Africa
IN these perilous times, the federal government should rise to the occasion and address the social consequences of its reforms on Nigerians. Perhaps, it should listen more and feel the pulse of the people, adopt new and effective policies that will impact on the wellbeing of the people.
By Goddy Ikeh
THE wave of disenchantment has continued in the country since the inauguration of the current administration on May 29, 2023, over what has been generally described by the opposition parties and the Organised Labour as ant-people policies. The nation’s newspapers are daily awash with stories of killings by herdsmen and bandits, kidnappings for ransom and other crimes which are associated with the harsh economic realities in the country.
In his recent post, “Tinubu: Nigeria is sinking and streets are full of tears”, Farooq A. Kperogi, clearly captured the daily plight of Nigerians when he wrote:
“The searing torment that everyday folks are going through in Nigeria right now is so dire, so unbearably extreme, and so unexampled in its rawness that even diasporan Nigerians like me who live tens of thousands of miles away from home can feel it not just vicariously but also experientially.
“The unending streams of requests for help to meet the most basic obligations of life that we get from previously proud, resourceful, and self-sufficient family members, friends, acquaintances, and even strangers are the conduits through which we have experiential encounters with the ongoing cost-of-living turmoil in the country.
“The lower classes are sinking deeper into soul-depressing depths of poverty, despair, and hopelessness, and the middle class is so hobbled by the economic crunch that it is disappearing faster than soap bubbles. The lower and the middle classes are now united by a common sensation of emptiness, agony, and anxiety for the future.
“Every day is worse, less hopeful, and more precarious than the previous day for most Nigerians. Even hope, which French philosopher François de La Rochefoucauld assured us is the last thing that dies in humans, is desperately going into a death spiral. That’s an ominous signal President Bola Ahmed Tinubu would do well to not take lightly.
“Nigeria is famous for its superabundant supply of self-regenerating hope even in the midst of the most nerve-racking existential strain. You know you’re dealing with a potentially explosive social rupture when hope is grasping for breath among people who are famed for feasting on hope.”
He, however, stated that “the current state of affairs isn’t unavoidable. It’s the predictable consequence of the pigheaded pursuit of a ruinous policy of subsidy removal from petrol, the lifeblood of Nigeria. I sounded an early warning about this a month before Tinubu was inaugurated.”
While Nigerians are still agonizing on the effects of the government’s reforms on their businesses and wellbeing, the Central Bank of Nigeria, CBN, raised the import duty rate to N1,423 to the dollar. Reacting to the development, the Chief Executive Officer of CPPE, Muda Yusuf, said: “The drastic upward review of the exchange rate for the computation of import duty from N952 to N1423 would have a devastating effect on businesses across all sectors.” According to him, this increase is like the last straw.
“It is double jeopardy for the investors across all sectors, especially those in the real sector. This action will further fuel inflation as production and operating costs get escalated. The vulnerable segments of the population will be further impoverished as cost push inflation gets exacerbated,” Arise news quoted Yusuf as saying.
Yusuf noted that it is worrisome that the upward review is coming at a period when businesses are yet to recover from the shocks of the new round of currency devaluation resulting from the sudden unification of the exchange rate, which has driven the official exchange rate to about N1400.
He, however, appealed to the CBN to reverse the rate hike in the interest of the already impoverished segments of our society and the numerous businesses that are already on the verge of collapse.
Yusuf argued that the shocks, disruptions and dislocations that would follow the review would be of immense proportions for businesses to bear.
“It is even worse that the rates take immediate effect. This is a policy action that is difficult to justify, especially in the context of the multidimensional headwinds that businesses are grappling with. The CPPE recommends that going forward the determination of the exchange rate for import duty computation should be treated as a fiscal policy matter and located within the remit of the fiscal authorities which is the finance ministry. This is necessary for proper alignment with extant fiscal policies,” he said,
Meanwhile, manufacturers in the country had before the hike in import duties by the central bank, predicted fresh hikes in the prices of commodities in the market in response to the continued fall of the naira against the dollar. Recently, the naira plunged to N1,420/$ at the parallel window of the foreign exchange market.
Reacting to this development, the President of the Manufacturers Association of Nigeria, Francis Meshioye, stated that the naira, which has now remained at over N1,400 in the parallel market would lead to price hikes in the economy.
“It is not possible to remain profitable with this exchange rate. The first challenge is breaking even. It means the prices of things will be higher, and the income is not there for people to buy things as they should buy as things become more expensive.
