Nigeria’s economic crisis is gradually getting out of proportion. Due to galloping inflation, unemployment and naira depreciation, Nigerian workers are now the lowest wage earners. This is according to latest figures from the World Bank, the International Monetary Fund (IMF) and data from Fitch, Standard & Poor’s and Bloomberg news. The development has also triggered soaring prices of food items and medicines. Despite government’s economic reforms, the naira has lost around 70 per cent of its value and dropped to record lows in recent months.
The continued depreciation of the naira has led to rise in the prices of all imported products. The headline inflation rate is still above 37 per cent, and food inflation reached at 40.1 per cent for the month of March. This is the highest recorded since 1996. Unfortunately, the federal and state governments are still dithering on the new minimum wage while organised labour has insisted on a significant increase in workers’ salary. This means that the monetary authority will grapple with a possible negative gross domestic product (GDP) for the second quarter (Q2) and third quarter (Q3) of the year with rising inflation. With real per capita GDP growth forecast not looking bright in key sectors of the economy, poverty will likely deepen as a result of the economic hardship. In spite of government’s promise to stem high inflation, stabilise the currency and reduce prices of essential commodities, nothing has really changed. Recent government’s plan to set up Price Control Board to regulate food prices is yet to take off. Its promise to distribute 42,000 metric tonnes of grains to states from the national grains reserve is yet to commence across the states. Government should urgently initiate far-reaching fiscal and monetary policies to check high inflation and stabilise the value of the naira.
The CBN’s monetary policies have not yielded desired results. There are also reports that the apex bank may have discreetly abandoned the much-commended forex rate harmonisation less than seven months after its introduction. So far, there have been no adequate monetary and fiscal measures to contain the domestic and external shocks. The CBN has not cleared the huge backlog of accumulated forex demand on the official market, estimated at over $7 billion, due to limited dollar flows.
With the rising cost of living, the demand by the Nigeria Labour Congress (NLC) for a new minimum wage of N615,000 per month is in order. The recent 25 and 35 per cent approval given by President Bola Tinubu during the May Day rally for civil servants on the remaining six consolidated salary structures is grossly inadequate. No amount of salary adjustment will be satisfactory without addressing rising inflation, naira devaluation and rising cost of essential goods and services. The government should chart a new course for the economy. Sadly, the government has not addressed the remote and immediate causes of the economic challenges. Often, government’s measures are not far-reaching enough. Insecurity remains largely unchecked, and fiscal and monetary policy measures have not been properly articulated before implementation.
For instance, the removal of petrol subsidy without putting in place measures to cushion the effects has really hampered economic growth. Let the government revamp the economy and put it on the path of recovery and growth. Nigeria’s high debt profile and debt servicing, excessive borrowing and import bill as well as exchange rate instability have not helped matters. The economic outlook for the next six months remains uncertain, unless government initiates concrete fiscal and monetary policies that will steady the economy. The government should address the challenges facing Nigeria’s business environment. Good policies are needed to attract foreign investments.
Beyond the upward review of the minimum wage, there is need to strengthen the purchasing power of Nigerians and provision of social investment for workers in line with Chapter 2 of the 1999 Constitution (as amended). To save the economy from its present crisis, government must salvage investments in micro, small, medium and large-scale enterprises, as well as address insecurity and power supply challenges. The government should also diversify the economy through huge investment in the non-oil sector, which will boost the economy and grow the nation’s GDP.