Central Business District, Lagos

Olaseni Durojaiye

The disclosure that the country’s inflation rate has entered the double-digit level has attracted a twin call on the federal government to “expand the economic management team to include more private sector operators” and “come up with a clear-cut economic policy,” even as the 2016 budget has been described as “welfarist” full of interventions without specifics on sectors.

The Nigerian Bureau of Statistics (NBS) had revealed that inflation in the country had climbed to 11.4 per cent from a previous 7.9 per cent.

In an interview with THISDAY, immediate past president of the Institute of Chartered Accountants of Nigeria (ICAN) and a capital market operator, Chidi Ajaegbu, stated that the implication of a double digit inflation include inflationary pressure and weak purchasing power. While noting that inflation is not altogether a bad phenomenon, he however lamented the absence of an economic policy that can turn around the situation for the better.

“Government needs to pay more attention on the management of the economy. There is so much money outside the banking system; the CBN don’t have the statistics to make it an agent of development. However, the time has come for the federal government to expand the economic management team to include more private sector chieftains so that they can contribute ideas on how the economy can be run. The economic team as presently constituted does not inspire confidence; there is need to inject more technocrats and captains of industry,” he stated.

In similar vein, the Director General, Ikorodu Chamber of Commerce and Industry (ICCI), Tope Oluwaleye, and a research analyst with a Lagos based economic advocacy group, Rotimi Oyelere, argued that the inflation rate of 11.4 was not unexpected in the absence of a budget and lack of foreign investment inflow. The two also called on the government to put forward an economic policy.

According to Oyelere, “With the inflation rate at 11.4 per cent there is not cause for panic. It is not unexpected if you consider all the macro variables including the foreign exchange issue, weak naira and the fact that we don’t have a budget in place yet.

“The 2016 budget is welfarist; it is full of interventions. It does not speak on how to address individual sectors. Government needs to come up with a coherent economic policy that shows focus, on how to generate employment, a policy that speaks of specific plans for the different sectors that will attract inflow of foreign investments,” Oyelere argued.

Echoing others, Oluwaleye reiterated that, “the government needs to give us an economic roadmap. All the indices are inter-related, we appear to be moving one after the other; but we need to work in an integrated manner.”

Meanwhile, THISDAY findings further revealed implication of the double-digit inflation to include wrong perception about the economy as being uncompetitive compared to economies of other African countries and, increase in operating cost and a resultant reduction in margin and turnover. THISDAY also gathered that it had led to reduction in sales for those in distributive trade.

In a telephone interview with THISDAY, Director General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, stated that, “The implication on the real sector is that operating cost has gone up, that will then affect profit margin and turnover because it also adversely affects sales, “ Yusuf stated.

Continuing, Yusuf explained that, “ if operating costs increases, costs of production also increases then the cost of products also increases; if this happens, prices go up and sales drops. Eventually it negatively affects capacity utilisation. For those in distributive trade, prices of goods have gone up and sales have dropped and prices have also dropped because it’s not all costs that you can pass on to consumers,” he stated.

In his response, Dr. Frank Jacobs noted that the double digit inflation affects everybody in the economy. Dr. Jacobs explained that “It makes it almost impossible to run business when you have increase in interest rate, increase in foreign exchange rate and now increase in inflation. We’ve been calling on government to do something long before now; we hope they will now because inflation affects both the producer and the buyer – the producer pay more to get raw materials while the buyer pay more for the goods,” he added.

Job Creation

With the country’s population currently at over 170 million and a high population growth rate, Nigeria needs to create 40 to 50 million additional jobs between 2010 and 2030, a new World Bank report says. To reduce poverty and promote more inclusive growth in the economy, the reports, said the new jobs need to be more productive and provide higher incomes than the country’s current jobs.

The report titled “More, and More Productive, Jobs for Nigeria” provides a detailed overview of jobs, workers, and employment opportunities, while “Understanding and Driving Private Sector growth in Nigeria” studies constraints and drivers of firm-level growth and implications for employment.”

The third report “Skills for Competitiveness and Employability” examines the demand in priority economic and job growth sectors and how to ensure that Nigerians have the right skills.

World Bank Country Director for Nigeria, Rachid Benmessaoud, said understanding where people work and constraints to firm growth, and the necessary skills were fundamental for formulating appropriate policies.

“The solid, detailed diagnostics in these reports are critical inputs to developing education and jobs strategies for Nigeria.” The World Bank Country director said. The reports showed a geographic divide between regions, with northern Nigeria having low levels of education access and high youth underemployment than the South.

Economic Retreat

An economic retreat convened by the present administration to offer solutions to the current economic challenges facing Nigeria will start tomorrow and end on Tuesday. The retreat, being put together by the National Economic Council, which has the 36 state governors as members and Vice-President Yemi Osinbajo as chairman, will hold in the Presidential Villa, Abuja. According to a statement on Thursday by the Senior Special Assistant to the Vice-President on Media and Publicity, Mr. Laolu Akande, President Muhammadu Buhari will deliver the keynote address during the retreat’s opening session on Monday. Akande said Osinbajo, being the chairman of NEC, which is an advisory body to the President, would preside over the retreat with governors from the 36 states of the federation attending.

Others expected at the meeting, according to the statement, are the Central Bank Governor, Godwin Emefiele; and the Minister of Budget and National Planning, Udo Udoma, among other top government functionaries.

America Export Oil

Three months since the U.S. lifted a 40-year ban on oil exports, American crude is flowing to virtually every corner of the market and reshaping the world’s energy map. Overseas sales, which started on Dec. 31 with a small cargo aboard the Theo T tanker, have been picking up speed. Oil companies including Exxon Mobil Corp and China Petroleum and Chemical Corp have joined independent traders such as Vitol Group and Trafigura Pte in exporting American crude. The “growing volumes of exports” from the U.S. are now “spooking the markets,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London, said in a note. The “flurry of export activity” is helping to support spot oil prices in the U.S. relative to contracts for later delivery, she wrote.

With American stockpiles at unprecedented levels, oil tankers laden with U.S. crude have docked in, or are heading to, countries including France, Germany, the Netherlands, Israel, China and Panama. Oil traders said other destinations are likely, just as supplies in Europe and the Mediterranean region are also increasing.

The U.S. is likely to remain for the foreseeable future a small exporter compared with OPEC giants Saudi Arabia, Iran and Iraq and non-OPEC producers Mexico and Russia. Ian Taylor, chief executive of Vitol, the company behind the first export, believes exports will remain a “very marginal business.”