- Govs setting trap
- Inflation trending up
AMIDST INFLATION trending up across the world, Nigeria is getting hit from all fronts as all sectors tilt towards collapse. The Telescope Nigeria’s team of Olanrewaju Akinfenwa and Tubosun Adio take a cursory look at the economy and chatted with experts who put the situation under perspective.
Though it is a worldwide phenomenon, with even United Kingdom recording its highest inflation of 10 percent in a decade, Nigeria has been on the downward trend in the last seven years with the drivers of the economy appearing to be clueless and unable to reverse the situation.
An engineer with a ministry of works who craved anonymity because of what it terms backlash said things have been difficult. “Big construction companies have been hit harder than anyone. Most of their contracts needed revision but nobody is willing to revise anything as there is no assurance that the revision would still work.
“Imagine a contract that has provision for variation and when the work was inspected, we found out that the work was just about 15 percent done but the variation the company was asking for would require the work to be at 80 percent completion.
“It was not their fault, imagine we were buying diesel for about two hundred plus in January, but by July, it was hovering around seven hundred naira. And as it is before December, it may hit a thousand naira”.
Mr. Akintunde Maberu, a chartered stock broker and a chartered banker said it is beyond the macro economy. He wondered how anybody could project on any economic issue. “ Haa, it is absolutely difficult to meet projection at this period. It is not only project. That will be going too far. Even household planning fails at this time. In a cost push inflation occasioned by spiral increases of nearly all items; even projection of household expenses can never be exact.
“When inflation is not spiral, variation to project cost can only be made if the timeline is prolonged, otherwise it will be difficult to get approval on variation request or upward review demand. Though inflation rise is currently worldwide: Ghana, South Africa, Argentina, UK, US etc. Aside from the common denominator of gas, oil and wheat crises occasioned by the Ukraine/Russian war which affects most countries, the Nigerian economy is suffering from mismanagement, inept leadership, corruption, stealing etc.
“We have commercial bankers instead of central bankers managing our monetary policies. The lack of knowledge in this area makes (Godwin) Emefiele to compensate with developmental finance which, though has proved rewarding but no data to measure performance.
“Looking at the Q1 economic data, we have over borrowed to meet our loan repayment obligation and leave almost nothing for capex, the Q2 is not markedly different. Consequently, government must radically implement economic emergency measures as suggested already. Cut wastages in the cost of governance, prevent oil theft and improve on meeting the OPEC quota from September.
“Already, the contract for the protection of pipelines has already been renewed with Tompolo. Increase local productive activities; agro allied export and other non oil export. Let the MPR remain at its current level. Exporters must quote in local currency. For now, stop pilgrimages, oversea study, travel holidays etc.
Professor Kehinde Segun, President in council of Certified Institute of Cooperatives and Social Enterprise Management, CICOSEMA did not see any silver lining for Nigeria.
He said, “The Nigeria’s inflation situation can be considered as one that is called galloping inflation. It has reached an all time high in the light of general price situations that have become unbearable. Looking at the situation as it is, it is evident that the Nigeria’s economy is running on auto pilot in such manner that it has completely lost control of itself and its managers.
“This is evident from the general price index for the year. If you look at the situation generally, you will look at the consumer price index, you look at market rate indices you will see including the interest rates, you will observe that in fact things have gone down south and this is evident from general projections and figures from the bureau of statistics which projected inflation for 2022 to be at about 16.1 percent; of course it is far away from the 2021 projection at 17 percent.
“So, inflation itself was planned and expected to go down by one percent by 2022 and that didn’t happen because if you look at what the situation is now it is evident that it is getting out of hand. As we speak, the inflation rate is going close to 20 percent and the interpretation of that is that what we used to buy on the average will cost about 25 percent more.
“If you look at staples for those within the poverty line, if you look at bread for instance the price of bread has since gone up to at almost hundred percent. At the July rate of about 19.61 percent it is evident that by the end of this quarter, which is the end of September, we expect that the inflation rate should be over 20 percent. Of course if you look at it the interest rates have since increased and the general price level also is expected to consequentially also increase.
“For our economy it is not in this country’s interest that interest rates should continue to go up, the general price index is going up, that will continue until Nigeria changes from a consumer nation to a producing nation. The country continues to import virtually everything including our major source of income which is crude oil products. Nigeria is not manufacturing anything as we speak. Crude oil continues to be refined outside the country and the employment opportunities that would have been created by the production sector has also been lost on us. And as we have seen overtime even the unemployment rate also has been down south.
“People don’t have jobs and the challenges stare all of us in the face and of course as at 2019 the unemployment rate in Nigeria was about 23.1 percent while underemployment rate was about 16.6 percent. Right now Nigeria’s unemployment rate is far above 33 percent and of course underemployment has also significantly gone to over 50 percent. If we continue like this it is evident that the economy might not be giving us what we are looking at.
“People are not getting palliatives because government is broke and the only thing government is doing at the moment is looking for money from everywhere. The cost of importation has since gone up because government is using importation as an avenue to raise money for the economy. So government is looking for everything that they can tax and this is not in the interest of the country.
“Now we are approaching the election year; electioneering and its activities have since gone up and we are not producing, so what do we do? We expect that the political economy will begin to put further pressure on the economy. If you look at the exchange rate of Nigeria’s Naira to the Dollar has also since gone down. In the last one, two months or thereabout, we have gone seven hundred and ten; seven hundred and fifteen to the dollar which has not help our situation. Whatever we are bringing to Nigeria will cost so much more. Of course the consequent of that is that those items that are brought in at that rate their prices would further go up and of course only fewer people would be able to afford it. “For the civil servants, public servants and the rest of it, it becomes challenging in the light of the fact that their salaries and emoluments have since been far eroded by the galloping inflation. The implication therefore is this, Nigerians still have the money they used to earn but now they can only buy far less than what they use to buy. So when we have all of this situation, government can no longer spend as it used to spend because it doesn’t have money, then you cannot increase civil servants salaries and wages, it means therefore we will begin to very soon see the collapse of infrastructure because government requires money to sustain and maintain these infrastructures that have been built over time.
“We also have the challenge of security now. With security challenges people cannot go to where they want to do business activities because it is people who sleep, the economy doesn’t sleep. All over the world people are working but Nigerians have to retreat into their homes because even working in the day is dangerous as it is in the night too. People are afraid. Foreigners even are afraid to invest in Nigeria so the FDI has since significantly dropped. With all of these challenges put together we know that we expect more pressure on our currency, we expect more pressure on government expenditure.
“The saddening part of it most importantly is that the public service has not been able to hold its ground because of the excessive situation of massive corruption. And of course we know that when people find themselves in a privilege position it also have its implication on the Nigerian economy”.
He rounded up by saying that the cost of everything will continue to rise, rent would go up and cost of building would also go up, he lamented that the situation is really bad!
For Mr. Segun Adetu, it is a big issue. “This is a big question that requires a deep thought before an answer.
“We are in an economy where no particular attention is given to variation in prices as created by other variables.
“The Government, at all levels, has played ignorance to a lot of things that have helped double the inflationary trend over time.
“Consequently, it would be inadequate to discuss price index without putting attention to other contributory factors as a reason for flying inflation and runaway project cost”.
All in all, we are looking at a grim situation which may become worsened by the approaching electoral activities.
The worst scenario is the activities of outgoing governors trying to sabotage the incoming administration with massive projects which would create financial hiccups for the states.
(Next week we will x-ray activities in Rivers and Osun states).