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By Omoniyi Salaudeen
Today marks the beginning of another new fiscal year. Expectedly, the excitement that usually heralds the coming of a New Year is still very much in the air.
This is even more so with all the mouth-watering electioneering promises the presidential candidates of the various political parties have been reeling out thereby raising the hope that things would get better in the months ahead.
However, contrary to the gimmick being used by the state actors to woo the electorate, the economic forecast by the experts does not present anything significantly different from the year 2022.
According to the experts, the New Year’s economy is shrouded in a thick cloud of uncertainty, especially given the general elections holding in February and March.
A former President of the Nigerian Institute of Bankers (NIB) and renowned Economist at the Babcock University, Illisan, Ogun State, Prof Segun Ajibola, while giving a short analysis of the outlook of the economy for the new fiscal year, declined bluntly to give a specific answer, saying: “If I want to be sincere, my answer will be that I don’t know what the economy will look like in the New Year for now. This is because a change in presidential guard is always a major development in any country even in the US economy that is the number one.
“In our case, we don’t know if the same party will retain power at the centre. We don’t know if it is going to be a different party with different manifestoes. So, if you want to speculate now, you will be speculating along political lines which I don’t want to do because I am not a politician.”
Nevertheless, he expressed cautious optimism over the budget proposal before the National Assembly, noting that there is a silver lining if measures like inflation control, policy on agriculture, oil subsidy removal, and complete market deregulation are adequately and faithfully implemented.
His words: “But if the budget is sustained the way it is, we can say that there is a ray of hope with emphasis on agriculture in particular and the oil price that is still high up with the hope that inflation will be tamed down. With all those provisions, we can say that there is a silver lining in the budget. But then, 80 per cent of what we are saying depends on how the budget is implemented and who is implementing it. Those are the speculative aspects that I don’t want to engage in.”
Speaking on subsidy removal, he maintained that Nigerians would be better for it in the long run if the market regulators could ensure the complete removal of NNPC’s monopoly.
“Removal of subsidy may not work in isolation. If there is going to be subsidy removal, the market must be deregulated and the monopoly of the NNPC must be removed. If the subsidy is removed and we still have to import fuel, there must be sufficient quality control, sufficient protective rules, and regulations so that any mess will not be imported into Nigeria. If the monopoly of NNPC is broken with the removal of subsidy, at the end of the day, we may end up paying less than what we are paying today because there will be private sector efficiency which most times is lacking in the public sector. So, the removal of subsidies must be accompanied by rules that will make the market sufficiently competitive to the benefit of the consumers. Secondly, we are talking about the rehabilitation of the local refineries. If we can refine locally, the issue of the naira exchange rate will no longer be a major consideration. And we may even pay less because we will no longer be dollarizing the price of petroleum products. Thirdly, with Dangote refinery coming onstream, there may be a boast in the local supply. And at the end of the day, if we can address the issue of subsidy as a package, Nigerians may even pay less than what we are paying now for petroleum products because there will be healthy competition. But if the subsidy is removed and they maintain NNPC’s monopoly, we have not done anything as far as I am concerned,” he argued.
Prof Ajibola also noted the negative impact of Nigeria’s debt burden on the economy in the last three years, suggesting debt restructuring or forgiveness as a possible way of reducing the amount spent on servicing the loans.
“As a sovereign nation that wants to continue to be credit worthy, we must continue to service our debt. And you can see that the provision for debt service is still high. This will continue to have the same negative impact unless we can achieve debt forgiveness and debt restructuring which will now reduce the debt burden on the economy. The debt burden has always been very high in the last three years,” he noted.
Also the Managing Director of Cowry Asset Management, Mr Johnson Chukwu, in a telephone conversation with Sunday Sun, predicated the outlook of the New Year’s economy on the outcome of the general election, arguing: “The New Year’s economy will depend largely on what happens in February and March during elections. The tenure of this government will come to an end this year and we are going to have a change of government. Either way, the new government is going to come up with its economic policies. So, the smooth conduct of the election is going to be a major determining factor. If we have a free and fair election in February and March and we have a new government that is accountable, we should see stability in the macroeconomic environment, and the inflow of direct foreign investment, we should see the government taking major decisions that will reposition the economy. One of these is the issue of subsidy removal on petroleum products and electricity tariffs. If we address those things and there is some level of improvement in the relationship between the government and the Niger Delta residents, we will see an improvement in crude production. These are critical economic decisions that need to be taken by any government to define the direction we will be taking.”
