Dark Clouds Over the Economy by Dakku Peterside

Given the bleak outlook for the economic path ahead that we are most likely to traverse as a country, what are our options? We must act decisively. Conventional thinking is useless in this situation. Governments should wake up and actively pursue economic policies and actions that will improve the situation in this country. Now is not the time to blame.

Rome is on fire, and Emperor Nero and the Roman elite are busy enjoying a gladiatorial rendezvous and dastardly Hocus Pocus toying with the future of the empire. has been sidetracked by the macabre dance of preparing for the next election. While ignoring the hard truth that the backs of millions of Nigerians, especially in terms of food costs, are being broken daily by the harsh tripartite economic realities of hyperinflation. Massive unemployment; COVID The energy crisis caused by the war between Russia and Ukraine in the economy affected by -19. The political class seems indifferent to the collapsing economy and the collapsing living standards of Nigerians.

These days, the average Nigerian may be ignorant of the economy or uninterested in economic indicators, but almost all Nigerians, from influence and experience, know that the health of the economy is in disarray. You don’t have to be an economist to know that bread bought for 500 naira in June sold for 700 naira at the end of July, or that 10 kilograms of cooking gas costs from March to July. Airfare from Abuja to Kano rose from his N50,000 on economy tickets to about N100,000 between June and July. The average cost of road transport has also doubled for him in the same period. The above pattern is most pronounced in terms of fuel prices, including diesel. the price of groceries; the means of transportation; the cost of imports, no matter how trivial.

While the cost of goods and services, and most commodities, has risen in Nigeria, wages and incomes have remained stagnant or have fallen. This is exacerbated by the deteriorating foreign exchange rate regime. Nigeria is an import dependent economy. This is exacerbated by import inflation due to high prices for goods and services abroad due to the worsening global economic crisis. If the price of commodities rises abroad, importing those commodities means importing the inflation that accompanies them. This is coupled with a rapid decline in the Naira’s value against the world’s major currencies on the informal market (one dollar is now almost exchanged for N720).

Our economists try to explain the situation mainly through key economic data from the National Bureau of Statistics (NBS). Recent statistics have caused Nigerians to think soberly about the fate of the country, but the full impact of this is yet to come out. Inflation rose by 1.82% in the month, higher than the rate recorded in May.

The composite food index on a year-on-year basis rose to 20.60% in June. The food sub-index increased he 2.05% month-on-month in June. Inflation in Nigeria has risen abnormally since the beginning of the year, rising from 15.6% in January to its current 18.6% in June. Following a similar pattern, food inflation, a catalyst for ballooning inflation, rose to 20.6% in June from a record 17.13% in January. Prospects send signals of dark clouds.

Ordinary Nigerians are losing confidence in the ability of the managers of our economy to halt and reverse this trend. I can see. The highest inflation rates are in food, gasoline, cooking gas, clothing, and passenger transport by road and air.

…I recommend that the government take remedial policies and actions to mitigate the painful consequences of economic hardship for many Nigerians. Over 100 million Nigerians live below the poverty line. Imagine how they are coping with this severe inflationary economic trend. What about families and other responsible people with fixed incomes? How do they deal with devastating inflation constantly wiping out the net value of bonds?

After months of vigilance, Nigeria’s central bank’s Monetary Policy Committee (MPC) has raised its interest rate benchmark by 100 basis points (1%) in its last two consecutive meetings to combat this inflation. . In theory, this should slow inflation and improve economic conditions. But vice versa, the higher the monetary policy interest rate, the higher the inflation. The reason for this may be, firstly, that the government’s COVID-19 fiscal interventions have injected large amounts of money into the system. The second is import inflation, which is not affected by the MPR. The third is further naira depreciation and, finally, the survival instinct of businesses to raise costs and pass the brunt of the higher prices on to consumers. The final, but perhaps the biggest, culprit is uncontrolled government borrowing, a euphemism for money printing, mostly by CBN-mandated ways and means.

