www.vanguardngr.com/2016/07/nigeria-weeping-economy-search-redemption/
WHEN President Muhammadu Buhari swept his
way to power with the change mantra, many
Nigerians were hopeful that things will get
better. Buhari talked tough and many felt he
meant well. In-fact his stand on the economy,
which is to look inwards, was well received. Many
supported his position of not yielding to the
devaluation of the naira.
Yes, the economy
was taking some
bashing; Nigerians
were going to have
it rough and tough
initially. Nothing
good comes easy
was the
understanding of
many. The
government
planned to jump
start production by
injecting funds into the economy. To bring
workers back to work, empower Nigerians to
have enhanced purchasing power to oil the wheel
of economic growth and progress. But thus far
the economy is sinking and there is no recovery
plan that is adequate to tackle the economy
down turn. There was a debate on the value of
the naira and pressure came on the Central Bank
of Nigeria to devalue the currency.
Proponents of devaluation had argued that it will
bring in a lot of dollars from foreign investors.
CBN submitted to pressure by floating the naira.
The result was a steady decline of the national
currency. The foreign exchange that was being
hoped for has not come, with foreign investors
waiting in the wings and watching to see the
currency go further down the line. Nigerian
policy makers seem not to learn from the past.
This economy can only grow through the
genuine efforts of Nigerians. Foreign investors
can only be additional benefit not the core of
growth and development of the Nigerian
economy.
Four drivers of the economy
Managers of the economy are well aware that
consumption, investment, government spending
and exports drive any economy. As it is the four
drivers of the economy are looking downwards.
They may not look up any time soon if
appropriate policy measures are not applied. The
economy as admitted by both the minister of
finance and the Central Bank governor is sinking
and there is no recovery plan that is adequate to
tackle the economy down turn. Nigeria needs
massive investment, the purchasing power of the
consumers need to be enhanced, government
need to spend wisely on infrastructure and the
private sector have to produce for both local
and international markets.
The nation is not earning enough from crude oil
export, so there is shortage of foreign exchange
in the country. Nigeria policy makers seem not to
learn from the past. This economy can only grow
through the genuine efforts of Nigerians. Foreign
investors can only be additional benefit not the
core of growth and development of the Nigerian
economy. In the days of import license, the
argument was that once the economy was
liberalised, the nation can go to sleep and things
will fall in place. Nigeria undertook the Structural
Adjustment pills. Policies and programmes were
put in place.
One of such was the introduction of the foreign
exchange market. At that time, there were three
separate markets for foreign exchange. There
was the first tier, the second their and the
autonomous market. In each of these markets
different rates were applied for the same
commodity. Along the line, foreign and local
investors started agitating that the true value of
the naira was reflected in the shadow market
called parallel market. The IMF, World Bank and
other self styled experts kept asking the nation
to adjust the naira value against the dollar.
From about N1 to the dollar in 1986, the
adjustment has taken the nation currency down
the drain to N395 to the dollar as at today. So
long as the parallel market exist side by side the
inter-bank market, and Nigeria not earning
enough foreign exchange, the naira will continue
to weaken with its attendant inflationary
pressure on the economy.
The fundamental issues in the economy are not
being addressed in each of these adjustment
experiments. No nation allows its economy to
become a guinea pig for testing the suitability of
a theory in the market place. The primary
problem in Nigeria economy is its weak
production base. Nigerians must realise that the
economy as well as the currency can only get
better if every Nigerian makes up his mind to be
productive and be discipline.
It is shameful that Nigeria imports virtually
everything under the sun. This simply is
unsustainable. There is a general need for a
reorientation of the minds of Nigerians, an
orientation borne out of the fact that there is
dignity in labour. Nigeria can come out of the
current recession if all hands are on deck in a
very short time by looking inward and producing
locally most of the items it is importing now.
Nigeria imports at least 70 percent of its refined
fuel, despite pumping 1.6 million barrels of crude
a day in June according to the International
Energy Agency, and faced fuel shortages as
retailers struggled to get foreign currency to buy
product.
The currency’s official exchange rate weakened
to more than N280 per dollar, compared with
the fixed rate of N197-199, and the naira trades
at around 360 on the black market, increasing
prices for consumers.
Strong production base
The lack of a strong production base has
resulted in imported inflation. As the value of the
naira nose dive, prices of goods and services rise
as more naira are needed to import the same
quantity of goods in the past.
National Bureau of Statistics in a statement
recently said “In June, the Consumer Price Index
(CPI) which measures inflation continued to
record relatively strong increases for the fifth
consecutive month. The Headline index increased
by 16.5 per cent (year-on-year), 0.9 per cent
higher from rates recorded in May (15.6%).
While most COICOP divisions which contribute
to the Headline index increased at a faster pace,
the increase was however weighed upon by a
slower increase in three divisions; Recreation &
Culture, Restaurant & Hotels, and Miscellaneous
Goods & Services
“Year on year, energy prices, imported items and
related products continue to be persistent
drivers of the Core sub-index. The Core index
increased by 16.2% in June, up by approximately
1.2% points from rates recorded in May
