Akpan H. Ekpo is a Professor of Economics, specialising in macro/micro economics, public sector and quantitative methods. He is currently the Director General, West African Institute for Financial and Economic Management. He speaks in this interview with Sunday Vanguard, on the state of the economy in the first quarter, issues in budget 2013, economic growth rate, incidence of poverty and the need for the CBN to coordinate expenditure of sub-national governments to enhance robust monetary and fiscal policy framework for the economy.
As a professor of Economics, how will you assess the nation’s economy in the first quarter?
The economy in the first quarter is not satisfactory. We still have very high rate of unemployment, which is about 23.9 per cent, approximately 24 per cent. Statistics revealed that over 20million youths are currently unemployed and some people are even putting the figures at 30million. The recent report from National Bureau of Statistics (NBS) shows that even some PhD holders are unemployed.
Why do we have foreigners managing barbing saloons, super markets and other micro businesses which Nigerians ought to do?
I called it the New Scramble for Nigeria . The capitalist will sell you even the rope with which you will hang him with. The solution requires significant government intervention to regulate the system and create a level playing environment for indigenous firms to operate. There are a lot of opportunities in Nigeria and Indians are coming here to invest. The question is, are they carrying Nigerians along? They get low interest rate loans from Europe and invest in Nigeria , and at the end, the make all the profits and take the money back, leaving our economy with nothing. In economics, we call it portfolio investments. They should build factories and invest in manufacturing to create jobs, leave super markets and saloon businesses for Nigerians. Government must intervene to help Nigerians out of abject poverty.
Why do we have good economic policies and technocrats in different sectors yet the economy is not functioning optimally?
The problem is structural. For instance, we do not have good roads. We have crude oil but we import the refined petroleum products, which does not make economic sense. Our public health system has collapsed. If you are sick and cannot go to India , you are finished. So, we must shift from the primary structure to manufacturing, and from small scale agriculture to modern agriculture with maximum outputs. If Jonathan can revamp the health sector, invest in human capital formation/development and provide electricity for Small and Medium Enterprises (SMEs) to grow, then we can go to sleep. Also, we need a functional rail system to link the whole country and move good and services across the country and within the sub-region.
Which area will you rate government high?
Well, in all fairness, relative poverty has declined by only two per cent, according to World Bank report, but that is just a little decrease, compared to the unemployment rate in the country. The lending rate is still on the high side, there is epileptic power supply and economic growth is low in the first quarter of 2013. Aside from these, there is slow implementation of the current budget due to the disagreement between the executive and members of the parliament on the budget. Inflation rate is easing with single digit, as the current inflation rate is less than 10 per cent. There should be reduction in banks lending rate to a single digit. This will allow players in the real sector of the economy to borrow at cheaper rates.
Realistically speaking, it is difficult for manufacturers in Nigeria to borrow at the rates of between 20 and 23 per cent and be able to meet the cost of production, increase productivity and pay back the loan at the stipulated period.
Are the on-going reforms in the banking industry making positive impact in the economy in terms of output optimisation?
The CBN reforms averted what can be described as systemic failure. But another thing is that, mergers and acquisitions have further reduced the number of commercial banks, thereby making the industry less competitive. Clearly, we can simply say that what we have today is like Oligopolistic banking system, with just few banks controlling the entire industry, which is not the best for a developing economy like ours.
The cashless policy is already making positive impact in Lagos state. My advice is that the CBN should not implement cashless monetary policy in all states of the federation, because about 70 per cent of the population reside in the rural areas. So, as the economy modernises, it will just take shape by itself.