Ibrahim Bala writes;
Persistent soaring prices of commodities and services this past years especially this current year has put pressures on disposable incomes of households and businesses.
For example, a bag of local rice averagely cost N50,000( $52.50) from N26,000 ($27.30) in the last three years, while the banned foreign rice averagely cost N60,000 ($63.02) in an economy where the average minimum wage is N65,000 ($68.28) at least for the next remaining two months of the six months N35,000 ($36.76) increments that commenced on 1st September, 2023, otherwise, the normal average minimum wage is N30,000 ($31.51). Prices of commodities and services are on the rise almost everyday in the country, hardly you go to market or store and meet the same price as the previous week or day as prices change overnight and unfortunately the trend continues unabated. Whereas, a simple government policy of “PRICE CONTROL” can serve as a panacea for this disturbing economic ills that’s causing untold hardship on the majority of Nigerians,
Furthermore, the CBN within six months this year from June to December had adjusted the Exchange Rate four times: On June 24, 2023 from N422.30/$1 to N589/$1 and on July 6, 2023 the rate was adjusted to N770.88/$1, whereas, on November 14, 2023 it was adjusted to N783.174/$1 while in mid December 2023 it was adjusted to N951.941$1 .
The Nigerian economy is heavily dependent on imports fueled by “DOLLARIZATION” pertaining to physical Dollar Cash as though the US Dollar is a Legal Tender in Nigeria. Therefore, the bane of our economic growth and development as well as instability of prices with its attendant inflationary pressures can be traceable to various factors such as, policy somersaults and lack of implementation , disconnect and uneven pattern of developments due to robust inequality resulting in the gulf between the extreme poor and the super rich, highly dependance on imports instead local production with its corresponding large reservoirs of unemployment and unproductively, as well as the lack of a concise and holistic long term economic development plan.
Stability of prices is of vital importance to economic activities as it promotes demand of products and services, which affects economic growth positively through the general price level by boasting the purchasing power of consumers. For example, the sudden high rise in petrol price has caused many Nigerians to abandon their vehicles, thereby, resulting in a sharp decline in demand of petrol. Ignoring Price Control brings about exploitation from the part of sellers and suppliers. A friend who frequently visits Saudi Arabia told me that he purchased this year a package of his favorite Dates at the same price he used to purchase it since 2012, likewise the exchange rate of their currency to the US Dollar. Even though, global commodities prices greatly influence countries terms of trade and Nigeria is no exception.
In this article, my objective is to proffer workable solutions towards stabilizing our economy through re-engineering our productive base as well as formulating the right policies for Nigeria’s sustainable economic growth and development. Dwelling less on economic jargons and theories, but practical and tested policies that have worked elsewhere especially in Asia with reference to India as a populous and emerging economy. “Economics is common sense made difficult” according to Professor Sam Aluko of blessed memory, until we begin to approach our economic life based on our peculiar experiences, problems and solutions, growth and development would continue to be a mirage.
The following series of helpful policies will help us plan and succeed in our quest for a sustainable growth and development:
1. Price Control: Introduction and enforcement of Maximum Retail Price( MRP) across every commodity produced locally in Nigeria as well as imported into the country with no exception. Government can achieve this by accurately computing the Net Production Cost of every commodity sector by sector, equally reducing or waiving the major cost drivers, such as customs duties and excise, electricity tariff, taxes, etc. This means that no producer or seller is allowed to sell above the MRP which is unambiguously, clearly and boldly written on every single product produced in the country as well as imported as should be captured in Nigeria’s imports policy. While food stuffs in the form of grains, fruits and vegetables should be subjected to strict weight and measurements in grams and kilograms. Even the so called Mama-Put cooked Rice ( Biryani ) in India is weighed and measured across the states with fixed price per gram, as I personally witnessed and experienced which makes food plus the basics affordable to almost everyone no matter status or class.
