By Dakuku Peterside

An increasing number of Nigerians are being  driven into poverty, not by choice, but by the current political and economic climate, shaped by stringent macroeconomic policies. These policies, such as subsidy removal, devaluation of Naira, and increase in electricity tariff, have had unintended consequences. For instance, removing subsidies has led to a significant increase in the cost of living, while the devaluation of Naira has made imported goods more expensive. These factors, combined with the high level of insecurity, have affected food security in Nigeria, and created a perfect storm of economic hardship. The signs of this unavoidable reality are readily apparent. The interventions to prevent this descent into poverty are either ineffectual or remedy the condition too slowly.

An unprecedented rise in inflation has destroyed households’ disposable incomes and pushed many families into poverty. Spiralling inflation is having a devastating impact on all, but especially on households in the lower rungs of the working class, who in their millions are joining the already over 133 million multidimensionally poor Nigerians struggling to earn a living because high inflation has eroded the value of their income. As shown by the NBS Consumer Price Index of April 2024, published in May 2024, the headline inflation rate rose to 33.69 percent in April 2024 compared to March. The headline inflation rate was 11.47 percent higher in April 2024 compared to the previous year. During the same period, inflation in urban areas was higher than in rural areas. Even worse, the food inflation rate in April 2024 was 40.53 percent, increasing by 15.92 percent compared to April 2023. What does this mean for the ordinary citizen? More money can purchase fewer goods and services.

We cannot dismiss the direct correlation between rising inflation and rising poverty in Nigeria. A household with a monthly income of N300,000 in April 2023 would have lost 33.69 percent of its real purchasing power if it earned the same amount in April 2024. This means that the same amount of money can now buy significantly fewer goods and services, putting a strain on the household’s budget. Imagine this household struggled in 2023 to make ends meet; how will it cope with less than 33 percent of its value in goods and services this year? It is little wonder many Nigerians are in despair and are calling on the government to tweak its policies and salvage the situation before it is too late. Families in the earning bracket mentioned above are even better than many whose total income is less than N100,000 if both parents in the household earn minimum wages per month.

The government intervention so far, with the best of intentions, has yielded little result as inflation continues unabated. The monetary policies of increasing base interest rates to above 22 percent, improving the cash reserve ratio by banks to above 40 percent, and constantly engaging in the money market to mop up excess liquidity have yielded less than the expected result in curbing inflation. More is needed, and my little knowledge of street economics shows me that the Nigerian economy often defies some fundamental economic concepts that work in developed countries because of our economy’s informal and unregulated nature. The Nigerian government must creatively use other bespoke and practical fiscal and monetary measures to tame our raging inflation.

Paradoxically, there is compelling evidence that inflation continues to rise because of critical government policies. Instead of providing more concerted anti-inflationary measures, the government has added more inflationary steps to the economy. The government cannot confront inflation while imposing limitless taxes, tariffs, and charges on the things that people spend money on daily. The impact of excess tax is on everybody, but the burden is more on people experiencing poverty whose purchasing power has been eroded by inflation. The government cannot tax itself out of our economic predicament. Increasing personal income tax is one way government reduces disposable income to curb demand pull inflation, but the inflation in Nigeria is not because of increase in household income, but caused by cost induced factors. So tax on people whose income has not increased in the past year is a recipe for hardship.

Other factors also imperil government efforts to curb inflation. Imported inflation has been the bane of Nigeria, given the number of raw materials and goods imported into Nigeria from countries with high inflation rates. This is not helped by the new exchange rate regime that has seen the Naira fall to its lowest value in a generation. The government has been trying to control the erosion of the value of Naira to no avail. Increasing cost of energy has pushed  some  businesses to  pack up. These factors have exacerbated the rise of inflation, and unless the government starts tackling them, it cannot effectively win its fight against runaway inflation.

The consequences of inaction are severe and far-reaching. The system requires a set of anti-inflationary measures to relieve the people and companies so that livelihoods can improve, and real incomes recover from shock to encourage people to live and save. Savings and prosperity will fire up investment, production, supply, and consequent demand. If inflation worsens, the economy will, at best, go into stasis, further regression, and possibly a depression. More manufacturers will quit, and unemployment will worsen with even more crime and insecurity. The picture I painted above is not far from us.

