That the Nigerian economy is still in dire straits is no longer news, but the real worry for stakeholders appears to be the helplessness of both the fiscal and monetary authorities to stem the tide of naira’s free fall that has sent prices of basic items like food, energy and transportation skyrocketing to unprecedented heights and pushing more citizens into misery.
Findings have however shown that in the parallel market for instance, the naira as at last weekend had tumbled to N1,316/$1 across the country, with bureau de change operators concluding there are no convincing signs that the local currency will appreciate significantly in the near future as demand for FX keeps mounting, reports Daily Sun.
It was gathered that the Central Bank of Nigeria (CBN) is beaming its searchlight on commercial banks and gathering intelligence to sanction those hoarding FX to keep the demand artificially high.
Sources said a new generation bank is currently under probe as a substantial amount of FX was tucked away in its offshore branch.
Bureau de change operators also accused the banks of hoarding FX to sell at cutthroat rates in future.
“The hoarding of FX by the banks is fueling artificial scarcity and continued rise in dollar rate against the naira. Some banks are speculating, purchasing from I&E selling for profit in parallel market. So, artificial demands are driving up forex rates and that is working against the efforts of CBN to stem the slide of the naira,” he said.
It was also gathered that the scorching economy has taken its toll on Micro, Small and Medium Enterprises (MSMEs) with about 7.5 million of them packing up between 2021 and August 2023.
These small businesses died due to high electricity tariff, poor access to finance, expensive petroleum products and generally harsh operating environment, according to the Association of Small Business Owners of Nigeria (ASBON).
The President of ASBON, Femi Egbesola said: “Today, according to our survey, we have about 39 million existing businesses that are captured by data. 20 per cent of that is gone. If you look at 20 per cent of that is 7.8 million businesses that have gone under.”
Six big companies in Nigeria have posted about $385 million in losses as the naira weakens. Airtel Africa, Nestle are also among companies reporting losses in the 2022 financial year.
This was even as the latest consumer price index (CPI), which measures the rate of change in prices of goods and services, released by the National Bureau of Statistics (NBS) said inflation rose to 26.72 percent in September 2023 — up from 25.80 percent in the previous month.
The latest figure marks the ninth consecutive rise in the country’s inflation rate this year.
In September, the NBS said the headline inflation rate increased by 0.92 percent points when compared with the August figure.
Experts said there must be concerted efforts to aggressively ramp up crude oil production and commence the exportation of other goods for the country to earn foreign exchange.
For instance, a former Deputy Governor of CBN, Kingsley Moghalu, said export remains the best way for any nation seeking to earn foreign to realise the objective.
Experts lament that the sad reality in Nigeria today was that inflation rate is approximately 27%, amid about a N87 trillion debt overhang, low oil productivity; a profligate civil service design, ballooning debt servicing, unbridled corruption, weak export, high unemployment rate, weakened private sector, decayed infrastructure and blooming insurgency.
They posit that the fastest way to strengthen the naira is by reducing importation to the bearer minimum by encouraging local production of items used on a daily basis by citizens. They also urged the government to revive the refineries to cut back on spending dollars when paying for export of crude oil and reimportation of refined petroleum.
According to the Immediate past chairman of the Manufacturers Association of Nigeria (MAN), Apapa branch, Frank Onyebu, Nigeria’s economy is waiting for true leadership. Some indications like cutting the cost of governance and some other things have shown that things have not changed. It has to be leadership by example.
“There are so many initiatives that have been taken, but there are a lot more to be done.
On deregulation of the foreign exchange market, deregulation of the oil sector, fuel subsidy, we do not see any impact because it seems like whatever savings the government is making is not still getting into the economy.
The people are suffering because of they are not getting impact of these policies. We are not seeing the returns in the economy. If the savings being made are pumped into the economy through infrastructural projects or manufacturing sector that will create employment through palliatives to the sector, it will have effect on the economy.
On forex, if you deregulate the market you need to pump in enough dollars or else the situation can get worse.
The forex situation can only get better depending on government policies and actions.
The removal of the fuel subsidy is causing leading to high inflation rate. The effect of the increase in transport cost has been transferred to commodities, resulting in high cost.
Things can’t get better except by deliberate actions.’ He said
Government has to consider the direct and indirect effect of any policy before they are effected.
Onyebu observed that the only hope of this economy now is the manufacturing sector but the sector is on its knees now. The contribution of the sector to the GDP is still less than 10 per cent but it should be up to 35 per cent but lamented that government has been paying lip service to the issue of diversification of the economy. Government has to wake up fast. He concluded
In his reaction, the Director, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf., said that the present government has demonstrated the fact that it is concerned about the state of the economy. During a meeting at the economic summit recently, the government stated that was aware of the situation.
He noted that within a short time, the government was going to ease the liquidity problem in the foreign exchange market.
The president talked about raising about $10 billion within a very short time.
If they are able to do that, then perhaps we may begin to see some stability in the foreign exchange market because at the heart of all this problem is the foreign exchange which is contributing much more to inflation, cost of operation of businesses, contributing to the anxiety in the economy and the confidence crisis in the economy.
The good news is that the government has prioritised the stabilization of the foreign exchange market, so we are praying that the promise made will materialize, if that happens we might be on our way to getting some stability and restoration of confidence in the economy. What is happening right now is that there is almost a complete collapse of the economy.
Once confidence begins to return, the economy will rebound gradually.
We should also look at some of the positive pronouncements by the government so that we don’t paint everything as completely gloomy.
The Central Bank governor has also said a lot about how to ensure monetary stability, how to ensure we don’t incure deficit and some steps have been taken around improving revenue because some of the challenges we have faced overtime is the way the deficit, debt grew, all these things also contributed to the current crisis and these are not issues that can be solved very quickly.
The good news is that the government is determined to fix it. I think some of the steps they are taking now are in the right direction.
Similarly, Chairman, SMEs Group of the Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson-Okezie said the managers of our economy are not capable of handling the affairs of our economy.
The central bank is yet to stabilise its system. The the new appointees who are there are yet to settle down.
For the fires issue, the country is not a producing country and because we are importing more it’s pressurizing the forex.
Another issue is that the managers of the system have not been able to deal with those are manipulating the system and they also don’t solution to the problem.
We need to go back to the basics, the forex issue is one of the causes of inflation as long as the forex challenges are there the Naira is getting more and more useless.
The inflation has gone beyond hyper inflation and what is worrisome is that there are no signs that things will get better following economic trends and fact because there is nothing on ground to show that things will get better.
There is nothing on ground to ameliorate the inflationary trend and forex challenges,
The government seems to be chasing shadows doling money to people which does not make sense.
Right now, SMEs are dying and it is worse for them because they lack access to funds.The big players have better access to funds than the SMEs so they can easily survive difficult times.With inflationary trends, poor power supply and other challenges confronting small businesses, most of them have gone underground.
The government has to go back to the drawing board and get things working for businesses to go back, revisit the issue of subsidy and get things working. Government needs to improve our revenue, we need to fix our refineries and many more.