Connect with us

Editorial

Government playing politics with inflation

Published

on

With frantic efforts by the President Bola Tinubu administration to stabilise the economy, the inflation rate has continued to rise on a monthly basis without drastic measures.

Following the trends of inflation report by the National Bureau of Statistics (NBS) one begins to feel that the government has been rather inactive in managing the inflation situation. We have been applying only the orthodox approach which is all about increasing monetary interest rates. As much as we have increased the monetary policy rates by 5.5 percent in the last 12 months, inflation has climbed rather steadily to 28.92 percent today, with a slight dip some months back, followed by steady rises.

The Central Bank of Nigeria (CBN) has raised the monetary policy rate by 400 basis points to a record 22.75 percent from 18.5 percent. Members after the two-day meeting in Abuja increased the asymmetric corridor to +100 basis points /-700 basis points (Previously: +100 basis points /-300 basis points) while they also increased the Credit Reserve Ratio (CRR) to 45.0 per cent from  32.5 percent; and retain liquidity rate at 30 percent.

The CBN Governor, Olayemi Cardoso disclosed this at the 293rd Meeting of the Monetary Policy Committee in Abuja and said the increase of the anchor rate was to moderate the country’s soaring inflation rate, which stood at 29.90 per cent in January.

The decision of the MPC also coincided with the announcement by the CBN of the sale of foreign exchange to Bureau de Change (BDC) operators in the country at N1,301 per USD, according to a Tuesday memo signed by Hassan Mahmud, the director of the Trade and Exchange Department at the apex bank.

The resumption of the sale of forex to BDCs is happening more than two years after the former CBN governor, Godwin Emefiele, stopped the sales to BDC operators in that segment of the forex market.

According to the memo, the move is part of CBN’s “strategic steps” to increase liquidity and strengthen the naira against “manipulators”.

However, the new aggressive stance of CBN in raising the anchor interest rate, which determines what the banks charge on facilities to customers, is being queried by Prof. Uche Uwaleke of the Department of Banking & Finance, Nasarawa State University, who said jerking up the MPR by 400 basis points in one fell swoop is simply overkill, suggesting that 200 basis points would have been better since they have another opportunity to meet next month to review impact

Precisely, a few weeks ago the NBS disclosed that the inflation rate in Nigeria gained 7.58 percentage points in 2023 when it increased to 28.92 percent in December 2023 from 21.34 percent reported in December 2022.

The Consumer Price Index (CPI) reported by NBS showed that 28.92 percent in December 2023 is relative to the November 2023 headline inflation rate which was 28.20 per cent.

According to NBS, “Looking at the movement, the December 2023 headline inflation rate showed an increase of 0.72 per cent points when compared to the November 2023 headline inflation rate.

“On a year-on-year basis, the headline inflation rate was 7.58 percentage points higher compared to the rate recorded in December 2022, which was 21.34 per cent.

“This shows that the headline inflation rate (year-on-year basis) increased in December 2023 when compared to the same month in the preceding year (i.e., December 2022).

“Furthermore, on a month-on-month basis, the headline inflation rate in December 2023 was 2.29 percent, which was 0.20 percent higher than the rate recorded in November 2023 (2.09 percent).

“This means that in December 2023, the rate of increase in the average price level is more than the rate of increase in the average price level in November 2023.”

NBS stated that the percentage change in the average CPI for the 12-month ending December 2023 over the average of the CPI for the previous twelve-month period was 24.66 percent, showing a 5.81 percent increase compared to 18.85 percent recorded in December 2022.

On urban inflation, the NBS report stated that “On a year-on-year basis, in December 2023, the Urban inflation rate was 31.00 percent, this was 8.98 percentage points higher compared to the 22.01 percent recorded in December 2022.

“On a month-on-month basis, the Urban inflation rate was 2.42 percent in December 2023, this was 0.19 percent points higher compared to November 2023 (2.23 percent).

“The corresponding 12-month average for the Urban inflation rate was 26.22 percent in December 2023. This was 6.83 percentage points higher compared to the 19.38 percent reported in December 2022.”