Recent statistics about the hunger level in Nigeria occasioned by food inflation are alarming. There is a deteriorating food security and nutrition crisis in Borno, Adamawa and Yobe (BAY) states this lean season between May and September 2024. According to the Government-led Cadre Harmonise analysis released in March this year, in Borno, Adamawa, and Yobe states, some 4.8 million people are estimated to be facing severe food insecurity, the highest levels in seven years. Children, pregnant and lactating women, older persons, and people living with disabilities are among those who are most vulnerable. About 2.8 million of these people need urgent interventions.

The prices of staple foods like beans and maize have increased by 300 to 400 percent over the past year because of a cocktail of reasons. Inflation is outpacing the ability of families to cope, making essential food items unaffordable. Furthermore, the report stated that “malnutrition rates are of great concern. Approximately 700,000 children under five are projected to be acutely malnourished over the next six months, including 230,000 who are expected to be severely acutely malnourished and at risk of death if they do not receive timely treatment and nutrition support.”  The Acting Representative of UNICEF Nigeria argues that “this year alone, we have seen around 120,000 admissions for the treatment of severe acute malnutrition with complications, far exceeding our estimated target of 90,000.”  These statistics are for only 3 states in the Northeast Nigeria. Imagine what it will be for the whole 36 States in Nigeria. There is real fire on the mountain!

This rising hunger is not peculiar to the Northeast. From my knowledge of street economics, hunger and poverty is pervasive across all six geopolitical zones. Increasing poverty is directly linked with more severe economic outcomes. Increasing poverty can result in a more divided society, Issues with housing, homelessness, limited access to healthcare, nutrition poverty and poor living conditions that have a detrimental effect on one’s health. Children living in poverty have less access to education, which will reduce their chances in the future. More families facing poverty will experience conflicts, stress, and domestic violence. Poverty can set off a vicious cycle in which the effects of it act as catalysts for additional episodes of poverty. Increasing inflation and poverty are bad omens that blow us no good. They are bad for our economy. They are bad for our people. The government must pay attention to these factors and be more sensitive in our economic policy choices.

Only some anti-inflationary measures that comprehensively capture the macroeconomic dimensions and provide solutions may work. Poverty alleviation measures are barely temporary and, at best, work in the short run to cushion the effect of heightened inflation and food insecurity. The government should provide solid medium- to long-term solutions to tackle these problems. They should re-evaluate some of their policies to see whether they are inflationary and jettison them to allow good policies to thrive. We can only imagine the unintended consequences of allowing poverty and inflation to fester. The increasing inflation and poverty are creating desperation among a portion of society, which is increasingly becoming despondent and seeing itself at the fringes of society. The implications of this are plausible. Many ordinary citizens are burdened by poverty, hunger, and severe inflation, which have made their lives miserable. The government must take action to alleviate this scourge and help Nigerians lead meaningful lives.

By Dakuku Peterside

A few weeks ago, Nigerians were startled by a legislation that had largely escaped public awareness. This legislation, which has since undergone substantial amendment, carries profound implications for the financial health of every Nigerian, sparking widespread controversy.

The law raises several concerns regarding our legislators’ rigour, effort, and dedication to enacting laws. The legislation, which is known as the Cybercrime (Prohibition, Prevention, etc.) (Amendment] 2024 Act. Section 44 (2] (a] of the Act, mandated a levy of 0.5% of all electronic transactions value by businesses specified in the second schedule of the Act, which includes GSM service providers and telecommunication companies, Internet Service Providers, Banks and other financial institutions, Insurance companies and Nigeria Stock Exchange.

To implement this law, the CBN, on the 6th of May 2024, sent a circular to all banks and financial institutions in Nigeria to charge a cybersecurity levy starting from the 20th of May 2024 on electronic transactions by customers, barring a few exemptions. Industry watchers have claimed that the government aimed to earn about N2 trillion per annum, judging by the over N600 trillion value of all such transactions in 2023. This caused an uproar in the country, and most civil society organizations, private sector businesses, labour organizations, and concerned Nigerians used all the media available to them to voice their condemnation of this imprudent law.

The banks and other mandated institutions are to collect the levy and remit it monthly to a designated fund (National Cybersecurity Fund) at the CBN for transmission to the Office of the National Security Adviser (ONSA). The fund’s stated primary purpose is to provide financial resources for fighting cybersecurity crimes in Nigeria.

