A former Minister of Finance and erstwhile Managing Director of the World Bank, Dr Ngozi Okonjo-Iweala, warns of difficult times ahead on the heels of looming global recession occasioned by the coronavirus pandemic. Excerpts of interview:
Oil prices have been going down and the consequences appear dire for Nigeria among many other oil producing countries. What is your perspective?
This is a really difficult situation now and I have always advocated same thing during a time when commodity prices were good, that is the truth. You now have to create what economists call buffers; during the time the prices are good, you save and you keep it so that when prices are down or bad, you have the savings to draw from.
And this is what many countries do and that’s what we were trying to advocate and still advocate in all the countries and continent that are dependent on commodities. If you look even in the Middle East, where you have countries like Kuwait, UAE among others, you have so many countries that are commodity dependent but they save and save because what goes up must come down. So, you have to anticipate the day when the commodity prices, whether it is oil, industrial metals, whether it is agricultural exports, will come down. That is the reason and it is important to learn that lesson because this is not going to stop. There will be business cycles and there will be cycles of commodity prices.
So, what you need to do is to make the economy less dependent on these commodities and that is why for the longer time, restructure the economy so that you can also have other sources to create job for the people, other sources where you can tap revenues. Part of the issue, let’s take Nigeria and some other African countries for instance, our economies have a lot of sectors that are diverse. We have agriculture, tourism, creative industries among others.
I think learning how to task some of these other sectors better, manufacturing, you have to look across board and say, “are we getting enough resources from these sectors?” It is not just diversifying your economy but also diversifying your sources of revenue – meaning you have to task better. This is what our country is going to look at now and start planning about how they are going to do better in the future.
But there is a deep global recession fear as projected by IMF. What should Africa as a group do?
You are absolutely right because the IMF has projected that the world is going to contract by 2% this year. African countries, about 1.8 percent and that’s a very tough contraction for all the countries. And we have to look, what can we do within us, what can we get together on our own and then, what do we need to go outside and get and on what terms? We have to look at both internal and external resources. And of course, when the economy is contracting, the amount of internal resources we are able to garner will be much limited and we have to look at external resources to have complements and that’s what many countries are looking at now. And then, we are looking for it because we don’t want countries to pile up more debts which they cannot pay. Countries are looking for very low interest rate and low concessional resources and grants. And there are organisations that are willing to give countries grants. I mentioned GAVI vaccine allowance; global funds at very low interest rate resources and some are available from IMF and the World Bank. I think countries need to tap the multilateral agencies, the same with the African Development Bank, ADB, and make sure they don’t go to sources that are going to result to higher debt because countries don’t have the room to be servicing more debts. So, they need to get very low interest rate resources.
China just reported a negative growth of -6.8%. Looking at the fact that China is so much connected to Africa, what will the spill-over report do to Africa as a whole?
This is a serious problem. China is a huge market for the rest of the world. It’s also a huge manufacturing hub for the rest of the world. So, when China goes into this kind of trouble because it demands a lot goods and commodities and if that demand is not there, that means that the market is not there. You can see that in oil which price has plunged because China’s demand is down. Now we have to plan. We have to wait and see how the Chinese government deals with this and, obviously, with the economy slowing down and contracting, people have to think of how to garner resources to sustain their economies. Let us see the choices they make and do. But I think you can expect difficult times ahead.
Do you see light at the end of the tunnel?
Well, we must always maintain hope as long as you are alive. I think this is going to be a difficult year, 2020, spilling over to 2021. But I believe that if the world acts as one, if countries do not retreat into nationalism, populism, reaching out to their peoples only, they will all have the resources to deal with these issues and be able to help countries that do not have enough. During the 2008 and 2009 financial crisis, it was a very tough time for all countries. But the world came together and those countries that needed support got the support, resources were mobilized. At that time, then-British Prime Minister Gordon Brown said this was a time for the world to come together because we could not be so pessimistic to allow these to happen. I can see light at the end of that tunnel. We got to keep on hoping and that’s why we are human, because we don’t have to descend into pessimism, otherwise we will be completely paralyzed and we won’t act.