Leo Ukpong, a professor of Financial Economics and dean, Faculty of Business Administration, University of Uyo, in this interview with ANIEFIOK UDONQUAK, gives an insight into what is needed for Nigeria to be truly out of recession. He speaks on other issues. Excerpts:
There have been reports that the country is out of recession as the economy reportedly grew by 0.5 per cent last year. Do you think the country is actually out of recession?
I think I am one of those who are sceptical about the country’s economy is out of recession. When the former finance minister, Ngozi Okonjo-Iweala rebased the Nigerian economy and said Nigeria was the largest economy in Africa, everybody jumped around but nothing changed. The quality of life was still the same and unemployment was still high and inflation was high too. Now, exiting recession is what we can claim on paper and that recession is over but in reality, there is nothing to show. When the economy moves out of the doldrums, the only index people use is unemployment. If unemployment does not decrease, there is something else that is going on. That is artificial because until people start being employed and jobs are created, people are earning income and they can take care of themselves, you have not done anything. If you set up a new building for instance and nobody’s income has increased, you will find it difficult to tell the impact of the new building.
I don’t think we are out of recession. I think what happens is the marginal increase in oil revenue following a lull in militant activities in the Niger Delta. The quantity of oil produced has increased and this has probably added something to the country’s Gross Domestic Product which is very transitory because if for any reason oil prices dip again even with a stable quantity, we will fall back to recession. In terms of recession, I always look at two major indicators, employment and inflation, if those two things don’t improve, I find it difficult to agree that the country‘s economy is out of recession.
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For instance, if you are earning say N1000 a month, and everything you buy rises by 50 per cent, your income has also gone down by 50 per cent. But if we look at the high price as a quantity, the interest rate is still very high; businesses cannot borrow at over 20 per cent interest rate. The job situation is terrible. Every year, we are graduating many students from Universities and Polytechnics but there are no jobs. In terms of recession, strictly, I have not seen any improvement in welfare, unemployment; I don’t think we are out of recession. I think it is a temporary thing. Statistics is something anybody can manipulate but the average person on the street will not tell you we are out of recession.
In what areas should the Federal Government focus its attention to grow the economy?
Nigeria will not go anywhere without two things. power must be stabilised. You cannot grow any economy in the 21st Century without power. Everything must be powered. Two, oil is being phased out; even Saudi Arabia with its oil wealth is thinking how to move away from it. Diversifying the Nigerian economy is the only way to grow the economy. The number one factor is our ability to manufacture what we need. Forget about what we need to export if we cannot add value within the country in what we produce, we are not going anywhere. We drive a lot of cars but most of the spare parts we need to fix them are not manufactured here; things that we need in terms of internal demand.
If we cannot meet that demand, the money will still be going out of the country. Long term, with serious planning, it will take us about 10 years to meet our internal demand. There is no way we can become a manufacturing society without an adequate supply of power. The power sector must be stabilised to grow the manufacturing sector. Once we do that the internal pressure on jobs will be reduced, prices will drop because we will produce what we need.
Let us look at the investment the Akwa Ibom government made in the multispecialty hospital which has been shut down; what is your opinion went wrong?
The kind of contract they went into with the foreign doctors and nurses made it easy for the consultants to leave because the state could not afford to pay them. The fees were too expensive. For the building, nobody is going to take it away; in fact; the more we keep that building without using it, the more it would deteriorate. All kinds of parasites like rats, snakes would live there. The fixed cost you cannot recover, you cannot do anything about it, leave that out or spread it over a hundred years.
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Medical cost is a variable cost because usually, you would order medication because of the kind of patients you treat, so you don’t order medications and keep. But for electricity, even if it is one patient there, you must run electricity. I think that is where we need to look at. It is very sad, the other day I passed through the place; I shed tears, the same thing with the Ibom Tropicana entertainment centre along Udo Umana Street. All the money we sunk in there, what is the return? All the money we sunk into Ibom e-library, even the so-called Ibom international stadium, we can’t break even with one game in a month. A stadium must be used every day in a week. You must have activities in that stadium at least two or three times a week to keep it going. We play one friendly match and then they will fly in people for another match after a long while the place is shut down. It does not work that way. The hospital was a good investment but the pricing was wrong.
