Last week, the World Bank released its report on Nigeria’s worsening economic conditions. Reporting under its Nigeria Development Update, the global financial institution revealed the progressive deterioration in the country’s economic conditions.
The report showed that inflationary pressure has become an endemic scourge on the well-being of Nigerians that must be fought by the authorities. Rising inflationary pressures coming from the Ukraine war, the Bank said, could push an additional one million Nigerians into extreme poverty.
Indeed disruptions caused by the war have led to increases in the prices of diesel, aviation fuel, and wheat, for instance. The jump in the price of Aviation fuel from just N190/litre in January this year to over N700/litre now has pushed the cost of flights beyond the reach of many Nigerians. In the same way, diesel, used both in transportation and powering industrial machines, has jumped from a price of about N224.9/litre early this year to N800/litre, and there are reports it could hit N1,500 a litre soon. Similarly, the rise in the price of wheat has contributed to the surge in food inflation, taking food away from many mouths.
Before the Ukraine war, when inflation in Nigeria was already one of the highest in the world, the Bank had projected that from 2020 to 2021, as many as eight million Nigerians would join the swelling band of the poor in the country.
On the whole, the World Bank, said from 2020 to this year, as many as 15 million Nigerians are expected to join the unfortunate club of the poor, courtesy of poor policies of our government.
It has long become evident to discerning observers that this economy is in trouble and so inflation and the associated ills are inevitable. The inflation rate, which rose to 17.71 per cent in May, over the Bank’s projection of 15.5 per cent for the year – is a reflection of the extensive erosion of the productive base of the economy. From agriculture to industrial manufacturing, the level of productive activities in the economy has been seriously constrained. In agriculture, for instance, production has been virtually stopped in some sections of the country due to the activities of bandits, terrorists, and others.
The real trouble with the economy, however, is not the problems enumerated above. After all, all human societies face problems or challenges. The problem of the country is the fact that nothing concrete, in the true sense of the word, is being seen to be done about these problems. All we have from official quarters are lamentations by government officials. If it is not the Minister of Health lamenting about how the country’s high population is impeding development, it is his counterpart in charge of finance, complaining that the country cannot pay salaries unless it borrows.
Lamentations will not put food on the people’s tables, nor will they bring down the prices of goods that have risen because of the simple law of demand and supply. When demand has outstripped supply, it is only logical that prices will rise.
Indeed, inflation is a nexus of the economy; so, if a country is experiencing this kind of rising inflationary pressure, it shows something is fundamentally wrong with the economy. That fundamental problem can only be dealt with through a well-thought-out action plan.
The central cause of this degeneration of the economy and the consequent decline in welfare can be attributed to the loss of focus by those whose responsibility it is to manage the system. Every economy demands attention; it demands to be managed. But there is ample evidence of the disregard of governance as all politicians have virtually shifted their attention to politics and the transition to the next administration. Ministers, heads of departments, and agencies are now more of field officers, as they go about scouting for votes in order to secure positions in the next political dispensation. All of these are being done to the detriment of the whole nation.
This paper believes the government should be concerned about the parlous state of the economy. In any country where you have this kind of inflation and related problems, people’s welfare is reduced. The government should, therefore, as a matter of urgency do something tangible about this.
We urge it to get down to work and show Nigerians that it is still in charge of the economy. There are a couple of things it could do to avert any further worsening of the economic conditions of Nigerians.
The government could release part of the country’s strategic grain reserves at a time like this to stem the rise in food prices. The government and its relevant organs should also search to find out what previous administrations in this country did when faced with similar challenges. It could also declare an emergency on the economy with a view to marshalling all resources needed to confront these challenges frontally.
Incidentally, the World Bank’s June 2022 Nigeria Development Update was appropriately titled ‘Continuing Urgency of Business Unusual,’ ostensibly to draw attention to the government’s “business-as-usual” policy stance, which it says “hinders prospects for economic growth and job creation”.
Today, central banks all over the world are in frantic mood, taking unusual steps to curb this scourge of inflation brought about by the Ukraine war. From the United Kingdom to the United States of America, Turkey, and Brazil, central banks have hiked interest rates. The Fed, for instance, jerked interest by a whopping 0.75%, the highest one-time rate hike in nearly 30 years, with a promise to do more if need be. More leading banks like the European Central Bank (ECB) and that of Japan are expected to follow suit
The Central Bank of Nigeria also did the same recently when it increased the interest rate from 11 .5 per cent to 13 percent. But it needs to do more; it has to come up with policies that will address inflation taking into consideration the country’s peculiarity. It must be reminded that its primary duty is to ensure price and exchange rate stability. This is clearly stated in Section 2 (a) of the Central Bank of Nigeria Act, 2007.
So, why is the CBN shying away from this responsibility? Why is it shifting its attention to the funding of power, agriculture, etc.? It is not President Muhammadu Buhari’s duty to control inflation. That is the job of the central bank, working in conjunction with other agencies of government, in terms of policy coordination.
The CBN should also review the granting of loans to rice farmers, the power sector, etc, more so when some of these loans are sometimes not repaid? If the beneficiaries refuse to repay today, what will the bank give out tomorrow?
The CBN must work with all experts to reverse the free fall of the Naira. We also urge the president to call on the economic team to get to work on this situation immediately. The economy is in shambles and all hands must be on deck to address it. There must be a redirection from who gets what in the next election to how the people survive the harsh economic situation.