Recently, the Nigerian naira sharply declined to an unprecedented rate of N955 per dollar, causing widespread concern and hysteria in business circles and among many Nigerians. President Bola Tinubu and the Central Bank of Nigeria (CBN) must take innovative and pragmatic measures, swiftly to stave off further damage to the currency and the economy. Acting decisively is paramount to restore stability and confidence.
The economy is troubled with negative signs, worsened by Tinubu’s decision to merge exchange rates. Establishing a more realistic exchange rate and reducing the arbitrage gap has proved challenging. The official exchange rate of N767.76/$ has failed to bridge the gap, leading to an increase from N100/$ to N200/$ and creating space for illegal arbitrage. This raises anxieties about the stability and integrity of the Nigerian currency, necessitating urgent action.
Nevertheless, after a meeting between President Tinubu and Acting CBN Governor, Folashodun Shonubi, to deliberate on the condition of the foreign exchange (FX) market, a momentary respite appears to have emerged for the ailing currency. The naira witnessed a modest upturn, hovering around N880/$. Despite recent improvements, experts voice apprehensions regarding the long-term viability of this progress.
After rising inflation rates and declining business activities, concerns grew over the naira surpassing the exchange rate of N1,000/$ and losing value quickly, which could have profound repercussions for the CBN. The International Monetary Fund (IMF) deepened these troubles with its recent statements highlighting the challenges the naira face following loose fiscal and monetary policies. These events have raised valid considerations about the apex bank’s ability to stabilise the weakening currency.
Tinubu’s economic adviser and current Finance Minister, Wale Edun, emphasises the need for a practical exchange rate of N700/$ for the naira. Edun argues that higher rates lack support from the fundamental aspects of the economy. This contrasts with The Economist Intelligence Unit’s projection of a stable N1,000/$ rate until 2027, which seems overly optimistic. Edun’s perspective raises fears about the potential consequences if timely interventions are not implemented.
As a result of decreased non-oil export revenues, the projection could be accurate as the supply is constrained. The current demand is artificially driven by unregulated money laundering activities, including speculators, hoarders, and both state and non-state actors. It is disturbing that the market relies on ill-gotten naira acquired by politicians, public officials, bandits, kidnappers, and associated contractors, rather than legitimate producers or genuine businesses. The situation is worsened by the lack of strict oversight on deposit banks and money exchange enterprises.
Tinubu needs to transition from inconsistent, poorly devised, and disorganised choices to strategic, well-devised, and comprehensive economic policies. The current state of the economy requires immediate attention and effective decision-making. To achieve this, he must form a strong Economic Management Team consisting of economists and technocrats instead of solely relying on miscellaneous politicians as ministers. This shift will ensure that economic policies are grounded in sound analysis and expertise, resulting in sustainable growth and development.
To stabilise the naira and prevent hyperinflation, the CBN must take specific actions. It should ensure sufficient funding for the forex market to maintain a steady supply of foreign exchange and discourage speculation. Also, the apex bank needs to enforce strict regulations and monitor bureaux de change operators and banks to prevent round-tripping and illegal arbitrage. Lastly, a closer collaboration between the CBN, regulatory agencies, and law enforcement is necessary to monitor and punish any infractions swiftly.
An economy facing high unemployment, inflation, production contraction, and dwindling public revenues needs a strong stimulus package. The focus should be on protecting key sectors like agriculture, pharmaceuticals, transportation, and small businesses. Pay particular attention to small and medium-sized enterprises (SMEs), which drive economic growth and employment. Support SMEs by subsidising power supply, providing access to low-interest credit, and reducing taxes and levies.
As we face economic challenges, tough decisions await us. Before making these decisions, it is critical to carefully diagnose and adequately prepare. The shortage of dollars has led to the control of goods by black-market operators, hindering the goal of reducing the gap between official Importers and Exporters rates and the parallel market rates. Temporarily strengthening the market and protecting the naira is essential. By channelling resources towards legitimate businesses, the Federal Government can halt the national currency’s decline.
Checking Nigeria’s Rising Debt Profile
These are challenging times for Nigeria as the country grapples with an uncertain political environment,
heightened insecurity, and a struggling economy. The nation is facing financial difficulties, as indicated by the escalating debt profile and the resulting burdensome repayment obligations. To avert an impending disaster, President Bola Ahmed Tinubu and his cabinet must emerge from their passive stance and implement measures to halt the country’s downward spiral.
An alarm raised last year by the Centre for the Promotion of Private Enterprise re-echoed the magnitude of Nigeria’s debt crisis. The warning that Nigeria’s national debt, encompassing both the liabilities of the Asset Management Corporation of Nigeria (AMCON) and borrowings from the Central Bank of Nigeria (CBN), could soon reach the N50trillion mark caused serious concern. The present situation is already unsustainable, with the government spending 90per cent of its revenue on servicing debts.
