John Danjuma Omachonu
Nigerians are increasingly losing confidence in government as hardship ocassioned by deteriorating living conditions and rising poverty, among others persist.
Consequently, whether by the current high level of poverty, tension, erosion of the value of the naira and high exchange rate, high prices of goods and services to the general level of insecurity, Nigerians are increasingly losing faith in government.
The implication is that the gap between the government and the governed is increasing on daily basis, just as trust deficit is also on the rise.
Interactions by the metrobusinessnews.com (MBN) with small business owners to large ones revealed a common denominatior of despondency that has left their businesses in a suffocating, hostile and unpredictable environment.
They are also being bogged down by extra costs imposed by power distribution companies, DisCos as Nigerians are virtually paying for darkness while production costs of manufacturers have gone up as a result of escalating prices of petrol and diesel.
For instance, consumers under the Ikeja DisCo, around the Arepo axis and it’s environs, have been in darkness for over 72 hours until this Monday, September 25, evening, that the light was restored.
Reacting to the restoration, one of the residents commented on the ACCDA thus:
“Up nepa … M😁😃😄 but am not impressed all of a sudden the untraceable fault is now found and fixed over night …. All this bobo na old school arepo ronu lightening does not strike twice in one place but this lightening has struck once too many.”
Similar stories, if not worse, abound in other areas under the coverage of other DisCos.
The situation is compounded by decayed infrastructure and insecurity that have made prices of food items beyond the reach of common man.
Further interactions also reveal that an average Nigerian buys food items like yams, potatoes and fish on fractional and rational basis.
For instance, consumers join money together to by a fairly big tuber of yam that sells between N1000 and N1500 now, or alternatively, sellers are willing to divide tubers to a customer based on what he has to part with.
To the disgruntled Nigerians, government at all levels have failed in effectively discharging their responsibilities as an enabler of economic development that would inspire confidence in the citizens.
Also, forex traders welcomed Yemi Cardoso, the new Acting Central Bank (CBN) governor on his first Monday, September 25, 2023 to the office, with the exchange rate trading at around N1000/$1.
As a sign of dysfunctional foreign exchange market, the exchange rate between the naira and dollar was quoted for as high as N1,006/$1 on peer-to-peer platforms where forex is sold using cryptocurrency stable coins, N1,000/$1 on P2P platforms.
Meanwhile, in the parallel market, dealers were trading slightly above N1000, although appreciated to around N998/$ towards the end of the trading day of Monday, September 25.
The exchange rate however remains above N1000/$1 for forex “inflows” which are noncash transactions.
Turning to the official Investor and Exporter Window, also known as NIFEX, the exchange rate settled at N773/$1.
Interestingly, it reached an intra-day peak of N799.50/$1. The Nigerian Autonomous Foreign Exchange Rate, or NAFEX, was also recorded at approximately N759.71/$1.
Consequently, the gap between the official and parallel market rates has widened significantly, standing at around 23 percent, substantially greater than the 5-10 percent differential commonly deemed acceptable by currency experts.
Similarly, on the forex turnover, there was a notable decline as it plummeted to $64 million, a drastic fall from the $153.7 million observed at the end of trading on Friday, September 22.
More worrisome is doubts which some public policy announcements are generating.
Nigerians, for instance, are yet to know the true situation of the $3 billion loan allegedly secured by the Nigerian National Petroleum Company Limited to salvage the naira whose fortunes have been and still nosediving.
Also, tongues are still wagging on the true position of the subsidy, which President Bola Tinubu said had since gone, but for which, some of the effects are said to being felt.
The questions, among most Nigerians, are, why is there no appreciation in the value of the local currency as well as why Nigeria is not gaining from the rising prices of petroleum products, particularly, petrol at the International oil market and why is the local prices not been affected by the price dynamics at the International markets?
According to an analyst, “It is not surprising Nigerians are losing faith in government at this time, considering the high hope and promises made by government to right the wrongs. Matching those promises with the high degree of deterioration in the quality of life and policy uncertainty in a completely import dependent country like Nigeria, with embarrassing level of imported inflation, feeding from multiple exchange rate system, the only option for the impoverished average Nigerians is to be skeptical of any government moves, no matter how good intentioned.”
Consumer spending power is overwhelmingly flagging and sagging as unemployment rate rises, even as the operating environment is undeniably very tough and stifling for businesses.
Another analyst feels that it does not appear that the government has a clue about what the issues are nor have insight on how to get out of the present economic conundrum.
Bismarck Rewane, chief executive officer of Financial Derivatives Company, (FDC) in the current edition of the Prism (Biznomics), “Nigeria on the path to economic effervescence — Andrews Liver Salt !!!” released Monday, September 25, 2023 said:
“Recent reforms are making the average Nigerian live on a shoestring. Prices are skyrocketing as inflation crosses the 25% threshold and the naira might be in a free fall, crashing to an all-time low of N995/$ as the scramble for dollars increases in the midst of inadequate forex supply.
The credibility and independence of the CBN has also come into question with forex market participants pricing in a monetary policy risk premium and lingering capital control measures on the naira.
The persistent dollar shortage and macroeconomic vulnerability prompted FTSE Russell to downgrade Nigeria’s stock market from “Frontier” to “Unclassified market”, triggering selloffs and a whopping loss of N757 billion in two days.
External debt is also ballooning ($43.16bn in Q2’23) as interest payments take precedence over infrastructural and socio-economic needs.
Higher oil prices are good but not great for Nigeria
Globally, oil prices trade at $95pb and are projected to hit $100pb by year-end due to supply shortages. While government revenue (FAAC) could increase in naira terms, Nigeria’s reliance on imported energy products (LPG, diesel, petrol and kerosene) amid a falling naira means higher food and transport costs, exacerbating inflationary pressures. These will be major considerations for the MPC at its next meeting, whenever that will be. Nonetheless, we expect the MPC to remain hawkish.
But some form of looking inward could solve Nigeria’s economic woes. Viable options would be improving the value addition of top agricultural traded products like cashew and cocoa, as well as mineral resources like steel.
More importantly, Nigeria needs to show its political will, improve access, and encourage local businesses, particularly SMEs, to participate in the AfCFTA by removing non-tariff barriers.”
Also, the dream of many ‘homeless’ Nigerians to own their own homes continues to fade as prices of building materials rise astronomically following a cost-push inflation that has driven commodity prices beyond the reach of most consumers.
Investors’ optimism about Nigeria’s stocks has reduced considerably with the hawkish stance of CBN as well as introduction of the FG backed retail bonds attracting more investors.
However, all eyes are on President Tinubu, to walk the talk with the manifestations of the promised better life for Nigerians and reviving the ailing economy.
Only stronger naira for greater purchasing power, employment generation, reduction in inflation rate, cost of governance, among other can engender the confidence of Nigerians in government.