“So, the demand will become low, and this will affect our bottom-line. The break-even point will become critical. So, what businesses should do is to ensure that they break even at this time. It is a critical and very challenging time for us.”
Meshioye predicted that these price hikes are unlikely to resonate well with consumers whose spending power has been continuously depleted.
According to him, the frequent fluctuations in the forex market have made it difficult for manufacturers to make long-term plans.
“It is a harsh time, which means we have to revise our strategy. It is hard for us to have a long-term plan, and even the short-term plans we have to regularly revise them so that we can incorporate the reality of the economy into it,” he said.
Apart from the internal security issues and the harsh economic environment which Nigerians are going through, some security experts have warned that the withdrawal of Burkina Faso, Niger and Mali from ECOWAS poses serious security concerns for the country.
Speaking on this development and other security issues in the country, a security expert, Kabir Adamu, stated that there is a correlation between the deterioration of the Nigerian economy and the rise of criminality in the country.
Adamu said in an interview with ARISE NEWS recently that the fragility of the states is a fact. I am almost 100 percent certain that when it comes to the fragility of the state, unfortunately we are dealing with a challenge that we need to meet. I also want to make it clear here that I don’t need anything new. Let’s comply with the provisions for security.
“I’ve been in circumstances where the conversation is actually that if we need to solve the security challenge, we need to make sure the local governments are effective and operational. Also, with the economic circumstances in the country at the moment, there is a positive correlation between the deterioration in our economic circumstances and the insecurity. There is a need to look at the economic circumstances and the positive correlation with the rise in criminality across the states.”
The security expert also said the inability to understand that their powers are limited is a major danger that exists with the proliferation of the state, local or community level security groups.
“There is a provision within the police act and by virtue of that act, the police have the mandate to not only register, but to support where the constitution allows it, the issuance of specific kinds of weapons to those groups, to train them so that they understand where their power starts and where it ends. This is the major danger that exists with the proliferation of these types of state level and local or community level groups. The inability to understand that their powers are limited perhaps, just to the gathering of intelligence and maybe the ability to detain or arrest and then maybe to hand over to the more formal agencies or departments for prosecution.
“What we have seen in the past is that they assume that the power to prosecute is usually extra judicial and that is where the problem is. I think the police need to step in and act on that provision within its mandate.”
He also called on the Police Force to develop a checklist of requirements to be met by the newly formed security bodies in the country on every level.
According to him, the proliferation of these security groups at the state level and local or community levels poses a major challenge to tackling the security challenges in the country.
However, the federal government and its officials have not stopped asking Nigerians to be patient with the administration and that the reforms being introduced would turn around the economy and check the security challenges in the country.
For instance, the Governor of the Central Bank of Nigeria, CBN, Olayemi Cardoso, says that the nation’s economy will be stabilized by the impact of the Dangote Refinery and the state-run Port Harcourt Refinery through price moderation.
Speaking recently at the launch of the Nigerian Economic Summit Group (NESG) 2024 Macroeconomic Outlook Report in Lagos, Cardoso assured that the expected stabilisation or reduction in fuel costs is poised to have far-reaching implications across various sectors, contributing significantly to the overall economic efficiency and resilience.
According to him, while the Dangote Refinery has already commenced production, the Port Harcourt Refinery is expected to begin production soon. On tackling the scarcity of foreign exchange, Cardoso stated that the apex bank, Ministry of Finance and the NNPCL are collaborating to ensure that all foreign exchange inflows are returned to the central bank to boost reserves accretion.
Describing the naira, which exchanges around N1,370 to the dollar at the parallel market as undervalued, Cardoso said: “We believe that the naira is currently undervalued and, coupled with uncoordinated measures on the fiscal side, we will expedite genuine price discovery in the near term.”
Acknowledging the challenges facing the Nigerian economy and the resistance to proposed solutions by various stakeholders, he assured that the economy was now at a turning point, and that the bold reforms being undertaken across different segments of the economy would ultimately be directed towards addressing these challenges in a sustainable manner.
“I am confident that we are already witnessing positive outcomes, and these will undoubtedly become more apparent in the near future. The dedicated and relentless efforts being made are certain to bring about significant and positive changes for our economy,” he said.
He assured that the rising costs of food and volatility in the forex market would soon be addressed. Cardoso stated that the projections for the nation’s economy paint an optimistic trajectory as the Federal Government of Nigeria anticipates real GDP growth of 3.76 percent in 2024, slightly surpassing the estimated 3.75 percent for2023.