Looking further into the measures that can tame the current rate of inflation and the dwindling value of the naira, he listed direct foreign investment, an increase in oil production capacity, and a stable political environment as the major factors that would determine the new turn of the economy.
He submitted: “The value of the currency depends on several factors. One of those factors is the country’s foreign exchange earning capacity, demand for foreign goods and services, and productivity of the economy. If the government maintains a good relationship with the Niger Delta residents, there will be an increase in crude oil production which will stablise our foreign reserve. Again, political stability will determine whether we will have a foreign direct investment in flow. If we elect the right president and he can come up with appropriate policy, we will see the potential of the country coming out in full force. We are going to see both foreign investment portfolios and local investors investing in the economy. That will improve the foreign exchange rate. It is not appropriate for anybody to say that this is what the foreign exchange rate will be for now.
“I have learnt to discountenance manifestoes of political parties in Nigeria given our history of poor implementation of political parties’ programmes. I rely on the personality of the candidates. I want to judge the candidates with what they say with their mouths and what they have done in their previous engagement.”
Similarly, another financial expert and the CEO of Flame Academy & Consulting Limited, Mr Orji Udemezue, in a quick overview of the year 2022, lamented the hardship that characterized the economy, predicting a better future under a purposeful leader.
“Nigeria’s economy has been on the precipice. Things are not moving the way they should. Economic growth has been moving at a very slow pace. And we doubt if the figures we are getting from the NBS are quite believable. Inflation is still very high in the market than the figures they are showing. The economy is not doing well at all and people are suffering. They can hardly afford basic things of life as the value of disposal income has gone very low. Unemployment has been very high. Yes, we agree that it is not peculiar to Nigeria. The whole world has been going through difficulties as a result of the COVID-19 pandemic and the Russia/Ukraine war.
“Now that Nigeria is going into an election, it is very difficult to say how things will go. The outlook of the economy will depend on the outcome of the coming election. If there is no crisis and somebody who can drive the economy wins, we will see a lot of goodwill where several investors will be eager to come in and will see an inflow of foreign capital and foreign direct investment.
“If we get it wrong again and we bring in people who cannot change anything and we continue the system as usual, the investors will not be excited to come in. So, what happens in the February and March elections will decide largely the direction the economy will go.
“Generally speaking, Ukraine and Russian war is still a major factor. Even though discussions are now, it is not yet abating.
“On overall, Nigeria’s economy can do a double-digit growth if we have proper leadership. We have what it takes to diversify the economy away from oil. Oil is still playing strong with a very good market price due to the factors I mentioned earlier.
“But if we continue to spend more than 40 per cent of our foreign exchange income on importing refined petroleum products, we can never recover from the current economic crisis.
“Nigeria’s inflation is imported inflation because we have scarcity of dollars and we import everything that we use. Whether the CBN wants to allocate dollars stingily or not, the fact is that we don’t have enough dollar reserves to meet our demand. So, we are suffering from cost-push inflation. And the monetary policy cannot handle it alone. We can tighten monetary policy as much as we want, but the inflation rate will never abate until fiscal policy begins to make us do the basic things we can do to remove the pressure on the naira by moving away all the dollars we use to import petroleum products and divert it to other useful things. Until we get it right, we will continue to dance this dance of shame.”
Though Udemezue admitted some benefits of subsidy removal, he predicted a hard time for ordinary Nigerians under the regime of subsidy removal.
“The removal of subsidy will bring untold hardship on Nigerians because of the nature of the economy as it is right now. The removal of subsidy is not wrong in itself, but the question is: should the masses of this country continue to suffer while the bourgeoisie in government continue to enjoy the largesse? If we remove the subsidy, it will hit much harder on the ordinary Nigerians who are earning N30,000 as a minimum wage. It is going to make inflation go off the roof. If the effect of removal is going to trickle down eventually in the medium and long term, we may say let’s go through the pains and come out better. But the fear is that, if they remove the subsidy, whatever gains they make will still end up in private pockets as largesse for those in government. Because we don’t trust the government, we do not believe that subsidy removal will benefit the people at the end of the day. But if we have honest and transparent leadership, removing the subsidy will pay this country in the end. Until we get our leadership right, we will continue to complain of the bad economy,” he declared.