Do you think there is enough manpower locally to run the hospital efficiently?
Yes, we do, in this state we have. If you go to private hospitals and see what the doctors are doing. Most of them are also in a specialist hospital. When you go to their private hospitals, you will see how they manage it. If we price the services competitively, the environment is nice to attract the best brains. I think we have the talents and we must bring out the talents to run the place but we must give them the facilities. Workers like nurses are very important in the hospitals because even in the absence of doctors, the patients will feel better depending on how the nurse interacts with the patients.
We lost most of our nurses to foreign countries because of poor remuneration. The school of nursing in Anua that we have here has produced a lot of nurses. If you go to the US, you see lots of our people who were trained at the school of nursing here. When we trained them here, they left the country. Most of them would be willing to come back home and help but you must have the facilities for them to work. That facility is something that will attract the best brains. In Nigeria, we do and within Akwa Ibom, we do have them also.
The previous partnership with the state government on how to run the hospital did not work; what do you suggest should be done differently this time around?
There is a certain subsidy that works. They cannot run that place competitively if the government does not subsidise their services. If you bring a surgeon, who could earn more money somewhere and work out maybe N200, 000 in a day and you bring him here and say that you want to pay him N200, 000 in a month; do you think he will come? The opportunity cost is too high. But you can say, look, we do not have N200, 000 a day but we have the facility and you will help us, we will pay you maybe a hundred thousand, come here and help us. Or you pay them that amount on call because they would not be doing the surgery every day. When you have a certain case, you fly them in, you pay them and they go back. For the general consultants, if you pay them decent salaries as long as there is a doctor at each shift, it would work. Most of them have their private health facilities around here; they could work there for eight hours within a good place with excellent facilities.
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In future, what should the state government do to avoid the same scenario?
I am not sure whatever we want to advise the government today would have much impact and if the government would be willing to listen. If you look at the immediate past and the current, the immediate past built a lot of projects at a very high cost. Projects should generate revenue to make them sustainable. It appears they did not do the feasibility studies. Let us take the Tropicana centre, the only wing that is moving is the movie wing. Even the Le Meridien Ibom Hotel and Golf Resort built by former Governor Victor Attah which was a good project would work if we have enough business people around.
When the economy was booming, a lot of government dignitaries came to lodge there. Right now, the story is different because of the recession. I think for any project, the first thing is to see the market. Lagos is a much-diversified city, economically. Even if the government reduces its expenditure in Lagos, they have enough private businesses that would sustain the economy, from tourism to manufacturing. Here in Akwa Ibom, we have not built that base of the private sector business such that if the government happens not to be getting enough money, that side would still attract economic activities. I was praying that Governor Udom Emmanuel who was in the banking sector, knowing how wealth was being created, he should build the private sector of the Akwa Ibom State economy and the quickest way to do it is manufacturing.
Once, you have a plan, look at what we consume, be it food or footwear, not only in the state but for the entire country. Look at Dangote, just imagine salt and sugar what the two commodities have done for Dangote. That is the kind of idea we need. Everybody uses salt, sugar and even cement; we should have a situation where people come from all parts of the country to buy manufactured goods here. Once we do that, the government would have created the private sector foundation rather waiting for the federal allocation. We have a lot of debts from the past administrations and the debt service alone is taking a lot of money. And this fixation with agriculture, in my opinion, is a wrong thing because if you ask a simple question ‘how many jobs can you create from planting tomatoes?’ How many jobs can we create from planting coconuts that you plan to harvest in three years? Until we harvest the coconut before we start processing and you hope that there is a foreign market.
Manufacturing is something that we should embark on. Am not sure the government wants to do so because it likes futuristic things. Nigeria said it wanted to export yams and we made a big deal out of it but right now, we already have a problem. The international community says it does not want Nigerian yams and there is nothing we can do because they have the standard. If we want to produce yam, we should make sure there is a demand for yam within Nigeria but I think the problem is with the processing of yams not that the country cannot produce enough yams.