There are many things wrong with this levy beyond the fact that Nigerians are discontented with government and non-governmental levies and fees plaguing the living light out of them. Some have argued about the interpretation of the law by CBN that the transactions to be charged should be on the businesses mentioned in the Act, not their customers or Nigerians. Others have questioned why this law, created, and signed into law in 2015 by the Jonathan administration, was amended now to include the cybersecurity levy and why the haste to implement it now, especially given the harsh economic conditions occasioned by good-intentioned policies that have had a devastating impact on Nigeria.

The argument on timing is germane given the level of inflation and the devastating degradation of the value of the Naira and, by extension, the purchasing power of Nigerians. Some still argue about the increasing focus of the government to use tax as a significant economic policy for revenue generation, especially in an increasingly volatile economic climate where productivity is low, and businesses are shutting down because of increasing cost of doing business, ranging from the cost of labour, energy, and raw materials. My take on this anchor on the morality behind the levy given Nigeria’s social contract with the state, procedural antecedents in institutional revenue collection for government, the burden on Nigerians on financial transaction-related charges, and the imperfections of our legislative processes.

The pertinent question is why should Nigerians who pay personal and business taxes pay for security in whatever guise or nomenclature? Whether cybersecurity, physical security, or any form of security, it is the Nigerian government’s exclusive and primary responsibility, which is why we pay  tax to the government. Under the social contract between Nigerians and the state, we accept and give out our rights, especially the right to security of our lives, to the state and expect the state to protect us by whatever means necessary. The state provides the security infrastructure, architecture, and personnel to provide security for all. The government singling out an aspect of security and levying citizens to pay for it is tantamount to double taxation when we already pay income tax and allow the government income from our natural resources to provide this service. Unbundling security and taxing some is a prelude to other security tax forms. Should we expect a Banditry levy, terrorist levy, or armed robbery levy soon?

The second question is, when did the office of the National Security Adviser become a revenue-generating and collecting centre? The Nigerian state has explicit provisions for regulatory agencies or public enterprises that provide public goods and services. The office of the NSA is not such and does not have such a mandate. It is an anomaly procedurally to saddle this office with the mundane task of revenue issues, and as a government unit coordinating security, it should receive its funding from the federal government budget. Enacting and implementing laws that go against established procedures affects the structures and systems of the state and sometimes goes against the mandate on which institutions are created.

The third issue is why the national assembly members were screaming at the top of their voices against this law when the same body amended it. Does it mean that they did not understand the law they passed? Or is it that the law was amended and passed without the knowledge of many members passing through the due processes? Is the interpretation of the law by CBN not in tandem with the intentions of the lawmakers? Is there a problem with framing the law caused by language failure? Did the framers mean online or electronic transfer levy? It would be easier for the public to understand the levy if it had come outright as a transaction levy because many people cannot link their electronic transactions and cyber security levy. Where is the ‘cybersecurity’ in transferring legitimate money? The law does not resonate with many Nigerians of average means and education, and they cannot link their everyday transactions to cybersecurity.

Granted, the legislation enacted by the National Assembly is not perfect. It sometimes has some flaws. They are subject to review, revision, or repeal. Because of this, the law is a living thing that changes with the seasons and the passage of time. Remember, errors are not uncommon when enacting laws. Had Magaji Tambuwal, the then-Clerk of the Nigerian Assembly, been successful in getting President Bola Tinubu to sign a version of the “Real Estate Regulatory Council of Nigeria 2023” — which is regarded as phoney — into law, he would have been inducted into the Hall of Fame. This demonstrates that sometimes, legislation approved and accented to by the president may not always accurately reflect the framers’ intentions. Numerous things occur in between.

The fourth issue is the incongruence of the cybersecurity levy while the Taiwo Oyedele committee is working on the harmonisation of multiple taxes, reducing unprogressive taxes and  the multiplicity of legislation that imposes taxes on business. Besides, the cybersecurity levy affects citizens’ living wages. We cannot stagnate household income and continuously increase all cost elements of a living wage (housing, transport, utilities, food) through more charges like cybersecurity levy and not increase poverty in the extreme or diminish consumption income in the main.