But in the latest release, the Debt Management Office (DMO) puts Nigeria’s total public debt at N87.38trillion at the end of the second quarter of 2023. The figure represents an increase of 75.29percent or N37.53trillion, compared to N49.85trillion recorded at the end of March, 2023. The DMO, in a recent report, said the debt includes the N22.71trillion Ways and Means Advances of the Central Bank of Nigeria to the Federal Government. The statement also noted that other additions to the debt stock were new borrowings by the Federal Government and the sub-nationals from local and external sources.
The DMO had earlier projected that Nigeria’s public debt burden might hit N77trillion following the National Assembly’s approval of the request by former President Muhammadu Buhari to restructure the CBN’s Ways and Means Advances. The Ways and Means Advances is a loan facility through which the CBN finances the shortfalls in the government’s budget. The DMO’s Director-General, Patience Oniha, during a public presentation of the 2023 budget organised by the former Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, noted that the debt would be N70trillion without N5trillion new borrowing and N2trillion promissory notes.
However, the latest data revealed that the current debt stock of N87.38trillion exceeded the DMO’s projection by N10.38trillion. Further breakdown showed Nigeria has a total domestic debt of N54.13trillion and a total external debt of N33.25trillion. While the domestic debt makes up 61.95 percent of total debt, the external portfolio makes up 38.05 percent. The Tide also observed that there was a significant increase in both domestic and external debts within three months. The domestic debt rose by 79.18percent from N30.21trillion, while the external debt rose by 69.28percent from N19.64trillion in Q1 2023.
In its 2022 Debt Sustainability Analysis Report, the DMO warned that the Federal Government’s projected revenue of N10trillion for 2023 could not support fresh borrowings. According to the Office, the projected government’s debt service-to-revenue ratio of 73.5percent for 2023 is high, and a threat to debt sustainability. It noted that the government’s current revenue profile could not bolster higher levels of borrowing.
Nigeria’s story is tragic. Its debt crisis began in 2005/06 with a debt buy-back with the Paris Club and the London Club of international creditors, leading to $18billion in debt forgiveness. However, enabled by a rubber stamp National Assembly, Buhari led the country into another debt trap, with public debt expanding the most under his regime, compared to previous administrations since 1999. The foreign debt component also grew over three times more than the combined figure recorded by the previous three administrations.
The present government should discontinue the last administration’s profligate borrowings and spending. There should be financial prudence since the country produces nothing tangible for the international market other than crude oil. Therefore, spending 90 percent of revenue on debt servicing is certainly not sustainable; it leaves next to nothing for capital projects, besides paying workers’ salaries.
It will be beneficial for the authorities to prioritise revenue generation by implementing initiatives and reforms to increase tax collection. This includes Strategic Revenue Growth Initiatives to raise the tax-revenue-to-GDP ratio, currently at 7 percent, to match other countries. Additionally, the three tiers of government should establish public-private partnership schemes to encourage financial support for capital projects previously funded through borrowing.
The crude oil business has long been shrouded in opacity, hindering transparency and accountability. Every dollar generated from the sale of crude oil should be properly accounted for, and we should take measures to block fiscal leakages. The recovery of the $62billion oil revenue owed by major oil companies, as sanctioned by the Supreme Court since October 2018, should not be further delayed. This substantial amount, if recovered, has the potential to uplift the economy.
Addressing the extensive theft of crude oil and expanding the tax net are imperative. The government should privatise most of the infrastructure it borrows to establish, such as airport terminals, railways, and seaports. The NASS, a compliant parliament, should restore its reputation by ceasing to approve all requests blindly for external borrowing without scrutinising the sources of repayment and considering the potential consequences for future generations of Nigerians.
Reducing bureaucracy, lowering governance costs, easing the fiscal burden, and increasing revenue are also vital to conserve funds. It is important to monitor the revenue-to-debt-service ratio closely to avoid excessive debt. Otherwise, Nigeria could end up in a situation of unsustainable debt burden, needing to ask for debt forgiveness from other countries, which might reflect poorly on the current administration. There should be a renewed urgency in ending gratuitous borrowing. This is our stand!
Time To Resolve FG, Labour Impasse
President Bola Tinubu’s withdrawal of fuel subsidy during his inaugural speech on May 29 was a steely re-
solve well-made. But it has set the alarm bells reverberating. The decision sits nicely with the World Bank, International Monetary Fund (IMF), and technocrats who had participated in protracted advocacy for it; but not so for the downtrodden, who understand particularly the unpleasant effects that progress with it.