For rural Inflation, it said, “The Rural inflation rate in December 2023 was 27.10 percent on a year-on-year basis; this was 6.38 percent higher compared to the 20.72 percent recorded in December 2022. On a month-on-month basis, the Rural inflation rate in December 2023 was 2.17 percent, up by 0.18percentage points compared to November 2023 (1.99 per cent).

“The corresponding 12-month average for the Rural inflation rate in December 2023 was 23.25 per cent. This was 4.91per cent higher compared to the 18.34 per cent recorded in December 202.”

Unfortunately, the Whereas 2 percent – 4 percent inflation is considered to be healthy inflation (for matured economies), and we may run up to say 6 percent – 8 percent in our economy without any sense of panic, the Central Bank of Nigeria has set its inflation target at anything below double-digit. Let’s call that 9 percent. We are thus 13 percent above this target.

How else can we force down inflation? And what latitude can we entertain especially because high rates of inflation also usually come with high GDP growth rates? The contention for me is that we should target much higher rates of growth in our GDP than the 2 percent -3 percent that we are doing and projected to do presently. It’s actually quite depressing when one sees such projections. Can we accommodate lower double-digit inflation as a price for much higher GDP growth rates? The new administration has gone all out to promise a GDP growth rate of between 8 percent to 10 percent. How can we achieve this without letting inflation run away any further?

I believe it is achievable though but that will require us discombobulating where our 22.22 percent inflation is coming from. First off, growing the economy much faster simply means getting rid of inefficiencies, ensuring that people actually get productive for whatever salaries they are paid, improving capacity utilisation in industries, getting companies to grow, encouraging new productive ventures, and generating considerable productive buzz in an economy.

We can look at other economies that have achieved this to be able to get an idea of what it takes. Many such countries – like China, India, and even other African nations which have grown at about 8 percent for some years, such as Cote D’Ivoire, Senegal, Egypt, and Ethiopia – saw real investments in infrastructure, evidencing healthy growth rates. A focused leadership, resolute in enforcing a level of discipline, punishing and rewarding promptly to signal its direction, and with adequate performance monitoring of all sectors and its targets can put Nigeria on this same track.

The Central Bank of Nigeria, through its monetary policy committee (MPC), has adopted an orthodox approach permanently by continually increasing interest rates. Perhaps that’s the best the CBN can do, or else it is accused of extra-monetarism. The textbooks say once general interest rates are increased, inflation will slow down because people are better incentivised to save money, and to borrow less, thus money in circulation reduces and inflation follows suit. If we consider where Nigeria’s inflation is coming from – with a major portion stemming from food inflation – we will most likely conclude that we have cost-push inflation. This means that sellers are passing on the higher cost of bringing goods to the market.

However, if we are honest, we will find that Nigeria’s inflation is a multi-variable phenomenon — cost-push, illegal money in the hands of many people, bad data as a result of a large informal economy, inflation from our import-intensive economy, and price gouging by those who can exploit consumers. We should understand that Nigeria’s economy is a very loose system where people get away with all sorts. So, is there any direct intervention that can be made in the agricultural sector to slow down food inflation? That will require a careful and deliberate walk-through of the entire value chain. It is not enough to throw money at the problem by way of intervention funds, a lot of which goes to waste.

A multi-sectoral approach is required, with strong executive leadership. We have no excuse for food inflation to be so high on a month-on-month basis. If we could intervene and begin to work down food and other inflation, this will have an immediate effect on our overall headline inflation numbers. We cannot afford to leave every sector to the shenanigans of players in such a growing economy. Perhaps direct government interventions to assuage the agonies of our farmers and transporters will help to tame general inflation.

Policies to increase the competitiveness and efficiency of the economy, putting downward pressure on long-term costs – At the end of the day, competitiveness and better regulation of sectors within the economy, are what guarantee the strength of an economy. Deregulation of markets is not the application of laissez-faire policies where anyone does what they like, but better, more transparent, and more scientific policies and regulatory approaches. This will then ensure that sellers in an economy think twice before playing games. Overall, too, the leaders in an economy have to be able to reduce the rat race by which people chase more money and more advantages for themselves no matter whose ox is gored. In most of Europe, people have since gotten to that level.

