By Omoniyi Salaudeen and Daniel Kanou
Whether the bleak prognosis on the current state of the Nigerian economy as articulated by some economic experts is something to say, the vulnerable segment of society that finds solace in the popular saying – hard times never last – would better to bury the thought, because hope for possible early relief may not come any time soon. 
Just like in other economies around the world, the nation is currently facing the highest rate of inflation since the awarding of the Udoji salary in the early 1970s.
The latest inflation figure published by the National Bureau of Statistics (NBS) for the month of August is 25.52%. And the most disturbing thing is the fact that there is no silver bullet to tame the runaway trend that the federal government’s long-term plan of action as the prices of basic items keep rising. .
And the vulnerability of the situation is further aggravated by the exposure of the economy to the vagaries of the global market due to the peculiarity of excessive dependence on foreign imported goods, leading to high production costs.
This is, in simple economic terms, what a scholarly professor of economics, Segun Abiola, has called stagflation. That is, a situation where an economy is unable to produce enough to meet the demands of its citizens.
While explaining the context of the current inflationary trend in the country vis-a-vis the global phenomenon, in a telephone interview with Sunday Sun, he said: “What Nigeria is facing today is the cost inflation, which is the second major type of inflation. Whether you have money in your pocket or you don’t have money, what is produced from farming to manufacturing, the cost goes up. Because no one wants to produce at a loss, what he produces is what he will sell. In the 1970s, we had demand-driven inflation. Because of Udoji’s salary, people had money in their pockets, but the goods were not there. As such, we have resulted in the import of goods. What we face today in Nigeria is what is called stagflation, which is worse than inflation itself. Stagflation occurs when you don’t produce enough to meet demand. People have no money, yet prices are rising.
He identified fixed-income earners – government and private sector employees, pensioners, bank depositors – as the most vulnerable groups in the current circumstances.
“Employees, retirees, those on fixed incomes, depositors in banks are the first victims of inflation. They are the first to suffer because the real value of their gains will go down and they don’t have the ability to adapt immediately like the builders,” he explained.
While referring to the recent disclosure of the federal government’s plan to review civil servant salaries by the Minister of Labor and Employment, Dr Chris Ngige, Prof Ajibola expressed concern about the financial capacity of the states to pay.
“The government itself has no money. There is a news from the Minister of Labor that the government wants to review the salaries of civil servants, but we all know that some states are still unable to pay the minimum wage of 30,000 naira. You would have listened to the proposed budget, which is in deficit by 50%. So the government itself will think about how to raise taxes to support governance. It’s a difficult situation for everyone,” he said.
According to him, unless the federal government makes a determined effort to adopt deliberate measures such as the method of import substitution, solve the energy crisis, encourage local refineries to produce petroleum products and also tackle other domestic factors resulting in high production costs, the inflation rate will continue to rise.
His words: “We all know what is responsible for the rate of inflation in Nigeria. Ours is the cost inflation rate. The cost of raw materials for industries, electricity, petroleum products is increasing. When we look at the price of food products, it is also high. We still cannot produce enough to feed 200 million people. Because we are so dependent on imported items for domestic and industrial use, we are vulnerable to global inflation.
“This is further compounded by the continued depreciation in the value of our currency against major international currencies like the dollar, pound, euro and others. And since these will be converted into local currency, it increases the cost production. Even almost everything we use in agriculture – fertilizers, herbicides, agricultural tools – is imported. So there is no reason why food prices should not increase. why food inflation is higher than the overall inflation of the economy.
“Because the cost has increased, farmers or middlemen, manufacturers and those in the retail business have to pass it on to end users. And unless we are able to verify that, it will be very difficult for us to control the rate of inflation.
“We need to increase the level of production of basic items like food so that we are less dependent on imported food. We have been talking about import substitution for a long time; we can replace imported food products with local food products to reduce our vulnerability to the foreign exchange market. We also talked about the cost of infrastructure, especially energy, we can work on our ability to generate electricity in the country. It will also reduce the average cost of production.
