By Cosmas Omegoh

Experts are warning that Nigeria’s economy is stressed on all fronts, fearing that soon the country might experience spiraling inflation.

They are not happy with the spate of insecurity across the country, rate of inflation, and unemployment. They are also saddened by the dismal performance of the naira, rising unemployment, and the country’s inability to service its rising debt, among other things.     

According to them, the dismal showing of the said indicators, are emphatic statements that the country’s economy is distressed.   

Last week, for instance, it emerged that the dollar exchanged for N710 at the parallel market.

Also last week, the citizenry were informed that the Extra Crude Account (ECA) had been depleted. 

The Minister of Finance, Budget and National Planning, Zainab Ahmed, in a communiqué at the end of the Federation Allocation Committee (FAC) for July, said that the money in June, plummeted from $25.37 million to a paltry $376,655.

Ahmed later revealed that the country’s debt-servicing cost in the first quarter (Q1) 2022 stood at N1.94 trillion, N310 billion higher than the actual revenue received during the period.

She went on to project that a total of N6.72 trillion would be required as full-year budget for petrol subsidy payment in 2023, should the country decide to accommodate the current subsidy regime.

Now, talking about inflation, the Nigerian Bureau of Statistics (NBS), said that Nigeria’s inflation rate increased to 17.71 per cent in May 2022. It added that: “On a month-on-month basis, the headline inflation rate increased to 1.78 per cent in May 2022; this is also 0.02 per cent higher than the rate recorded in April 2022 at 1.76 per cent.”

That aside, last March, NBS reported that Nigeria’s unemployment rate rose to 33.3 per cent, adding that “a total of 23.18 million persons in Nigeria either did nothing or worked for less than 20 hours a week, making them unemployed.”

At the moment, the prices of various staple foods have all gone up astronomically. 

A family loaf of bread earlier sold for N450, for instance, now costs N900. The price of 6kg of gas is now N4,800 up from N1, 600.

News from the power sector, a key driver of the economy, is not pleasant in anyway. Between January and July 2022,  for instance, the national grid had collapsed six times. 

Reports say the country now generates a meagre 40MW of power compared to the still lamentable 3,000MW it was earlier generating.

The recent solidarity rally embarked upon by the Nigeria Labour Congress (NLC) had pilled more misery on electricity consumers who were left with no power supply.  

In the meantime, various manufacturing companies still struggling to survive have had to provide alternative power for themselves. But sadly, the high cost of diesel now sold at N900 per litre in some areas, and fuel selling at N190 per litre poses real challenge. Companies and small scale businesses which cannot afford the rising cost of doing business are closing shop.

As it stands, the country is believed to be reeling in pains. Many are throwing up their hands in resignation.

To cap it all, Nigerians from all walks of life now face real existential threats – at all fronts. Insecurity is here to stay. Farmers in most parts of the country can no longer go to their fields; they are all helmed in as food insecurity looms. Most Nigerian roads are now impassable; marauding bandits have taken charge, killing people at every turn. Nowhere is safe anymore – not even those living in Abuja, the seat of power where bandits have hit lately.  

The feeling among many Nigerians is that the country totters at a precipice, waiting to tip over. They stand strong that the country’s economy might collapse, fearing that the days of gloom are here. That doom might soon follow if nothing drastic is done urgently.

How to access economy’s performance

A development economist, Dr George Akin Ogunleye pointed out that for Nigerians’ fears to be put in a proper balance, it is important to assess the state of the nation’s economy using specific indicators, contending that their performances are clear indications of how the economy is faring.  

“The performance of every economy is based on certain macro-economic variables. They clearly tell us the true health of the economy. 

“These variables are the exchange rate, rate of inflation, rate of unemployment, security level among others. If we base our assessment on these four, we will be able to know whether the Nigerian economy is moving forward or not,” he said. 

Dr Ogunleye who teaches in the Department of Economics, Osun State University, examined the variables one after the other. “Now, let’s talk about inflation. Before now, people used to talk about single digit rate of inflation. But now, it is not only double digit, but very high double digit.

“That is the reason we have clamour for increase in wages everywhere: ASUU is clamouring for wage increase; every other union is doing the same. And the reason is clear: the money with which people bought goods and services yesterday no longer buys the same today. Now, everybody in the country is poor, except the few privileged ones holding political offices.

“The way we are going, I’m afraid Nigeria may end up having spiraling inflation soon,” he said.  

Looking at the exchange rate, he said: “It tells us something about the volume our money exchanges with other counties’ currency.

