Now on the trail to economic armageddon, how can Nigeria be saved? (I)

The latest figures from the National Bureau of Statistics put the rate of inflation at around 35 per cent. Food inflation regarding the specific cost of food items is over 40 per cent. Although the pump price of fuel hovers between N617 and N690 at the NNPCL filling stations and Independent marketers in Abuja and […]

The latest figures from the National Bureau of Statistics put the rate of inflation at around 35 per cent. Food inflation regarding the specific cost of food items is over 40 per cent. Although the pump price of fuel hovers between N617 and N690 at the NNPCL filling stations and Independent marketers in Abuja and Lagos, across the rest of the country pump prices for fuel go from N700 up to N1000 in some places. And with the landing cost now at N1200, it is expected that the price of the commodity will rise from the current N617 to N750 at NNPCL and Independent Marketers filling stations.

In the likelihood of this happening soon, your guess is as good as mine how much it will be sold at the other filling stations in locations outside Abuja and Lagos.

The naira has been on a yo-yo, fluctuating between N1300 and N1500 to the dollar. Lately, it has shot up to N1600 and like fuel price it is projected to plummet further down.

At the micro level, a medium-sized tuber of yam goes for N10,000 in Lagos and N5000 in Abuja. A bag of rice hovers between N90,000 and N100,000. Same goes for maize. A bag of beans sells for between N150,000 and N200,000.

The prices of other household commodities have similarly gone up stratospherically way out of the reach of majority of Nigerians. It is the fortunate family that can afford to eat once a day in the present circumstances. Others have resorted to eating once in two days. And many families now have to make do with grass, wild plants and leaves to be washed down with water, while others scrounge on what the Hausa people call “dusa’’ which in better times are supposed to be food for domestic animals and poultry.

The government’s response to the rising inflation is to increase interest rates on money. But who will borrow money at N30 per cent and not put up a five per cent or more mark up to cover the cost of money, production, overheads and sundry costs. And if the business has a foreign content in terms of raw materials, machines and procurement which requires foreign exchange at the going rate, you can be sure that the cost will be transferred to the customer which invariably will add to the inflationary rate.

Per the new minimum wage of N70,000, it is a welcome development, but private sector employers will now be expected to add a mark up to their cost of personnel and labour and transfer the cost to the customer or client. Again, this will inevitably trigger new round of inflation vitiating whatever measures the government is taking to rein it in.

We might as well face it; our economy is on the skids and soon enough it will come to a systemic meltdown with very serious consequences if we continue on this trajectory. The consequences will transcend to the social and political spheres of our life creating unprecedented political crises in the country.

So, the N64-trillion question is what do we do to stem this incipient economic armageddon, and how do we go about it?

The first step in this undertaking is to identify the root cause of this development and the symptoms it has manifested along the trajectory and then to stanch it before it takes us to the final abyss.

It is no brainer that the trigger of the current economic haemorrhage in the country is traceable to President Tinubu’s whimsical decision to remove subsidy on petroleum products on his very first day in office on May 29, 2023. Almost from that very moment inflation of prices mercurially started to take an upward trend. And they have not come down in any way since.

Although the government has tended to justify it on the basis of the need to free up the subsidies in order to deploy it to other areas like education, health and infrastructure, there was an underlying implication of this measure which many did not appreciate or understand.

Let me explain it in simple everyday terms. By removing the subsidies totally without the benefit of wide consultations, President Tinubu in effect, yielded to the pressure of the International Monetary Fund and World Bank to hand them the password to the Nigerian economy, which is embedded in our oil production and revenues. That was the final policy act that previous governments, right from military President Ibrahim Babangida right up to President Muhammadu Buhari, had resisted at least to keep the Nigerian economy in our control to some extent.

But with President Tinubu’s decision to remove the subsidy totally, the last vestiges of control exercised by Nigeria have now totally been handed over to the IMF and World Bank. And now the Nigerian economy is behaving like a phone that has been hacked into; the owner of the phone and number are not in control; the hackers who are now in control can use the phone to do transactions using the number at the expense of the real owner.

How does this work in practical terms?

By totally yielding to the IMF terms for a financing facility, the Tinubu administration gives itself little or no room to independently manoeuvre on economic policies that affect Nigeria. It must yield to IMF’s instruction and supervision in that regard. But what is worse is that with the control yielded to it by the Tinubu administration, the IMF now transfers our sovereign assets to the stock exchanges, majorly in New York and London, where arbitrageurs hawk it around to raise the money that IMF would advance the government to meet its balance of payment obligations.

Invariably, the advance will come with conditions which our government, having yielded grounds to them, may not necessarily be in our favour. First of all the arbitrageurs will charge an upfront percentage fee for their efforts at hawking Nigeria’s sovereign debts. Then the advance will be done in tranches, with each tranche subject to prevailing costs and currency exchange rate in the global money and securities/bond markets which are always volatile. And the most prominent of the conditions is that the government will not implement any economic policy that is not approved by the IMF. That is why the government of President Tinubu is powerless against inflation pressures, currency exchange fluctuations, subsidies and general economic policies in Nigeria.

So how do we go about removing this economic millstone around our necks?

(To be continued)