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By Omoniyi Salaudeen and Daniel Kanu
If the bleak prognosis about the current state of Nigeria’s economy as enunciated by some economic experts is anything to go by, the vulnerable segment of the society who finds consolation in the popular dictum – tough time never lasts – had better bury the thought, as the hope of early possible relief may not come anytime soon.
Just as in other economies of the world, the nation is currently facing the highest rate of inflation ever since after the Udoji salary award of the early 70s.
The latest inflation figure released by the National Bureau of Statistics (NBS) for the month of August is 25.52 per cent. And the most worrisome thing is the fact that there are no quick fix measures to tame the galloping trend than the long term action plan of the Federal Government while the prices of basic items keep on rising.
And the vulnerability of the situation is further compounded by the exposure of the economy to the vagaries of global market due to the peculiarity of over dependency on foreign imported goods, leading to the high cost of production.
This, in simple economic term, is what an erudite Professor of Economics, Segun Abiola, described as stagflation. That is, a situation where an economy is unable to produce enough to meet the demands of its citizenry.
While explaining the background to the current inflationary trend in the country vis-à-vis the global phenomenon, in a telephone interview with Sunday Sun, he said: “What Nigeria is facing today is cost-push inflation, which is the second major type of inflation. Whether you have money in your pocket or you don’t have money, what is being produced from agriculture to manufacturing, the cost is increasing. Because nobody wants to produce at a loss, what they produce is what they will sell. In the 1970s, we had demand-pull inflation. Because of Udoji salary, people had money in their pockets, but goods were not there. As such, we resulted to importing goods. What we face today in Nigeria is what is called stagflation, which is worse than inflation itself. There is stagflation when you are not producing enough to meet the demand. People don’t have money, yet, prices are going up.”
He identified fixed income earners – government and private employees, pensioners, depositors in the banks – as the most vulnerable groups in the present circumstance.
“Wage earners, pensioners, those who are on fixed income, depositors in banks are the first level victims of inflation. They are the first to suffer because the real value of their earning will go down and they don’t have the capacity to adjust immediately like the manufacturers,” he explained.
While making reference to the recent disclosure of the Federal Government’s plan to review the salaries of civil servants by the Minister of Labour and Employment, Dr. Chris Ngige, Prof Ajibola expressed concern over the financial capacity of states to pay.
“The government itself doesn’t have the money. There is a piece of news from the Minister of Labour that the government wants to review the salaries of civil servants, but we all know that some states are still not able to pay the minimum wage of N30,000. You would have listened to the proposed budget, which is in 50 per cent deficit. So, government itself will be thinking of how to raise taxes to sustain governance. It is a tough situation for everybody,” he pointed out.
According to him, unless there is a determined effort by the Federal Government to adopt deliberate measures like import substitution method, resolve energy crisis, encourage local refineries to produce petroleum products and also address other domestic factors causing high cost of production, the rate of inflation will continue to rise.
His words: “We all know what is responsible for the inflation rate in Nigeria. Ours is cost-push inflation rate. Cost of raw materials for industries, electricity, petroleum product is going up. When we look at the price of food items, it is equally on the high side. We still cannot produce enough to feed 200 million people. Because we rely so much on imported items for domestic and industrial use, we are vulnerable to the global inflation.
“This is further compounded by the continued depreciation in the value of our currency against major international currencies like dollar, pound sterling, Euro and co. And since these will be converted to local currency, it raises the cost of production. Even almost everything we use in farming – fertilizer, herbicide, farm implements – is imported. So, there is no how the price of food items will not go up. That is why the food inflation is higher than the aggregate inflation in the economy.
“Because the cost has gone up, the farmers or the middlemen, the manufacturers and those who are in retail businesses have to pass it on the end users. And unless we are in a position to check that, it will be very difficult for us to control the rate of inflation.
“We have to raise production level of basic items like food so that we rely less on imported food. We have been talking of import substitution for long; we can substitute locally produced food items for the imported ones to reduce the level of our vulnerability to the foreign exchange market. We have also been talking of the cost of infrastructure, energy in particular, we can work on our capacity to generate power in the country. That will also reduce the average cost of production.