“We all know how much we depend on foreign goods. This craze is pushing our exchange rate downwards. So, if the value of our currency is going down, we can imagine how that will impact goods and services. So, let’s begin to appreciate our condition because we have refused to produce the things we need.

“It needs to be said that Nigerians are clearly living above their means. We import everything. And as long as we continue to do that, the price of dollar will continue to go up. That way, we are inviting inflation.

“Now, let us consider the case of fuel and diesel which are leading economic indicators. Whatever happens to them will also affect the prices of every other goods because they all depend on them.

“When you produce goods using diesel sourced at N900 per litre, definitely the prices of such goods will go up. That in itself fuels inflation.”

He expressed unhappiness with the humongous sums of money said to be spent on debt servicing and subsidy payment. 

“Recall that the government voted N5.6 trillion in 2023 for subsidy payment which is more than 25 per cent of this year’s budget. That is a lot of money. Are Nigerians consuming petrol subsidised with N5.6 trillion? I have my doubt.

“Besides, look at the rate of unemployment. It is so alarming in the country. People have university degrees, but there is no employment for them. Many who are employed are actually underemployed. People graduate from the universities with skills but don’t have jobs to do; so they deployed their skills negatively. That is why we have yahoo-yahoo boys and all that – each one of them using the knowledge they acquired to survive.” 

A finance and tax expert, Mr Ben Kpaduwa, admitted that the economy is bound to experience a free fall because “the country does not produce anything to sell and earn foreign exchange.”

He recalled that Nigeria’s only export commodity is oil but which according to him, “is regulated. There is a limited total quantity you have to bring to the market, which has price ceiling too. With such controls, we cannot sell more oil than we would have wanted to, unlike the advanced countries that produce and sell their own goods to earn foreign exchange.”

He too accused the spate of insecurity as a huge drag on the economy, regretting that the government of the day is not serious about tackling the challenge, stating: “I don’t see the reason the bandits will continue to overpower over a million security personnel in the country.”

He disclosed that the security situation in the country is badly hurting the economy because “no investor would put his money where there is insecurity. It will go down the drain.

“That is also fueling the free fall of the naira because no one wants to come here to invest. So, that much needed foreign direct investment we can no longer get. Many countries have already issued travel bans on their citizens. So,  how do they bring in foreign exchange?”

He warned that if insecurity is not addressed, both the naira and the economy will continue to nosedive and “this will continue to have multiple effects on the economy which is stagnant for now.”  

He told our correspondent that “the citizens are currently overtaxed,” and told the government too that “the citizens can no longer bear that anymore.”

On the huge sums spent on servicing debts, he reiterated his earlier stand that there is nothing bad in borrowing.

He maintained that “when you borrow and put the money on critical infrastructure that will bring return on investment.”

Another development economist, Prof Uche Collins Nwogwugwu, while assessing the Nigeria’s current economy opined that it is “experiencing different forms of equilibrium both at the very high and very low levels.”  

He maintained that “the optimism of Nigerians is very, very low, because the economy grows on people’s expectations and optimism.”

Related News

He went on to lament the security issues around the country, which he believes are not helping matters. This, he said, is pushing many people into seeking ways of saving their future. 

“This is affecting the value of the naira because people are holding the foreign currency they have.”

Prof Nwogwugwu who is the Dean, Faculty of Social Sciences, Nnamdi Azikiwe University, Awka, Anambra State, lamented that: “Production is not actually taking place,” stating that “insecurity is driving the prices of food skywards because many people are no longer going to their farms.” 

This, he added, is real crisis in itself.

He is unhappy that the government of the day has trust deficit issues. “Everybody looks up to the government when things are tough,” he said, adding that “but now, all the calls on government seem to have fallen on deaf ears. It appears that no one is in charge anymore.

“Every economy is hinged on the activity of human beings. But in this situation, many don’t seem to have a guarantee for tomorrow. There is manifest fear among the populace. People are storing food; people are storing dollars because they fear for tomorrow. That is part of the reason the value of the naira keeps dipping.”

He warned that the country was not making the right efforts to tackle the existing challenges by asking the question: “What is progress? Progress is value addition – building on what is in existence,” insisting that “when there is nothing in existence or what is in existence is depreciating, people are afraid.”

He revealed that “at the moment, people are only working to sustain their lives,” a development he insisted does not augur well for the Nigerian economy. “Such people are merely working to live, not to save, and not to grow the system because the infrastructure to grow the system is not there. Those who are currently involved in production are merely doing so to keep body and soul together. If there is growth, unemployment will reduce. But there is no growth. Rather, what we have is negative growth.”

