Breaking News

2012 budget benchmark is efficient forecast – Prof Ekpo


Akpan Ekpo is a professor of economics and the Director General, West African Institute for Financial and Economic Management (WAIFEM). He speaks on the 2012 budget benchmark of $70 per barrel, increase in population from over 140 million to 168 million within a short period, the unemployment crisis in the economy and what government should do to diversify the economy into non-oil export sector.

The Ministry of Finance, recently revised the 2012 budget bench mark from $75 per barrel to $70, after the frame-work forwarded to the National Assembly stated $75. What are the economic implications?

I believe the benchmark of $75 per barrel was brought back to $70 after due consultations with relevant stakeholders. The National Assembly should accept the current bench mark because the technocrats in Ministry of Finance have done their work by putting the bench mark at $70. For me, $70 is efficient forecast considering the Euro crisis. The demand for oil in the international market may decline due to Euro crisis. In forecasting, we have three scenarios, such as optimistic scenario, pessimistic scenario and the baseline.

Normally, the pessimistic scenario is usually taken due to fluctuation in oil prices in the global market. The pessimistic scenario gives room for the fall in oil prices and if the prices increased, the excess revenue goes to the Sovereign Wealth Fund (SWF), formerly known as the Excess Crude Account.

The recent declaration by the National Population Commission (NPC) that Nigeria’s population has risen from140million five years ago when the last national headcount was conducted to 168million for most expert is a rapid increase. Do you share this opinion?

Prof Ekpo

The population of 168million is quite large. Infact, between 2020 and 2015 Nigeria ’s population will hit 400million. We are told that the economy is growing at eight per cent and the population at 3.2 per cent. Meaning that in theoretical terms the economy is doing well, but practically, the economy is not doing well. This is because we have a large population without both qualitative and quantitative increase in services that are essential, such as the number of hospitals, medical personnel, number of schools, quality of education and social services. It means, per capita wise, we are worst off, because there is decline in the provision of essential services.

For instance, the public school system has collapsed and the health sector is nothing to reckon with. People are flying to India for medical treatment. Parents are sending their children to Ghana to attend schools.

With the population of 168million we cannot boast of running water and enough houses. We now see increase in population and decline in the quality of social services, showing that the economy is not doing well because poverty is on the increase. The recently published United Nations Development Programme on Human development ranked Nigeria very low, which shows clearly that something is wrong with our economy.

Could you give us statistics on the poverty level in Nigeria ’s economy at present?

In 2008, poverty rate at the national level was 54 per cent and increased to 62 per cent between 2010/2011, meaning 60 per cent Nigerians live below poverty line. When compared with the population of 168million, it very large as the figures shows that almost 90million Nigerians are in poverty. It is not surprising because in my own opinion, we have no middle class.

The middle class in developed countries are almost like the rich class in terms of access to social amenities. They are large in number and they decide how things move in any country. In Nigeria , it is either you are rich or poor. The middle class existed in the 60s and 70s and disappeared after the Structural Adjustment Programme (SAP) in introduced in the 80s.

What is the current rate of unemployment in the economy?

The official rate of unemployment in Nigeria according to National Bureau of Statistics is 21 per cent. So, Nigerians between the ages of 17 and 45 willing and able to work are unemployed. It is even higher among youths because the rate is estimated at about 60 per cent.

Now, the question is, Why is the economy growing at eight per cent without creating jobs? It means, it is a jobless growth in terms of impact in the labour market. It is very sad because unemployment has spread to rural areas across the country. Unemployment in Nigeria has reached a crisis situation.

In 2004, the official rate of unemployment was 13.4 per cent. In 2006, it rose to 14.6 per cent and 21 per cent in 2010/2011. These figures are for the national level. At the state level, almost all the states in Nigeria suffer high level of unemployment.

In 2009, the following states recorded high composite unemployment rate, Bayelsa 38.4 percent, Katsina 37.3 per cent, Bauchi 37.2 per cent, Akwa Ibom 34.1 per cent, Gombe 32.1 per cent, Adamawa 29.4 per cent, Kano 27.6 per cent, Yobe 27.3, Taraba 26.8 per cent, Jigawa 27.5 per cent, Federal Capital Territory 21.5 percent and Imo 20.8 per cent.

No state in Nigeria has 5 per cent and below unemployment rate, which is the bench mark of relative full employment in the economy. This is serious crisis and government must find solution by increasing employment instead of down-sizing.

What measures should government put in place to address these challenges?

The problem of unemployment in the economy has reached national crisis and must be addressed as a matter of urgency, especially when we look at the global economic crisis. Rather than down sizing, government should increase employment as a stop-gap measure. Government should embark on infrastructure development, provision of social housing across the country.

Housing project is capable of creating jobs for the citizens and it has positive multiplier effect, because the workers would in turn pay taxes to government. Government should turn attention to the agricultural sector and encourage modern farming technology, which has immense potentials for creation of jobs. Power and railway projects are also other areas of employment generation.

For instance, if government decides to renovate primary/secondary schools in rural areas, that alone would creates thousands of jobs, especially in Nigeria , where there is no unemployment benefits for the unemployed citizens. Government should encourage manufacturing to boost the non-oil export sub-sector within the short and medium term.  Also, we need appropriate macro and fiscal policies that would enable Small and Medium Enterprises (SMEs) to create jobs.

What is your comment on the issue of fuel subsidy?

To start with, we do not have facts to show that subsidy exists because 80 per cent of refined petroleum products are imported. How do we arrive at subsidy? What we are calling subsidy might be inefficiency in the system. The entire economy depends on oil and if government increases the price of fuel from N65 per litre to N149, there would be structural inflation in the economy. This is because the prices of goods and services would increase due to the quantum jump in fuel price.

If subsidy exists, government should bear the burden until the environment is conducive. President Goodluck Jonathan should not remove fuel subsidy now. He needs a peaceful environment to implement his transformation agenda. We should also understand the fact that subsidy removal is different from deregulation.

Deregulation requires competitive mechanism of the market forces of demand and supply to determine the prices of products. While subsidy means after the markets forces had arrived at certain prices and government sees that the prices are higher for the citizens decides to take part of the burden through subsidy.

Also, we were told that subsidy was removed long ago and put in Petroleum Trust Fund (PTF) for infrastructure development and building of Universities across the country. How come government is talking about removal of subsidy again?


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.