Thursday, 24 April 2014
Don’t Be Deceived By Okonjo-Iweala; Economic Growth Stopped In 1970s – Dr. Muttaka
Dr. Muhammad Usman Muttaka is the Head of Economics Department of Ahmadu Bello University, Zaria. In this interview, he has described the reported growth of Nigeria’s economy as a “paper growth”.
The economy of Nigeria is said to be growing by eight per cent. What should have been the indicators of this growth?
The issue of growth is something that is not new in the economic literature because the measurement of development in any economy is associated with level of income that is generated, basically within a period of one year. So, if you said growth, you mean how the economy fared within that period.
So, I need to just draw a small caveat here. When you say growth, you are referring to the total aggregate of the output of the economy. Therefore, it needs a lot of measurement; a lot of quantification so as to measure the performance of that economy. And of recent, those indicators were given. One, stabilization of macro economy, that is, the level of income for individuals, level of employment, prices, inflation and a lot of other things that are complimentary.
I need to draw an example here, if you said that my house is growing, does it mean by size? It is either the number of people in the house that has risen or the space for each one that is growing. So, if you say the space of everyone is growing, it means that the house is growing in tandem with the population. In a nutshell, we say growth is used to measure the performance of any country in terms of economic activities.
So, you are saying that Nigerian economy is doing well?
No, not quite. It depends on the type of growth you have. There is new economic literature now that says growth without job is jobless growth and so many others. Because macroeconomic indicators involve level of prices, inflation, unemployment and employment, as well as level of living standard and poverty.
If you take these things, you will find out that in the economic literature it was argued that if your economy is growing; all the aforementioned would be relatively under control. If you take unemployment, for example, it is said in the literature that four per cent of unemployment is acceptable. But is that what we have in Nigeria? Does that growth that is being posted reflective of this? That is the first question to ask.
The second question is that if inflation is contained to certain number; is it inflationary or ineffective demand? When the people do not have income, no matter the prices, they cannot be able to purchase. So, along that line you will also look at your balance of payment, because we are import dependent. You also look at the percentage of agricultural contribution to that growth, because it has the implication of measuring the performance of the economy.
Where would you place this type of Nigerian growth, considering the level of poverty in the country?
I call it paper growth. Paper growth in the sense that the growth that is being peddled out does not reflect what you would find in the country. When you go to the street, you will see that the level of unemployment has increased and level of poverty has increased too.
You should look at other sectors like agriculture; is it working? Manufacturing; is it working? So, it is only minute sector of the economy like the telecommunication sector that is growing and that is what accounts for this growth that they are talking about.
Look at the oil sector; is it growing as a major revenue earner for the country? These are the indicators you should look at.
The debt of the country is said to be growing but it is not making much impact because of its low interest. What implication does that have on the economy?
The issue of debt; one can look at it on the Breton wood politics, which says some debt are harmless. There is no debt that is harmless. It is harmful. The way it is managed may translate to the harmless nature of any debt, anyway. In the case of Nigeria, if for instance, you take loan and invest in reproductive sector. For instance, you invest in agriculture where you open land to produce food and create employment and attain food sufficiency that can be a harmless loan. But what we have now is not even accountable. We don’t know what they are doing with it.
Where the Minister of Finance is coming from, you can easily understand why she says that our debts are harmless. She is from the World Bank. Hence, she has to find market for the World Bank because when she leaves the ministerial office she would look for another office in the World Bank. That means she has to work for them. Many economists believe that where we are going in terms of debt would be tragic.
According to your explanation, can we say that there are some debts that could help the economy of the country?
The only debt that can help the economy is the one that is managed for investment. For instance, you secure a loan and invest in development of human manpower like education. With that, you can produce manpower that can compete and add value to the country. But any debt that is not reproductive, that debt will never be a good debt. And I don’t think Nigeria has any business as it is now to take any loan because the resources they have are so enormous. But the issue is that there is a lot of corruption and therefore that corruption will continue to tie the country down unless we address it. And I don’t see that happening soon.
Let’s look at this issue of petroleum subsidy. It is stopped in 1970s put at one trillion naira. Out of that amount, it is said that N232b is questionable. What effect would that have on the country’s economy?
You see, some of us have already made our points about this fuel subsidy. The first question is that the issue of petroleum or oil sector is an international affair. So, it is an open secret if you want to know the cost of drilling a well and extracting one barrel of crude oil. You go to Saudi Arabco website you will see the prices. They will also tell you how much it will cost you to refine one barrel of crude oil, and the other products that would be extracted as well. Therefore, for a liter of petrol or PMS as they call it, you would know the price. But it is only in Nigeria that somebody will come and tell you that yes, there is subsidy. How does the subsidy come in? How much did they get the oil? How much did it cost them to refine, how much did they pay in transporting it? How much does it sell as the pump price? And you are not even producing it you are importing it. Where were you importing it from and at how much per liter? Because all these things are supposed to be open.
