By Dakuku Peterside
Rome is burning, and Emperor Nero and Roman elites are busy revelling in gladiator rendezvous and despicable hocus-pocus with the empire’s future. The leadership in Nigeria is playing Nero, and the Nigerian elites are side-tracked by the macabre dance of preparing for the next elections.
Whilst neglecting the harsh truth that
millions of Nigerians’ backs are broken by the harsh tripartite economic
realities – hyperinflation, especially food; massive unemployment; and energy
crisis occasioned by the Russian–Ukrainian war in a post-COVID 19 economy.
The political class seems indifferent to the crumbling economy and collapsing
living standards of Nigerians.
These days the average Nigerian may be an economic illiterate or may not be interested in economic indicators, but almost all Nigerians know by impact and experience that the economy’s health is in shambles. You do not need to be an economist to know that a loaf of bread you bought for N500 in June sold for N700 by the end of July or that cost of 10kg of cooking gas almost doubled in a space of four months from March to July 2022.
Airfare from Abuja to Kano rose from N50,000
economy ticket to about N100,000 between June and July. The pattern above is
most noticeable in fuel prices, including diesel, prices of food items,
transportation, and cost of imported items, no matter how insignificant.
There is an increase in the cost of goods and
services of most commodities in Nigeria whilst wages and income remain stagnant
or depreciate. This is made worse by the worsening exchange rate regime.
Nigeria is an import-dependent economy . This is made worse by the imported
inflation due to the high price of goods and services abroad because of the
worsening global economic crises. When the prices of goods increase abroad,
importing those goods means importing the inflation attached to the goods.
Combined with the rapid fall in the value of the Naira against major world
currencies in the unofficial market (Dollar exchanged for almost N720 to
$1).
Economists amongst us try to explain the
situation using critical economic data, mainly from the National Bureau of
Statistics (NBS). Recent statistics will make any Nigerian have a sober
reflection on the fate of this country , though the full effect of this is yet
to play out. Spiralling inflation stands at 18.6% in June 2022 on a
year-on-year basis, and on a month-on-month basis, the inflation rate increased
by 1.82% in June 2022, higher than the rate recorded in May 2022.
The composite food index on a year-on-year
basis rose to 20.60% in June 2022. Nigeria’s inflation has been running wild
since the beginning of the year, rising from 15.6 per cent in January to the
current rate of 18.6 per cent in June. In a similar pattern, the food inflation
rate, which is a catalyst of the ballooning inflation, increased to 20.6 per
cent in June against 17.13 per cent recorded in January. The outloook sends
signal of a dark cloud.
Ordinary Nigerians are losing confidence in
the ability of the managers of our economy to arrest and reverse this
trend. From the prism of the man on the street, it appears that our economic
ruin is inevitable. The highest inflationary spikes are in prices of food
items, petrol, cooking gas, clothing, passenger transport by road and by air.
After months of caution, the CBN’s
Monetary Policy Committee, MPC, raised the interest rate benchmark by 100 basis
points (1%) in their last two consecutive meetings to fight this inflation.
Theoretically, this should slow down inflation and improve the economic
situation. However, the opposite is the case – the higher the Monetary Policy
Rate, the higher the inflation. The reasons for this may be, first, too much
money in the system due to Covid 19 financial interventions by the government.
The second is imported inflation which is not
affected by MPR. The third is the further depreciation of the Naira, and
finally, the survivalist instinct of businesses to mark up costs and pass to
consumers who bear the brunt of the increase in prices. The last but probably
the biggest culprit is uncontrolled government borrowing mostly by ways and
means at the behest of the CBN, a euphemism for printing of money.
This situation is not helped by dwindling
government revenue because of insecurity and Nigeria’s inability to maximise
the production and sale of crude oil during this high price regime in the
international market.
Given this gloomy picture of the economic road
ahead that we are most likely to travel through as a nation, what are our
options? Our government must act decisively with speed, clarity, transparency,
and innovation. Traditional thinking cannot help us in this situation.
Government should wake up and aggressively pursue economic policies and actions
that will improve the situation. This is not time to point accusing fingers.
Any fair-minded person will admit that it is not entirely government’s fault
that these economic woes befall us. However, it must also be said that the
government has not shown capacity and will to tame the situation.
This situation results from accumulated
financial mismanagement and policy misdirection of past administrations,
including this one. But one must recognise the devastating impact of COVID-19
on our economy and the unpredictable international economic climate that is
volatile and affected by conflicts such as the ongoing Russian – Ukrainian war
and the energy crisis that ensued. Having acknowledged this, I must point out
that these facts do not exonerate the current government from taking absolute
responsibility to tackle the situation, no matter the root causes.
Therefore, I recommend that government put out
remedial policies and actions to mitigate the painful consequences of the
economic hardship on many Nigerians. Over one hundred million Nigerians are
living below the poverty line.
At this point, government must, as a
matter of urgency, attack the problem with a four-pronged approach: First,
government must devise how to protect the poorest of the poor amongst us using
policy instruments. If government fails to do this, it may encourage an upward
crime swing. Second, government must be decisive in managing the pump price of
petroleum products and prioritise domestic gas supply to the local market. Most
inflation today is linked to a rise in the cost of crude oil, which translates
to an increase in the price of petroleum products.
Third, although government, through the
Central Bank of Nigeria, has done a lot to boost local food production, it must
go further to invest in the processing, storage and distribution of food and
help farmers and other businesses create more value across the value chain
spectrum. Fourth, CBN as a significant stakeholder, must continue to use
monetary policies in conjunction with fiscal policies of the federal government
to stabilise the economy.
The depreciation of the Naira has continued to
directly or indirectly affect most families in Nigeria owing to the import
dependent nature of the economy. The unregulated activities of “black market“
for foreign exchange portend great danger to our import-dependent economy unless
CBN and the Federal Government step in to control the situation.
In this period of elections campaigning, it
behoves Nigerians to hold the presidential hopefuls accountable and examine
their abilities and capacities to bring Nigeria out of this economic quagmire.
Any populist promises by our presidential candidates to revive the economy,
create jobs, and put us back on the path of growth must be interrogated by
voters. Without the finer details and mechanics of how it can and should be
done, it should be taken for what it is, wishful thinking, and discarded
accordingly. The era of economic guesses is over.
Let 2023 be a watershed of economic
change. Government and the political elites must quit playing Nero and start
working hard to salvage our “burning Rome”.
*Peterside in a commentator on public issues
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