By Udeme Clement
Akpan Ekpo, is a professor of Economics and the current Director General, West African Institute for Financial and Economic Management (WAIFEM). He spoke with Sunday Vanguard on the State of the economy in the last two years and what government can do to pull the economy out of recession.
Can the assumptions in budget 2017 turn the economy around for greater growth?
Whether the 2017 budget of recovery and growth would pull Nigeria out of the current recent depends on several factors like, the extent of implementation of the fiscal elements of the budget. This means 80-85 percent of the fiscal components of the budget must be implemented for the country to exit the recession. Also, the availability of funds to execute the approved projects; the amount in the budget for debt servicing is very high (N1.4trn); the debt-servicing /revenue ratio is too high to sustain the implementation of the budget. Government has to be strategic in searching for a better mix to obtain funding for the budget, noting that domestic resource mobilisation via taxation has its limits. Serious commitment through regular monitoring of budget implementation is important. It must be stated that exiting recession does not imply the end of the serious economic challenges facing the country, such as rising unemployment, decayed infrastructure, lack of basic amenities to millions of Nigerians and rising incidence of poverty.
Some economic experts faulted government on the delay of the budget. What is your take on this?
I share a different view. I do not think it is proper attacking government just for the sake of criticism. There is no doubt that the delay in the budget has implications for the economy but that itself should not stop the execution of the budget once the President assents to it. Five months of delay is definitely not good for the economy but proper implementation would still result in positive outcomes. We need to wait and see how it goes. If there is commitment by all stakeholders, the targets could be met if not at least close to the targets. My major concern is the delay in the growth plan component. It should be noted that it is the growth aspect if properly executed that would restore the economy on the path of positive growth up to 2020.
The amount allocated to debt servicing in the budget is very high and worrisome. It is even more disturbing if you compute the debt/revenue and debt serving/ revenue profile. The option is for government to find a proper mix of raising revenue to finance the budget. It is important to also manage debt payments and I am sure the Debt Management Office (DMO) has the expertise to do so. I would only caution government not to raise revenue by increasing the tax rate for the working class. Rather more people should be brought to the tax net by expanding the base and finding innovative ways to tax the rich and curb their conspicuous consumption habits. There is need to learn from Lagos State.
Is the economy actually recovering from recession?
The recession is easing but the economy is not yet out of the recession. The recession engulfed the entire economy in 2016 and it affected both the demand and the supply side of the economy; under such a scenario you cannot be out of the recession within 3 months. In fact, the easing of the recession may not even be due to any policy or policies. The outcome of any serious policy takes time to register impact. When was the fiscal policy of government concerning the recession put in place?
How will you assess Buhari’s performance in the last two years?
Yes, President Buhari has been in power for two years. If we want to be honest, the economy that was battered for more than 45 years cannot be fixed within two years even under the same developing capitalist framework. Nonetheless, the President came to power under a change mantra hence Nigerians were and are very expectant and one cannot blame the citizens for that. To me, I defined change as a break in continuity, that is, a break in the the old ways of doing things including the old economic system. The existing element of the old regime would be very marginal, negligible to say the least, in the new system. The APC is a Social Democratic Party embracing capitalist development. It only has a human face, that is why its programmes are embellished with the social investment fund. Otherwise, the difference with the former ruling party is the same. The number of high profile PDP members defecting to the APC with acceptance from the latter remains not just a problem but calls to question whether the APC wants change. However, it is important to give President Buhari credit for exposing the unprecedented looting of the country’s resources by the former ruling elite. I do not know of how many Nigerian leaders would be bold enough to expose such thievery in the military, judiciary and the polity. I wish to suggest that in the remaining two years the President should concentrate in building the country’s infrastructure particularly, human capital (education and health) as well aspower supply. Change would mean the implementation of a developmental state economic blue-print anchored on a comprehensive economic plan within the context of market socialism. Otherwise, the change would remain cosmetic.
Should the cyber hackers attack Nigeria. What will happen, especially with our system, where we do not have back-up data of important sectors?
Government and the banks should engage experts to prevent such cyber-attacks. It would be important to take preventive measures.
Are the forex policies of the Central Bank of Nigeria (CBN) helping the economy?
The current forex policies of the CBN seem to be working in the short-run; the domestic currency is appreciating. Let us see what will happen in the long-run even though in the long-run we are all dead. To complement CBN’s forex policies, the structural reforms must continue unabated. The economy cannot be structurally transformed with monetary policies via exchange rate pass through alone. The special forex window for SMEs is a step in the right direction and should be sustained. Once all the parties play to the rules and regulation, SMEs and the economy would benefit.
The United Nations Development Programme recently ranked Nigeria 152 out of 158 poorest countries in human development. What is the economic implication of this?
Ranking Nigeria as 152 of the 158 poorest countries in human development should not be viewed lightly. It should put government on its toes by working towards reducing the poverty incidence in the country. Government programmes should ensure that over a reasonable period of time, 70 per cent of Nigerians have been moved out of poverty by guaranteeing them the basic necessities of life.