“We talk about the petroleum products too which is another major challenge in determining overall cost of production. If local refineries can work, it will reduce the cost of imported fuels and reduce the overall cost of production. It is a package.
“If we can work on all these domestically, we will be able to address those that are peculiar to our own circumstances. If we can successfully address that, then the pressure won’t be as much. We can then gradually work on the imported inflation in the country. On the overall, we will be able to tame this monster called inflation.
“If with determination and commitment we can pursue those things that I have earlier highlighted, then we will reduce our vulnerability to externalities – those things that are imposed on us outside the shore of this country.
“The current inflation is a global phenomenon, but because we rely so much on global economy for basic necessities, that is why the negative impact of inflation is so much on us. We can gradually reduce that through the process of import substitution. But it is not something that can happen in 24 hours. They are long-term measures, but we must start from somewhere.”
As the nation inches towards the 2023 general elections, he cautioned against reckless spending such as vote-buying by politicians, warning that “a thing like that can disorganize the state of equilibrium of the economy.
“It is outside the contemplation of any economy. A thing like that disorganizes the state of equilibrium of any economy. INEC has been talking about how to control the incidence of voting-buying; they need to walk on that aspect and control it.”
A former presidential aspirant on the platform of the African Democratic Congress (ADC) and retired Deputy Governor of the Central Bank of Nigeria (CBN), Prof Kingsley Moghalu, on his own part, slammed the Governor of the apex bank, Godwin Emefiele, for mismanaging the nation’s economy with the resultant crippling inflation.
“Please, don’t tell me that inflation is a global phenomenon just as some will mischievously or ignorantly refer to the level of debt to GDP ratio of advanced or productive economies.
“There is a difference between real global challenges and we are fundamentally killing our own economy with our own hands in the service of corruption, vested interest, and incompetent political leaders.
“Between a mismanaged fiscal space and a deeply compromised Central Bank that has sold its soul to politicians and private sector profiteers, the wheels have come off the Nigerian economy.
“The combined fiscal, monetary, and forex calamity superintended by the Federal Ministry of Finance, Budget and Planning, on the one hand, and the leadership of the CBN in the past seven years, on the other, is a tragedy for the Nigerian that could have been avoided. The effects on the lives of the average Nigerians are truly sad to see.
“Let competence govern critical aspects of our national lives. This is why I have argued that the problem is not the absence of competence in economic management in Nigeria. The problem is the absence of competent political leadership. We need a productive economy,” Moghalu posited.
Similarly, a Consultant with the World Bank and former Finance Commissioner in Abia State, Dr. Phillips Ntoh, blamed the current inflationary trend on the inability of the authorities concerned to properly harness the human and material assets with which the nation had been endowed.
According to him, the only way to get the economy out of the woods is by making the economy to be productive as well as value addition to the raw materials being exported.
To achieve this end, Ntoh said, there must be right type of leadership with adequate financial and fiscal knowledge to tackle the current challenges.
Speaking with Sunday Sun, he said: “The major cause of inflation is too much money chasing few goods. By implication, the economy is not productive. We are not producing enough goods and services that will meet up demand.
“Ironically, workers are not paid the right salary. They are not paid something that can sustain them, something that can take them home. Here, you see prices of goods and services rising and the workers that are earning a minimum wage salary of N30, 000 cannot even buy a bag of rice, cannot pay house rent, and cannot take care of the minimum basic things that are required to run a family. Lecturers are on strike because of poor remuneration.
“The implication is that the economy is not productive. We are not producing enough that will meet up with the present rising population.
“The solution is that the economy should be productive. And then we should add value to it because it is not just enough to produce raw materials. We produce mainly raw materials, primary goods, without adding value. We produce primary goods mostly which are not converted to finished goods. It’s only the finished goods, goods with added value that will bring in money, increase income and the revenue that will add to the GDP.
“For inflation to come down, our economy must be productive so that most of these things that are imported can be produced locally and also export to other countries.”
