FeaturesMonologue On Survival Amidst Nigeria’s Declining Economic Fortune

Monologue On Survival Amidst Nigeria’s Declining Economic Fortune

February 25, (THEWILL) – How can you describe Nigeria’s economy at the moment?

Nigeria is in a serious economic crisis, with mass poverty, hyperinflation, high income inequality, stagflation (high unemployment, underemployment and rising cost of living), balance of payment problems, shrinking economy, high level of corruption and insecurity.

But we were told before the 2023 presidential election, that irrespective of who wins – Tinubu, Atiku or Peter Obi will be pro-market reformers, and be good for the economy and better than Buhari?

Yes I said so, but I think I underestimated the level of rot Buhari’s government would have caused. The JP Morgan report on Nigeria last year and the report from the probe panel on the CBN exposed a lot of things which we did not know before. The correct estimate of our external reserve was about $3.7bn as against the $33bn the CBN was reporting, the difference was made up of borrowed funds from international banks, and local Nigerian Banks.

So the CBN was doing cosmetic financial reporting?

Absolutely yes. Furthermore, the CBN had printed too much new money for the Buhari government. Broad money supply (M2) was N19 trn as at 2015 when Goodluck Jonathan left government, Buhari’s government printed new money, increasing the total money stock to N53 trn before he left.

But that is quantitative easing, do other governments including the most developed nations of the United States and UK do that?

Yes, other nations do it, but they spend it in promoting income redistribution and channel the funds to the poor vulnerable members of the public like what happened during covid 19 when households in these developed nations where given free money to cushion the effects of economic hardship. They also did so during the global financial crisis of 2008 to bail out banks and other “too big to fail financial institutions.”

Sadly, in the case of Nigeria, the new money created is stolen and used to empower supporters of the government. The CBN left its traditional role of monetary policy management, to start lending like the commercial banks to friends of government in the name of intervention funds. Billions were given to proxy corporate entities at as low as 2%-6% per annum without any impact on the economy. These companies used such funds to buy up the scarce US dollars or lend back to the same Federal Government by buying FGN bonds and treasury bills at attractive interest rates.

So why the mass poverty despite the economic reforms from Tinubu?

Economics has a national income equation Y (National Income) = C (Consumer Expenditure by Households) +I (Firms and Business investment expenditure) + G (Government Expenditure) + Import – Export. The Government needed more from its pie of the national income, so removed fuel subsidy, and deregulated the FX market removing huge money from the C & I and enlarging the pie of Government (G).

For example, before subsidy removal, the Government shared roughly N650 bn in one month between the Federal, State and Local Government. Since the removal, they now share over N 1 trn each month. So the monthly allocation to the Federal, state and local government. Households Consumers (C) and Firms had to pay for this difference.

Since government revenue has increased without an increase in salaries of civil servants, we should see more development in the form of social infrastructure, but that is not the case in Nigeria. The increased revenue of the government has created more money for politicians to steal.

Why the hyperinflation?

The CBN devalued the naira from N462 under Buhari to over N1,500 today. Black market rate also devalued from N760 levels under Buhari to over N1,700 today. So it is normal that the price of all imported goods would have doubled as well. Local producers will likewise double the prices of their commodities to keep up with the rising costs of doing business in the economy.

Why the perpetual devaluation of the Naira even when the FG had borrowed over $10bn last year which was expected to be used to stabilize the naira?

Politicians themselves no longer have confidence in the naira. There is no serious fight against corruption by this government. So their increased monthly loots are used to buy up all available dollars from the black market. People with stolen funds will buy the dollar at any exchange rate.

So what is your advice for the common man in the face of this economic crisis?

Cut your cost down, live far below your means so you can accumulate capital. Capital accumulation is the only escape route from the vicious circle of poverty that has engulfed Nigeria. If you can’t accumulate capital, you will remain poor.

Keeping money in the bank is the most stupid thing to do in hyperinflation. Buy real assets like lands, buildings, gold or precious metals. You could also buy up grains like rice, maize, oil and other commodities that you can store and release to the market when the economy returns to equilibrium.

