Implications of Nigeria’s worsening macroeconomic problems and possible solution (I)

The Nigerian macroeconomic environment continues to have severe implications on Nigerians and their standard of living.

Nigeria went into a severe recession in 2020, and the COVID-19 problem disrupted the labour market. Nigeria was particularly vulnerable to the global COVID-19 economic disruption, which was exacerbated by the drop in oil prices.

However, the current economic problem is not solely due to COVID-19 because growth returned in 2021 when the government relaxed the pandemic restrictions and oil prices recovered.

Presently, massive developmental issues continue to confront the country. These issues include the problem of inflation, unemployment, government policy, monetary policies, poor infrastructure and electricity supply, inadequate health facilities, insecurity, weak leadership and corruption, over-reliance on oil, and depreciation of the naira.

Nigeria’s annual inflation rate increased to 15.7 percent in February 2022, up from 15.6 percent the previous month, as fuel shortages increased transportation costs (15.1%), hurting goods and commodities. Inflationary pressures on food have also been high (17.1 percent). Thus, Nigeria has not been able to sustain the decline in inflation experienced in November 2021 after four years of a high inflation rate.

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Also, the unemployment rate in the country has increased and will continue to grow. This is because most companies may have to go into extinction due to the inability to operate and thrive in an environment like Nigeria.

Statistics show that the unemployment rate rose to 35 percent, and about 42.5 percent of Nigerian youth are unemployed.

Unemployment and inflation have significant implications on the poverty rate in the country. According to the Nigerian National Bureau of Statistics, 40 percent of Nigerians, or 83 million people, live in poverty in 2020. With the current economic problems, it is expected that the number of poor people in the country will rise to 90 million in 2022, accounting for 45 percent of the population.

Furthermore, since February, Nigerians have been experiencing fuel shortages due to the importation of substandard fuel, resulting in weeks of extreme scarcity and long queues at filling stations. Premium Motor Spirit, PMS (petrol), and diesel prices increased, and most filling stations only sell a few quantities to buyers at an increased price.

This causes a strain on businesses, especially small and medium scale enterprises that depend on petrol and diesel to carry out their day-to-day activities.

Nigerians are also experiencing inadequate electricity supply. This results from poor funding, non-payment of electricity bills, corruption, and the shutdown of significant power facilities due to infrastructural decay and non-performance of the power sector.

The power sector recently experienced the national grid collapse, which exacerbated the problem of erratic power supply. However, this sector could not initially supply adequate electricity needed in the economy before the collapse.

In addition, dollar scarcity has forced the government to restrict some items from foreign exchange supply, cut goods supplies, and put downward pressure on pricing as one dollar is now exchanged for N590 naira.

This, however, increases the price of raw imported raw materials that producers rely on, thus increasing the cost of production. In effect, producers shift the burden to the consumer by increasing the prices of items sold. These worsened the macroeconomic problems of the high inflation rate, poverty, and unemployment that permeate the country.

This results in increased suffering amid abundant resources in the country. Hunger pitched a tent in most families, and family members and neighbours now solicit financial support to meet the basic needs of life.

Individuals going to market now have no choice but to put the basic concept of economics into practice by scaling their needs according to priority. This is because the purchasing power of people has reduced, and disposable income is not enough to meet the necessities of food, clothing, and shelter.

Again, anger and frustration loom almost everywhere in the country. Barely can you go outside the confine of your home without witnessing a fight or quarrel. Transporters and passengers now engage in hot argument or fight over the transport fare and the change to collect.

This makes an average Nigerian mentally unstable at this present time with the happenings in the country.

No wonder a Nigerian artist, Eedris Abdulkareem sang the song “Nigeria Jaga Jaga” in 2004. In his lyrics, “Nigeria Jaga Jaga, everything scatter scatter, poor man, suffer suffer, “… Can we then say Nigeria is not Jaga Jaga with the current economic situation?

The masses are suffering in this country. There is no food, no light, no water, no work for a significant proportion of the population.

Busayo Aderounmu is an economist and researcher.