So, the issue of subsidy is like some people are just part of the corruption that we are talking about. They are trying to justify their inefficiency in curtailing certain leakages that are within the economy. So, as far as we are concerned, in simple elementary economics, there are different sectors of markets. There is what they call perfect competitive markets, there is what they call monopoly; there is what they call oligopoly.
The oil industry is in the oligopolistic kind of market. It is like a cartel. The international price now is not determined in Nigeria. It is determined elsewhere. Therefore, you can’t say that oil price in my country would be as competitive as they want us to believe. We would ask them how?
The advocates of competition in Nigeria’s oil market seem to have forgotten the elementary structure of that market. This subsidy is just a gimmick, which has no basis. If they are honest enough, they should come out to tell us how much they import these things. We can then go to the international market and ask how it is sold in the international market and the landing cost of each liter. Then we would see whether there is subsidy or not.
From this analysis, what is the implication of this subsidy that is said to be given to Nigerians on the economy of the country?
Yes, the implication is uncertain. The issue of investment, production and everything is uncertain. And for an economy to grow, there must be stability so that you can plan for ten or twenty years. Our major problem started when we jettisoned our developmental plan. By 1970, if we had followed the developmental plan that was drawn, we would have outweighed our contemporaries. We started planning with Brazil, India and Pakistan and they are still planning. Our problem started in 1986 when we were asked to throw away planning and embrace Structural Adjustment Programme. And from there nobody knows what is going on.
It is said that about 600,000 barrel of crude oil is being lost every day in Nigeria. What effect does this have on the country’s economy?
That is what they are quoting but I bet you even if you go to NNPC and ask them how much crude oil we are producing per day, they can’t even tell you. The country is held hostage by those international oil companies. Because of the nature of our country, we don’t have the mechanisms to checkmate those companies. As such they declare what they want as what they produce per day.
So, that 600,000 they are quoting is far below what is being lost. The implication is that the money for our crude oil is not coming to the government but to private individuals, and this would affect the capacity of the government to cater for the needs of Nigerians in providing infrastructures and other essentials.
That is one problem. The other problem is that if you quantify the amount of money that is going out of Nigeria in payment of school fees abroad, health tourism; you would be just weeping because it is far above the national budget of those sectors.
There are so many things that one needs to look at. In economics, you don’t look at things in isolation. In economics, it is one thing that triggers the others. So, one has to look at all the issues simultaneously.
Some stakeholders are saying that failure to punish offenders is also detrimental to the country’s economic growth. For example, recently ghost workers were discovered but nobody was punished. What’s your take on that?
I would look at it from the perspective of what brought about ghost workers. For instance, if you take a civil servant to Abuja, you know that lifestyle there is high, and you know his income. On that he has to find another way to live above waters. If he is an accountant, he would say let me add six names so that he would be collecting seven people’s salary to augment his income.
There is also the issue of some obnoxious policies that bring about all these. For example, you take tax payers money to build housing estates to give to civil servants and come back to sell those houses and throw out the civil servants. They would come back to connive with their friends to buy the houses for themselves and raise the rent.
Let me make a comparism. Seventy per cent of houses in Paris now are owned by the government. It is only in Nigeria that you build a massive housing estate like the one in Gwarimpa and sell them out. So, there is ignorance on the part of the policy makers on the economic implication of those things.
Two, some know the implication but because of their corrupt tendencies they would do those things. Three, some people who are not Nigerians. They are just Nigerians by name and by birth. Their allegiance is not for Nigeria. Therefore, they don’t mind if Nigeria collapses today. They are people whose families are not in Nigeria. They are just in Nigeria for certain gains.
So, many things are involved here that include moral and ethics as well as even the essence of human existence.
What do you have to say about SURE-P that has started executing some projects, which are supposed to be under the jurisdiction of some ministries?
Seriously, there is a problem with that arrangement. This has to do with the National Assembly. I feel that the National Assembly should have an independent office that would be investigating certain issues like budget implementation, economy and even politics.
What SURE-P is doing is what ministry of works is doing. Therefore, what happened to the budget meant for that ministry? Nobody knows. But the National Assembly would just say they are going for an oversight but in most cases nothing comes out of it.
PTF that looks like SURE-P came up under military regime but this SURE-P supposed to have been checked by the National Assembly. Lack of that checking makes our economy to suffer. So, all these conceptions were brought to fore by people who are not Nigerians in their allegiance. They compare what is happening at their adopted countries and try to implement them in Nigeria without understanding our economy and what is good for our economy.
Nigerian economy has human resources that are highly competitive anywhere in the world. Two, there are enormous resources, especially land that can turn around the country. Nigeria also witness minimum natural disasters. We also have the market because 160 million people is a large market that everyone needs to respect. So, we have every opportunity to progress. But there are many impediments, some are out of ignorance while some are out of greed and selfishness. But the future is not gloomy if we may have a rethink because we are far behind where we ought to have been.