The Faltering Economy
As Nigeria plunges into a deep economic recession and runaway inflation makes nonsense of the current take home pay of most Nigerians, the Central Bank of Nigeria has taken another step set to impose more hardship on Nigerians and prolong the faltering march towards recovery. The increase in benchmark interest rate by 200 basis points by the Central Bank of Nigeria (CBN) on Tuesday will further burden the real sector and could worsen the volatility at the equities market. That is the bottom line.
The Central Bank has once again shown it is run by a neophyte in economic policy as this rise in interest rates from 12% to 14% makes no economic sense. Beating its chest in a pyrrhic victory the Monetary Policy Committee of the CBN led by its Governor, Godwin Emefiule claim this move is a puritan cure all that will heal the ailing Nigerian Economy.
What does the hike in interest rates mean in layman's terms? What the CBN hopes to achieve is encourage local savings and an inflow of foreign investment to boost the economy. It also assumes that Nigeria is awash with a mountain of cash hence there is a tilt and imbalance in supply and demand as more money is chasing fewer goods hence the need to encourage saving to stem the runaway inflation. This is total balderdash. Nigerians have never been as broke as they are currently stand.
Like a cancer most states can't pay salaries or pensions, government revenue is at an all time low due to the activities of Niger Delta Militants, Industries are collapsing like a pack of recharge cards, investors are withdrawing funds and leaving the Nigerian economy like rats leaving a sinking ship and poverty is claiming new victims every day. Where is the CBN MPC getting their info that Nigerians are swimming in money and need to save more? Who will invest in Nigeria when companies like Delta and United who invested in Nigeria, have over $1 Billion Dollars trapped here and can't remit their earnings to their offshore accounts?
Who will invest in a nation where kidnapping and insecurity is rife and millions of children are dying slowly of malnutrition? Indeed the CBN Governor and his MPC are not living in the Nigeria most of us are living in and why the President has not relieved this colourless individual and his backroom staff of his position is a mystery. The cause of the runaway inflation is not that Nigerians are awash with a newly found wealth but the deregulation of the downstream oil sector.
Petrol has jumped from N85 to N145, Kerosene from N50 to N200 and Jet A-1 has virtually disappeared. There is no way inflation can been reigned in with this sudden increase without any palliatives. The question is where are the palliatives to sooth this knee jerk hike in petroleum products? Hence with this increase the common man has to bare the brunt of this price hike.
Trillions were professed to be saved by the removal of subsidy. Where are these trillions today, in the face of the current realities where most live from hand to mouth? What the current rate hike will only do is increase the cost of borrowing. Companies will find it difficult raising letters of credit to buy goods from both local and foreign suppliers.
This will contract the real sector of the economy causing more job losses and prolonging the recession. No one has ever survived a deep recession by more austerity. Spending ones way out of a recession by quantitative easing and infrastructural development has always been the key. So this trend of putting more hardship on Nigerians is really uncalled for.
The CBN should have left the interests rates as it is and concentrate on improving the FOREX market and defending the Naira which has been in free fall since President Buhari came to power. A slump from 195 to the dollar to 310 can never be seen to be good in any ramifications. And the forex policy on ground has only succeeded in deepening the hole in the ground as one policy flip flop after another has failed to revive a battered Naira and the faltering economy.
The key to getting out of this logjam has been as clear as crystal and until the Government stops playing ostrich every attempt to defend the naira by half measures will fail. Remittances remains the largest pool of foreign exchange that is unaffected by Niger Delta Militants or Boko Haram. Last year alone Nigerians in the Diaspora sent back a whooping $21 Billion. Why the CBN coverts this money and refuses to allow Dollar remittances remains a mystery.
The slide of the Naira began in December 2014 when this obnoxious policy was instituted and since then its been open season on the Nation's battered economy. This is the fastest route to ending the speculations and sharp practices in the forex market as currency traders are all singing "How low can you go" as all bets are on the Naira sliding to N500 to the dollar. This is totally unacceptable especially coming from a regime who promised to strengthen the Nation's currency alas the Naira is becoming as worthless as Idi Amin's toilet paper Ugandan Schilling.
Once again the beat from the talking drum must be sounded. The President needs to overhaul his economic team or take the blame for the current mess Nigerians are facing. In the long term, private enterprise and exports must be encouraged to escape the import driven glut that has fuelled growth for decades. But to continue along this path of passing on more hardship to Nigerians who are on their last hole of their belt tightening measures; is totally unacceptable.
Until the palliatives are released to stem the rising cost of living occasioned by the hike in petrol, President Buhari can not lay claim to being a better leader than his predecessor who fooled many a Nigerian with the sound of SURE-P whose Chairman jumped ship once the fraud of a programme became vivid to the uncanny. Buhari doesn't even have a colourful acronym to tickle our fancy as we await the long over due economic ump. Maybe the clandestine visit of OBJ will yield some results for the Wiley old former leader is not oblivious to the sufferings of Nigerians and always emerges to set the record straight in our darkest hour.
President Buhari needs to know that ALL Nigerians cannot see the light at the end of this dark glumly tunnel except the likes of Femi Adesina, and until the needful is done it is difficult to blow his trumpet lest one descends into sycophancy. We all want President Buhari to succeed but under the current flag of a faltering economy led by a clueless economic team it is hard to see success at the end of this wandering in the wilderness.
Usman Mohammed IBB University, Lapai-Niger State.
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