President Bola Ahmed Tinubu PHOTO: Twitter/@officialABAT
The high degree of uncertainty still bedevilling the economy one year after the inauguration of President Bola Ahmed Tinubu’s administration is quite troubling. We expect him and his cabinet members to listen to the counsel of other experts and do everything possible to achieve stability in the economy and get the citizens out of the severe economic hardship in the country.
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Since Tinubu’s big bang announcement of the removal of fuel subsidy and harmonisation of the various exchange rate regimes that prevailed before the inception of his administration, things have not remained the same. Indeed, things appear to have fallen apart and the centre has found it difficult to hold. Nigerians are still waiting for the much-desired stability in the economy or, at worst, for the economy to be taken back to where Muhammadu Buhari left it when the U.S. dollar exchanged at N461 in the official market and N750 in the parallel market. As economists would say, “prices are sticky downwards” and thus the situation with the inflation rate and the exchange rate keeps getting worse. Life has been miserable for the average Nigerian since May 29, 2023, when the announcement was made. Lamentation of woe has become commonplace across the country.
The frequent increase in the prices of petroleum products due to the depreciation of the local currency, removal of subsidy and the consequent inflationary effects has made most Nigerians poorer with real income falling to unimaginable levels as prices of basic commodities get out of the reach of the common man. This is compounding the already existing problems of insecurity, the poor state of infrastructure and the unfriendly business environment to the extent that there appears to be little hope for respite on the horizon.
Statutorily, price stability has been a core focus of the Central Bank of Nigeria (CBN) in the management of monetary policy. Under the separate stewardships of Chukwuma Soludo and Lamido Sanusi as CBN governors, the country experienced a single-digit rate of inflation, which was in line with the core functions of the apex bank as a key pillar of monetary policy. After Sanusi left as governor, the rate of inflation became uncontrollable with other macroeconomic indicators following suit.
Currently, the CBN seems to be doing some sort of firefighting in the management of inflation and the exchange rate with little to show for it. The inflation outlook now is uncertain. The causative factors, which are largely cost-push, are still very much with us. Insecurity is one of the key drivers of the rising prices apart from the mismanagement of the two policy pronouncements by President Tinubu on May 29 last year. Food production has been drastically affected by the insecurity, especially in the food belt of the country. This has implications for the level of importation of food to fill up the gap and has also exacerbated the costs of food production locally. It is very worrisome that the government seems incapable of addressing the hydra-headed problem of insecurity. The unfavourable business environment is also adding to the cost-push effects of inflation. This is sad.
On the monetary side, the frequent resort to increasing the monetary policy rate by the CBN appears defeatist. This strategy, which has persisted since the time of Godwin Emefiele as governor of CBN, has simply helped to make credit costly and done serious harm to the operation of small businesses, thus stagnating economic growth. The key attraction of the policy is largely applicable to portfolio investments, which are just coming to cash in on the high returns of their portfolio for as long as the bonanza is on. When the operating environment is not conducive for business, the much-needed fixed foreign capital or foreign direct investment will not come by merely increasing the monetary policy rate.
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What the CBN should do is to strengthen its supply and demand management policies in relation to the management of the exchange rate. How can supply increase under the current circumstances when oil theft persists in the economy? That is a veritable source of more foreign exchange for the government to service the economy. The demand management policies of buying Made-in-Nigeria goods should be one of the key areas of focus in managing the market for foreign exchange. The current yo-yo movement of the naira-dollar exchange is clearly indicative of the much work that needs to be done by the CBN in addressing the economic problem the country is currently facing.
Finally, the Minister of Finance and Coordinating Minister of the Economy seems to be missing in action in the management of the current economic challenges. There are lots of economic policies being churned out by the various ministries under this administration that make one wonder whether there is any coordination in whatever form in channelling the macroeconomic indicators to the desired targets. These include policies on the proposed minimum wage, the increased taxation on cybersecurity, a hike in electricity tariff and a hike in the monetary policy rate.
For a fact, the Tinubu administration has succeeded in making Nigerians poorer and impoverished in its first year in office, and it appears the end is not in sight. Even at that, the administration has found it very difficult to cut the cost of governance despite public outcry in this regard. Nigerians expect something better from this administration.
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