The optimism, he said, was under pinned by the implementation of key government reforms set to shape the economic landscape.
He also said that the positive outlook for Industry, Services, Agriculture, and Mining, Electricity, Gas & Water Supply sub-sectors reflects the potential effect of market-based reforms through private investment and SMEs led growth that would contribute to business improvement and confidence.
“Government reforms in the mining an energy sub sectors are expected to serve as a catalyst for growth and development. While the potential for growth exists in 2024, each sector may encounter unique challenges and opportunities,” he said.
According to him, inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 percent. This will be aided by improved agricultural productivity and the easing of global supply chain pressures, benefiting businesses by boosting consumer confidence and purchasing power.
“Government reforms in the mining an energy sub sectors are expected to serve as catalyst for growth and development. While the potential for growth exists in 2024, each sector may encounter unique challenges and opportunities,” he said.
However, reacting to some of the assumptions and programmes of the CBN, Muda Yusuf endorsed some of the actions taken so far by the CBN to stabilize the economy.
Yusuf stated on Arise Television on Tuesday, on January 30, 2024, that the steps being taken to clear the backlogs of Foreign Exchange by the CBN is a good idea, and that in a short to medium term, there will be easing of the pressure faced, but it is not a “quick fix” to the fundamental structural deficiencies faced in Nigeria.
The economist, however, said that the approach adopted by the apex bank at stemming the valuation of the naira should be interrogated as the Nigerian economy could not afford the dramatic changes in the foreign exchange, and that the government should address the social consequences of these reforms on Nigerians.
While applauding the clearing of another $500 million by the CBN, Yusuf said: “We have gotten to a point where borrowing to support this kind of system will also create its own challenges. So, I think the best way forward is what I believe the CBN is trying to do, because of the magnitude of this challenge, it’s not something you can fix in six months, in seven months, because if your reserve has depleted so much, you have challenges with your oil production, oil output, you have an economy, which, over the years, has been programmed to depend so much on foreign exchange from oil, you have an economy where the non-oil sector is contributing not more than 5-10% of your foreign exchange earnings, these are fundamental structural deficiencies, and these are not things that you can be fixed very quickly.
“But what I think is important in all of this is for the CBN to continue on this trajectory of trying to rebuild confidence, that is, by clearing this backlog so that whatever we have that is coming to the CBN will now be able to be injected directly into the market,” the report by Arise TV quoted Yusuf as saying.
According to Yusuf, ideally, the CBN should not be the major provider or supplier of forex, but due to the issue of trust deficit in the system and confidence crisis, the responsibility and challenges of stabilising the market are now squarely resting on the CBN.
“Unfortunately, because of these backlogs, the CBN is not able to directly intervene in the market as effectively as it should because the CBN is prioritising the clearing of backlogs, which makes sense, because if you really want people to bring in forex into your economy, those who had issues with this liquidity, those whose forex are already trapped, those whose transactions are disrupted by the liquidity crisis, which is creating a lot of credibility for Nigeria in the international trade process, we need to sort out all those things.
“So, my view is because the CBN is trying to sort that out, the capacity to intervene to stabilise the market has been constrained significantly, more so that we have a situation where we have a reserve that is severely depleted, because you can only defend a currency to the extent of the reserves that you have,” he said.
While maintaining that the reforms are needed, he said that the government should make the reform process less severe in terms of the pain that it was exerting on Nigerians, and that the government should address the social outcomes of the reforms being put in place.
According to him, in addressing the social outcomes of these reforms, “the government should go back to the drawing board and look at how to address the social consequences of these reforms. To reduce the pressure of prices, cost of living, cost of transportation, cost of energy. And in doing that, we may need to step out of the orthodox method of economic management, because this is something that is peculiar to our situation. We need to relate to our reality.”
“You cannot drive this process completely through the orthodox economic policy. We need to recognize the implications of reforms for poverty, for job creation, for cost of living. So, the normal market principles cannot deliver that situation. So, it requires a lot of government intervention, but the intervention must be effective, it must be something that is not vulnerable to corruption, I think that is something that we need to do,” he added.
It is obvious that despite the pains Nigerians are going through as a result of the reforms, the federal government and its agencies are gearing up to impose more legislations and levies that will inflict more pains on the people like the latest import duty rate raised to N1,423 to the dollar by the CBN. Certainly, this singular action will have multiplier effects on the prices of imported goods and services.
T.S
-February 4, 2024 @ 17:18 GMT|
Tags: Farooq A. Kperogi
