Recession: Pat Utomi Speaks

Pat Utomi Speaks with Neta Nwosu for ThisNigeria on the Recession in Nigeria.

What is your view on Nigeria entering recession formally?

Well, what I first see is that anybody who knew anything knew it was coming. It was just a matter of a formal release of the Gross Domestic Product (GDP) data for the third quarter, and Nigeria would have had back to back decline in the GDP, which technically is what a recession is, that is, all the pointers were there.

In my view, there were four classic reasons. The first reason, the easiest to see, is the disruption of the supply chain by COVID-19 because, for example, one of the biggest challenges right now is raw materials because bigger industries can’t find raw materials. Everybody is running around, no raw materials. So, they can’t even produce if they want to produce. There is disruption of supply chain by COVID-19.

The second critical one is the collapse of oil prices as a result of both COVID-19 and general development around oil. And already, last year, before COVID, the big power play between Saudi Arabia and Russia had already resulted in the decline of oil prices. But here is the third and really critical factor.

When that power play led to oil price decline, look at the behaviour of the decision makers. The National Assembly was building up a budget on irrelevant things like repairing their building, with more money than is going into Education, Public Health; everything combined.

You see an irresponsible political class which is perceived as incapable of driving development globally, and that perception was summarized in a Forbes article about May, of last year, which basically said that Nigeria was a money losing machine. If you want to lose money, go into Nigeria.

Nigeria was a money losing machine. If you want to lose money, go into Nigeria.

Forbes Magazine

And what are the components of the money losing of Nigeria?

First of all, regulatory risk is one of the biggest risks of doing business in Nigeria. If you go into business, you are likely to be killed by government than by market factors. So, the naked truth is that those four facts were compounded by quality of the management of the economy, and so, recession is here; it didn’t come as a surprise. The epic question is what is the strategy for trying to get out of it?

 So, what’s the strategy?

I don’t know. I’m not the one making the decision.

But if you were engaged to get us out of recession, what would you do?

First of all, we have to become a producing country. We have to produce our way out of recession.

Typically, people will tell you that one of the things that you do in recession is try to create economic activity through quantitative yielding, that is, our money supply being pumped up by making more credits; government embarking on projects to give private sector work to do.

The classic example of this in economics is the Great Depression and how General Roosevelt accepted the counsel of John Maynard Keynes that it is even better to be building the road going nowhere, so that people can be engaged in production of building, to stimulate economic activity.

The point of the matter, however, is that it’s got to be purposeful to add up. If you stand on the street and distribute money to people to spend, when they spend it, how does it stimulate production if most of what you consume is imported? It means that it goes out of the country, and does not add up to increase economic activity in the country.

So, we have got to find ways of getting people to produce.

We have to produce our way out of recession.

Pat Utomi

How, do you get businesses stimulated?

Young entrepreneurs should get access to credits, and all of that. Unfortunately, the politics of Nigeria is such that we don’t want to create a programme like that.

What else will happen is that 70 percent of the money enters into the hands of politicians. They don’t really stimulate the economy; they just put it into their pockets and invariably buy stupid things with them, like fancy cars or jets and stuff like that.

But how do we cure ourselves, purge ourselves of that drain on public treasury?

These are fundamental things that we should address. But I’m not so sure that we seem ready yet to hold politicians accountable. That will be a huge struggle.

Generally, they are not repentant enough, they can say something in public, but do exactly the opposite because for them, politics is like the hunter who has hunted down game, and its now ‘chop’ time. If their attitude to public life is ‘How can we achieve immortality by the way we served our people’, then, you will have a different outcome.

We would like to know the implications of the recession for the middle class and for the ordinary man?

It means that many more companies will not be able to have people who can afford their services, so, more businesses will close. There will be more layoffs, and there will be more hunger in the land. That is what will happen. And more hunger in the land means more armed robbery. It means more Boko Harams; too many people with nothing to lose. So, it’s a very compound problem. Not a simple one, not just a technical matter; it’s about real life.

Effects of The Recession on Nigeria

Many more companies will not be able to have people who can afford their services, so, more businesses will close. There will be more layoffs, and there will be more hunger in the land. That is what will happen.

Pat Utomi

Some economists claim that this is a full-blown recession?

There could be a depression. It’s worst since the civil war.

They are saying that this time around, the country’s GDP slipped by 3.61 per cent, compared to – 6.1 per cent growth recorded in the second quarter, and that the fall is steeper than the figures that plunged the country into recession four years ago. So, what has changed? What exactly happened?

Well, there could have been many things happening that reflect the continuous slipping about to be produced, like the continuous drop, sustained drop in oil prices because of the system and oil price has been long on the downward trend, and then, we didn’t control spending to bar that price decline.

This is happening because we didn’t control it. We just talked about raw materials; nobody’s been able to find raw materials. So, those people who can’t find raw materials, what do you think they are doing to people who work for them? They are laying them off; they are paneling people all over the place.

Let’s take a simple Nigerian poll. The universities have not been opened for this year. Think of all the people who offer services to students in the country, what their current state of productive output would be. So many factors have just added up to this.

Let’s take a simple Nigerian poll. The universities have not been opened for this year. Think of all the people who offer services to students in the country, what their current state of productive output would be

Pat Utomi