A higher rate of income tax could reduce spending, demand, and inflationary pressures. This is another approach to curbing inflation. Whereas Nigeria may not raise taxes at this point, what we propose we do is get serious about enforcing government revenue. The CBN is increasing interest rates in a desperate but thus far futile bid to slow down inflation, whereas the fiscal sector merely wrings its fingers at our low revenue-to-GDP ratio. The former minister of finance must have given up since no support came from a disinterested president.

There is a large room for tax compliance in Nigeria. And we are not talking about just taxes, but every revenue accruable to the government – rents, rates, duties, fees, fines, levies, and what have you. We cannot run such a slack society and expect glory to abound. Also, there is no basis for reducing government expenditure at this point. Our people’s standard of living is still so low, such that the government must have a mindset to spend more – on education, health, security, infrastructure, electricity, and rail networks. However, the efficiency of this spending is what matters.

Are we getting value for money? Is the spending getting to the people? Are we empowering Nigerians? If viewed this way, we will not be powering up unproductive inflation, but rather growing the economy (GDP). The real problem we have had in Nigeria is low growth and very high inflation. Growth must ramp up, while inflation goes down. As difficult as it may look, this is the only way forward that can be achieved through sincerity and deep thinking.

Ultimately, the government at the center should collaborate with the state governments to put to the lasting menace of insecurity so all farmers have access to their farming activities and transport their food produce into the market. Infrastructural challenge is another nightmare that must be given urgent attention to boost economic activities in the country.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Editorial

Endless turnaround maintenance of Port Harcourt Refinery

Published

on

Since 2021 when the turnaround maintenance of the Port Harcourt Refinery started, there have been heaps of failed promises of the production commencement date.

First, it was former Minister of State for Petroleum, Timipre Sylva promising severally of commencement of productions of Port Harcourt Refinery, but these promises never came to limelight till he resigned for political calling.

Next was the Managing Director of Port Harcourt Refinery, Ahmed Dikko who at a time said the turnaround maintenance was 98 percent completed and would have commenced operations in December 2023. That promise again was unfulfilled.

The Group Managing Director of Nigerian National Petroleum Company Limited (NNPC Ltd), Mele Kyari equally said that Port Harcourt Refinery would start production in two weeks time, that elapsed in April, 2024. April has come and gone.

The Head, Corporate Communications of NNPC Ltd, Olufemi Soneye was also quoted to have said that the reason for non-commencement of operations of the Port Harcourt Refinery was regulatory and compliance tests. As it seems, all efforts to restart the operations of the Port Harcourt Refinery and by extension other refineries, have been futile.

Political watchers have adduced poor management, corruption, sabotage and lack of political will as some of the problems confronting smooth operations of our refineries. They particularly accused those benefitting from importation of petroleum products as being responsible for the non-functionality of the four refineries in Nigeria.

Political will, of course, plays a major role in shaping directions the policies go. Political will in this instance translates to good leadership, and in this case, the buck stops at the table of the Federal Government, particularly the President, who doubles as the Minister of Petroleum.

Petroleum being the mainstay of the country’s economy should be given all the attention it deserves. The reason being that virtually everything in the country is tied to the petroleum products situation.

Since the announcement of the removal of fuel subsidy on May 29th, 2023 by President Tinubu on assumption of office, life has not been the same in Nigeria. Cost of living has  risen astronomically, consequent upon the hike in price of petroleum products.

In the midst of plenty, courtesy of the abundant human and material resources, Nigeria is still often described as the poverty capital of the world. What an irony! Turnaround maintenance of the refineries subsists without end. Every hope is now placed on the Dangote Refinery, a private outfit. While the diesel price slash is commendable, how on earth will a single private entity take the whole country to Eldorado?

We cannot regulate what we do not produce, this is a natural principle that cannot be contravened. We only pray that Port Harcourt Refinery comes on stream someday.

We look forward to that time. Our position is that Government agencies saddled with the responsibility of providing fuel and other petroleum products to Nigeria must do their work and justify their pay.

This onerous task is mandatory and statutory to them and shall amount to disservice if they fail. Our prayer is not for them to fail, but that they fulfil their vows and make the country great for the overall interest of all.