The situation has not been helped by Nigeria’s inability to maximize crude oil production and sales during this high price regime on international markets and declining government revenues due to instability. Our low productivity means that governments don’t earn much from taxes, tariffs and levies from economic activity. With a revenue-to-debt service ratio of around 120%, Nigeria owes her more than $100 billion. This is almost a quarter of the gross domestic product. The private sector is struggling due to the lack of an enabling environment. Insecurity has paralyzed economic activity in most parts of the country, with constant attacks by terrorists, bandits, criminals, separatists and agitators resulting in loss of life and property.

Given the bleak outlook for the economic path ahead that we are most likely to traverse as a country, what are our options? We must act decisively. Conventional thinking is useless in this situation. Governments should wake up and actively pursue economic policies and actions that will improve the situation in this country. Now is not the time to blame. Any fair-minded person will admit that governments are not the only ones to blame for these economic hardships that have befallen us. However, it must be said that the government has shown neither the ability nor the will to settle the situation.

This state of affairs is the result of the fiscal failures and policy mistakes of past administrations, including this one. However, the devastating impact of COVID-19 on our economies and conflicts such as the ongoing Russian-Ukrainian war and subsequent energy crisis have created a volatile and unpredictable international economic situation. must be recognized. Acknowledging this, we must point out that these facts do not absolve the current government of its absolute responsibility to address this situation, whatever the underlying cause. .

I therefore recommend that the government take remedial policies and actions to mitigate the painful consequences of economic hardship for many Nigerians.More than 100 million Nigerians live below the poverty line. doing. Imagine how they are coping with this severe inflationary economic trend. What about families and other responsible people with fixed incomes? How do they deal with the constant wiping out of the net value of bonds due to devastating inflation? No wonder they do.

At this point, as a matter of urgency, governments need to tackle the issue through a four-pronged approach. First, governments must devise ways to protect the poorest among us through policy instruments. If governments fail to do this, it can contribute to an increase in crime. Second, the government must take a firm stand on controlling pump prices for petroleum products and prioritize domestic gas supplies to the domestic market. Most of today’s inflation is related to rising oil prices leading to higher prices for petroleum products.

Presidential candidates must tell Nigerians how they intend to save Nigeria and Nigerians from rising energy costs, rising food prices, ballooning debt profiles, declining revenues and reducing the cost of governance. Hmm. Nigerians have been taken for granted. Let 2023 be the watershed for economic change. I have to do it right this time and I really have no choice.

Third, while the government, through the Central Bank of Nigeria, has done a lot to promote local food production, it will invest more in food processing, storage and distribution to ensure that farmers and other businesses can grow in value across the board. Chain spectrum should help you create more value. Fourth, the CBN as a key stakeholder must continue to use monetary policy in conjunction with federal fiscal policy to stabilize the economy.

The declining Naira continues to affect most households, either directly or indirectly, as Nigeria’s economy relies on imports.

The unregulated activity of the foreign exchange “black market” portends great danger to an import-dependent economy unless the CBN and the federal government intervene to control the situation. Unfortunately, the average Nigerian sees the black market rate of the dollar and the naira as the de facto market rate, and if traders in this market determine the exchange rate, it is in our collective economic interests. It is dangerous.

In this election season, Nigerians need to hold their presidential candidates accountable and consider their capacity and ability to get Nigeria out of this economic quagmire. The populist promises by presidential candidates to revive the economy, create jobs and put us back on the path to growth must be questioned by voters. Without the finer details and mechanics of how it is possible and how it should be done, it is considered to be what it is: wishful thinking and discarded accordingly. Should. The days of economic forecasting are over.

Presidential candidates must tell Nigerians how they intend to save Nigeria and Nigerians from rising energy costs, rising food prices, ballooning debt profiles, declining revenues and reducing the cost of governance. Hmm. Nigerians have been taken for granted. Let 2023 be the watershed for economic change. I have to do it right this time and I really have no choice. The government and political elite must stop Nero and start working hard to save ‘Burning Rome’.

Dakuku Peterside is a policy and leadership expert.