A day after the announcement, all hell was let loose at petrol stations. The Nigerian National Petroleum Company Limited (NNPCL) rolled out a fresh price template for the commodity, which supplanted the N185 per litre, for between N448 and N557 across the 36 states of the country and the Federal Capital Territory (FCT). But the retail marketers traded above the price dimension, for up to N800 per litre in some localities.
The organised labour’s expeditious and truculent reaction, with its threat of a nationwide strike, was not unforeseen. Its grouse was the non-consultation with varied stakeholders before the decision was reached and the paucity of measures put in place to insulate the deleterious effects of the price spike on workers. That the 2023 Appropriation Act (budget) captured fuel subsidy until the end of June made its precipitous and unilateral elimination further abhorrent to labour.
Earlier agreements snapped in the bud the planned 7th of June nationwide strike. These encompass the establishing of a joint committee to reconsider proposals on wage escalations; inclusion of low-income earners in the $800 million cash transfer programme; rehabilitation of the country’s ailing refineries; repair of highways, the $70 billion proposed fund for financing of the SMEs, among others.
The Trade Union Congress (TUC) had in its separate consultations with the government’s team, presented a N200,000 minimum wage demand to replace the prevailing N30,000. The Nigeria Labour Congress (NLC) endorsed it. However, finding a common ground on this proposition and the consequential adjustments on general wages to be conducted at both Federal and state levels will be convoluted.
Following a prolonged lag in winding up dialogues with the Federal Government regarding the implementation of subsidy incentives, labour resolved to call out workers in protest. They reached this step to communicate their dissatisfaction with the government’s unseriousness to engage in meaningful negotiations with the labour side. Tinubu’s moratorium in assembling a team is attributed to his filibustering in forming his government.
The government’s failure to agree on labour’s demands led to a recent two-day warning strike by workers. Following this, workers issued a 14-day ultimatum which expired last Friday. Labour leaders are now eager to confront the Federal Government, which may happen after their meeting tomorrow to determine the next course of action. The hasty removal of fuel subsidy, without adequate measures to alleviate its impact on Nigerians, reinforces concerns about President Tinubu’s readiness for effective governance.
The NLC acted within its rights as an organisation dedicated to workers’ welfare. Since the subsidy was withdrawn, life has not been easy for the average Nigerian. It has stoked inflation, at over 25 per cent. The inflationary spiral is already being felt in the over 200 per cent hike in transport fares. Frenetic discussions between labour and government representatives have not been producing any tangible advancement.
Organised labour is entitled to enlist in amicable mass actions. The anguish and hardship are real. The recent street protests that upset Benin City and the looting of warehouses and businesses in Yola, Adamawa State, are timely cautions. These call for immediate responses. The unfolding development is a clarion request for the Federal and State authorities to expedite effort on the promised palliatives.
Therefore, the Federal Government must end the gridlock with labour as the lamentable situation intensifies the misery Nigerians have been going through since the spontaneous fuel subsidy elimination. Tinubu must realise that thoughtlessly abolishing the subsidy which contributed to the hike in petrol price by over 300 per cent within a couple of weeks, while promising to administer palliatives thereafter, is comparable to operating on a patient and applying anaesthesia later.
To pursue the struggle to a logical conclusion, both the NLC and the TUC have to join hands, work together, and overthrow all dangerous policies of the government. The cacophonous tunes by the two labour centres in the present imbroglio are regrettable and do not portend well for labour activities in the country. For the trade union movement to be effective in any nation, there has to be solidarity of purpose. The struggle to salvage Nigeria is no longer a matter the organised labour alone should pursue, because the government’s grim strategies touch every citizen.
The two labour centres must move out to disparate groups in society so that their protests and strikes will be laudable and better productive. Market women and men, artisans and civil society groups must be approached because the struggle now belongs to everybody. Labour must re-strategise. They should build a dynamic alliance and function collectively to negotiate and obtain a stronger deal to enhance workers’ and the citizens’ welfare.
Tinubu must be aware of the dangers in ignoring obvious red flags in a distraught, hungry citizens of a nation and her disoriented youths. We are gratified that he is amenable to listen and react positively to the sentiments of the people. Labour should be malleable as well. We implore the Federal Government to explore an amicable solution to the standoff which will be acceptable to both parties. There is no substitute for a harmonious resolution of the dispute. The economy cannot afford a messy labour cul-de-sac.
As UNGA Meets …
At least 150 world leaders are attending the 78th United Nations General Assembly in New York,
United States. The event commenced on September 18 to conclude today and was scheduled to be attended by heads of state and government from at least 145 countries. Some high-profile issues include climate change, poverty and food insecurity, war and humanitarian needs, and growing inequality.
