…Urge MPC to halt further policy hike
By Merit Ibe
With inflation surging to unprecedented levels in recent weeks, leading to erosion of citizens’ purchasing power and sentencing millions into deeper poverty, experts have advised the fiscal and monetary wings to urgently pool more potent strategies to save the tanking economy.
Systemic tremors caused by FX scarcity, huge energy cost and what appears to be largely non-effective solutions have amplified calls for a change of approach.
Today, headline inflation, according to the National Bureau of Statistics (NBS) stands at 33.69 per cent and when compared on a year-on-year basis, the inflation rate in April 2024 was 11.47 percentage points higher than in April 2023, where it stood at 22.22 per cent. This indicates that the headline inflation rate has risen significantly over the past year.
Again, Nigeria’s unemployment rate surged to 5.0 per cent in the third quarter of 2023 from 4.2 per cent in the previous quarter, the latest Labour Force Survey of the NBS revealed in February.
As President Bola Tinubu marks one year on the saddle, analysts say there is little to cheer for as too many policy reforms have been unveiled at the same time that are choking the people.
They have also called on the Monetary Policy Committee of the Central Bank of Nigeria (CBN) to hit the brakes on further tightening (increase in lending rate) as it would be tantamount to murdering the economy.
Although confidence among chief executive officers of big companies rose for the first time since the third quarter of 2022 on diesel price easing expectations and naira appreciation in April, economic watchers warned against premature celebration as there is much more work to be done. They note that an increase in the Manufacturer Association of Nigeria’s (MAN) CEOs Confidence Index (MCCI) by 1.7 points to 53.5 points in the first quarter of 2024 from 51.8 points in the fourth quarter of 2023, does not mean the economy was out of the woods, neither does it call for a relapse in the aggressive push for solutions.
An Executive of the Manufacturers Association of Nigeria Export Group (MANEG), Okhai Ehimigbai, said it has been one year of bitterness as manufacturers are bleeding.
“Government is just heaping taxes and policies upon policies both on manufacturers and the masses, which continues to undo the economy.
“The business environment is not improving as promised and as such there is no need introducing more taxes to destabilise the already weak system.
“But you have to improve on what you met on ground before you start bringing in new policies as these are reasons why a lot of industries are exiting the country and others closing shops, leading to declining FDI.
“Rather than attract FDI, we are driving FDIs away with our various taxes and policies. Most investors are closing up or reducing their investments.
“We are yet to take advantage of our large population which will attract investment and production.
“Government should make the business environment friendly by putting up the right policies that will bring in foreign direct investments and boost local businesses.
“At this level we are now, we should be encouraging these industrialists to come in, even encouraging the local ones.
“If you go to the industrial zones now, they are dry, many have left while the existing ones are just trying to survive hoping things will get better”, he said.
Chairman, SMEs Group, Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson-Okezie, recalled that President Tinubu, in March this year, claimed to have attracted foreign direct investments of about $30 billion since assumption of office on May 29 May 29, 2023, but insisted that it was somewhat cumbersome to really determine the foreign direct investments that may have been attracted by the incumbent administration.
“However, considering the companies, particularly multinationals that have left Nigeria in the past three years and particularly in the last one year and a number of businesses, particularly SME’s and operators in the real sector that have gone down, if we are to compute, we can comfortably say that over $500 billion FDIs must have been lost.
“Actually, it is extremely difficult to determine because if we are talking about FDI we are talking about inflows divided by the GDP.
“If the current federal government has attracted any foreign direct investment, it is yet to be seen. What is quite visible is the number of Nigerian companies that are closing down like SMEs, manufacturers and multinationals that are leaving the country. Definitely there has been a decline in FDI in the past one year”, he explained.
Prof. Uche Uwaleke, Head, Banking and Finance Department, Nasarawa State University, while analysing the first quarter GDP of Nigeria, noted that the aggressive hike in monetary policy rate by the CBN in February 2024 had a negative impact on output.
He said: “ agriculture contributed 21.07 per cent to GDP, ICT 17.89 per cent, trade 15.70 per cent, manufacturing 9.98 per cent, finance & insurance 6.81 per cent, crude oil 6.38 per cent and real estate 5.20 per cent.
“Manufacturing and agriculture sectors appeared hugely impacted by economic headwinds during the quarter. Growth rates were a mere 1.49 per cent and 0.18 per cent respectively. The agric sector (comprising four activities although dominated by crop production) tanked significantly in Q1 2024 to 0.18 per cent from 2.10 per cent in the previous quarter.
“With the agric sector’s dismal performance, it is easy to understand why food inflation has climbed to over 40 per cent as of April 2024.
“The financial sector grew by 31.24 per cent, a clear demonstration that it is detached from the productive sectors of the economy. In my view, this identified growth pattern, weighted in favour of the services sector, is not healthy for a developing economy such as ours. Little wonder, economic growth does not appear inclusive, reflecting in rising unemployment and poverty levels.
“It is time we reset this faulty economic structure, leveraging technology, in favour of the productive sectors: industry and agriculture” Uwaleke admonished.
For Muda Yusuf, the Director General, Centre for the Promotion of Private Enterprise (CPPE), the lending rate hike remains troubling for businesses.
“New rate hike is an additional cross to be borne by investors who have exposure to bank credit facilities. Naturally, a rigid monetarist disposition by the Central Bank is expected. But we need to reckon with the costs to the economy.
“Hopefully, with the positive outlook for domestic refining of petroleum products, we may begin to see a moderation in energy cost and a pass through effect on general price level. This is one silver lining that is on the horizon at the moment. Necessary fiscal policy support are urgently needed to compensate for the adverse impact of extreme monetarism on the economy” he said.