of Economics and Director-General, West African Institute for Financial and Economic Management (WAIFEM) in this interview proffers the solution. Excerpts.
What do you suggest should be done to address the problem of high lending rate?
If you have a large number of banks, it would force down the lending rate because of competition. We don’t have that; our banking system here is oligopolistic. That is one area where the reforms have not made progress. Rather than allow more banks to come on board, the reforms shrank the number we have to 25 and now 24. So we have few banks and large network. Only about five or six of them are dominant. In reality, there is no competitive model. So what can an apex bank do? After trying moral suasion, it can now sort of compel the banks to go down that path. If the inflation is at single digit, meaning that it is no longer a problem, then the apex bank can bring down the MPR. If the MPR for instance is 8 per cent, CBN can add 4 per cent to make it 12 per cent because the MPR is an anchor. If that 12 per cent is for preferred customers, another 2 or 3 per cent can be added, which is still okay. So anyone coming in as CBN governor should address the issue using the last two approaches. The first approach is not possible because we do not have a competitive banking system. So you can either compel them to reduce the rate or you work through the MPR.
What’s the way out of Nigeria’s economic quagmire?
The best option for us is to seriously diversify our economy away from oil. We need to put in place concrete strategies for us to industrialise so that in the next five years or so, manufacturing will contribute at least 20 per cent to GDP. The other economies that have oil, they don’t think about oil any more. Go to Norway, Sweden, Saudi Arabia, Kuwait – all these countries have oil, but they don’t depend on it like we do. We have solid minerals but we are not exploiting them. What about ideas from human beings? Are we exploiting these ideas to make products like other countries do?
These are the alternatives in my view, because if you create these opportunities and people are working, they would pay tax and government will have revenue. Even the oil sector is not diversified; we export crude and import refined products. We have to also carry out reforms in all sectors. Agriculture should be linked to the manufacturing sector. Then we have to build our infrastructure. In the developed economies, power is 24 hours. So factories can operate two shifts and employ people. When government officials say they have created jobs, I just laugh because when you create jobs, it has to be wage employment. If you have wage employment, you can plan. But if you have a seasonal job like in agriculture where people are employed on a temporary basis and then maybe out of work for another six months, you can’t plan. So where are the jobs coming from when there are no factories. It is wage employment that builds a country. But if agriculture becomes modernised like the minister is saying now, then there will be agri-business. People will be on wage employment.
Does the issue of inclusive growth being pursued offer any hope for Nigerians?
I have a different view on the issue of inclusive growth. All growth is inclusive. It is because the country has been growing without development. Rather than address development, they left it and are now saying inclusive growth. You can grow and not be developed. Development means government decides how to share that growth. For example, government now says, from this growth we will spend so much on education, we will earmark this amount to health, roads, etc. It used to be growth and development, but they’ve now left development and say inclusive growth. They now feel that inclusive growth brings everybody into it and the private sector will now do what development should have done. It is not possible because the private sector itself is part of the problem.
Except government intervenes in the growth process, there will be no development. If you say you are growing at 30 per cent and unemployment is increasing, education is declining in quality, health is declining in quality, water is not available, then there is no development, no matter how high you grow. Inclusive growth is a Bretton Woods concept, which tries to reduce the role of government in the development process. But it is not possible because if you look at all these countries that have made it – Singapore, India, China, Indonesia, Malaysia – they have strong state sectors. So it is not the problem of the state sectors, it is the problem of the quality of the state intervention that is important. Whether growth is inclusive or not, it will not lead to development if there is no deliberate government intervention.
Why did you say the private sector is part of the problem?
The market system that we run in Nigeria and in other parts of the word has cycles. A country can go through a period of boom, decline, crisis period and even recession, and then recover and grow again. If the private sector operators, based on the way they invest, have too much unintended stocks, they will cut down on those they are hiring; that is what causes recession. The result will be under-consumption, under investment. When that happens, they cannot pump resources for their recovery because they themselves need to be rescued. You’ve heard of fiscal stimulus. When there is crisis, it is only government that bails out the private sector and others. So how can you now ask the private sector that already has a problem to drive the economy? That is why when there is crisis it is government that comes to the rescue.
If unemployment is more than 5 per cent, like in our case – 24 per cent – the private sector cannot fill that unemployment gap; they are driven more by profit. How do you explain that banks are making huge profits and still lay off workers? Unemployment has reached a crisis level and growth, whether inclusive or not, will not solve it. The solution is development, decisive government intervention in critical areas, as contained in the Transformation Agenda: power, railway, agriculture, clusters of industries, health, education, etc. So they have to think outside the box. Anything the Bretton Woods institutions say should not be copied wholly. In the United States, if you remove government intervention, the economy will collapse. Why do you think they have fiscal stimulus? The US government, for instance, puts money into General Motors to keep them in business thereby preventing job losses.
Government is an economic agent only that it does not know how to compete. The private sector is still the engine of growth but government has to manage the economy, including the private sector. Who will spend money on research in agriculture? Who will train the mass of people you need in the public school system so you can now get them to work in the private sector? It is the government anywhere in the world. It does not negate the existence of private schools, they will be there, but it is only government that can spend such money on primary school, secondary school. That is why in America or United Kingdom, no matter the number of private schools, they don’t joke with public school system, here in Nigeria, it has collapsed. Government must be involved in funding knowledge, innovation, technology, etc. I don’t buy the idea that government has no business in business.
In a paper I did many years ago when I was a young lecturer, I showed that every Nigerian is paying for corruption. The paper was Corruption and Prices, A Theoretical Note. We are all paying for corruption because a businessman does not like to waste time, so he bribes his way through and then reflects that in his prices. So if the actual price is 10 Kobo and he says it is 12 kobo, the extra 2 kobo is the cost of corruption you are being made to pay. I am not saying corruption is good, I am only saying there is alternative argument. We can’t stop corruption because of our governance structure. When people say let us be like China, I tell them we can’t be like China. In China there’s a communist party that gives orders. If you are caught corrupt and it is serious you are shot. The party says before you retrench so many workers we need to know why; where market works we will allow it and where it doesn’t work we will not allow it, etc.
We are trying to build a market system and it has implications. If you are building capitalism at the beginning stage like we are doing – what I call the primitive accumulation stage – you cannot escape from people being corrupt no matter what you do. One generation will be very corrupt, loot the treasury and invest some. Even America didn’t start with money dropping from the sky. In the past, some Americans looted the treasury, there were pirates, etc. All these people invested their ill acquired wealth in their country. The money remained in the country. Why Nigerian style is different is because they keep the money outside the country. If you steal and build factories here, I would say it is bad but people are working. But you take the money outside to develop other countries. Once the money is in their bank, the banks will use it to support their productive sector and their people will be kept in employment.
If you are corrupt in Asia and you use the proceeds of corruption to invest in Asia, the penalty if you are caught may not be too heavy. But if you invest the money in a foreign country they can kill you. That is why I don’t understand our own brand of accumulation. We have to study it. Why is the money being taken and kept abroad, building houses and buying properties abroad? Sometimes if the person dies, his family has no access to the money anymore. So it is a special type of accumulation that needs to be studied by economists and sociologist who are younger because it worries some of us. In our own time we say primitive accumulation but now it is a unique type of accumulation.
In view of recent developments, what is the outlook for the economy this year?
If the power sector is revamped, the railway system is functional, good roads are provided, we will make a lot of progress. Above all there should be fiscal prudence.
An abridged version of an interview with Helen Eni published in the Broad Street Journal