Nigerian economic sustainability (Series 2)

The naira has attained the status of one of the leading global worst-performing currencies as it devalued by 83.60 percent. From₦899.39 to a $ on Dec-29-2023 to₦1,651.28 to a $ on Oct-30-2024, with heightened black-market pressures driving increased unregulated demand. To curb this anomaly, the Minister of Finance and Coordinating Minister of the Economy announced that work is in progress to capture all the foreign currency outside the banking system into the financial system over the next nine months or allow individuals and corporations with this fund outside the financial system to face the consequences of legal and financial punitive charges. This is expected to create an opportunity for increased compliance with laws and regulations, enhance foreign reserves, and further strengthen the naira position against the dollar. This will run concurrently with the oversubscribed FGN 9.75 percent domestic dollar bond initially required to raise $500 million, as the federal government intends to raise $2 billion from the local community.

The Nigeria Labour Congress has further petitioned that there is a need to revise the minimum wage to align with current market realities of persistent increases in prices of goods, services, commodities, and the cost of living, among others. The average cost of affording a healthy diet declined by 0.8 percent to ₦1,255 in August, which is still high when compared to the average number of people in a household and the total income generated by that same household. In Nigeria, the price of food and living expenses is growing at a faster rate than the cost of income and wealth generated by that same household. About 60 percent (21 of 36) states across Nigeria have complied with the revised minimum wage of ₦70,000, with Lagos and Rivers State taking the lead by implementing ₦85,000 as the minimum wage. The local corporations in the services sector have also made some adjustments to employees’ compensations and benefits through introducing some wage adjustment initiatives such as palliatives, cost of living adjustments, conversion of contracts to full staff, transport reliefs, remote working, and other laudable initiatives.

“From a further analysis of the revenue from taxes, Pay as You Earn (PAYE) accounted for ₦1.24 trillion (63.83%), while capital gain tax only accounted for ₦5.91 billion of the total tax revenue made up of PAYE, direct assessment, road taxes, stamp duties, and capital gains tax.”

July 11, 2024, is a day that will not easily be forgotten in the Nigerian judiciary, as the Supreme Court of Nigeria granted full financial autonomy to the local governments through a panel of seven justices led by Emmanuel Agim. This judgement should enhance increased independence of the local government on their respective state governments while advancing development at the grass-roots level. The secretary to the government of the federation further inaugurated a ten-man inter-ministerial committee chaired by the SGF himself to enhance the full implementation of this laudable Supreme Court judgement. There have been mixed reactions on this judgement at the state level, as some state government jurisdictions that usually receive these funds prior to the implementation of these judgements are not ready to fully dissolve power to the local governments. At the last FAAC meeting, ₦1.298 trillion (56.48%) of the ₦2.298 trillion revenue earned in September 2024, of which the statutory revenue was the major driver by accounting for ₦1.043 trillion (45.39%) of the total revenue earned for September 2024. The split of the FAAC is as stated: federal government (32.71%), state government (34.93%), and local government. Lagos, FCT, and Abuja accounted for ₦1.222 trillion (50.37%) of the total internally generated revenue (IGR) by all states of the federation in 2023. Taxes to total IGR are 80 percent, while revenue from ministries, departments, and agencies accounts for the other 20 percent. From a further analysis of the revenue from taxes, Pay as You Earn (PAYE) accounted for ₦1.24 trillion (63.83%), while capital gain tax only accounted for ₦5.91 billion of the total tax revenue made up of PAYE, direct assessment, road taxes, stamp duties, and capital gains tax.

Let us take some moment to reflect on some very provoking thoughts as listed below!!!

Nigeria used to be known as the Giant of Africa; in fact, it still has the largest population but has been displaced to the fourth position with the largest GDP in Africa despite the significant FX devaluation of the Naira against the US Dollar over the last seventeen months.