Tecnimont, the Italian company undertaking the $1.5 billion rehabilitation project of the Port Harcourt Refinery has through its Local Managing Director, Gian Fabio Del Cioppo pledged to fulfil the terms of contract, so as far as we are concerned, there is nothing stopping the country from achieving the target of the turnaround maintenance project.

The only clog would of course be lack of political will, which we know could be cultivated. So let all hands be put on deck to achieve results.

Continue Reading

Editorial

Gas explosions: Nigeria and its avoidable tragedies 

Published

on

Nigerians die daily for reasons  so avoidable it would make  a 19th century peasant weep.  The deaths are often a product of systemic wickedness, nonchalance, and greed. Too often have gas explosions claimed the lives of Nigerians untimely. Whether it is the leaders refusing to enforce the checks and balances for personal gain, or citizens selling defective gas cylinders, it all balls down to a collective aversion for kindness.

The internet is rife with news of this tragedy occurring in a Sisyphean cycle. Jolted by the cries of the populace, the leaders promise reprieve, release press statements and in the weeks that follow, little to nothing happens. “One must imagine Sisyphus happy,” Camus wrote. Unfortunately, our Nigerian dead imagine nothing.

While people relaxed from their labour, were preparing for the Workers Day celebrations, nine people including a pregnant woman were injured in Tuesday’s gas cylinder explosion at Alaba Lane, Alayabiagba Community of Ajegunle-Apapa, Lagos.

“The fire explosion started around 1:30 pm and immediately, two tricycles were burnt, school children coming back from school were affected. A particular young man was seriously affected as his body was peeling off, but rushed to the Gbagada General Hospital,” according to reports.

The usual suspect is, of course, negligence, as the Director of Lagos State Fire and Rescue Service, Margaret Adeseye, puts it: “preliminary investigation revealed that several various gas cylinders traded within the neighbourhood have one triggered from a susceptible leakage leading to the snapping of a high tension cable and resultant Fire.”

The explosion razed down “four commercial tricycles, six lock-up shops, a bungalow part of properties, while salvaging adjoining structures including a major fuel service station.” Children were hurt, the future of the nation plunged, as usual into avoidable misfortune.

The way out is through. The press releases are wonderful PR statements but they do not bring back the dead, as was the case in Ogun State recently where a truck explosion cost the nation another life. The leaders must enforce the checks and balances put in place. The law is no decoration.

We mustn’t wait until a politician’s family member is involved in a tragic gas accident before “banning” (as is the default response of the Nigerian leadership). The leaders must realise that such misfortunes are contagious, and money is hardly a bulwark against 3rd degree burns in a nation where all its doctors are fleeing.

Renewed Hope requires renewed action. This is all that Nigerians ask of its leaders. All agencies responsible for monitoring trucks, cylinders need to work together to defeat this peculiar evil. Like COVID-19, gas explosions are no respecter of persons.

Of course, citizens too must do their part and resist the allure of profit over the death of others. A society without empathy is headed for a dystopia. It will not matter the price of petrol or electricity tariff, if all that matters is the pursuit of super profit at the expense of one’s neighbour. We owe it to the dead to live fully and graciously. To escape, as we should, avoidable tragedies.

Continue Reading

Editorial

Nigeria must act now to mitigate flood disasters

Published

on

As the rainy season looms ahead, a palpable sense of concern grips the nation.The recent cautionary message from the                      Federal Government to 31 state governors  regarding the looming threat of floods from April to November serves as a wake-up call, demanding swift and concerted action from both state and federal authorities.

Presented by Minister of Water Resources and Sanitation Joseph Utsev, the 2024 Annual Flood Outlook paints a bleak picture, underscoring the urgent need for preemptive measures. It is not merely an emphasising advisory; it is a resounding call to arms.

The spectre of past flood calamities in Kano, Taraba, Lagos, and other states still haunts our collective memory.

The haunting images of devastated homes, displaced families, and shattered livelihoods serve as poignant reminders of the human toll exacted by our complacency.

It is imperative that we glean lessons from these tragedies and take proactive steps to forestall the impending catastrophe.

The warning issued by the Federal Government is crystal clear: floods are imminent, and the time to act is now.

