Sunday, February 25, 2024

EDITORIAL: The toxic economic situation in Nigeria

Millions of people in Nigeria are struggling with economic problems caused in part by government reform policies introduced earlier this year.

Data released two weeks ago by the National Bureau of Statistics showed Nigeria’s inflation hit an 18-year high of 27.3%.
The trend could exacerbate suffering in a country with an estimated 25 million food-insecure people.

The United Nations estimates that 25 million people in Nigeria, or about 15% of the total population, are food insecure.

Regional instability, climate change and inflation are the major triggers of food insecurity in Nigeria. The situation worsened after the government stopped paying subsidies on fuel in May, sharply increasing costs for food, transportation and energy.

Nigeria’s currency devaluation is also impacting commodity prices and contributing to overall inflation.

According to the World in Data analysis, Nigeria is among countries with the highest food expenditure with an estimated 60% of total personal income spent on food.

Experts say the situation will worsen if food inflation continues to rise, and that vulnerable people will be most adversely affected.

The current economic situation of many Nigerians, the unemployed, employed or small business operators, is to say the least, perplexing and confusing.

Inflation continues to worsen the cost of living of the populace, eroding the purchasing power of citizens with no succour in sight.

With persistent inflation, businesses and households will continue to perform poorly, and the citizens will continue to pay more for the same goods and services.

The consequence and impact of inflation (price instability) in recent times in Nigeria cannot be overemphasized.

Nigerians have witnessed job losses, an increase in malnutrition, decline in social status, food insecurity, and high levels of different forms of begging from family, neighbours and friends and so on.

Likewise, most Nigerians managing small businesses are struggling to survive daily because of low sales, accelerating inflation and worsening living conditions.

It may even result in a higher mortality rate in the short term because when health care is expensive and unaffordable, it will widen the inequality that already exists.

More lower-income earners are already replacing healthier food options with what is available, which could be toxic and detrimental to their health.

The crisis associated with the high cost of living affects more than just the bank accounts of Nigerians; it also hurts and affects their mental health as it increases worry and anxiety.

Data from the NBS reported that the headline inflation for May 2023 was 22.41 per cent and 22.79 per cent for June. The same inflation was 15.68 per cent in 2016 and 9.01 per cent in 2015.

Currently, the inflation in Nigeria is the highest in the last 18 years and this is a cause for concern.

Though the cost of living and inflation crises are typically global, the impact is more on the African continent.

For instance, inflation in Ghana reached 42.50 per cent in July 2023; the highest level in two decades. Ghana has witnessed over 100 per cent increase in food prices and transportation costs. The energy costs have risen dramatically.

Inflation is running at 44.81 per cent in Sierra Leone as of June 2023, which is also the highest in recent times and driven by food and fuel inflation and the depreciation of the Leone currency.

Inflation has risen to a 36-year high in Congo and many African countries are under growing pressure of high inflation and unbearable cost of living.

“We frown on the misappropriation of our resources by state governors specifically in this biting economy”

Even though inflation is a global phenomenon at this time, the steady inflation in most African countries has been largely driven by the effects of the war in Ukraine; and cost of food, fuel and energy.

In Nigeria, forex unification, government policies, public debt and the recently reviewed fuel costs, are the main causes.

Importantly, when prices of energy, food, commodities, goods, and services go up, purchasing power usually comes down.

Persistent inflation may continue to erode the value of African currencies against the dollar and cause general price instability, which should be of great concern.

The government of Nigeria needs to adopt significant structural policy reforms, and tight monetary and fiscal policies to maintain stronger growth rates in terms of improved Gross Domestic Product and to stabilise the tide of inflationary pressures on our economy.

As Nigeria languishes in debt laced with unending economic crisis, it would have been given that the state governors would cut their coat according to the cloth but the reverse has been the case as some of the state chief executives have been leading a profligate lifestyle.

The removal of fuel subsidy, increase in taxes, and others are enough for the state governments to wake up to the existing realities of proffering timely solutions to these economic maladies that plunged the states and citizens into difficulties.

In this vein, there has been a general belief that state governors will fulfill the righteousness of discarding the culture of profligacy.

However, there has been no record of commitment towards doing away with the spending spree the states have embarked on, even when there are other pressing needs to cater to, which the funds at their disposal cannot address.

As a pressing matter, some of these states that are infested with the squander mania syndrome owe civil servants salaries and pensions. Also, the states are plagued with bad roads, and poor healthcare centres, to mention a few, which deserve ultimate priority.

According to a report, the 36 states of the federation have spent N1.71trn on recurrent expenditures, including allowances, foreign trips, office stationery, and aircraft maintenance in the first nine months of 2023.

Also, the state governments borrowed about N46.17bn from three banks to pay salaries between January and June 2023.
Similarly, the total spending by states, including capital expenditure, amounted to N4.59trn in the period under review.
There is a public outcry that the states are spending lavishly.

Lagos State has the highest domestic debt (N200bn), then Delta (N70bn) and Oyo (N58.87bn). Also, Delta State is topping the list of borrowers from multilateral lenders with N71.45bn in debts, Lagos followed with N51.36bn, Akwa-Ibom (N27.04bn) and Ogun (N22.82bn).

It is our point that the misappropriation of resources by state governors is uncalled for.

We frown on the misappropriation of our resources by state governors specifically in this biting economy.

The country’s economy is currently in shambles and politicians’ attitude to spending is unfortunate.

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