July 21, (THEWILL) – The Federal Government is firing from all cylinders to revive the ailing economy struck by the twin effects of removal of petrol subsidy and the devaluation of the naira. In the past one year, there have been strategic monetary policy actions, and a little bit of effort on the fiscal side, to reposition the battered economy on the path of growth.
The CBN has, since Dr Olayemi Cardoso became the governor, raised the Monetary Policy Rate (MPR) by 750 basis points to 26.25 percent in May 2024 from 18.75 percent in July 2023.
However, inflation surge and worsening insecurity are throwing sand in the gear of accomplishing the objective. This has rendered the prospects of an economic recovery during the second half of the year a mirage, putting various economic agents in a quagmire, particularly those in the real sector.
Nigeria’s inflation rate rose to a 28-year high in June 2024, hitting 34.2 percent from 22.8 percent in June 2023 and 34.0 percent in May 2024.
The inflationary pressures remain driven by currency depreciation, with the official exchange rate averaging N1471/US$ in June compared to N769/US$ in June 2023 and rising imported food inflation (36.4 percent year-on-year).
According to the National Bureau of Statistics (NBS), headline inflation (which refers to commodities like food and energy) remains dominantly driven by food inflation. That month, food inflation rose to 40.9 percent year-on-year, up from 40.7 percent in May 2024 and significantly higher than 25.3 percent in June 2023.
Similarly, core inflation (which excludes food and energy) rose to 27.4 percent in June 2024, from 27.0 percent in May 2024 and 20.1 percent in June 2023.
In the open market, a bag of rice now goes for N100,000, while a tuber of yam costs N10,000 as is the case with a paint-tin of beans. One seedling of pepper goes for N100 as a paint-tin of garri costs N5,000.
“Cost of living has become unbearably high in Nigeria because of high cost of transport and the depreciation of the naira. There is a world of difference between the official inflation rate and what really exists in the market,” said Monica Terembah, a grocery business owner in Lagos.
She added that the purchasing power of Nigerians has declined remarkably making it difficult for her to record appreciable turnover in a month. She noted that most of the essential commodities, like food, have become unaffordable to most people.
Analysts have noted that the major cause of food inflation is insecurity as many farmers have abandoned their farms due to the attack by herdsmen and bandits, especially in the Northern parts of the country. Cost of distribution has also sky-rocketed due to bad state of roads and also insecurity.
Although fighting insecurity was a major promise by President Tinubu during the election campaigns and in his inauguration speech on May 29, 2023, the phenomenon has remained a threat to every step taken to curb it.
According to Armed Conflict Location & Event Data Project (ACLED), a global data hub that collects real-time conflict-related data, 4,500 Nigerians were killed and 7,000 kidnapped in Tinubu’s first year as president.
An analysis of the data showed that the six geopolitical zones of Nigeria, including the Federal Capital Territory (FCT), Abuja, experienced several violent incidents within the period under review.
In his inaugural speech on May 29, 2023, President Bola Tinubu vowed to tackle the lingering insecurity in the country
He said, “Security shall be the top priority of our administration because neither prosperity nor justice can prevail amidst insecurity and violence,” adding that he would overhaul the sector.
“To effectively tackle this menace, we shall reform both our security doctrine and its architecture. We shall invest more in our security personnel, and this means more than an increase in number. We shall provide better training, equipment, pay, and firepower,” he said.
However, one year after he assumed office as president, almost all parts of the country still suffer one form of insecurity or the other.
Arguably, one year may not be enough to judge the success or otherwise of an administration, there has been no significant improvement in the security sector from where Mr Tinubu’s predecessor, Muhammadu Buhari, left it.
These statistics, when compared to the previous year’s data, show that more people were killed across Nigeria in the first year of the Tinubu administration than in the preceding year.
Recently, the government disclosed that it had opted for massive food importation to ease the cost of living crisis bedeviling the country.
According to the minister of Agriculture and Food Security, Abubakar Kyari, the federal government has approved a total sum of N2 trillion to tackle food inflation and actualise the accelerated stabilization and advancement plan.
The minister further said that the federal government had also approved a 150-day duty free import window for food commodities for the importation of certain commodities — through land and sea borders — under the programme. According to him, the 150-day duty free import window for food commodities include suspension of duties, tariffs and taxes for the importation of maize, husked brown rice, wheat and cowpeas. Under this arrangement, imported food commodities will be subjected to a Recommended Retail Price (RRP). Amid the lingering security challenges, foreign exchange (FX) inflows into the Nigerian economy jumped by 57 percent in one year, resulting in the naira showing some signs of stability.
Analysts attribute the rising forex inflows into the Nigerian economy to consistent policies of the Central Bank of Nigeria (CBN) which have spurred investor confidence and instilled market stability into Africa’s most populous nation.
Data from the CBN showed that Nigeria recorded $8.86 billion in FX inflows in February 2024, higher than $5.66 billion in the corresponding period of February 2023, representing a 57 percent jump over the period.
Similarly, foreign exchange turnover increased by 180 percent year-on-year to $240.64 million in February 2024, compared to $85.80 million recorded in February 2023, the CBN’s economic report said. Inflows through the CBN rose by 29 percent to $3.26 billion in February 2024 as against $2.53 billion in the corresponding period of February 2023.
On a month-on-month basis, aggregate inflows into the Nigerian economy increased by 80 percent to $8.86 billion, compared with $4.91 billion reported in the preceding month, according to a monthly economic report of the apex bank.
Inflows through the central bank rose by 128 percent to $3.26 billion, from $1.43 billion in the preceding month. Also, autonomous inflows rose by 61 percent to $5.60 billion, from $3.48 billion.
Experts say the upsurge in the FX inflows reflects positive impacts of the increase in the prevailing interest rate and the relative stability of the exchange rate. However, without taming the twin challenges of insecurity and inflation surge, there is little prospect of the efforts yielding the desired relief in a battered economy.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
