Business
Nigeria’s Economic Progress: Waiting for Godot?
‘Waiting for Godot’ is a play by Irish playwright, Samuel Beckett, in which two characters, Vladimir and Estragon, engage in a variety of discussions and encounters while awaiting the titular Godot, who never arrives. This play, according to Wikipedia, in a poll conducted by the British Royal National Theatre in 1999, was voted the “most significant English-language play of the 20th century.” The play portrays the political, religious, philosophical and socio-economic perspectives to solutions of life challenges, but all end up as mere chimera—a charade.
As in the ‘Waiting for Godot’ play, Nigeria and its people have been fantasizing about the imminence of an Eldorado—economically—especially since the commencement of the Bola Ahmed Tinubu-led administration some nine months ago. Apparently playing to the gallery or in total submission to the dictates of the Bretton Woods institutions (The World Bank and IMF), the administration adopted and applied (market-led) economic policies that have caused so much disruption to the economy. This reality, though unexpected, has since bogged the administration with grappling with the negative consequences and fallouts of its economic reforms so far.
Thus, more than anything else, the government has been preoccupied with packaging and re-packaging of palliatives for the citizenry to (merely) assuage the fast-spreading and deepening poverty, hunger and anger in the land. The latest dimension of the degenerating social order is sporadic upheavals in forms of public protests in many towns and cities across the country. Public angst and cries against spreading hunger, spiking cost of living and deteriorating insecurity are pervasive.
For close to nine months since the inauguration of the current Tinubu administration, every economic indicator has been moving in the wrong direction. Whether it is inflation rate, exchange rate of the Naira, level of unemployment, public debt, Foreign Direct Investment (FDI) or the external reserves—all have been heading in the wrong direction. For instance, while the headline inflation rate was 21.84 per cent in January 2023, one year after, end-January 2024, it has shot up to 29.90 per cent; and will surely maintain the trajectory—going forward.
Paradoxically, while several internal and external factors will keep sustaining this hyperinflationary trend, the government keeps wishing for a magical decline of the figures. This accounts for why the 2024 Federal budget is predicated on an inflation rate expectation of 21.24 per cent. Yet, the impact of the fuel subsidy removal by end-May 2023 has pushed the prices of all goods and services through the roof. Particularly, food inflation has risen phenomenally—as food supply and agriculture (especially, faming) remains threatened by worsening insecurity in the land.
Although by mere pronouncement, the government has declared a state of emergency on agriculture, the wide-spread insecurity across the country has kept most farmers off their farms. Ironically most of the areas usually referred to as ‘food baskets’ of the country are now more like ‘war zones’ as farmers in their communities, villages and hamlets are daily being overrun and displaced by terrorists, bandits, brigands and other armed gangs. Most of the surviving farmers are in their new-found-abodes—Internally Displaced Persons (IDPs) camps—in various locations across the country. This state of affairs puts the lie to the intentions of the so called state of emergency on agriculture.
One of the upshots of this—which is lingering food scarcity—sustains the spiking food inflation trajectory. Also, in more ways than one, the peremptory floatation of the Naira and its kindred policies (as contained in the CBN’s circular of 14 June 2023 to Deposit Money Banks, DMBs) have kept the local currency on the tailspin. The sharp and sudden crash of the Naira vis-à-vis the dollar and other hard currencies has translated to very high and rising cost of importation of all items. And for the highly import-dependent economy (that Nigeria is), prices of all imports have practically gone through the roof. This is ‘transferred’ to the ultimate consumer by importers of raw materials, machineries and sundry intermediate goods.
Right from the outset, the intention of the Government in the Naira floatation policy was to attain a sustainable unified exchange rate in the foreign exchange (forex) market in Nigeria. However, for upwards of nine months now, the policy is a woeful failure. Rather than achieving a single forex rate, the official and ‘black market’ windows have kept waxing stronger—with the Naira collapsing in both of them. In fact, in the past few days, the local currency has been losing more strength in the official than parallel window. Specifically, Naira to dollar exchange rate in the official window has hit N1500/$, while it remains slightly below this in the ‘black’ market.
The upshot of this scenario has been persistent uncertainty for all economic agents, but particularly for businesses. This pervading uncertainty has been at the root of recent (almost daily) hiking of the exchange rate for cargo duties charged by the Nigeria Customs Service (NCS). The exchange rate (for duties) which was N952 per dollar in December 2023, has been raised several times in a matter of weeks, to now stand at about N1500 per dollar. And the hike has not stopped.
Already, several reports show that many importers have begun to abandon their cargoes at the ports because of the huge sums the NCS expects them to pay as duties. These cargoes are also accumulating outrageous demurrages; and all these scare the importers. Not a few of these importers have since resorted to using the port facilities of neighboring West African countries. And this is a huge loss to Nigeria. Not a few persons, too, have resorted to smuggling—rather paying through their nose to import into Nigeria—with crashing consumer demand/weak purchasing power.
As all these are playing out, the Organized Labor (OL) remains in a ding-dong with the Federal government, over deteriorating life of Nigerian workers courtesy of the recent economic policies. For the umpteenth time since June 2023, the OL—represented by the Nigeria Labor Congress and Trade Union Congress—have threatened calling out Nigerian workers on protests/strikes. While the imbroglio lingers, the standard of living of the Nigerian worker keeps declining—essentially because of the collapsed Naira and rising inflation.
This deplorable fate of the Worker has become such that the NLC is now known to be proposing one million naira as the minimum wage that it would table before the Federal government-constituted Minimum Wage Negotiation Panel. The NLC says it would index its proposed minimum wage to the high and rising inflation as well as the deteriorating Naira exchange rate: issues that have practically left the worker impoverished and hapless.
From another plank, the fuel subsidy debacle is yet lingering. Driven by the collapsing Naira exchange rate, cost of importation of refined petroleum products (especial, Premium Motor Spirit, PMS) has kept rising too. With the soaring landing cost of PMS, importers of the product have been ‘pushing’ to transfer the high cost directly to the pump (price of PMS). However, even as reported by the IMF and the World Bank, the Nigerian Government has been ‘covertly’ paying some subsidies to these PMS importers. It therefore means that like the Naira floatation initiative that failed, fuel subsidy removal policy also has not succeeded.
So, as the President Tinubu administration is about to enter the last quarter of its first year, Nigerians, and indeed, the world is waiting for the direction of the Nigerian economy. How soon will the Government move from dishing out palliatives to effectively begin to churn out policies that stimulate the economy? How soon will these failed policies be ‘reformed’ to begin to leapfrog the economy of Nigeria. Or, are we ‘waiting for Godot’?
- The author, Okeke, a practising Economist, Business Strategist, Sustainability expert and ex-Chief Economist of Zenith Bank Plc, lives in Lekki, Lagos. He can be reached via: obioraokeke2000@yahoo.com