Rome is burning, and Emperor Nero and the Roman elites are busy reveling in gladiatorial trysts and despicable sleight of hand with the future of the empire. Nigerian leaders are playing Nero and Nigerian elites are bewildered by the danse macabre of preparing for the upcoming elections. While overlooking the hard truth that the backs of millions of Nigerians are being broken by the harsh tripartite economic realities – hyperinflation, especially food; massive unemployment; and the energy crisis caused by the Russian-Ukrainian war in a post-COVID context
19 economy. The political class seems indifferent to the collapsing economy and the collapsing standard of living of Nigerians.
The average Nigerian these days may be economically illiterate or uninterested in economic indicators, but almost every Nigerian knows from impact and experience that the health of the economy is in shambles. You don’t have to be an economist to know that a loaf of bread you bought for 500 naira in June sold for 700 naira at the end of July or that the cost of 10 kg of cooking gas has almost doubled in the space of four months from March to July 2022 Airfare from Abuja to Kano went from an economy ticket of 50,000 naira to around 100,000 naira between June and July. The average cost of road transport has also doubled over the same period. The above pattern is most visible in fuel prices including diesel, food prices, transportation and the cost of imported items, however insignificant.
There is an increase in the cost of goods and services of most commodities in Nigeria while wages and incomes stagnate or depreciate. This situation is aggravated by the deterioration of the exchange rate regime. Nigeria is an import dependent economy. This situation is aggravated by imported inflation due to the high price of goods and services abroad due to worsening global economic crises. When the prices of goods increase abroad, importing these goods means importing the inflation attached to the goods. Combined with the rapid fall in value of the Naira against major global currencies in the unofficial market (Dollar traded for almost N720 to $1).
The economists among us try to explain the situation with the help of critical economic data, mainly from the National Bureau of Statistics (NBS). Recent statistics will cause any Nigerian to reflect soberly on the fate of this country, although the full effect of this has yet to materialize. The inflation spiral stands at 18.6% in June 2022 on an annual basis, and on a monthly basis, the inflation rate increased to 1.82% in June 2022, higher than the rate recorded in May 2022.
The food composite index on an annual basis rose to 20.60% in June 2022. The food sub-index increased by 2.05% on a monthly basis in June 2022. of the year, from 15 .6% in January to the current rate of 18.6% in June. In the same vein, the inflation rate for food products, which is a catalyst for the surge in inflation, rose to 20.6% in June from 17.13% recorded in
January. The outlook sends the signal of a dark cloud.
Ordinary Nigerians are losing faith in the ability of the managers of our economy to stop and reverse this trend. From the prism of the man in the street, it appears that our economic ruin is inevitable. The highest inflation peaks are in the prices of food, gasoline, cooking gas, clothing, road and air passenger transport.
After months of caution, the CBN’s Monetary Policy Committee (MPC) raised the benchmark interest rate by 100 basis points (1%) in its last two consecutive meetings to combat this inflation. Theoretically, this should slow down inflation and improve the economic situation. However, the opposite is happening: the higher the key rate, the higher the inflation. The reasons for this may be, firstly, 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 the MPR. The third is the continued depreciation of the naira, and finally, the survival instinct of businesses to mark up costs and pass on the consumers who bear the brunt of the price increase. The last but probably the biggest culprit is the government’s uncontrolled borrowing mainly by ways and means at the behest of the CBN, a euphemism for printing money.
This situation is not helped by declining government revenue due to insecurity and Nigeria’s inability to maximize the production and sale of crude oil during this regime of high prices in the international market. Our low productivity meant that the government did not derive much revenue from taxes, duties and levies on economic activities. Our revenue-to-debt-service ratio is around 120%, and Nigeria owes over $100 billion, or almost a quarter of our gross domestic product. The private sector is struggling due to a lack of enabling environment for its activities. Insecurity has crippled economic activities in most parts of the country, and lives and property have been lost due to relentless attacks by terrorists, bandits, criminals, secessionists and agitators.
Given this grim picture of the economic road we are most likely to travel 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. The government should wake up and aggressively pursue economic policies and actions that will improve the situation. Now is not the time to point fingers at accusers. Any fair-minded person will admit that it is not entirely the fault of the government that these economic woes are happening to us. However, it must also be said that the government has not shown the capacity and will to tame the situation.
This situation is the result of financial mismanagement and policy misdirection accumulated by previous administrations, including this one. But we must recognize the devastating impact of COVID 19 on our economy and the unpredictable, unstable and conflict-affected international economic climate such as the ongoing Russian-Ukrainian war and ensuing energy crisis. Having recognized this, I must emphasize that these facts do not absolve the current government from assuming absolute responsibility to address the situation, whatever the root causes.
Therefore, I recommend that the government put in place corrective policies and actions to alleviate the painful consequences of economic hardship on many Nigerians. More than one hundred million Nigerians live below the poverty line. Imagine how they deal with this tough inflationary economic trend. What about people on fixed incomes with families and other responsibilities? How do they cope with the constant wiping out of the net worth of their fixed income securities due to devastating inflation? No wonder the labor movement is agitating for better wages and working conditions.
At this point, the government must urgently tackle the problem with a four-pronged approach: First, the government must design how to protect the poorest among us using policy instruments. If the government fails to do this, it could encourage an increase in crime. Second, the government must be decisive in managing the price at the pump of petroleum products and give priority to the supply of domestic gas to the local market. Today, most of the inflation is linked to an increase in the cost of crude oil, which translates into an increase in the price of petroleum products.
Third, although the government through the Central Bank of Nigeria has done a lot to boost local food production, it needs to go further to invest in food processing, storage and distribution and help farmers and other businesses to create more value through value. string spectrum. Fourth, the CBN, as an important stakeholder, should continue to use monetary policies in conjunction with federal government fiscal policies to stabilize the economy.
The depreciation of the naira has continued to directly or indirectly affect most Nigerian families due to the import dependent nature of the economy.
The unregulated “black market” activities for foreign currency portend great danger to our import-dependent economy unless the CBN and the Federal Government step in to control the situation. Unfortunately, the average Nigerian regards the black market rate of the dollar against the naira as the de facto market rate and when traders in this market determine the exchange rate, it is dangerous to our collective economic interest.
At this time of election campaign, it is incumbent upon Nigerians to hold the presidential candidates accountable and examine their skills and abilities to pull 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 to growth must be questioned by voters. Without the finer details and mechanics of how it can and should be done, it must be taken for what it is, wishful thinking, and discarded accordingly. The era of economic guesswork is over.
Presidential candidates must give Nigerians details on how they intend to save Nigeria and Nigerians from soaring energy costs, rising food prices, soaring debt profile, lower revenues and lower governance costs. Nigerians have been taken for granted enough. May 2023 be a turning point of economic change. We have to get it right this time and we have no choice. The government and political elites must stop playing Nero and start working hard to save our “burning Rome”.