We need technocrats to tame economic headwinds, says Ekpo
Prof. Akpan H. Ekpo is the Director-General of West African Institute for Financial and Economic Management. As a thorough-bred economist, he specialises in macro and micro economic theory, public sector and quantitative methods. The former Vice-Chancellor of University of Uyo has also served in various public service committees. In this interview with CHIJIOKE NELSON, he speaks on the need for economic plan and appointment of technocrats to manage the economy.
Request for emergency powers for certain economic decisions has come and maybe, not gone. What is your take?
You see, that is another panic measure. For me, you don’t need emergency powers to get the economy out of recession. Already, there are existing instruments that government can use to do it. If truly members of the National Assembly represent Nigerians, they will not be dilly-dallying in response to economic issues. Why was there a delay in passing the budget? Around March this year, I warned that the economy was close to recession, at a lecture I delivered in Lagos. At that time, they were still dilly-dallying on the budget. If they had passed the budget on time, the fiscal side could have spent and that would have enhanced the economy.
That budget contained stimulus that would have helped the economy. Even when they passed the budget, it took several months for them to implement the budget. The President doesn’t need emergency powers, the call is a panic measure. We told government that it has to spend out of recession by borrowing externally and domestically to finance capital projects.
Again, our recession is a special type because it affects also the supply side. It is not just a demand issue. About 26 states owed salaries for almost eight months, meaning that people didn’t have money to buy goods and services. The delay in forming the cabinet, passing the budget and implementing it have been part of the crisis. At that time, only the central bank was talking and only monetary policy was trying to do some thing.
My worry for Nigeria is more than the economic recession. If for example, the third quarter Gross Domestic Product (GDP) growth becomes positive marginally, that means the economy would be out of recession. But has the problem of unemployment been solved? Has that solved the problem of inflation? Has that solved the poverty problem? So, we need to carry out long-term structural reforms and be serious about what we are doing.
The government needs experts to help them manage the economy. It is not a tea party. They need technocrats to advice them. And in our system, no government has a long-run luxury. Every government has four years, so they have to move fast.
Do you not see technocrats now?
If you look at Nigeria’s economic history in the last 56 years, there are some times where you could say they appointed technocrats to manage the economy. But since 1999, there have been problem because politics dominated the economy. Of course, the military, for some reasons were able to recruit some technocrats. I can tell you that everything about the Nigerian economy has been researched, documented and written about, before 1999. They are on shelves. In fairness to former President Olusegun Obasanjo, he tried putting together experts to macro-manage the economy. He brought people who were good. Those experts co-opted other experts to look at the economy. After Yar’Adua it continued, but with an error. It was a mistake to have an economic management team that included private sector players and government players at same time. For example, a private sector person in the economic management team would exploit discussions easily. Their role is to predict government, but you (government) try and surprise them.
What they have now is a ministerial team. But they invite experts on ad hoc basis. But what government needed is a strong economic management team. Nigeria has a lot of experts. Every country needs intellectuals to assist, more so, when some people running the key ministries are not in the profession that you need to assess the economy appropriately.
Where do you see gaps?
I will give you an example. During the tenure of late General Sanni Abacha, he appointed Chief Anthony Ani as minister of finance. But Anthony said he is an accountant and that he does not think he has what it took to run the economy alone. So, Abacha approved for him a ministerial advisory committee. He brought in only economics and a lawyer to drive the process during that process. Go and look at the macro-fundamentals at that period. And there was a link between the ministerial advisory committee and the national economic team headed by Prof. Sam Aluko. So, even Abacha who was a dictator left the economy to be ran by experts and the economy did well then. I was involved. In fact, I was the chairman of that ministerial committee in the ministry of finance for four years. We ran the economy. Another problem we are having in Nigeria is the issue of exchange rate.
As an economy like Nigeria, you do a managed float, you don’t float your currency freely because ab initio, your own currency, the naira, is not convertible. The foreign currency is not your money, so you have to always put up the attitude that it is always scarce. Economics is usually about scarcity. When a commodity is scarce, you don’t use demand and supply to find the value. You allocate efficiently, but you don’t ration. You can see that the misalignment between the interbank and parallel market rates is too much. When I last check, government was still the greatest supplier of foreign exchange, and they give it to the banks to sell. Any bank official would be rational and want to round trip. So, the gap is just too much. And that is going to affect foreign direct investments. What you will have is hot money. So, when there is a recession, you adopt what is called economic nationalism. So, let’s pray that the economic recession does not continue for a long time, because if that happens and we enter into a depression, we may just be like Zimbabwe or Venezuela.