The Nigeria Hydrological Services Agency’s classification of 148 local government areas across 29 states, including Lagos, Kano, and Delta, as high flood-risk zones emphasising the gravity of the situation.

Every moment of inaction heightens the risk to countless lives and properties. State governors, local authorities, and relevant agencies must set aside differences and collaborate effectively to implement robust flood preparedness and mitigation measures.

From infrastructure reinforcement to early warning systems and community awareness campaigns, a comprehensive approach is imperative to safeguard vulnerable communities.

As responsible stewards of our nation’s welfare, we cannot afford to be caught off guard. Let us heed the warning, unite in purpose, and proactively address this looming threat.

The cost of inaction is too grave to contemplate, and the time to act decisively is now. This is not a drill.

The minister’s revelation that 31 states face high flood risks, while all 36 states and the Federal Capital Territory will experience moderate flooding, demands immediate attention and collective action.

“The high flood-risk states are Adamawa, Akwa Ibom, Anambra, Bauchi, Bayelsa, Benue, Borno, Cross River, Delta, Ebonyi, Edo, Imo, Jigawa, Kaduna, Kano, Katsina, Kebbi, Kogi, Kwara, Lagos, Nasarawa, Niger, Ogun, Ondo, Osun, Oyo, Plateau, Rivers, Sokoto, Taraba, Yobe,” the Minister said.

We cannot afford to wait until the waters rise and lives are lost. The time to act is now. It’s imperative that federal and state governments, agencies, and local communities join forces to mitigate the impact of floods.

This requires a coordinated response, including public awareness campaigns, infrastructure upgrades, emergency preparedness plans, and investment in flood mitigation projects.

The future of our nation depends on it. Let us heed the warning and take proactive steps to build a more resilient Nigeria, where lives and properties are protected from the ravages of flooding. The clock is ticking; let us act now to avoid a catastrophe.

While 31 states face high flood risks, the remaining five states must also be proactive in their preparations. It’s not enough to simply warn residents to relocate from flood-prone areas; state governments must provide safe and conducive spaces for relocation, complete with essential services like relief materials, healthcare, and security.

This will help mitigate the trauma faced by displaced families. Citizens, too, have a critical role to play. They must be willing to relocate from their homes and comfort zones to prevent avoidable deaths and losses. The stark reality is that flood disasters are devastating, as seen in 2023 when 45 lives were lost, 171,545 persons displaced, and 22,666 homes partially damaged, with 5,358 others completely destroyed.

The economic toll was equally staggering, with a $4.6 billion bill that significantly dented Nigeria’s GDP. Let us learn from the past and take collective responsibility for flood preparedness. State and federal governments, agencies, and citizens must work together to build a more resilient nation, where lives and properties are protected from the ravages of flooding. The time to act is now.

In 2022, flooding claimed 662 citizens; 2.43 million others were displaced and 3,174 were injured nationwide, per NEMA.

The financial losses were estimated at $9.12 billion by the Federal Government, and by a United Nations agency at $7 billion. A UN report stated that food insecurity was aggravated in the country as 569,000 hectares of farmland were destroyed by the flood.

According to the then Minister of Water Resources, Suleiman Adamu, 178 LGAs in 32 states were declared “highly probable flood risk states.”

Although climate change remains a global concern, leading to flash floods, droughts, forest fires, and cyclones, the government must not make excuses.

They need to take lessons from previous floodings and replace their nonchalance with strategic actions and campaigns. They must do all they can to avoid the repetition of losses of lives and properties.

The citizens must play their part by clearing drainage in their vicinity, cultivating good waste disposal and environmentally friendly culture. To entrench this, the government must place strict surveillance and enforce stiff penalties against erring residents.

State governments should demolish structures erected on flood paths to enable rainwater to drain appropriately.

NGOs in the environmental niche should activate campaigns distilled in local languages through the media to prepare citizens for the flood.

The federal and state governments should be proactive in the deployment of ecological funds to provide guardrails against natural disasters. This must be used for pre-emptive measures like building bridges, desilting rivers, evacuating canals and drainage, and building dams and levees. The dams would help preserve excess rainfall to irrigate farmland during the dry season.

The government must fully embrace its onerous duty to safeguard lives and properties.

Continue Reading

Trending