Monday Editorial
The economic downturn in the country is making life hard going
In the course of signing into law the 2016 budget recently, President Muhammadu Buhari said Nigeria was “experiencing probably the toughest economic times in the history of our nation”. He acknowledged what most citizens now go through when he said, “I read the newspapers and listen to the television and radio. I hear your cries. I share your pains.” If anything, that pain has only been increased with last week’s removal of subsidy on petrol.
To say that many Nigerians are living in difficult times is to put the situation rather mildly. In the past few months, prices of commodities, particularly imported ones, have shot through the roof, making life unbearable for the citizenry. Inflation is soaring away in double digits, put at 12.8 per cent in March and expected to climb higher in April when the figures are eventually released. Even the underperforming electricity distributing companies (Discos) have also upped their tariffs by as much as 40 per cent, despite the fact that they cannot keep the lights on.
To make matters worse, those at work are finding it difficult to make ends meet because their monthly wages are not paid on a regular basis. About 27 of the 36 states reportedly owe salaries to their workers, some for as many as 10 months. The agony in the streets can only be further appreciated in the fact that millions of Nigerians are unemployed and have no form of social security to cushion their plight.
Indeed, a combination of factors is making life particularly difficult for Nigerians now. A prolonged period of cheap oil in the international market has impacted the flow of foreign currency to the national treasury. Since 2014, the economy has been contracting as the price of oil, the country’s chief foreign exchange earner, plummeted from an average of $100 per barrel to less than $30 early this year, thus costing Nigeria more than two–thirds of its foreign exchange earnings.
For a country that is dependent on imports for almost everything, the impact of the cash flow crisis was made worse by extravagant and corrupt governments over time. The central bank is now forced to ration dollars and restrict some items from accessing foreign exchange from its official window as way of conserving foreign reserves. The nation’s currency has been devalued twice within a period of almost two years and now stands officially at N197 to the dollar. But on the black market, the naira has lost half its value such that by the weekend, it was hovering around N360 to the dollar. Since many of the importers get their foreign exchange from the black market, the economy is suffering from the low strength of the national currency.
Matters are complicated by a drastic fall in foreign investments. In the first quarter of 2016, for instance, some measly $711 million flowed into the country, a 74 per cent drop from the previous year. “The collapse in investment inflows will deal two very serious blows to Nigeria’s economy, which is already reeling due to low oil prices,” said Capital Economics’ Africa economist, John Ashbourne. “This will exacerbate the country’s serious balance of payments problems and further depress investment in an economy that is starved of capital.”
Last week, the president rekindled hope when he said N350 billion would soon be injected into the economy for capital projects. “We are working night and day to diversify the economy such that we never again have to rely on one commodity to survive as a country,” said President Buhari. “So that we can produce the food we eat and most of the things we use. We intend to create the environment for our young people to be able to innovate and create jobs through technology.”
We hope the administration will act fast by putting in place policy measures that will cushion the effects of the current hardships on ordinary Nigerians.