Whether by lack of political will to take decisive action against some individuals either in government or as non-state actors for some obvious misbehaviors against the state, meddling in price fixing of petroleum products through undue preference to Nigerian National Petroleum Company, despite its recent commercialization, particularly in importation of petroleum products, rising in the quantum of debts, local and foreign and as well as those owed by its Ministries, Departments and Agencies (MDAs) to critical sectors of the economy, the Government at all levels is increasingly becoming the biggest threat to survival of Nigeria’s economy, analysts say.
Also, the rising level of impunity by some government officials as well as growing acrimony between both appointed and elected leaders, with the resultant effect of gradual erosion of synergy between the fiscal and monetary policy measures are considered as part of the immediate and remote causes of the country’s descent into lowest ebb of social and economic rankings, where most citizens are living below poverty level.
For instance, in recent weeks, Nigerians have been facing serious hardship occasioned by severe fuel crisis with long queues at several fuel stations.
The worsening situation has triggered the re-emergence of the black market, making some retailers to sell above the normal price, in an economy that the citizens are barely struggling to survive.
The federal government has not been forthcoming on the controversial subsidy with the unrestrained payments running into trillions of naira and still counting with the claimed aim of protecting the interest of the poor being very far from being achieved.
Mike Osatuyi, national operations controller of Independent Petroleum Marketers Association of Nigeria, (IPMAN) confirms that subsidy is fueling smuggling, particularly, with the porous borders and lack of adequate monitoring by the security personnel at the borders.
Osatuyi, who featured on the Arise Television’s popular program, The Money Show on Tuesday, November 29, 2022 blamed the current shortage on the federal government which has allowed NNPCL to be the sole importer of the products.
“The federal government should be blamed for allowing NNPCL to be the sole importer and thereby making their members to buy from third party. Also, the fact that smuggling is possible with the connivance of the perpetrators with the government security agencies at the borders. So hold government responsible,” he said.
The IPMAN official, who could not identify any internal mechanism to check abuses by their members said, the only option has been on moral suasion, adding that even though, the association favours deregulation and removal of subsidy, there is need for round table discussion between their association and the federal government.
“Government gives room for abuses so, let’s talk before deregulation. N148/litre is the direct price but IPMAN and others are forced to go through third parties N761 diesel from depots. Monopoly of supply is not the best Govt. should involve others like MOMAN Govt should wet the system, as what we are experiencing now is system failure, “he added.
Similarly, IPMAN president, Chinedu Okoronkwo, who also made a live appearance on Channels Television’s Politics Today on Tuesday explained that the reason for the scarcity of the products had to do with distribution challenges.
According to him, petroleum marketers are expected to get the products from tank farm owners at N148.19 per litre. However, he said, they now receive the products at N185-N210.
Babajide Soyode, former GM, corporate planning. NNPC, who also featured on the Arise Television posited that smuggling is thriving because of the relative higher prices of the products in the neigbouring countries.
“Remove subsidy today and tax the product and there will be no need for Customs at the nation’s borders Subsidy is only surviving and sustaining the elites and others, who are taking our money to Dubai. Remove the N6.7trillion subsidy and invest in infrastructure. I disagree with Mr. Prudent completely on the continued retention of the subsidy. It is a leadership question,” he said
Despite all the arguments against the subsidy, the Buhari government is still stuck to the idea that the poor are benefiting from the subsidy that is believed to be shrouded in secrecy.
Indeed, most Nigerians believe that petrol subsidy and other major expenses being incurred by the federal government are taking a serious bite out of the country’s declining foreign exchange earnings.
In fact, the country is in the middle of a serious crunch that has strained its forex reserves, eroded the value of the naira, spooked foreign investors and raised prices of goods and services in an import dependent economy.
