Prof. Jude Njoku is a former Vice Chancellor of the Federal University of Technology, Owerri. He was also a governorship aspirant on the platform of the Peoples Democratic Party. In this interview with Amby Uneze, he expressed concern about the nation’s economic quagmire and proffered measures to revitalise the economy. Excerpts:
Nigeria is currently passing through economic difficulties, as an agricultural economic expert, what do you think could assist the country wriggle out of her present quagmire?
I think from available information on the phenomenon of recession in the economy, it began in the later part of 2015 and snowballed into 2016. Incidentally, it happened when there was a change of government and the government was trying to settle down while the economy was nose-diving, and it created difficulties for the government to manage because it was like a man who has come into power and was just trying to understand how the system functions and then suddenly there is a turbulent and it is difficult to manage. We went into a very difficult year in 2016 and all the economic indices were deepened and aggregate inflation rose to high heavens. That is, the prices hit the roof and there was severe shortage of foreign exchange arising from the fact there was drastic fall in oil production. The price of petroleum also went down drastically, so the revenue available to government went down drastically and government was not able to fulfil its basic obligations to the point of finding it difficult to paying workers’ salaries as well as to pensioners and so forth.
Again, foreign exchange management was difficult and the Central Bank of Nigeria (CBN) came up with a foreign exchange regime that pegged the value of Naira relative to the Dollar. That didn’t go down well with free market forces and so there was this agitation particularly amongst the monetary and fiscal experts that the Central Bank should move away from a fixed exchange rate to a more liberalised exchange rate regime.
Of course with that shortage, the manufacturing sector went into difficulties; again, the reason being that acute shortage of foreign exchange means that they couldn’t import the needed raw materials to be used to produce optimally. In fact, there was lay off in many manufacturing establishments, banks also laid off, almost every industry laid off some of their workers. It was a very difficult situation. Of course, you also noticed that it took the government a long time to take off. It took the President about six months to appoint his cabinet. That means that the machinery of government took off very slowly. Imagine that in the case of America recently, it took less than 24 hours after Donald Trump was announced the President-elect to announce his cabinet. The very moment you announce the cabinet it means that you begin the machinery of government moving. So, that had its own effect.
Of course, the fight against corruption sometimes created negative image for Nigeria. The President did well by going outside to launder the image of Nigeria positively, but at the same time somewhere along the line he kept creating the impression that Nigerians were very corrupt. It was a disincentive for foreign investors to come. And of course there was this fight against corruption, fight against insurgency which he had recorded very appreciable success. I have said the Boko Haram insurgency if defeated frontally will transform into guerrilla warfare and that is what we are witnessing now. Though they have been displaced in frontal attack but now they have gone into guerrilla warfare and there are pockets of attacks here and there. But to a large extend they have decimated the strength of the Boko Haram insurgency and it is to the credit of the government of the day.
Also, there is heightened insecurity in the country where gunmen appear from nowhere attacking villages, attack people on the road, there is militancy in the Niger Delta which heightened in 2016 that affected crude oil production and the nation’s revenue, though that had come down.
Has there been an appreciable move to redeem the mess, economically?
In recent times, I think there has been a positive turn on the economy as the indices can show. We noticed that some of the indices are improving, we have improved GDP, we also have noted that inflation was still rising even though that was food inflation, that also was because of structural difficulties in the production system; I think a couple of the indices are beginning to improve. There is marginal growth that is coming up, giving hope that we are coming out of recession. I think also that government has been able to come up with its own economic recovery and growth plan, which is on the positive side.
People had been agitated that government didn’t have any clear-cut road map for tackling the mess in the economy. Now they have come up with the economic recovery and growth plan and most of them have been criticised. A good number of experts, particularly members of the international community and donor agencies think it is a good plan, but it has also received some bashing from some of our local experts. However, by and large, majority of the people still think it is a good plan, but they worry on its implementation. The Ministry of Budget and National Planning has come up with some strategies for its implementation but they have not taken off. I recall that recently, the Minister of Budget and National Planning, Senator Udo Udoma said that the implementation was imbedded in the 2017 budget. By and large this is a budget that should have started with implementation in January, and we have moved into the third quarter of the year and still the budget for 2017 has not started being implemented. Of course you know the process of budget. Now that the budget has been signed by Mr. Acting President, it supposed to go back to the MDAs for them now to dissect the budget, assign it to various projects and programmes and then it begins the process of implementation by way of advertising the projects for tendering purposes.
Are you saying that budget issues slow progress of the economy?
Of course, by now, we would have been preparing for another budget for 2018. So these things are not helping us to reflect on the economy. It is not helping to improve liquidity in the system, which is what most people are suffering. You can see projects are not going on, people are cash trapped, the spending power is low, and the private sector is almost grounded for non-implementation of budget. You can be sure that before we can start the implementation of 30 percent of this budget we would have entered into another budget year. That is not good enough for our economy.
That means the implementation of the economic plan would be delayed so the worry is that you may have a good plan, but then the implementation becomes the problem. You can see the projects are slow with the implementation of 2016 budget which ended May this year. You could have seen that most of the projects were not implemented. I know a number of contractors who tendered for projects and their tenders could not be completed, and eventually the funds were not released. And people had spent quite some money in tendering for projects having felt that they would at least get some money to engineer the economy. If we don’t take our time it will happen again this year, it increases the level of misery, suffering and disease and the general welfare of our people.
