A Senior Lecturer & Coordinator of Postgraduate Programme, with the Department of Economics & Development Studies, in Covenant University, Ota, Ogun State, Nigeria. Ph.D Holder, Evans Osabuohien in this brief chat with Daily Times Correspondent Afolabi Adesola discusses trending economic issues and suggests way out of impending economic recession.
Economy without buffers will experience shocks -Don
Considering the current state of the Nigerian Economy sir, what in your opinion can you say brought us to this position?
First, I like to appreciate the privilege given to me to share my little knowledge on this platform. Let me make efforts to provide responses to your questions as follows.
You are asking a complex question in a simple way. The ‘current economy hardship’ is not a product of one day; though it occurred almost sporadically. First, an economy that does not have buffer (i.e. savings) to fall upon in the face of eventualities, should expect the aftermath of shocks, just as we are currently witnessing. In the days when there was excess oil revenue, the Federal Government (FG) during the era of President Olusegun Obasanjo made effort to create Sovereign National Fund; but it was kicked against (by the state governors etc.). So when the current rainy day came, there was nothing to fall back upon other than to be at the mercy of the current tide.
Secondly, an economy that is standing on only one leg (mainly the oil sector for bulk of the government revenue), will stagger when there is a change in tide. This becomes more problematic as the movement of the said one leg is not even controlled by the internal fundamentals but external forces that are beyond our control as a country. Thus, when there was unfavourable turn in the oil price at the global market (resulting from United States’ alternative to crude oil, among others), it affects the demand of Nigeria’s crude oil as well as the fall in price. This became double tragedy as Nigeria exports majorly crude oil and imports refined product; hence, her economy is doubly wounded.
How can the current situation be salvaged?
Complex problems do not necessarily require complex approaches, often times, they require simple approaches in different bits. The salvaging of the economy lies in tackling the above issues raised, among others. I do know that many scholars and experts have written volumes on some of these issues; the earlier we started taking practical steps, the better for us. For goodness sake, I do not understand both as an economist and as a Nigerian, why the country will still be importing refined petroleum products after decades of oil discovery in commercial quantity! In effect, refining the petroleum products domestically will reduce the burden on our external dependency. It will also create jobs along the value chain and offer the platforms for forward and backward multiplier effects on other sectors of the economy. The involvement of the private sector in this regard is a good step just like the refinery currently being built by the Dangote Group. Some have raised some concerns about it but it is good to start from somewhere. The other suggestion is diversification of the Nigerian economy. I will stress this in responding to the next question.
What form of policies do you think the government can formulate and implement to accelerate the progress of the country?
Personally, I do not think we need new policies presently; we have gamut of laudable policies. What is required is their implementation. For instance, the immediate past administration came up with Agricultural Transformation Agenda (ATA) geared towards giving business approach to agriculture; creating jobs by encouraging more participation in agriculture, and so on. I think the ATA need to be driven with all seriousness by the current administration. This is because with agriculture, the country in her compartments (Northern, Western, Eastern and Mid-western regions) was able to live prosperously, provided free education, was net exporter of major agricultural products, and so on. One will ask this rhetoric question: what happened (or what is happening) to our cocoa, groundnut, oil palm, rubber, cashew, and so on. The country has huge comparative advantage in agriculture with unlimited potentials to create wealth along the value chain right from the farmgate to the export market. We need to explore such potentials. This is important as a country that cannot feed her citizens is courting big troubles because depending on food import with all the resources that we have is a misnomer! Recently, I was privileged to have extensive interview with some leaders of Rice Growers Association of Nigeria in carrying out a research project. One of the illuminating insights therefrom is that we do not have business importing rice if farmers (and other players on the rice value chain) are given the basic supports.
What is your take on the Nigerian Stock Exchange?
I do not have much to say about this. The stock exchange (as the name implies ‘exchanging stock’) is to create avenue for exchanging values that have been created and/or to be created within the socio-economic system. When the economy is gloomy, investors are investors and capital will flow to places of anticipated and assured returns. Thus, the stock exchange cannot be healthy in a sickly economy. Some argue that it can garner external funds to drive the economy; however, a number of evidences have shown otherwise.
What is your view on the Flexible Foreign exchange policy to be implemented by the CBN?
My suggestion is to have ‘managed float’ (called it guided float) where margin (call it window) can be stipulated and not totally leaving it to the forces of demand and supply. This is because our economy depends largely on imported products which exert pressure on the forex.
With the current decline in the nation’s oil output, is there any hope for the Nigerian economy?
I will say YES. Apart from being an optimist regarding the Nigerian project, which has made me to resist the alluring temptations of working and live permanently abroad, necessity they say is the mother of invention. Think for a moment, if all the oil wells in Nigeria dry up today, will the entire economy in Nigeria collapse. No. A wise man said ‘when your mission becomes a task, all your senses will come alive’ to get it done. The long and short is that every segment of the Nigerian economy as well as the tiers of the government should start looking inward. In a recent chart with an officer in the Governors’ Forum in Abuja, I questioned him regarding the steps that the State Governments are taking to enhance their internally generated revenue. Thus, there is hope of Nigerian economy: if we get our refineries function, provide basic infrastructures and so on. The roles Public-Private Partnership as well as reliable security are possible suggestions.
How realistic is the implementation of the 2016 Nigerian budget?
Basic economics teaches us that a model is as good as it underlying assumptions. Apart from the budget being over ambitious, I have some concerns with the basic assumptions. They include: Oil price benchmark at USD 38 per barrel; Crude oil production 2.2000mbpd; and exchange at N197/USD1. You too can look at the aforementioned assumption and know that it not close to reality. In the course of the semester, during some of my macroeconomic lectures with our postgraduate students, I opened up the debate. They all share the same view.
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