2. Banning Importations of Tricycles and Motorcycles: Compelling the leading manufacturers in India and China to establish complete production factories ( Not Assembly Plants or CKD) here in Nigeria with incentives like tax holiday in order to boast employment opportunities and productivity in the country, more so, reducing FOREX pressures in the process. The National Bureau of Statistics disclosed in its Foreign Trade in Goods Statistics Report that the importation of Motorcycles in Nigeria was a whopping N367.39 Billion ($385.93m) in 2021 and N212.64 Billion($223.3m) in 2022. Totaling N580.03 Billion($609.59m) in the last two years, that’s an estimated annual average of N3.480 Trillion ($365.56b). Imagine the multiplier effect in terms of wealth creation coupled with the massive employments such strategic move would yield.
3. Termination of Transfer Payment to place heavy focus on Human Capacity Development and Building Strong Institutions : Recently, the Federal Government approved the sum of N5Billion Naira ($5.25m) Palliative for each state and the FCT for the procurement of 100,000 bags of rice, Fertilizer and 40,000 bags of maize for onward distribution to poor in various states. Grants constitute 52% of the funds, while 48% as loans, plus other various direct social intervention programs, such as conditional cash transfer, school feeding, etc that have engulfed billions of Naira. My take is, who’s more citizen or indigene than the others? I strongly feel such one-off policies targeted towards a few in the midst of many for immediate short-live consumption is squarely unjust and creates minimal impact for instance, what impact will 140,000 bags of grains have in a state like Kano with a population of 14.2 Million people or even Bayelsa the least populated state? Otherwise, how does the government accurately identify the real poor and vulnerable people in the society without proper records? Unless through the usual politics as well as favoritism.
What is genuinely required is a sustainable holistic approach of intervention in reducing cost of basic edible commodities like rice that is a common edible food in almost every household, to become affordable and in large supply, so that majority can themselves afford it, instead of the political-spoon-feeding that has been the order. Promoting SMEs and skills acquisition, and ultimately by building strong institutions for people come and go but institutions remain.
4. Dedollarization: This notion simply and squarely means banning or strictly restricting trading or usage of physical US Cash Dollar in Nigeria. In fact, it can even be criminalize with the exception of those genuine traveling, and should only be accessible at point of departure ( Boarding pass ) at airports and official border post by approved banks and selected Registered agents, and such physical US Dollar cash should not exceed $10,000 for a single Traveller, therefore, both inbound and outbound should be in form of inflows. Why is this necessary? Because massive amounts of cash Dollar are mostly traded through round tripping mostly obtaining at official rates while selling at the parallel ( Black ) market at exorbitant prices, also used as instrument or tool for corruption induce deals and activities, causing exponential demand for cash Dollar in the country. The recent surge in official Dollar prices due to floating regime has brought about billions of dollars exposures in Letter of Credit ( LC) matured obligations to both companies and banks.
5. Reduce Political Government Official Spending/ Consumption Debt: National Bureau of Statistics stated that Nigerian domestic and external debt stock Q2 2023 stood at N87.38 trillion (US$108.30 billion), while Pwc Nigeria in its highlights of Nigeria’s 2023 Budget of Fiscal Sustainability and Transition submits that non-debt recurrent expenditure (NDRE) represents N8.27trn ($8.68b) which is about 40% of the N20.51trn ($21.54b) budget. This means that close a half of the Budget goes for recurrent expenditure. Similarly, the Debt Management Office (DMO) says 73.5% revenue or income is used to service Government debt, describing the figures as unsustainable and a threat.
Finally, fostering greater equity in both financial and social endeavor will promote sustainable development. Robust agriculture and industrialization driven by modern state-of-the-art technologies are core in re-engineering Nigeria’s productive base devoid of politicization as in the case of previous CBN led anchor borrowers plus other initiatives that didn’t yield the desired impact as still more than 70% of the Paddy inputs required by our local Rice Mills are being imported into the country through our neighboring countries mostly Republic of Benin and Ghana, even after the huge billions of Naira injected into government’s various agricultural initiatives.
Efficient blend of effective monetary and fiscal policies management as well as financial accountability are key to stabilizing our economy. Lifting or relaxing forex restrictions like inter bank forex inflow transfers will surely ease pressures on forex, also reducing high cost of capital through single digit interest rates for agro allied industries and other important sectors, unifying and centralizing taxes, would go a long way to support the betterment of our economy.
Ibrahim Bala writes from Lagos.
He is a student member of the Chartered Institute of Stockbrokers & an active player in Nigeria’s Downstream Oil & Gas Industry.