THE rise in the inflation rate to a four-year high of 18.17 per cent in March this year, further darkened the ominous clouds gathering over the country and raised the fearsome spectre of economic ruin. The National Bureau of Statistics, in its monthly Consumer Price Index bulletin, reported a jump in the year-on-year inflation rate for the 19th straight month. There were price increases across the board in consumer items as the economy was buffeted by the COVID-19-related recession, insecurity, crisis in the foreign exchange market, unemployment and revenue shortfalls. The steep drop in the value of the currency re-priced imported goods and raw materials. As prices are spiking rapidly, the possibility of hyperinflation and its concomitant fallout are real.
The World Bank had warned in June 2020 that the collapse in oil prices coupled with the COVID-19 pandemic would plunge the Nigerian economy into a severe economic recession, the worst since the 1980s. Leaving the national salvage effort exclusively to the inept regime of the President, Major General Muhammadu Buhari (retd.), is proving catastrophic. Though key fiscal and monetary policymaking lie mainly with the Federal Government, states need to make radical changes in their spending and revenue generation template and run autonomous, self-sustaining economic units.
The NBS report was not surprising given contemporary developments. Headline inflation–featuring volatile food and energy prices–rose by 1.56 per cent in March, up from 1.54 per cent in February. The urban inflation rate year-on-year was 18.76 per cent compared to 17.92 per cent in February, while the rural rate rose 17.6 per cent compared to 16.77 per cent the previous month.
But the cold figures hardly convey the misery of ordinary Nigerians or the fierce headwinds faced by businesses, big and small. Nigeria is on a knife-edge over terrorism and cow politics. The Central Bank of Nigeria Governor, Godwin Emefiele, has rightly attributed the inflationary pressure to the worsening security situation in many parts of the country, particularly the food-producing areas where farmers faced frequent attacks by herdsmen and bandits in their farms. This has worsened food inflation. It hit 22.95 per cent on the back of insecurity across the country where farming, transport and commerce have been partially shut down in the North by terrorist insurgency, banditry, kidnapping, armed robbery. There is also the ferocious incursion into farmland by marauding Fulani herders converging on the country from within and throughout West and Central Africa. Cows and herders have disrupted farming in parts of the South-West and South-East and penetrated the South-South region.
Only massive subsidy, currently put at N120 billion monthly, is putting off the inevitable spike in the pump head price of petrol; prices of kerosene used by the majority of the urban poor and the vast majority of the rural population, and of diesel, used by industrial producers, have risen. Alarmingly, the unemployment rate climbed to 33.3 per cent in the last quarter of 2020, from 27.1 per cent in Q2. In the youth segment of 15 to 24 years old, the jobless rate was 53.4 per cent.
Blame for galloping inflation was also placed by Trading Economics on the COVID-19 pandemic fallout, reduced revenue from falling oil prices and demand, weak naira and insecurity. But even before COVID-19, the economy had been in disarray. For an import-dependent economy, the crash in the naira relative to global currencies has also been catastrophic. This, together with prohibitive lending rates, low rates on savings and the adverse operating environment, make local goods uncompetitive even with those of smaller neighbours.
The Edo State Governor, Godwin Obaseki, blew the lid on the FG/CBN template of printing money for sharing among the tiers of government to make up for revenue shortfalls. Emefiele’s explanation that it is normal government borrowing was cold comfort. Economists fret that unchecked, printing money consistently faster than the growth of real output could result in hyperinflation, conjuring fearful images of Germany’s experience in the 1920s and Zimbabwe’s more recently. Though several governments temporarily resort to printing currency as part of Quantitative Easing measures to deal with deep recessions and prevent deflation —Japan, the United States and the United Kingdom have recently done so— such interventions are creatively targeted at sustaining consumer demand, jobs, exports and production. Nigeria’s, sadly, often is to sustain the prohibitive and inhibitive cost of governance, benefiting only a very tiny segment of the population. Printing money is invariably inflationary as it expands money supply; it is worse when goods and services are correspondingly in short supply.
Though the country appears far from the global threshold of the hyperinflation of 50 per cent per month, the prevailing conditions, the monumental incompetence and confusion of the Buhari regime give cause for alarm. Investopedia blames hyperinflation on “government ineptitude and fiscal irresponsibility,” two attributes the Buhari regime and the 36 state governments have in abundance. Six years in office, there is a growing conviction that Buhari simply wants to complete his term, leaving the country broke, indebted (owing N32.92 trillion currently), insecure and broken; economically and politically.
To save the day, the CBN should review its inflationary practice of converting dollar revenues into naira for sharing by the federal, states and 774 local governments as long canvassed by the late economist, Henry Boyo. Improving the business climate to stem currency hoarding and capital flight and attracting foreign direct investment should be paramount.
The economy should be made more productive. With productivity growth, an economy can produce — and consume — increasingly more goods and services for the same amount of work. The World Bank advises that it is urgent to address bottlenecks that hinder the productivity of the economy and job creation. All stakeholders should, therefore, as a national emergency, collaborate to weave all the various policies, interventions as well as fiscal and monetary policies into a comprehensive national stimulus programme with the immediate objectives of curbing inflation, interest rates, forex turbulence and unemployment. Sub-national governments should urgently roll out economic programmes and timelines to reduce their beggarliness and attain fiscal self-sufficiency. Job creation should be the preeminent target.
Insecurity must be tamed; the nationwide siege by killer herders, bandits, terrorists and kidnappers should be put down to allow agriculture, mining, transport and commerce to fully resume. The government should open the economy to investors through corruption-free privatisation.
Nigeria is courting disaster by refusing to restructure. Even the unitary United Kingdom has moved beyond a centralised system. Alex Massie puts it succinctly in The Times (London): “The UK is not formally a federal entity but de facto, and even in the absence of a codified constitution, it possesses many of the features of a federal state anyway. It is a country of surprising, if often unrecognised, diversity in which unitary institutions are rarer than many people, including many MPs, think. It has no single education system, no single system of law, no pan-UK established church; even the NHS, the notionally great symbol of British unity, is actually organised along national lines.” This is the reality of modern government.
Nigeria is facing economic collapse on a grand scale. This unproductive and uncompetitive federal structure has done enough havoc to its political and social viability as well. The question to ask is, what is the point of any union if it cannot guarantee prosperity and welfare for its people?
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