Home / BUSINESS / Economy / Nigeria Not in Recession, We Have Structural Economic Problem – Prof. Oyinlola

Nigeria Not in Recession, We Have Structural Economic Problem – Prof. Oyinlola

Contrary to the Federal Government’s declaration that Nigeria is currently undergoing recession, a Macro Economics expert has said what the country is facing is mere structural problem. In this interview with Yemi Akinsuyi and Donald Tseen, Professor Olaniyi Oyinlola of the Department of Economics, University of Abuja, prescribes solutions to get the Nigerian economy working again.

Sir, what is your assessment of the current economic situation in Nigeria?

The situation is that the Nigerian economy has been going through some problems and which in the last two, three years was triggered off by financial crises arising from short fall in the sale of  crude oil. Nigeria economy is a one – legged economy, in the sense that it only relies on the  sale of crude  oil and it is through the sale  of crude oil that generates about 90% of foreign  exchange to import raw materials for industries, to import spare parts for maintenance of machines, and to service the taste, the highly bloated  taste of Nigerians for consumption of foreign goods and services.

It is also through the sale of crude oil that government generates revenue that is used to service the needs of government, paying salaries and doing infrastructural projects and all other things.  So, when there was short fall on crude oil sales and which came into two forms: short fall in sale, and reduction in price and so the revenue generation came down seriously. It started in the last quarter of 2014. It has been there but became problematic under the previous administration and the price went down as low as $29. I think 2015 from $100 and something dollars and coupled with that the new destruction in Niger Delta, which now further reduced production. So the price has fallen and we were not able to meet up with our quota sale and production also reduced. So all these compounded the problem and that is why there was always this debate of recession. I would have said I don’t think we are in recession.

What have we done wrong? what has led to this particular problem of recession in our economy and what can we do that will right the wrong?

I don’t think we are in a recession, technically, talking about recession, we are talking about a negative growth in gross domestic product (G.D.P). When you have a negative volume in two consecutive quarters, then it signals that something is wrong. But the main problem why you are afraid of recession is that it reduces employments and unemployment increases but the question is when the economy was growing it was not producing employment. So the problem of unemployment did not start with the negative growth of G.D.P the problem of unemployment has been there before the negative growth of the G.D.P when the economy was growing at 10%, unemployment was still rising, so the economy was not doing well. When the economy is doing well, the growth produces employment so when growth reduces, unemployment increases.

But now we have growth that was not producing employment because the growth was happening in sectors that were not employment elastic. Like in petroleum industry, crude oil production is not employment elastic. This grows in sectors with increase in foreign exchange earn and increase in money available to import and export. We have growth in trade and trade is not employment elastic. I have a big shop, I have  goods worth five million Naira

and my trade bought and I sold the goods worth N10 million, there is growth, my sale has doubled but I am still the only person using the same setup so it has not created employment. Increasing my sale from 5 million by a doubled sale of 10 Million is not that elastic. The actual area that supposed to generate employment is manufacturing sectors and probably solid mineral development and these areas have been neglected for years. Manufacturing has been in comma. It has been lying down. If you look at the GDP it is at 6%, 7%, 8%. Then solid minerals has always been less than 1% for a long time. So, these are areas that generate employment. Agriculture can be employment elastic but the kind of employment agriculture produces is not employment that brings the nation out of poverty. So the  kind of employment made is only when you move from primary to secondary production  i.e. when you increase agricultural output and you begin to convert those output into manufactured goods that you get employment that are poverty alleviating. Now we have produced tomatoes, you increase production from 100 to 200 tones, and you don’t have  means of preserving the tomatoes, so after few days,  half of  the tomatoes got rotten. But in this process of converting raw tomatoes into tomato paste, you now generate employment. Somebody is going to work in the factory,  the owner is going to employ accountant, employ an engineer and expand transport services. That is when agriculture is in its next stage. If it is hiring more laborers and paying  them N500, N1000 or N1500 per day you have not given them the kind of employment that will lift them from poverty. We have not looked at that for a long time in this country, Each time we have financial crisis and we are not able to do those things that we used to do, we shout that the economy has a problem.

And we now look toward these areas but when fortune smiles on us again and oil begins to sale at 100 dollar per barrel, we forget that we do not have an economy. So our economy is literally depending on what happens outside- whether  China is growing and buying more crude oil, whether India is growing at 8% and buying more crude oil, whether there is crisis in the Arab World and one important plant has shut down. So if Iran and America are not seeing eye to eye and America refuses to buy their oil. International communities have refused to buy Iran’s oil. Or there is a scarcity in the international market and the price of Nigerian oil will go up. We are just walking on chances rather than engineering our economy in a such a way that it is what happens within the Nigeria economy that makes the country vibrant and makes us to be able to generate employment and be able to provide necessary goods and services for our people.

Could all the problems you have listed be the main causes of Nigeria going through recession?

Yes; the main cause, like I have tried not to use the word recession because I don’t think that the problem we have is recession.

If the problem is not recession, what then do we have?

We have a long structural problem. I said initially that the economy is one legged. So when somebody is walking on one leg and suddenly the person who is walking on one leg is not holding something to support himself, he is bond to fall flat.

So what you are trying to explain to us now is that we should not use that particular word recession. Is it because of the problem that has been piling up that led to this economic hardship we are facing now?  So what is the way out of all these problems?