The last issue is that the burden of bank-related levies and taxes that individuals pay in Nigeria is too much on them. It will be good for researchers to do a comparative study with other developing countries like Nigeria to determine whether we are in this alone. Bank-related levies include transfer fees, card maintenance fees, card issuance charges, stamp duties, VAT on SMS, and SMS charges for the receiver and sender. This cybersecurity levy will be one too many. Imagine the implication on the cost of doing business, especially post-subsidy removal, post-increase in electricity tariff, the collapse of the Naira, hyperinflation and many charges and levies on businesses.

Existing business levies and taxes include Company Income Tax, Stamp Duties, Petroleum Profit Tax, Capital Gains Tax, Value Added Tax, Personal Income Tax, Withholding Tax, Tertiary Education Tax, one percent of payroll contribution to NSITF, 10 percent of Payroll Contribution to PenCom; one percent of Payroll ITF Levy and National Information Development Levy. Others are Radio and TV Licenses; Police Special Trust Fund Tax levy; Niger Delta Development Commission levy; National Agency for Science and Engineering Infrastructure levy; Land Use Charge; Parking Fee; Consumption Tax; Road Tax; Standard Organization of Nigeria fees; Nigeria Content Development levy; NAFDAC levy; Nigeria Health Insurance Authority contribution; Signage Fees. Touts and street urchins are leveraging the multiplicity of taxes and levies to attack businesses. Businesses are getting it rough and do not need another levy straw that will break their backs.

Cybersecurity levy is peculiar to Nigeria and is not applicable in many developing and developed countries of the world. President Bola Ahmed Tinubu acted well in suspending the cybersecurity levy; many Nigerians are happy about that. There are many reasons to repeal this law or quickly review it with broad-based consultations.

By Dakuku Peterside

Nigerian corporate influence and that of the West continue to collide. The rationale is straightforward: whereas corporate activity in Europe and America is part of their larger local and foreign policy engagement, privately owned enterprises in Nigeria  or commercial interests are not part of Nigeria’s foreign policy ecosystem, nor is there a strong culture of government support for privately owned enterprises’ expansion locally and internationally. Nigerian firms’ competitiveness on a global scale can only be enhanced by the support of the Nigerian government.  It is evident that the relationship between Nigerian businesses  and foreign policy is important to the national interest. When backing domestic Nigerian companies to compete on a worldwide scale, the government should see it as a lever to drive foreign policy, national strategic interest, promote trade, enhance national security considerations, minimize distortion in the domestic market as the foreign airlines were doing, boost GDP, create employment opportunities, and optimize corporate returns for the firms. For example, the South Korean mega conglomerates within the chaebols corporate structure, such as Samsung, Daewoo, SK Group, LG, and others, have become globally recognizable brands thanks to the backing of the South Korean government. For Chaebol to succeed, strong collaboration with the government has been essential. Also, in telecommunications, Huawei would only be such a well-known brand worldwide with the backing of the Chinese government. The opposite is the case with Nigeria.

Admitted nations do not always interfere directly in their companies’ business and commercial dealings, and there are always exceptions. I can cite two areas of exception: military sales by companies because of their strategic implications and are, therefore, part of foreign and diplomatic policy and processes. The second is where the products or routes of a company have implications for foreign policy. Air Peace falls into the second category in the Lagos – London route.

Two events demonstrate an emerging trend that, if not checked, will disincentivize Nigerian firms from competing in the global marketplace. There are other notable examples, but I am using these two examples because they are very recent and ongoing, and they are typological representations of the need for Nigerian government backing and support for local companies that are playing  in a very competitive international  market dominated by big foreign companies whose governments are using all forms of foreign policies and diplomacy to support and sustain.

The first is Airpeace. It is the only Nigerian-owned aviation company playing globally and checkmating the dominance of foreign airlines. The most recent advance is the commencement of flights on the Lagos – London route. In Nigeria, foreign airlines are well-established and accustomed to a lack of rivalry, yet a free-market economy depends on the existence of competition. Nigeria has significantly larger airline profits per passenger than other comparable African nations. Insufficient competition has resulted in high ticket costs and poor service quality. It is precisely this jinx that Airpeace is attempting to break. On March 30, 2024, Air Peace reciprocated the lopsided Bilateral Air Service Agreement (BASA) between Nigeria and the United Kingdom when the local airline began direct flight operations from Lagos to Gatwick Airport in London. This elicited several reactions from foreign airlines backed by their various sovereigns because of their strategic interest. A critical response is the commencement of a price war. Before the Airpeace entry, the price of international flight tickets on the Lagos-London route had soared to as much as N3.5 million for economy ticket. However, after Airpeace introduced a return economy class ticket priced at N1.2 million, foreign carriers like British Airways, Virgin Atlantic, and Qatar Airways reduced their fares significantly to remain competitive.