According to Godwin Emefiele, Central Bank of Nigeria Governor, at a recent event, the official foreign exchange earnings of the country at over $3.0 billion in 2014 is almost zero now, with absolutely nothing coming from NNPC
However, according to Friday Ameh, energy analyst. “The Federal Government has not positioned itself as an enabler for economic growth as expected by the citizens. This is despite opportunities at its disposal to reposition the economy but it has not optimized them, but rather stock to the fallacious welfarist disposition of the regime
Nigeria’s economy is forecast to grow below the earlier projection to between 2 to 2.5 percent according to the International Monetary Fund (IMF).
Companies operating in Nigeria are facing mounting roadblocks to doing business, emanating from the Federal, State and local Governments’ unfavorable disposition to conducive business environment, through multiplicity of levies.
In some states, the governors have turned themselves into demigods preoccupying themselves with beautifying the state capitals while most of the local governments are in sorry sight
Africa’s largest economies such as Nigeria, South Africa and Egypt are currently going through a rough patch. Sluggish growth in fiscal revenues, bloated debt, rising inflation, currency weakness and exposure to external shocks.
This has led to a wave of sovereign credit downgrades. For instance, Moody’s downgraded Nigeria to B3 from B2, while Fitch moved Ghana’s bonds to junk status (CC).
Each downgrade means a week country with a high risk of debt default and the implications are far-reaching.
Investors would begin to flee these African countries to more stable economies with greater yields like the United States.
Nigeria has joined other countries in raising its Monetary Policy Rate to attract investors and fight inflation.
But, while raising interest rate may help, uncertainty and defaults are bigger dents on investor confidence.
Nigeria, like other African countries has been embarking on borrowing spree from multilateral agencies like the IMF and bilateral creditors like China to defibrillate her economy. Essentially, these loans are meant to uplift fiscal imbalances. but unfortunately and if extra care is not taking, particularly, for the incoming government, the loans plus the already overheating debt burden, with the attendant huge allocation for servicing, may hunt the economy with possible debt trap manifesting .
In an indication of how the Nigerian economy has deteriorated, the country’s over 133 million population is multi-dimensionally poor with inflation over 21 percent, while food prices have gone beyond average human endurance.
In spite of these obvious and avoidable challenges, government officials are still living in self-denials with either bulk passing or complete abdication of responsibilities.
The conflicting signals coming from the Government and the President’s body language, which some officials are capitalizing on for their obvious failures and nonperformance appear hostile to private capital and are seen as disincentive to investors.
The financial sector is not unscathed by the debts, given the exposure of banks to some of these sectors, like the power sector.
The alleged unrestrained exposure of CBN to the government through the popular Ways and Means, running to over N20 trillion, is regarded by some analysts as ‘historic’ and bound to have negative impact on inflation and the dwindling fortunes of the local currency.
Also, frequent borrowing from the financial system is also crowding out the private sector and raising the cost of private sector credit. Average interest rates on treasury bills reaching as high as 17% and still counting following the rising MPR, could make the instruments more attractive for bankers to lend to the government rather than the private sector.
The naira’s official value, at the I & E window as at November 29, 2022 was N444.67/$, whereas in the parallel market, which has the closest semblance to a liberalised market, the exchange rate is over N700/$, creating opportunities for roundtripping and other malpractices.
metrobusiness.com investigations further showed that manufacturers are having it rough both with government and banks typified by higher interest rate, decay infrastructure like epileptic power supply, insecurity, higher shipping charges in form of demurrage and loss of competent personnel who are leaving japa-ing the country in droves for greener pastures due to what they term as hostile and unfriendly environment.
Some Nigerians are at a loss as to how we got to this level where the country is in dire straits and on the verge of economic decay curve where citizens’ confidence in the country is fast waning.
While some agree that some of the challenges could be externally induced, they are quick to say the leadership needs to assert itself and take some decisive steps at arresting some of the challenges.
According to them, this can only be achieved when responsibilities are assigned and defined reward system entrenched where performers are identified and rewarded while non-performers are sanctioned.