Yes, you know like I said initially that the situation is when we have negative growth in gross domestic product (G.D.P), on a certain number of times you begin to define it as we have been in recession. So we are in a technical recession. We have a semblance of recession but the cause of the crisis we have is not the same as what we went through when we have a recession. Our cause is structural; the crisis is a structural problem in the sense that the economy is not properly structured. The manufacturing sector that promotes and generates employment is weak. Solid mineral sector that promotes and generates employment is zero, agricultural sector, it is good to have food security, but beyond producing food, agriculture generates employment by providing raw materials for industries. If industry is not using the raw material for agriculture, there is a problem. The linkage between agriculture and industry is not there. We have not created and developed it. So what we need to do is to develop that linkage between agriculture and industry so that agricultural products can be made, can be used, and can be preserved. The process of preserving agricultural product is income generating and we can use it for our benefits. It reduces the cost of raw materials. We are making soap from the palm oil seeds and we have palm oil. Even Malaysia that they said is the world producer came to collect our seeds. We have palm oil so why can’t we develop it to the point that we can use it to make soap and not as if is a fantastic technology. In every village in Nigeria, they make traditional soap which means we need to pay attention to agricultural industries. We need to pay attention to solid minerals development and so link solid minerals to industries.  Even the petroleum product should be linked. Why should we be selling it as crude oil. We have tried public sectors for so many years we have been building refineries we cannot manage it, so why can’t we give the private sector a chance to manage the refineries?

What is the impact of the delay in the passage of the budget on the nation?

Yes the federal government is the greatest employer of labor, is the biggest purchaser of services  in the economy and if the budget is not passed or a situation where it is not signed there is a lot of uncertainty. The capital projects cannot be implemented beyond the level of the previous year, a lot of businesses and people that rely on contract from government cannot move forward. But when you have a budget in place, private sectors can plan. Each person will target what he is going to do within the budget but without the budget, such planning would not be there. Again without the budget it slows down the implementation of capital projects, of course, salaries will be paid but it will further reduce our speed of addressing the issues that have brought us into economic down turn. Because key to the under development of manufacturing sector is infrastructural deficit particularly electricity. If we don’t have electricity and every manufacturing concern is generating electricity then the cost of production will be high. It is cheaper to get electricity from the public source  than to generate your own. The cost of production is higher and reflects on your own goods and it makes you not competitive. So imported goods become cheaper than  locally made goods because over head cost for the industries is very high.

 In the absence of all these, how do you visualize the economy of Nigeria in the next ten (10) years?

We have all the ingredients that can make Nigeria one of the best economies in the world. It is one of the countries with a very high Gross Domestic Product (GDP) because we have the natural resources. We also have the human resources

With more than 100 universities and colleges, we have the capacity to produce human resources to meet the needs of the economy. We have the cultural diversity that generates different type of product ideas. Our diversity is supposed to generate products that we can sell and export like the biscuit and other foods culture, the biscuit is the traditional delicacy of some of these people, and that is why they decided to convert them for shopping, so we are attracted and we buy them. if we too can package some of our delicacies and sell them, we can equally be productive. We have the potentials but the problem is how can we access these potentials ten years is not far for us to achieve that.

 Sir, how can achieve  that?

One, let us fix the issue of power and let us pay attention to forging a linkage between agriculture and industry, mechanizing  agriculture and improving productivity per month and per hectare so when we produce these foods, we make sure we preserve them and in the process of preserving, we turn it into generating employment that alleviates poverty.

This problem of multiple taxation by  government agencies, the process of starting up a business  such as going through CAC and the rest, don’t you think it contributes to the down slope of the economy?

Yes it contributes to it. It does because we are competing with international economy. We are competing with other countries in the world. If it is easier to make business in other places and make the same profit to benefit them and us. We look at the legal process, the rule of law, the bureaucracy, infrastructure, and make sure that we are in good order. In those days, communication was a problem but now it’s no longer a problem. We pray that one day electricity will no longer be a problem.

Sir, what of the problem of corruption?

We will not be able to do what it takes to effectively fight  corruption in the next 5 years. But if we reduce the deception in the sense that if people are caught and punished   it becomes less attractive. We cannot do what Jerry Rawlings did in a military administration. It can’t be done in a democracy that is why Rawlings almost killed corruption in Ghana. Apart from collecting people’s money they lost their lives, That is difficult to do in a democratic setting. But let’s reduce the incentives.

How do you rate the current fight against corruption and what is the impact on the nation’s economy especially how are the masses going to benefit?

This is an economy in which people rely on handouts. Government is the highest employer and purchaser of service. When government is thorough with the purchase of service then all these issues of corruption will come to an end. When government wants to buy toilet tissues and the toilet tissues is (100) One Hundred Naira, government buys it (1000) one thousand naira per row. Somebody got a contract to get it and he goes to church or mosque to do thanks giving that God has opened a way for him. Ironically people believe that through corruption, money circulates in the economy. Unless you are able to replace that source of income with another source of income, the economy will continue to go on deficit. People will continue to say that if you kill corruption you are also killing their livelihood. When a big man steals One billion Naira and he comes out to share one million naira to people and they believe that is how they get their own money. This is stopping people from being productive on activities that generate money. Unfortunately, this is happening at the same time money is not flowing.

About DAO_Admin_01

Check Also

DMO Explains CBN Treasury Bills Auctions

  By Tony Obiechina  Following the recent auctions of Nigerian Treasury Bills by the Central …

New Finance Minister Vows to Stabilize Nigeria’s Economy

  By Tony Obiechina    The Supervising Minister of Finance, Hajiya Zainab Ahmed, has vowed …

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: