Economic experts have raised concerns over the growing hardship being experienced by Nigerians across the country, calling on President Tinubu-led administration to rethink the economic reforms so far introduced.
Notable among the reforms are the floating of the Naira, the removal of fuel subsidies, and the continuous increase of the interest rate in response to rising inflation, among others. These reforms have impacted both households and businesses operating in Nigeria negatively.
For example, the removal of fuel subsidies has led to an increase in the price of petrol, impacting the cost of transportation, food, and doing business.
Also, the floating of the Naira has led to a high and increasing exchange rate from about N520/$ on May 29, 2023, to N1592/$ as of Wednesday, August 7, 2024.
Experts, who spoke to BusinessDay on these reforms, stressed the need for the government to review the social cost of some of the policies, considering their impact on citizens.
“The government has seen a significant increase in its revenue lately, but that would mean nothing to the people because of the high cost of living currently being experienced across the country. The truth is that the exchange rate is everything,” Paul Alaje, a senior economist and partner at SPM Professionals, told BusinessDay.
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President Bola Ahmed Tinubu, at a nationwide protest broadcast last week, said that the federal revenue has increased to N9.1 trillion in the first half (January- June) of 2024. This is over 100 percent higher than N4.06 trillion generated in the first half of 2023.
Alaje explained that the floating of Naira was a wrong decision, seeing that the Nigerian economy is still import-dependent and aims for higher growth. For him, the acceptable exchange should be around 900-1000/$.
He noted that even though the Federal Inland Revenue Service (FIRS) is doing a lot to generate more revenue for the government, the exchange rate keeps reducing the value of the revenue when converted to dollars.
“We need to have a rethink, including the government of the day, to adopt a policy that will necessarily ensure stability. The current floatation of the Naira experiment is a failure and it will not work. I say this without mincing words. Argentina tried it, but it broke the back of the country. Venezuela is crying because of floatation, and Zimbabwe is almost printing a one-million-dollar coin. It’s a failed experiment. Those who promoted it were not the first that they preached it to.
“Japan was asked to embrace it, but Japan ran after several years of hunger, poverty, and deprivation for its people. Germany tried it after the war, I think from 1947 to 1949, when the war ended, the German economy became so bad that the currency became so poor to the point that they abandoned the currency. It does not work; we cannot float the Naira. No matter what people tell us that should encourage us to continue in flotation, it is a complete error, we cannot manage it.”
Also speaking with BusinessDay, Muda Yusuf, chief executive officer of the Centre for Promotion of Private Enterprise (CPPE), said to address hardship in the country, the government must ensure a good balance between the economic objectives and social objectives of its reforms. These social objectives, he said, include efforts to reduce hunger, reduce the high cost of living, and improve access to education, and access to health, among others.
“Maybe because we are conceding in the area of import duty, we are conceding in the area of tax and that will affect revenue, but that cannot improve the welfare of the people. So, we need to pay a lot more attention to the social indicators in terms of managing our economy,” Yusuf said.
He said there may be a need for the government to tweak the policies and ensure that the social cost does not get too high for the citizens to bear.
“We are focusing too much on economic indicators. It is not as if the economic indicators are that fantastic, but there have been relatively some improvements in terms of increasing revenues, closing the fiscal deficits, and all those things. But the social indicators sometimes are even much more important because even if your revenue is not growing but the quality of life is getting better, things will seem better.
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“And we also need to begin to examine, very rigorously, the social cost of these economic reforms, especially these orthodox economic policies. If the social cost is getting too high, we need to go back to the drawing board and tweak them. I am not saying we should abandon it, but we can tweak it. You need people to be on board for you to pursue reform successfully. So, you need to ensure that the social cost is not getting too high, otherwise, you will be disconnecting the people from your economic policies and governance.
“So, the managers of the economy should take cognisance of the need to reduce the social cost of economic policies. All these orthodox economic policies do not have to be cast in stone because our environment is not the same thing as the environment of the West. So, as a matter of principle and economic management philosophy, we should be reducing the social cost of economic reforms,” he said.
Yusuf also urged governors to address hardship in the states, noting that they are closer to the people and in a position to drive needed developments at the grassroots.
Ishaq Ibrahim, an Abuja-based economist, told Businessday that even with increased revenues if the government fails to prioritise investment in education, healthcare, infrastructure, and social services, there may not be significant improvements in economic conditions for citizens.
He said with improper management of revenues, the intended economic benefits may never reach the populace.
“Nigeria currently ranks high in unemployment. So, if the government’s revenue increases do not translate to job creation, improved security, good road infrastructure, and accessible healthcare for citizens, the economy may not see the desired growth.
“Also, let us not forget the high inflationary pressures and currency devaluation, which are continuously eroding the purchasing power and real income levels of Nigerians, This will also make it seem like government revenue increases are not benefiting the average citizen.”
