How Nigeria slipped into economic recession, by experts

•Warn govt against excessive borrowing
• Classify country as a rental economy.

Running an oil-dependent economy, lack of sustainable developmental strategies, and mismanagement of Nigeria’s petroleum revenues have been identified as some of the reasons the country slipped into recession.

Experts, such as the Vice Chancellor, Federal University Oye-Ekiti. Kayode Soremekun, former Head of Department, Political Science and International Relations, Covenant University, Dr. Duruji Moses Metumara, all blamed successive governments for operating mono-product economy, which is vulnerable to economic challenges.

The Vice-Chancellor, Federal University, Oye-Ekiti, Kayode Soremekun, in an interview with The Guardian declared that Nigeria is not oil producing nation but a rental economy.

According to him, collecting rents from multinationals that are producing the country’s natural resources cannot be used as basis for development.

He feared that Nigeria may forget diversification and return to being mono-product economy once the oil price bounced back and production back on track.
Soremekun said: “Though the country’s is serious about diversification now that oil prices are at the bottom low. But my only fear is that if the oil price should bounce back, Nigeria may probably go back to its traditional slumber. There are chances that the oil price may bounce back.

“Right now, the Federal Government is negotiating with the Niger Delta militants and to that extent, the country might go back to the oil market and when that happens, the oil money will come on board again, and the Yemeni Sydrome will take over again.”

He said that Nigeria got into the economic recession on account of concentration on a mono-product, oil economy.  “I want to say that we did not have economy before. Nigeria economy focused on oil resources and lacked productive base.  Any economy that lacks productive base is a rental economy. That is an economy that depends only on rents and it can never be the basis for development.

“Several scholars have proved that rents can never be used to measure economic growth. But Nigeria wanted to be the trajectory of development because of the money coming from oil. We have had a rental economy that was destined to fail when the oil price dropped. Nigeria is not the only oil producing country; there are other oil producing countries, which have refused to be mono-product and they are doing very well. Examples of such countries are Malaysia and Iran. They did not have to depend on oil alone for development.

“Nigeria is not an oil producing country. The multi-nationals are producing the oil for the country. Nigeria is a mere recipient of providential revenues and that cannot be used as basis of development.”

He stressed the need for the country to be diversified. “The current situation will give us opportunity to diversify the economy. It will spur us to the much-needed diversification. It is not just enough to diversify; we should also ensure full utilisation of the value chain to create jobs in the country.”

Also speaking with The Guardian, former Head of Department, Political Science and International Relations, Covenant University, Dr. Duruji Moses Metumara, attributed the current situation in the country to over-reliance on crude oil resources.

But he warned government against relying on borrowing from international banks to fund the economy.  “I am not totally against borrowing to manage the economy.  But when such money is borrowed it should be directed towards building the economy and should not be stolen. Government, should formulate policies that will enable the private sector contribute significantly to the economic development. We should avoid relying on borrowing that will plunge Nigeria into indebtedness.

Metumara said it is dangerous for a country to base its developmental fundamentals on the international market, which it has no control over, adding that Nigeria has been facing some challenges since the global economic downturn, which grounded world economies.

He accused the government of not being proactive in dealing with economic crisis, adding that to come out of the economic recession, Government needs to invest in infrastructure and build sustainable institutions that will stand the test of time.

He noted that the country might remain in recession for a long time if it refused to take the necessary measure. “We have had countries going into recession for a long time, while others are able to handle it effectively well within a short period of time. Coming out of recession depends on how a government is able to respond to it,” he added.

Sanusi had said in a speech delivered at the 15th meeting of the Joint Planning Board and National Council on Development Planning in Kano, that current economic policies and inconsistency do not favour business and investment in the country.

He attributed the current economic recession to the failure of past administration to diversify the economy, saying: “The problem is that there is nothing that we are facing today that we did not know would happen. That is the truth. We made mistakes. Many of them deliberate. We ignored every single word that pointed otherwise. Economics is a science. It is not a perfect science. But over decades and decades and centuries, people have seen that there are certain things that, when you do, will lead to certain consequences.