(15.1%). During the month, the highest increases
were seen in the electricity, liquid fuel (kerosene),
furniture and furnishings, passenger transport by
road, and fuels and lubricants for personal
transport equipment.
“While imported foods continue to increase at a
faster pace, the Food sub index on the
aggregate increased, albeit at a slower pace in
June relative to May. The index increased by 15.3
per cent (year on year) in June up by 0.4 per
cent from rates recorded in May. The index was
weighted upon by a slower increase in the
vegetables and “sugar, jam, honey, chocolate and
confectionery” groups. Nigerians must produce
what the nation feeds on. Nigeria cannot
continue to import rice, beans, petrol and what
not. Imagine if there is a Dangote in agriculture,
another in auto manufacturing, another in petrol
sector replicating the cement miracle, this
economy will certainly grow faster and less
dependent on import. The argument that the
business environment is harsh is begging the
question. If Dangote can succeed in the Nigerian
environment, others with the same mind- set can
succeed.
It is very obvious that devaluation can not
benefit an import dependent country. Nigeria
produces and exports oil. Nigeria does not
determine the price of oil nor the volume it
produces.
The second issue in the country today that
should be addressed is the question of sanctity
of contract. Foreign investors are not
responding to Nigeria economic overtune
because they are not sure that Nigeria
government will keep its promised. Many are not
convinced of the sincerity of those in power.
There are too many conflicting signals coming
from the principal officers of the current
government. It is a matter of concern that after
the CBN introduced the floating exchange rate,
the President in the open said he does not see
the benefit of the policy to Nigerians. Such
statement in the eyes of foreign investors
connotes lack of policy cohesion and does not
give hope for consistency. The question is if this
administration believes strongly in looking
inward, it should come up with policies and
strategies to implement its diversification policy.
As it is this government is on an economic roller
coaster that is leading no where.
As of today the purchasing power of the
citizenry is very low. Liquidity in the hands of
individuals is paltry with several months of
unpaid salaries in both public and private
sectors. It is the ability of the citizenry to buy
goods and services that gives signals to
producers to produce more. It is the stimulation
of production that generates employment, leads
to industries expanding their facilities to cope
with rising demand. This process when triggered
brings about moderation in the prices of goods
and services. In the warehouses of the few
manufacturing companies are inventories of
finished goods they are not able to sell. From
the annual reports of existing companies, a good
number are declaring loses and can not invest in
new projects. Nigeria is at the moment suffering
from lack of economic growth and at the same
time high level inflation. The economy is in what
is known as stagflation.
It is unfortunate that instead of releasing money
into the economy the government is locking up
funds that should have been used to foster
production in the CBN vault in the name of
fighting corruption. It has also failed to release
the money it promised it will release into the
economy as soon as the budget is passed. Timely
release of funds enables any economy to move
to the next level.
A breakdown of the total expenditure of
government in the first three months of 2016
showed that the recurrent component accounted
for 72.8 per cent, while capital and statutory
transfers accounted for 18.0 and 9.2 per cent,
respectively. A further breakdown of the
recurrent expenditure showed that the non-debt
component accounted for 72.7 per cent, while
debt service payments accounted for the balance
of 27.3per cent.
Thus, the fiscal operations of the Federal
Government resulted in an estimated deficit of
N725.18 billion, which indicated an increase of
178.6 per cent above the 2015 provisional
quarterly budget deficit of N260.25billion”. There
is no way the Nigeria economy can grow fast
with this kind of government expenditure
pattern. Enough attention needs to be paid to
the development of infrastructure in the country
if Nigeria intends to attract the right type of
foreign investment. Nigerians and Nigerians are
the problem of the nation. We must wake up
from our sleep; roll up our sleeves and work,
work and work to bail out our country Nigeria.

This government has failed technically and they will receive a technical knockout in 2019

OP, arrange your post well for easy reading. Good morning.

[b]Same old doctors prescription.

We know a poor production base lies at the root of our economic problems, which is a consequence of lack of supporting infrastructure such as electricity, and leads to import induced inflation. We simply cannot remain an import based economy and thrive in the global economic space.

It is however glaringly obvious that the failure of previous administrations (particularly those that reigned over record high oil prices) to diversify the economy from oil which would have cushioned the effects of fall in oil price, is a critical and principal causative factor, because it has handicapped this government in its ability to quickly provide infrastructure and develop non oil revenue sources. The paucity of funds limits the capacity of the government to do a quick turn around of the present economic situation, although it's clearly a work in progress.

This is not about passing blame, but about acknowledging the dire situation we have found ourselves in as well as the efforts that the present administration is making in righting the wrongs of old. We will come out this with victory. [/b]

rusher14:
Nigerians and Nigerians are
the problem of the nation. We must wake up
from our sleep; roll up our sleeves and work,
work and work to bail out our country Nigeria.


This is most profound.

We are working and even very hard,but policies are very retarding.