In a price war, there is little the government can do. In an open-market competitive situation such as this, our government must not act in a manner that suggests it is antagonistic to foreign players and competitors. There must be an appearance of a level playing field. However, the government owes Airpeace protection against foreign competitors backed by their home governments. This is in the overall interest of the Nigerian consumer of goods and services. Competition history in the airspace works where the Consumer Protection Authority in the host country is active. This is almost absent in Nigeria and it is a reason why foreign airlines have been arbitrary in pricing their tickets. Nigerian consumers are often at the mercy of these foreign firms who lack any vista of patriotism and are more inclined to protect the national interest of their governments and countries.

It would not be too much to expect Nigerian companies playing globally to benefit from the protection of the Nigerian government to limit influence peddling by foreign-owned companies. The success of Air Peace should enable a more competitive and sustainable market, allowing domestic players to grow their network and propel Nigeria to the forefront of international aviation.

The second is Proforce, a Nigerian-owned military hardware manufacturing firm active in Rwanda, Chad, Mali, Ghana, Niger, Burkina Faso, and South Sudan. Despite the growing capacity of Proforce in military hardware manufacturing, Nigeria entered two lopsided arrangements with two UAE firms to supply military equipment worth billions of dollars , respectively. Both deals are backed by the UAE government but executed by UAE firms. These deals on a more extensive web are not unconnected with UAE’s national strategic interest. In pursuit of its strategic national interest, India is pushing Indian firms to supply military equipment to Nigeria. The Nigerian defence equipment market has seen weaker indigenous competitors driven out due to the combination of local manufacturers’ lack of competitive capacity and government patronage of Asian, European, and US firms in the defence equipment manufacturing sector. This is a misnomer and needs to be corrected. Not only should our government be the primary customer of this firm if its products meet international standards, but it should also support and protect it from the harsh competitive realities of a challenging but strategic market directly linked to our national military procurement ecosystem. The ability to produce military hardware locally is significant to our defence strategy. This firm and similar companies playing in this strategic defence area must be considered strategic and have a considerable place in Nigeria’s foreign policy calculations. Protecting Nigeria’s interests is the primary reason for our engagement in global diplomacy. The government must deliberately balance national interest with capacity and competence in military hardware purchases. It will not be too much to ask these foreign firms to partner with local companies so we can embed the technology transfer advantages.

Increasingly, other companies, especially in the banking and fintech sectors, are making giant strides in global competitiveness. Our government must create an environment that enables our local companies to compete globally and ply their trades in various countries. It should be part of the government’s overall economic, strategic growth agenda to identify areas or sectors in which Nigerian companies have a competitive advantage, especially in the sub-region and across Africa and support the companies in these sectors to advance and grow to dominate in  the African region with a view to competing globally. Government support in the form of incentives such as competitive grants ,tax credit for consumers ,low-interest capital, patronage, G2G business, operational support, and diplomatic lobbying, amongst others, will alter the competitive landscape. Governments  and key government agencies in the west retain the services of lobbying firms in pursuit of its strategic interest.

Nigerian firms’ competitiveness on a global scale can only be enhanced by the support of the Nigerian government. Foreign policy interests should be a key driver of Nigerian trade agreements. How does the Nigerian government support private companies to grow and compete globally? Is it intentionally mapping out growth areas and creating opportunities for Nigerian firms to maximize their potential? Is the government at the domestic level removing bottlenecks and impediments to private company growth, allowing a level playing field for these companies to compete with international companies? Why is the government patronising foreign firms against local firms if their products are of similar value? What was the rationale for flight tickets from Lagos to London costing N3.5M for economy class just a few weeks ago only to come down to N1.3M with the entrance of Air Peace to the market? Why are Nigerian consumers left to the hands of international  companies in some sectors without the government actively supporting the growth of local firms to compete in those sectors? These questions merit honest answers. Nigerian national interest must be the driving factor for our foreign policies, which must cover the private sector, just as is the case with most developed countries. The new global capitalism is not a product of accident or chance; the government has choreographed and shaped it by using foreign policies to support and protect local firms competing globally. Nigeria must learn to do the same to build a strong economy with more jobs.