We may not have an economy after COVID-19 —Adebayo, professor of Economics

Professor Abayomi Adebayo is a lecturer at the Obafemi Awolowo University, Ile Ife, with specialty in Development, Health and Labour Economics. He speaks to DARE ADEKANMBI on the economic implications of prolonged lockdown as a result of COVID-19, the 2020 budget and other matters.

 

With COVID-19 impacting negatively on global economy and leaving Nigeria’s monocultural economy badly hit, what would be the impact of this, especially when a large chunk of the 2020 budget will be funded through borrowed money?

We have to look at it from two sides. COVID-19 is a big problem for all countries of the world and it is going to affect Nigeria more. Like you have said, we are a monocultural economy and it is already affecting our commodity, which is crude oil, very significantly now. Since crude oil price is what we base the budget on, it is obvious that we have a big challenge in our hands. If I were the economic manager of the country, I would become realistic. Every budget we put up every year is written by those in government and not God. The problem is that many of us are theoretical in managing the economies and nations. As an individual managing my family, if I have problem in terms of reduction in my income, then I practically cut down on what I am doing to make my income bigger than my expenditure. I personally don’t borrow money from anybody. Though I am an economist, I don’t believe in borrowing. I believe I should be able to manage my life and be a creditor.

So, a nation that is realistic will bring down the cost of governance by maybe 50 per cent. Let the income of everybody in government come down and anyone who knows they can’t take the reduced income should leave the place for others who can take it. That is realistic budgeting. But to go a-borrowing because we want to meet up a bloated kind of recurrent expenditure is wrong. When you face certain realities in life, then you cut your coat according to the available material and not your size. This is because the size itself has been created in a way that it can’t be supported in perpetuity. As a country, we can’t support the kind of size we are managing. It is not good for this kind of economy. We have to cut the cost of governance and we must address this matter squarely if we want to make any progress. We also have to be realistic in the contract that we put up. Do you know padding still goes on till today? What I will spend N1 to do as an individual, government will do same for N1, 000. We can’t continue to run our life like that and feel we are going to get anywhere.

Every budget is written by people, but the problem in Nigeria is that those in government always don’t want anything to affect their income. So, they give approval to borrow, instead of cutting down on things that are unnecessary and unsustainable. Those who are federal lawmakers and ministers feel that they should carry money and go to their constituencies and communities to share little from it to the people. That has been the method we have been using since 1960 and it has not promoted anything. So, it is time for those in government to govern realistically and manage the economy the way it should be managed. But I know Nigeria can’t do what I am saying because I know the country we are in. Those in government prefer borrowing and leaving it to the person coming after. In Nigeria, once you are elected, you say let me finish my own and let anybody coming after come and carry the problem, as if it is God that will come and solve the problem and not human beings. We don’t have people that have commitment in their hearts to building the country. People go into governance as gateway to personal wealth. So, that is the problem. The white know us. That informs how they handle us.

COVID-19 is going to affect us negatively and so if you talk about recession, we can experience it because our source of income is down and we are not changing our pattern. You can’t keep a budget you have set at maybe $50 for a barrel of crude oil and want to run the same budget when you have $23 a barrel. It does not make sense. When companies have problems, the first thing is to cut salary. The chief executive can’t say they want to earn the same thing they are earning when the country is doing well and when it is not doing well. In the private sector, they are realistic about it. They touch salary or downsize before they go to key issues such as infrastructure. All allowances that do not make sense first go away. If we want to manage our economy this year and not run into trouble, that budget must be revisited.

 

Those in charge are even contemplating bringing the benchmark for crude oil down to $30, which some even say is not realistic because it is still not table.

I agree with you because it is not stable and this is not the time to decide it should be $30 because we are under a condition that we can’t predict anything. The lockdown and the restriction have been extended for 14 more days, who tells you after the extension, we will come out.

 

What do you see as the economic implications of the lockdown and restrictions we have in most states?

They just come to tell us they are shutting down the country without saying anything about the economy itself. They are not looking at which of the real sector can be eased to be going on underground. I know COVID-19 is very dangerous and people felt we should follow the international pattern. But we need to be creative about what we do with our economy. They are states in the country today that are not on lockdown and their data about COVID-19 has not changed. The economy should not just be locked down for the sake of locking down. How do we do our own lockdown? The police don’t allow farmers to go to farms. It is so bad. This is the planting season and once the farmers miss the season, what do they want to plant? If they miss planting of maize now, will they be able to do so in June? We need people who can recognise certain thresholds and lock down within that context and make good provision for it. They are saying they make financial sector essential service. But if you keep collecting money from bank and you are not producing, what will your money become?

The government, through the CBN, is trying to support farming. But if you don’t plant and you give money to farmers, are they going to turn money to crops? By medical advice, the lockdown is fine. But there should be a strategic and creative way to either instruct police to allow certain sectors going. By COVID-19 pattern in Nigeria, have you heard of any case in the villages? Have you seen a farmer diagnosed with the virus? These are issues that people are not facing. Government needs to strategically handle the situation in a way that some real sector can begin to flow properly during the lockdown. It is as if government has money somewhere that it wants to keep sharing.