Why debt servicing is killing economy

On debt servicing, Dr Ogunleye is unhappy with the revelations made by Minister Ahmed. This is what he said: “When I hear that Nigeria is using a substantial part of its revenue to service debt, the question I ask is ‘how did we get there in the first instance?’

“I think this is happening because Nigeria and Nigerians are living outside their means.

“You recall that during the former President Olusegun Obasanjo era, he paid off all our debts. So, how did we come to servicing our debt with over 40 per cent of our revenue?”

He lamented that the money so borrowed might not have been spent on “developmental activities, but on consumption activities.

“If we invested wisely, the proceeds should have been able to repay both the principal and interest.

“Sadly, what we have in Nigeria is always dead-weight debt rather than light-weight debt. Unfortunately, the former is passed to the next generation that never called for it.”

On his part, Kpaduwa feared that the projects for which borrowed money were probably spent on are long-term ones which cannot be completed in four years hence the return on investment might be slow.

“Take the railways, for instance, even the recent attacks on the Abuja-Kaduna train service have almost crippled that investment. That is where insecurity once again pops up as a big challenge,” he noted.  

International dimension to falling economy

Prof Nwogwugwu said that there is an international perspective to Nigeria’s economic woes.

According to him, “the global economy is in trouble because of the Russian-Ukraine war. That is also affecting Nigeria – and largely   Europe. Those countries cannot abandon their own to intervene whereas they too are under fire.

 “The present challenges also have international dimension because the bullets the bandits are using to kill Nigerians were manufactured overseas. And don’t forget that those fueling insecurity here probably have international sponsorship.

“We must realise that the international community is a network. As long as you have trading partners, what affects one member affects the other naturally.

“Ukraine and Russia are Nigeria’s trading partners. But they are having problems now. This has a way of affecting us. For instance, until now who knew that Ukraine produced the wheat with which we baked bread at cheaper prices? That Russia supplies major parts of Europe with gas until the crisis arose.

“This is supposed to be a wake-up call for Nigeria. Yet, everything about it is being taken for granted.”   

Way forward

For Nigeria to come out of the woods, Prof Nwogwugwu emphasised that government must rise up to the challenge now.

He said: “At the moment, we don’t see the government rising to the occasion.

“So, the government has to take up its responsibility first by making very strategic statements on things going on. It is only when the people know that the government has taken up its responsibility that confidence will begin to return.

“But now, people don’t seem to have a guarantee for tomorrow. They are on their own, looking for means for survival. There is a state of fear.  When there is this state of fear, the only way forward is for the government to take up a position and reassure the people, and show them that it is visibly active.”

He also emphasised the role of the people in tackling the challenge.

“All what the people are discussing now are ways out to survive. As you can see, companies are struggling to sustain minimal activities so that they don’t close down. We will continue to experience this until the government comes up with something strategic.”

Part of the strategies the government must do now,  according to Kpaduwa, is to “widen up its revenue base especially non-oil exports so that it can earn foreign exchange for other critical capital development.”

He was unhappy that a large amount of money was being used on subsidy alone, which was unnecessary. “You cannot continue to subsidise PMS for the citizens; it is not done anywhere in the world. No economy will support that because the government is spending money that should have gone into key capital projects on subsidy.

“In the last quarter, the government had spent up to $2billion on subsidy. This ordinarily should have been deployed to developing key capital projects that ought to rave up the economy.

“At the same time, subsidy on electricity tariff ought to go.

“When you are servicing debt and at the same time subsidising things you ought not to be subsidising, that will be affecting your revenue base and the economy too.”

Above all, he called for a total overhaul of the management team of the economy, doubting the capacity of Minister Ahmed to manage the economy well. 

He insisted: “That is a critical way forward.”   

For Dr Ogunleye, if the government is sincere, part of the way forward is to have the will power to block all financial leakages in the system.

He said: “The government must have the political will to solve this challenge. Perhaps the incoming administration will be able to do so.

“Truth be told, anyone who is determined to repair this damage will definitely not be loved. But if he has the guts to block the leakages, then be assured that corruption will be whittled down.

“For the fight against corruption to be effective, it must start from the top and go downwards. When a leader is seen fighting corrupt people from the top, the people at the lower wrung of the ladder will shape up.”

He talked about the need to diversify the country’s production base. “We need to have local substitute for most of the things we import. By the time we do that, the craze for dollar will come down; then the value of the naira will move up. But relying on a narrow stream of income is a big problem in itself.”

He also emphasised on transparency saying: “Once this is lacking, everybody will capitalise on the opportunities open to them.

“If we diversify our economy and leave out  corruption, that alone will wipe out all the gains that could have been made.”