This year’s event, themed “Rebuilding Trust and Reigniting Global Solidarity: Accelerating Action on the 2030 Agenda and its Sustainable Development Goals towards Peace, Prosperity, Progress, and Sustainability for All,” is featuring African leaders addressing global and continental issues, as well as discussing the situations in their respective countries.
The Chairperson of the African Union (AU) and President of the Union of Comoros, Azali Assoumani, is expected to deliver a speech at the event. As one of the African leaders, his address, along with those of other heads of state, would reflect the continent’s regression and expectations from the world.
African leaders must remind Western nations that despite emitting fewer greenhouse gases, the continent is disproportionately affected by climate change. They should highlight the recent floods in Libya caused by Storm Daniel, which tragically claimed the lives of over 11,000 people.
Also, African heads should urge the international community to fulfil its previous pledge of $100 billion in annual climate finance, as well as to accelerate the phase-out of fossil fuels and establish a loss and damage facility. We believe that these demands were emphasised at the Climate Ambition Summit on 20 September, held alongside the general assembly.
The need for a more level playing field on the global stage should be accentuated, particularly in multilateral institutions, including the United Nations itself. Africa has been campaigning for a permanent seat on the United Nations Security Council, and the calls should be louder now. African leaders have to emphasise this in their speeches. The global financing system is another key issue. Africa says it is being treated unfairly, leading many countries to fall into “debt traps”.
The war between Russia and Ukraine will certainly come to light again. African heads of state must highlight its impact on the continent’s food security. They should call for a peaceful resolution to the conflict and demand that Russia rejoin the Black Sea Food Agreement, which Turkey brokered with UN support in July 2022. The pact helped export more than 32 million tons of Ukrainian agricultural products through the Black Sea, of which nearly 19 million tons were destined for developing countries in Africa.
Nigeria’s President and Chairman of the Economic Community of West African States (ECOWAS), Bola Tinubu, joined other world leaders in his inaugural outing at the event. Before engaging in the general debate, the President joined other leaders to participate in the High-Level Political Forum on Sustainable Development (UN 2023 Summit on SDGs).
President Tinubu’s address encompassed several issues, such as sustainable development, climate change, global cooperation, and the imperative to address inequalities and global humanitarian crises. He addressed the issue of coups in the region and efforts to promote democracy. Recall that there have been five coups in the region so far: Burkina Faso (January 2022), Guinea (September 2021), Chad (April 2021), Mali (August 2020), and Sudan (October 2021).
In the case of Niger, ECOWAS initially threatened military action to restore deposed President Mohamed Bazoum to power, but later preferred dialogue as a way to resolve the situation. Tensions are further rising among the three West African Sahel countries governed by Mali, Niger and Burkina Faso. The military governments signed a security treaty pledging mutual aid in the event of any rebellion or external aggression.
African leaders must address their nation’s governance challenges, as corruption and impunity are the main reasons for increasing coups. This culture weakens nations’ foundations, erodes public trust, and threatens essential services. As a result, ordinary people bear socio-economic hardships, with leaders gaining wealth while infrastructure and services erode, leading to political instability and military intervention. Solutions must be found to these issues.
A democratic government and peaceful power transfers are essential for a nation’s functioning. West Africa has experienced a series of coups, revealing the fragility of democratic institutions and mistrust of political processes. Countries fighting for democracy are now grappling with the reality that coups are more common than fair elections, highlighting elected officials’ failure to uphold democratic principles.
Fraud is prevalent in the electoral system of many African countries, particularly Nigeria. Unfortunately, our electoral integrity is threatened by factors like voter aparthy, election rigging, and lack of trust in electoral officials. This leads to a decline in citizen trust in democratic institutions following poor governance and electoral corruption. The independence of electoral institutions is also in doubt, as many believe that whoever pays the piper dictates the tune. Integrity in elections is crucial for building citizens’ trust in democracy.
The Nigerian state, like its counterparts in Africa, grossly underperforms due to lack of state capacity to deal with the contemporary complexities of governance. Governance and political leadership in the country have been driven by self-interest and other primordial considerations, which take priority over that of the public. The state has failed in three major areas: security of lives and property, promotion of the rule of law, and provision of visionary leadership.
Given that this year’s UNGA theme focuses on the 17 Sustainable Development Goals set by the global body in 2015 for a 15-year period, Nigeria must redouble its efforts to attain the SDGs by 2030. All development indices point southwards for the nation. Poverty, and hunger allevition education, health, peace, justice, strong institutions, climate action, gender equality, clean water, and sanitation have remained unattainable. Therefore, at the ongoing 78th UNGA, Tinubu must compare notes and learn from those who have made giant strides towards attainment of the SDGs.
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