 

But the government has an economic team of repute which should have advised it on the effects of the lockdown.

The issue is simple: we are weak. We have a weak economic system. Everybody capitalises on good response to COVID-19 without positioning how to handle some economic issues. Some people cried in Lagos that their goods are at the ports. If a good arrives and it stays at the ports for long, demurrage is collected. When they were doing lockdown, these are some of the things they ought to have put on the table. Medical science says lock down the economy. But what do we do with certain aspects of the economy so that the police, for instance, know that certain trailers carrying certain goods must be allowed to move. I know if you criticise government from today till next year, many times they don’t respond swiftly. This is because they have their own agenda and their own people who have their own opinion on the economic situation in the country. Sometimes when you are speaking, they tag you as belonging to one political party. People don’t sit down and look at things objectively.

I will advise that we should not overcapitalise on COVID-19. If we don’t look at strategic aspects of the economy that can correspondingly be going on, by the time we open up the whole economy, we may not have anything to be able to move forward and the effects will be more devastating.

 

So, you see dire economic consequences for the blanket and prolonged lockdown of the economy.

Yes. I, for instance, expect they will exempt farmers who are going to their farms. And the only thing we can capitalise on when we have problem is agriculture. If we have food to buy in the market, we will live and then next year, things will work. But if farming is affected now that oil price is down, where are we going to hide since we have also closed the gates against importation? So, these are conflictual decisions which we need to reconcile. It is a difficult decision too for them at their end, but I believe that we need creative approach to managing the situation on the ground so that the economy is not grounded.

 

What is your advice to government on what should be done after the coronavirus holiday?

After the current 14 days have lapsed, the signal on the situation will definitely inform what will be done, especially with the three states concerned. When the situation becomes stable and the number is going down, we can then begin to fully open up some sectors of the economy for people to get into business. Planting can’t wait till May or June. We have to plant now. All the food we are buying now will soon finish and we have to start planting now so that by Augusts or September, produce like yam and others can be harvested and sold.

 

There are fears of job losses in the private sector if the lockdown is prolonged. Do you see that too?

In the United States, for instance, once you don’t work in a day, you don’t earn anything. It is only in Nigeria that somebody does not come to work and they get salary. This is why the US government is taking up payment of jobless people in that economy. Here, there are still good private companies which allow their employees to work from home and still will pay them. But there is a limit to which they will be able to do that. In Nigeria, the public sector is barely less than 30 per cent in terms of employment. All others are small scale, medium scale businesses and then the multinational corporations and then the informal sector whose operators live on a daily income of what they can sell or buy.

Definitely, if we continue the lockdown, the informal sector people are going to get crazy because they have to live and the so-called palliatives are not just reaching a significant proportion of them. Operators in the informal sector are going to be dangerous and the private sector will begin retrenchment. When business is not going on well, the money you keep in bank does not work. So, banks will continue to look at their own costs and begin to downsize too. That means we can see a future unemployment rate increasing at a dangerous level. That is why you see people like Donald Trump saying we must open up the economy. He is an entrepreneur who knows what he is talking about. He has reduced the monetary support of the US to WHO. So, he is not thinking like a politician or a rights activist. There is no almighty government anywhere in the world that can just be going to the vault and be bringing out money to be doled out every time.

 

Your view about the conditional cash transfer, though a lot of criticisms have trailed it. What is your view about it?

When we have a problem like this, normally, government should step in. The issue with it is that it must be done fairly and objectively, without any sectionalistic bias. The problem people have with it is that if the states where there are high cases of the virus are not taken care of, why are we taking care of people in the states that don’t have it and where people still go about their businesses in a normal way? That has been an issue in Nigeria and we have lived with it for a long time. Whenever anyone is in power, such a person first takes care of his own people before others. People don’t look at the nationalistic posture in handling matters. Many times, we are sectional in think, tribalistic in managing government and that has become a big problem which I don’t want to go into.

Another weakness in Nigeria on the issue of transferring money is that we don’t have the social network structure to effectively reach the vulnerable, the real poor people. If in the US somebody calls now to say he is living in so and so place and has problem, they have a way to locate the person with the right address. But over 70 per cent of the places people are living in Nigeria don’t have addresses. When I was growing up, all the streets and houses have numbers. You post a letter, it comes to your house. All that has broken down in the last 30 years because no local government is numbering roads and houses and everything is in a shambles. Urban planning and all that are factors in setting up social structure to be able to reach people. In tracing people, they say they don’t have their addresses but only have their phone numbers. All these are major problems when it comes to tracing people and tracking people to be able to take care of them. There is no data to work with. It is just fire brigade approach to distribution of money and this gives room for corruption.

 

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