In recent times, Nigerian economy has found itself in a trouble waters. This may be occasioned by the devaluation of naira particularly owing to the fall of the price of crude oil at the international market which is the major source of revenue for Nigeria. This unfortunate circumstance has become a thorn in the flesh of most Nigerians including the public and private sector of the economic.
Economic Confidential findings revealed that, life has become so difficult for most Nigerians, as prices of goods and services have continued to skyrocket, people are losing their jobs, apart from the fact that many State Governments are not paying salaries among others. In this circumstance, the Federal Government appear to have no clear direction for the economy. This could be seen from the fact that the government has not made any convincing attempt to resuscitate the economy than apportioning blame on the previous administration.
Most worrisome is the recent seeking by President Muhammadu Buhari for emergency powers to deal with Nigeria’s economic predicament. Though, the presidency denied the fact that he was seeking emergency powers from the National Assembly in order to tackle the lingering economic crisis in the country, but most Nigerians are still in awe of such proposition by the economic team of the President giving his antecedent.
As a matter of fact, this is not the first time we have found ourselves in economic crisis. In 1982, after the oil boom, which lasted through the 1970s, Nigeria was faced with a plunge in crude oil prices, which led to exactly same economic challenges being faced today. Nigeria’s foreign reserve shrank, the naira plunged, apart from the fact that our giant appetite for foreign goods could not be funded by the revenue available at the time.
Former President Shehu Shagari, at the time, when Nigeria was obviously in a recession claimed that it had become imperative for the federal government to take immediate action to protect the balance of payments and revamp the economy. He proposed emergency stabilization measures to the national assembly, which was approved almost immediately. It was tagged the “Economic Stabilization (Temporary Provisional) Act 1982.
The bill was translated to foreign exchange control, which reduced Basic Travel Allowance (BTA) from N800 to N500 per person of the age of 16 and above per annum, with no allowance for children under the age of 16. As for Hajj forex subsidy, the government pegged the number of pilgrims permitted to perform the hajj in 1982 to a maximum of 50,000, with a BTA of N800 per person, against N500 for other citizens.
Reduction of business travel allowance from N3,000 to N2,500 per annum for companies registered in Nigeria. Reduction of Form ‘M’ lifespan to six months, as against one year in the past, and all registrations were done at the CBN headquarters. Re-introduction of pre-shipment inspection for spare parts, raw materials and books and the introduction of pre-shipment inspection for frozen and canned fish!
As part of the monetary policy, all interest rates were revised upwards across the board by two percent from their existing levels, but later in the year in November 1982, they were reduced by one percent.
According to the Nigerian military, which Buhari was part of, the stabilisation act had failed, with inflation rising above 30 percent, and foreign reserves falling as low as $2.85 billion, which could only bear Nigeria’s import bill for a single month. This led to the 1983 coup.
Speaking to Economic Confidential on the way out of an economic recession, a Lagos based Economist, Fagbemi Oluwafemi said; there is no doubt that, at a time like this, any meaningful government will seek for a way out, but in trying to do that, the government most trade with caution. His words “Government will try and stimulate the economy with several forms of fiscal tools. Depending on where the pressure is most significant the focus could be on trade partners, business incentives, consumer centric policy, federal spending cuts, or a combination of those.”
According to him, “working with our trade partners to accept more exports to them so that our manufacturing and production increase, resulting in increased employment and an infusion of cash into businesses and at consumer level which would increase investment. Also increasing imports could reduce prices on some products because of increased supply. Increasing trade deficit could potentially impact on domestic production and manufacturing.”
“Reducing taxes or creating tax credits for consumers would provide additional money in the consumers pocket and an incentive for consumers to spend more, thus infusing the economy and providing business with an incentive to continue production at current levels or increase production.” Adding; “Cutting federal spending and reducing deficit will increase the confidence of Nigerian allies and trade partners and helps stabilize the value of the naira. This could result in more favourable terms for trade and/or loans that the government may be seeking.”
While explaining the effect of increasing wage and bolstering prices he pointed out that, “increasing wage rates will creates mass unemployment, and bolstering prices perpetuates and creates unsold surpluses. His words; “This is basically because a recession is fundamentally a monetary phenomenon. Because of the default of loans to banks after a prolonged period of inflation, money simply disappears from the economy; prices of everything drops. If the government holds wage levels artificially high, when they should fall along with consumer prices, businesses become unable to make profits, or even pay all their employees.
Also speaking on the issue, a former President of the Association of Telecoms Companies of Nigeria (ATCON), Lanre Ajayi, said the President’s decision to seek emergency powers to fix the economy underscored his genuine determination to bring succour to the populace.
He, however, warned that “granting excessive powers to the president might be dangerous on the long run, arguing that within the ambit of the Nigerian Constitution, the President has enormous powers which he could evoke to do whatever is needed to be done to get the economy running. The President’s intention might be good but it might be abused if not checked”, he added.
On his part, The President of the National Association of Telecoms Subscribers of Nigeria (NATCOMS), Deolu Ogunbanjo said the President does not need any further powers to get the economy running.
According to him, “the law allows him ample room to use his enormous powers as the chief executive of the Federal Republic of Nigeria to manage the economy.” He urged the President to raise a team of experts that would advise him on monetary and fiscal policies that will help the economy back on stream, warning that granting the president emergency powers will lead to arbitrary use of powers, adding that the obnoxious Communications Service Tax Bill seeking a nine per cent tax on communications services in the country may be introduced by fiat.
He said such a tax will be overkill for consumers and operators who are already reeling under a myriad of challenges including multiple taxation and dearth of infrastructure among others.
In all these, analysts are of the view that, President Muhammadu Buhari should surround himself with experts that will help him and Nigerian at large to navigate through this storm.
