There is no doubt that the last one year has been tough economically in Nigeria due to the dwindling economy triggered by hyperinflation, rising job losses, foreign exchange conundrum, power failure, reduction in the daily oil production to 1.1 million from 2.1 million barrel per day due to Niger Delta crisis among others.
All these are as a result of ‘recession’ which Finance Minister, Mrs Kemi Adeosun described as ‘technical’. According to her, “things are tough, but we are not ignorant, I want to assure Nigerians the economy is in good hands and we are absolutely doing our best. We want to assure Nigeria we are on the right path, we are on the right track.”
The government had called on Nigerian to imbibe the spirit of nationalism with the diversification initiatives to focus on agriculture, entrepreneurial initiatives, improving local manufacturing drives and industrial developments. In addition, the 2016 budget gave 30% to capital projects to improve the infrastructure of the nation, a development, which is hoped would lead to job creation for the unemployed graduates and re-engaging the hitherto sacked labour force from industries, apart from poverty reduction.
The agricultural sector saw massive investment in rice production and mining, yet some saboteurs have undermined government’s effort in this direction, as these unpatriotic elements engage in aggressive exportation of the nation’s grains to other countries, which may likely lead to food crisis. The development prompted the presidency through the Senior Special Assistant to Muhammadu Buhari on Media and Publicity, Garba Shehu that the current exportation of grains may lead to the nation witnessing famine from January 2017.
He said, “No fewer than 500 trucks of grains depart Nigeria weekly due to huge demand in the global market, targeting the nation’s surplus grains production.”
Recently, economic watchers have called for the patronage of made in Nigeria goods and services apart from encouraging local production, yet, the business climate has been terrible for local and foreign investors. Many multinationals have left the shores of Nigeria to other countries due to epileptic power supply, multiple taxation, lack of access to foreign exchange and high interest rates.
The question on the lips of everyone is whether the economy if faring under the current administration? Are we are getting it right or progressing in the wrong direction?
Economic Confidential therefore consider some of the economic realities facing the nation to know whether we are getting it right.
Going by the current figure released by the National Bureau of Statistics (NBS) in October, the Nigeria inflation rate has increased to 18.3 percent. Since February this year, the nation has continued to witness upward inflationary trend, leading to increase in prices of goods and services including food, imported goods, clothing and footwear, housing and utilities, transport among others. Already, the Nigeria’s consumer prices have surpassed the 18.2 percent market expectation for the year 2016. Economic Confidential learnt that the rate has continued to increase from January where it progressed from 9.6% to 11.4% in February, 12.8% in March, 13.7% in Aril, 15.6% in May, 16.5 in June, 17.1 in July, 17.6 in August, 17.9 in September to 18.3 in October. This is to say the least unacceptable!
The impact of hyperinflation has continued to increase the poverty ratio in the country, suppressing the purchasing power of consumers and making Nigerians engage in panic buying in most cases. For instance, despite the local production, the price of rice has moved from N7, 500 in December, 2015 to over N22, 000 in December, 2016- that is close to 300% price increase. This is similar to other products including fish, palm oil, groundnut oil, toiletries and electronic appliances.
The implementation of over N6 trillion budgets for the year 2016 has been criticized by economists as there have been no improvements in several sectors. The presidency has approached the senate for a borrowing of about $30 billion to support the 2016 budget which was rejected by the upper chamber. The capital budgetary allocation has not in any way impacted the lives of Nigerians as over 60% are having housing challenges. The roads are in deplorable conditions and power sector has continued to supply lower electricity to consumers. On December 1, the nation’s power generation capacity dropped from 4,285 megawatts recorded on September 16 to 3,321 megawatts because of shortage of gas. The 2016 budget failed to address the social welfare packages for the youth, no single employment for the youth except the NPOWER recruits that are yet to start working. The security situation in the north-east has continued unabated, apart from social crisis in the Internally Displaced Persons (IDPs) camp. Furthermore, there is lack of political will on the part of government to fund critical sectors especially in information management and job creation with over 20 million Nigerians losing their jobs to the current economic realities.
The government has failed to stand by its economic policy on economic diversification. The nation has aimed at improving investment in agriculture, petrochemicals, solid minerals and manufacturing as best method of diversifying the economy. Yet, the manufacturing sector is not equipped with required foreign exchange to import machineries and equipment that will be used to produce goods locally for consumers. The policy inconsistency, corruption and selfish interest have been regarded as the bane of economic diversification policies in Nigeria. It has also driven foreign investors away from the country, for instance, many local vehicle manufacturers in the country have packed up because average Nigerians cannot afford a new car.
Despite economic recession and hyperinflation in the country, the Monetary Policy Committee of the Central Bank of Nigeria held the interest rate at 14%. Financial analysts believe that the action of the apex bank has made it difficult for manufacturers to borrow. The CBN Governor, Godwin Emefiele said, “Conscious of the need to allow this and other measures, like foreign exchange reforms, to work through fully we decided to retain all monetary policy means at their current levels.” He attributed the current recession facing the nation’s economy to plunging global oil prices and production due to militant attacks in the Niger Delta from the beginning of the year.
The increase in transportation fares in the country has been traced to the government decision to increase price of premium motor spirit in May this year without provisions for palliatives to cushion the ripple effect on the economy. The cost of air and road transport has doubled in the country which affected to a large extent the commodity market prices. Many market women and men in Nigeria inflate the prices of local goods because of high transport fares.
Taxes and Levies
There are cases of multiple taxations recorded in many sectors of the economy including telecoms, oil and gas and solid minerals. The states, local government and federal government have resulted to internal revenue generation because of the economic recession, making companies pay through their nose. Also, the import duties and other levies imposed on imported goods at the nation’s borders are becoming worrisome. Although, increase in taxes has supported the revenue shared by the federation account to the three tiers of government, efforts has to be made to encourage foreign and local firms with tax holidays and tackle multiple taxation.
Unfavourable Business Climate
Out of 190 countries worldwide, Nigeria came 169th in the World Bank ease of doing business index 2016/2017. The report showed that firms are finding it difficult to survive in Nigeria while there was no improvement in the nation’s infrastructural development because of poor power supply and lack of clear regulations and implementation in the business environment. The poor road networks, multiple taxation, poor electricity supply and shortage of foreign exchange have made many firms relocate to Ghana other neighbouring countries with improved infrastructure and in turn export their products to the country.
Foreign Direct Investment
The economic policy of the current administration has been driving away foreign investors. Statistics have shown that many FDI have withdrawn over $80 billion from the economy in the last one year. The government need to work on the infrastructural decay, provide clear cut policies and economic directives that will make the nation investment hub for the FDI.
The problem of power supply in Nigeria has become worrisome. The Niger Delta militants also contributed to the dwindling power generation because of their attacks on nation’s gas pipelines. This action has made most businesses to be run on diesel which is sold above N150 per litre. The electricity distribution companies have also failed to meter consumers, apart from giving their customers estimated billings for power not consumed.
The current foreign exchange regime has been hinged on scarcity and shortages for local and foreign businesses in the country. The CBN has changed its policy on different occasion to stop selling to the Bureau-de-Change operators before reconsidering the policy, yet, manufacturers, marketers and importers are battling with dollar scarcity.
It is left for the policy makers to decide whether we are getting it right in terms of our economic policies and planning for future growth. The nation’s economy has been battling with decline in revenue and (Gross Domestic Product) GDP growth, hyperinflation, weakening balance of payment, declining foreign reserve, weak capital market and rising unemployment. Despite the huge budget for 2016, the diversification attempt by government is yet to yield any result due to naira devaluation among other challenges.