“We are also talking about petroleum products, which is another major challenge in determining the overall cost of production. If local refineries can operate, it will reduce the cost of imported fuels and reduce the overall cost of production. It’s a package.
“If we can work on all of these issues at the national level, we can tackle those that are unique to our own situation. If we can solve this problem successfully, the pressure will not be so great. We can then gradually work on the inflation imported into the country. Overall, we will be able to tame this monster that is inflation.
“If, with determination and commitment, we can pursue these things that I highlighted earlier, then we will reduce our vulnerability to externalities – those things that are forced upon us off the coast of this country.
“The current inflation is a global phenomenon, but because we are so dependent on the global economy for basic needs, that is why the negative impact of inflation is so much on us. We can gradually reduce this through to the process of import substitution. But it’s not something that can happen in 24 hours. These are long-term measures, but we have to start somewhere.
As the nation moves closer to the 2023 general election, he cautioned against reckless spending such as vote buying by politicians, warning that “something like that can upset the steady state of the ‘economy.
“It is outside the contemplation of any economy. Such a thing disrupts the equilibrium state of any economy. INEC discussed how to monitor the impact of vote buying; they have to step on that aspect and control it.
A former Presidential candidate on the African Democratic Congress (ADC) platform and retired Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu, has for his part criticized the governor of the bank umbrella, Godwin Emefiele, for mismanagement of the national economy with the resulting crippling inflation.
“Please don’t tell me that inflation is a global phenomenon, just as some mischievously or ignorantly refer to the level of debt to GDP in advanced or productive economies.
“There is a difference between real global challenges and we are basically killing our own economy with our own hands in the service of corruption, vested interests and incompetent political leaders.
“Between mismanaged fiscal space and a deeply compromised central bank that has sold its soul to politicians and private sector profiteers, the Nigerian economy has come undone.
“The combined fiscal, currency and forex calamity overseen by the Federal Ministry of Finance, Budget and Planning, on the one hand, and CBN management over the past seven years, on the other hand, is a tragedy. for the Nigerian who could have been avoided.The effects on the lives of average Nigerians are truly sad to see.
“Let competence govern the critical aspects of our national lives. That is why I have argued that the problem is not the lack of economic management skills in Nigeria. The problem is the lack of competent political leadership. We need a productive economy,” Moghalu said.
Similarly, a consultant to the World Bank and former finance commissioner of Abia State, Dr. Phillips Ntoh, blamed the current inflationary trend on the inability of the authorities concerned to properly exploit the human and material assets whose the nation had been endowed.
According to him, the only way to get the economy out of wood is to make the economy productive and add value to exported raw materials.
To achieve this goal, Ntoh said, there must be the right type of leadership with adequate financial and tax knowledge to meet the current challenges.
Speaking to the Sunday Sun, he said: ‘The main cause of inflation is that too much money is chasing few goods. By implication, the economy is not productive. We are not producing enough goods and services to meet demand.
“Ironically, workers are not getting the right pay. They don’t get something to sustain them, something to bring them home. Here you see the prices of goods and services rising and the workers earning a minimum wage of N30,000 can’t even buy a bag of rice, can’t pay the house rent and can’t look after themselves minimum basic things that are needed to run a family. Teachers are on strike because of poor pay.
“The implication is that the economy is not productive. We are not producing enough to meet current population growth.
“The solution is for the economy to be productive. And then you have to add value to it because it’s not just enough to produce raw materials. We mainly produce raw materials, primary goods, with no added value. We mostly produce primary goods that are not converted into finished goods. It is only finished products, value-added goods that will bring in money, increase revenue, and revenue that will increase GDP.
“For inflation to come down, our economy has to be productive so that most of these things that are imported can be produced locally and also exported to other countries.”
Comments are closed.