But there is argument that Adam Smith and Keynes, did not study economics, hence we don need economists to get it right. Do you agree?
It is not right. In economic history, the early economists were called moral philosophers and in philosophy, they deal with a lot of social issues. What we even call economics presently used to be known as political economy. But as we moved on with time, it became more narrow. To say that Keynes was not an economist is not right. If you read all the works of Keynes, it would show you that in modern terms, he was an economist. The problem with Nigeria is that people claim to be everything. Even in Nigeria, most people who call themselves economists are not one. By definition in most schools, even if you don’t have a degree in economics, your transcript should show that you have taken some courses in economics to understand what is happening. If someone tells you that he has made a forecast that by next year, the GDP would grow, it should be based on a model. If you didn’t study economics, how will you understand the model? That is why in most countries, even if you have someone who is widely read appointed to head a ministry, like the ministry of finance, you would have technocrats who understand the issues around that person. In my view, you must study something to a certain level. So, it is good for us to put round pegs in round holes, especially when you are a developing economy.
The asset-stripping proposal has remained a controversy. Where do you stand?
As I said, we have gone through this before. The process has never been transparent. Not just NITEL, even look at NEPA or Power Holding Company of Nigeria (PHCN). They went through bidding processes, we unbundled them, but what has been the impact? Power supply today is worse than what it used to be. For a long time, we talked about selling NITEL until recently. So, the problem of NITEL is a little bit different in the sense that we watched over the years, the inefficiency of NITEL. For PHCN, when you sell your assets, both sides would do due diligence and you sell both assets and liabilities. But in the case of PHCN, we said we have sold, later those who bought came back and said they didn’t consider other factors, such as the price of gas. And government gave them money through the Central Bank of Nigeria (CBN), which is wrong. Something like power, which is very critical to Nigeria’s development and we even know those that can give it to us. It is not a rocket science. You invite the companies that have the expertise and the money and you discuss with them how to go about it with timeline. But what we did, to a large extent, with the sale of PHCN was that Nigerian elites had fronts who bought those assets on their behalf. That is why we are where we are today. So, I always prefer that we commercialise government enterprises than to privatise them. When you commercialise, it means that the management may be outsourced to private hands, but government still retains some ownership. And when you sell the shares, Nigerians would be asked to buy it. Then you limit the amount individuals that can buy so that you don’t put it in the hands of few elites.
How would the country attract foreign currency to bring relief to the exchange crisis?
I pity the Central Bank of Nigeria. They have been doing their best. It is a supply problem. They don’t have the currency, but then we need to change the structure of our economy. Our economy only consumes, we don’t produce anything that brings foreign exchange. We have to refocus policies to encourage people to manufacture, no matter how little, with value added before exporting. What we need now are structural policies. The central bank is pushing out a lot of intervention funds. A lot of times, their intervention funds have fiscal colouration and that is not supposed to be its business. But they are forced to do that because of their development functions.
I say this as someone who was on the CBN board and monetary policy committee for over five during the tenure of Prof. Chukwuma Soludo and briefly under Sanusi Lamido. So, I know the problem. Under their development functions, the central bank does a lot of things because the fiscal side is weak. So, if the recession prolongs, monetary policy may be ineffective, because what we are facing is a fiscal and structural problem.
My quarrel with the central bank is that certain aspect of the new flexible regime framework is not tailored for our economy. For example, they brought in futures market into the forex market. That is not for an economy like ours and that is because the commodity you are dealing with is a scarce commodity. This is a system that works where the people don’t even bother about the foreign exchange market and they have several ways of earning other foreign currency, like industrialised economies.
Equilibrium in exchange rate doesn’t exist in practice. We say that in classroom as a benchmark for comparing modela. The market gives you a sign or a guide, then you move the band. You can find it mathematically, you can find it by drawing the curves, but in practice, it doesn’t exist.