Buy dollars and always keep at least 20-30% of your savings in US dollars just like the Nigerian Banks. The Banks and the government are the winners from this economic crisis. The Banks made so much money because they kept a large portion of their reserves in dollars; act like them. If you can still JAPA, travel abroad before it is too late. Go and earn your own FX from the global community (rather than wait for the government to sell crude, then you buy FX from the Government).

You used to be a critic of JAPA, what has changed?

Nigeria is no longer relevant in the global economics of today and its share from the global prosperity cake will continue to shrink in the foreseeable future due to bad leadership.

Why stay in a country where the leaders borrow money from the world bank, IMF and ADB and steal it. Where they print money and steal it. Where politicians are richer than business men. Where prosperity is determined by how close you are to the government in power.

There is dignity in Labour in the developed nations of Europe, and North America. A cleaner or driver in the UK can earn GBP 2,000 a month while the MBA graduate or PhD holder from Oxford may just be earning GBP 5,000 per month. There is no wide income inequality, therefore there is no problem of insecurity.

Contrast with Nigeria where some people earn as much as N5,000,000 per month (Politicians earn far higher) while so many University graduates cannot earn the basic minimum wage of N33,000.00. Where they lobby and pay bribes to get a level 8 civil service job, with a salary that can only afford a bag of rice.

Question: What is your advice to the government?

Learn from Europe, we are all better off, when everyone is well-off. Put in place social safety nets that will reduce the level of income inequality in Nigeria.

Negotiate with the oil majors to increase our daily crude oil output from 1.4mbpd to at least 2.0mbpd. It is so sad that Nigeria cannot meet up with its OPEC quota when some other OPEC members cheat to sell more than their approved output. Oil theft must be blocked.

Call back the trillions of Naira given to private businesses as intervention funds during the tenor of Buhari. If these funds have been converted to FX, sell the FX and recover such funds. This alone is capable of reducing inflation and the FX crises.

Fight corruption with all seriousness. See what we have been recovering from Abacha since 1998 from the globe, I think many of our leaders in Nigeria did something similar. Abacha was just a scapegoat because he died and was hated by so many for his atrocities. The difference between the Abacha era and now is that looting of public funds has been democratized, it now takes place at the Federal, State and Local government levels. All these past politicians can be encouraged to invest their past loot in Nigeria.

Address Insecurity: The decision to introduce state police is a step in the right direction. However, the root cause of insecurity which is the impoverishment of the masses must be addressed. Special tribunals should be set up to address kidnapping with capacity to dispense judgement within 6 months.

Stabilise the naira: This will help build back confidence of Nigerians on the economy and in the naira and encourage foreign investors to return to Nigeria. Now that the naira has been devalued to N1500 levels, the nation has sufficient reserves to defend the naira at this level. Resume the weekly supply of FX to BDXs and all willing buyers at this levels. Block the monthly demand for FX by politicians.

Introduce higher bills like N2,000, N5,000 and N10,000 notes that will encourage the rich to hold naira rather than the US Dollar.

Cut the cost of governance at the Federal, State and Local government levels.

The government must show example by not only promoting but by buying made in Nigeria products especially cars manufactured in Nigeria. Encourage import substitution by encouraging many manufacturing firms to use locally produced raw materials even if they are inferior to imported ones.

Focus on Agriculture: That seems to be the only area where Nigeria has capacity to compete with the rest of the world today. Also support emerging tech companies.

***Dr Paul Uzum is a practicing stockbroker*

About the Author

Homepage | Recent Posts

More like this

Nagelsmann Bets On Youth In Germany Squad For Euro 2024 Build-Up

March 14, (THEWILL)- Six newcomers, including Bayern Munich teenager...

Rep Member Flags Off N140m Livestock Programme For 140 Youths In Borno

Marach 14, (THEWILL)- The National assembly member representing Jere...

Go Ahead To Inspect Kogi Guber Election Materials – Supreme Court Tells Ajaka

March 14, (THEWILL) - The Supreme Court has...