Prof. Pat Utomi, renowned political economist, in this interview with Charles Okonji, attempts a prognosis of the possible impact of coronavirus on the nation’s economy. Excerpts:
Nigeria is on the verge of another recession due to the coronavirus pandemic ravaging the global economy. What is your take?
The facts on ground show the probabilities and possibilities of what can happen. Firstly, the fact is that Nigeria has never taken seriously a matter of grave urgency for more than 30 years that the economy hopelessly depends on crude oil.Everything about the structure of the Nigerian economy points towards economic rent, which is still extracting from the circulation of revenues that come from oil. We have not seriously begun to explore diversification of the base of the economy. That is not to say that some of it has not happened. Some of it has happened almost out of the genius of individual Nigerians as individuals and as collectives. We have seen innovations that have created new markets in the culture industry, such as the Nollywood and entertainment industry. We have seen some smart young people do things with technology that have added value. Diversification has taken place not because of government efforts; this is largely because a number of Nigerian political class lack discipline and it totally absorbs itself.
The cost of running government in Nigeria is one of the basic reasons that Nigeria has not been able to diversify the economy. The Nigerian politicians are unwilling and unable to look at the structure of the cost of governance and their inattention to what it will take to diversify the economy. The banking industry itself has veered completely towards supporting this rent economy and trading that goes with recycling oil revenues. It has never found the discipline to support true economic growth.
If this is a reality, what do we expect from the crises like this?
I think that it can play two ways. It can either become a huge threat that is converted to opportunity, and therefore the restructuring of the Nigerian economy for good, or it can just become devastating as we plunge yet into another recession which would perhaps be prolonged.
Social disruption is another consequence, but looking at history and opportunities that crises have brought to countries to turnaround. In 1991, India was technically bankrupt; it had less than three weeks trading money in its foreign reserves. It was forced to sell some of its gold holdings to raise about $10 million so that it will service some of its debts. Its import was far above what it was earning. This was happening when they had just lost their leader, Rajiv Gandhi to assassination in the early 90’s. So they elected their new leaders, and they chose to have a standby congress and over 80 years old man who wanted to hold forte until they decide who will take over the Gandhi .
They broke what was known as licensee brag. India was a licensee economy, for you to do anything, you needed a licensee. Everything was about licensee and it was extremely corrupt.
In many ways, the Nigerian economy is extremely corrupt. We have a very big public sector corruption, so, capital is not flowing into Nigerian economy from abroad, and it is not being made at home. The mantra we used in growing the economy in 50’s like agriculture and like in Colombia, it would have been captured by Nigeria.
However, the nature of Nigerian politics makes it impossible for Nigeria to make money at home, and those who find money at home quickly move it out of the country for safety. The way they behave is making it impossible for investors to come from abroad to invest because no one wants to risk his money. Nigeria is a classic perfect case that unravels very quickly into a prolonged recession. But it is possible for what happened in India to happen in Nigeria. And to begin with these crises, a reversal in the way that allows the reforms that saved India. So the country is faced with both an opportunity and a threat, but how we play it determines Nigeria’s future.
Do you mean that Nigeria can easily slide into recession?
Yes, it will be more disastrous than what we had experienced in the past. As we speak, some ministries have not paid salaries because the government has not released any monetary allocation since this year. So, when we get to a point that even federal ministries are having problems with paying salaries with oil prices going below the benchmark for budgeting. If the National Assembly continues to behave the way they are behaving, it will affect the budget seriously as they are trying to go to obtain what they usually take from the ministries whose budget they padded excessively.
We have to acknowledge that we are in monumental crises; debts will mount all over in the economy. It will amount to agencies not paying contractors, and salaries becoming problematic and unstable wages begins to play out, and consumption will become a problem.
Do you foresee hunger and starvation as a result of massive shutdown of manufacturers as imports are restricted?
I don’t think we are famous for having reserves. The government invested significantly in erecting silos all over the country in the past few years, but we noticed that many of those silos have been abandoned. These were just excuses to award contracts.
So food security is not our strongest point. Though the CBN has been making some radical efforts to pop up the agriculture sector, to improve food production, so, as you can see, tension is rising all over the globe over food shortage.
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