I think we need to speedy up on the machinery of governance on budget and project implementation and be a little more sincere with what we are doing so that we can really come out of this recession, otherwise it is still going to take us longer than we are projecting to come out of the recession fully.
From the analysis you have given, it appears we are not nearing to the end of recession, what in your mind do you suggest government should adopt for quick economic recovery?
I think that a number of things have happened; if we increase our implementation speed, you would be quickening the process of economic recovery. Let me look at the certain sectors of the economy, a few months ago the Manufacturers Association of Nigeria (MAN) were crying bitterly because of very low capacity utilisation occasioned by shortage of raw materials because they could not get the necessary foreign exchange to enable their members import the raw materials for production. Added to that also were some level of dumping of foreign goods from foreign countries because of our penchant for loving foreign made goods as against our own. This affected their ability to survive.
But I think now that the Naira have picked up over a Dollar, that is a very great improvement, and they have greater access to foreign exchange now so they can import more of the raw materials they need and that means their capacity utilisation will improve, they will produce more and keep afloat and create more employment. I think that with this improvement in foreign exchange supply to manufacturers the indices of production in the manufacturing sector will improve tremendously and that will impact on so many other things, even in terms of prices of locally made commodities, etc. If we continue that way of managing the foreign exchange effectively and proactively the manufacturing sector will beef up.
Again with some of the policies and programmes that have been put in place in the agricultural sector over time, the sector will also pick up faster and the GDP component of the agricultural sector will rise faster. I think the economic recovery has its own estimates as to what they want to do. If you look at the economic recovery and development plan you will be talking about restoring micro-economic stability and inviting various sectors towards achieving the nation’s full economic potentials. When it comes to planning proper, they were looking at five key broad outcomes: achieving a stable micro-economic environment and achieving agricultural transformation and food security, as well as having self-sufficiency in energy and power; improving transportation infrastructure, and industrialisation with a focus on small and medium enterprises.
With respect to agriculture the plans to increase GDP from 16.0 trillion in 2015 to 21.0 trillion in 2020 with an average annual growth rate of about 6.92 percent between 2017 and 2022. With this plan they also want to drastically reduce food import and also achieve high rate of exports of agricultural products so that Nigerians can begin to export rice, tomatoes and vegetables, cashew nuts groundnuts cassava, poultry, etc. With respect of the manufacturing sector they want to see the sector grows at an annual rate of 13.3 percent which is almost three times the 4.8 percent growth experienced in 2016. It also seeks double the manufacturing sector GDP, creates special economic zones so as to attract manufacturing sector away from areas where product cost is very high. They also want to implement what they now call Nigerian Industrial Revolution Plan, which is the major plan of the industrial policy of government that focuses on agro-businesses, solid minerals, oil and gas as well as construction. These are all aimed at achieving the economic diversification policy of the government.
What areas of the non-oil diversification do you proffer?
Government has said it clearly that it tends to focus primarily on the agricultural sector in order to achieve its economic diversification policy. They are looking back at what the economy used to be in the 60s and 70s when the economy was driven by the agricultural sector; when we had the famous groundnut pyramids and cotton bells in the north, cocoa in the South west, rubber in the mid-west, oil palm in the south east, etc. They are thinking that if we go back or come close to that situation we will now move away from our almost total dependence on oil to a situation where our revenue will be generated from agriculture in addition to the mining sector. I think that is the major plank of the economic diversification efforts.
Truly if we hinge our effort in that direction there will be very significant improvement in our economy. You note that most of the development projects that were financed by proceeds from agricultural products are today standing the test of time. In fact, it is popularly known that even the famous University of Nigeria, Nsukka (UNN) was built with revenue derived from palm oil and even Ahmadu Bello University, Zaria (the oldest University in the North) part of the funding of the university was from groundnut and cotton produce, the same with University of Ibadan financed with proceeds from cocoa. These are the major ones but there are a lot of other minerals produced locally and they were being exported such as saint leave (Nchawu), bitter leave (olugbu), etc. There are so many Nigeria can export to enhance her ability to earn foreign exchange and a way to finance the economy because these things we are talking about with respect to the value of Dollar relative to the Naira is a matter of import and export because if you export more and then you earn more Dollar, then the value of Dollar relative to the Naira will fall. But if you are importing, there is excess of supply of your currency in the international market so the value of your currency will fall relative to the Dollar. Incidentally the Dollar is the relative index for measuring these performances.
So, a lot is being done in the agricultural sector to achieve this diversification. They have focused much attention on rice production and through this anchor borrower’s programme of the government which is being implemented in almost all the states of federation now, and so if they achieve that and provide complementary facilities, it will be a lot beneficial. I think agriculture is the major plank of that programme. Diversification simply means diversifying your sources of revenue, and it is applied at the national level, state level even at individual level. But government has to provide the enable environment; provide water, electricity, security, good roads, etc. In the agriculture, it is pertinent that farmers have easy access to fertilizer and improved variety that would enable them get higher yields. There are a lot of improved technologies for the agricultural programme but a lot of farmers do not know this, so we need to re-orientate our people on this aspect.