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Cautious Optimism As Naira Rebounds

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It has been good news since the past three weeks as our national currency, the Naira, continues to regain its lost value. The recovery follows frantic efforts by a government whose ill-advised, inaugural policies had set the legal tender, and the whole economy, tumbling.
The naira took an unprecedented plunge from last June and hit bottoms by the middle of March, 2024, following a hasty decision by President Ahmed Tinubu’s administration, to let it float freely on the market forces of demand and supply, in addition to removing petroleum subsidy, in disregard of the handicap of Nigeria’s import-dependence.
Without provisions to boost productions that satisfy domestic demands, or prime export capacities to balance import pressures on the local currency, a floating naira depreciated by 25 per cent in a single day in June, 2023, dropping to N1,950 per dollar in March, 2024, from about N750 per dollar earlier in May, 2023, while the price of petrol jumped overnight to 295 per cent, from N189 to N557. By December, 2023 overall inflation, according to official estimates, reached 28.92 per cent and food inflation shot beyond 33.33 per cent.
According to a World Bank report, whereas about 24 million Nigerians crossed the poverty line during the first half of 2023, in the twilight of the Buhari administration, situations got worse by the end of 2023, when accelerating inflations ushered-in by Tinubu’s hasty policies, pushed 63 per cent of Nigerians (about 133 million) into multi-dimensional poverty.
By the first quarter of 2024 hardships drove restive youths to near-uprising, which forced government into another haste – a concoction of palliatives – ironically, a form of subsidy, which it had earlier denounced as government wastefulness.
With the naira regaining its losses, it appears a panicky government has finally groped unto a solution. But if Mr President’s men are remorseful for the havoc done to Nigerians, they should be more sober this time in their computations to avoid distressing the country further.
The Federal Government has resorted to offloading dollar raised from sovereign bonds (in essence, loans), petroleum export proceeds and drawdowns from the external reserves, into the economy to reduce Foreign Exchange (FX) supply pressures, and to help it buy time in the hope of finding solutions to the wider unfavourable economic fundamentals bedevilling the economy.
On the dollar demand side, government has freed-up official restrictions that it believes created artificial scarcities that favour the black market. The Central Bank of Nigeria (CBN) has also cleared-off a backlog of FX obligations to assure investors, lifted the ban on sale of dollar to Bureau De Change Operators (BDCs), clamped down on currency speculators, closed down Binance, a crypto platform government accused of opaque dealings with money launderers, and borrowed dollar through short-term, sovereign bonds to ‘defend’ the naira.
Ever since, the CBN has offloaded dollar to BDCs at progressively reduced rates in the hope of prompting currency hoarders to cut losses and release supposed stockpiles. But in a clime where looted funds are desperately exchanged and exported, not much may be squeezed from hoarders, if surveillance is not stepped up. However, as at April 8, 2024, the CBN has offloaded a second tranche of $10,000 per BDC operator at N1,101 per dollar with a charge not to sell above 1.5 per cent margin. Many predict the CBN would offer the dollar below N1,000 in the coming weeks.
But for how long can the CBN go on with its bonanza to ‘defend the Naira’?  And what has been the cost of that defence? While the impact of strengthening naira is yet to reflect on commodity prices in Nigeria, the nation’s foreign reserve has dropped within 18 days by $0.95billion, down from $34.45billion on March 18, 2024, to N33.50billion on April 3, which represents a daily average depletion rate of $52.78 million. This is despite the $3billion loan from the AFREXIMBANK and petro-dollar revenues also thrown into the fray. To sustain its strengths, reports say the federal government plans to take stabilisation loans by June, 2024, speculated at a tune of $15billion, through the issuance of domestic bonds denominated in foreign currency. FG seeks the loans within the window of short-term, volatile Foreign Portfolio Investment (FPI) bonds which may disappoint the country in times of crises, as against Foreign Direct Investments which are more reliable. According to Bloomberg reports, FG has contacted investment banks, JPMorgan Chase & Co, Goldman Sachs and Citibank NA, for advice on Eurobonds, but Nigeria’s Debt Management Office denies Federal Executive Council’s approvals for such.
Certainly, a stronger currency is beneficial to an import-dependent nation like Nigeria, but without strengthening national productivity to generate surpluses for trade-balancing exports, the pursuit of merely high currency valuation becomes a vain strategy. While the naira strengthens, the reality of the adverse economic fundamentals that erode its worth remain unchanged, implying that its buoyancy rides merely on costly FX floods being pumped by the CBN. It is easy to guess the result, should the CBN halt supply.
For years Nigeria relied on its petroleum sector which at present provides about 78 per cent of FX earnings, but constitutes far less than 10 per cent of its real Gross Domestic Product (GDP), implying that to stabilise, Nigeria needs to grow its non-oil sector of over 90 per cent of GDP. Even the petroleum revenue is endangered by sabotage, illegal bunkering, dwindling investments and insecurity.
The FG may have taken the bet that sustaining the naira could buy it time from hard-pressed Nigerians, in the hope that a number of tangible local productions might kick-off. Notable among the expectations is the Dangote Refinery which, with its 650,000 barrels per day refining capacity, is expected to satisfy local demands of petroleum products to ease the huge FX demand in that front, and may hopefully earn FX through exports. Already, Dangote’s recent release of 100 million litres of diesel crashed the price of the product from N1,700 to N1,350, with another batch of 100 million litres expected to crash prices further, while the company plans to supply petrol by next month, but government-owned refineries which have drained so much resources remain dysfunctional. Again, the recent break through against reprocity flight barriers between the UK and Nigeria by Airpeace, reportedly crashed ticket prices to UK by 60 per cent.
FG may also see reliefs in the successful take-off in Aba, of 24-hour power supply by the Geometric Group and the recent commissioning of 700 Megawatt Zungeru hydro-electricity station, a tomatoe processing plant in Nassarawa, and a steel mill in Kaduna. However, agricultural, petroleum and manufacturing sectors remain at  their lowest and beseiged by insecurity, while the financial services sector appears to be strong but has incommensurate impact on industrialisation. If government does not encourage productivity in the real economy, its efforts in buoying the naira would be hopeless, while Nigeria falls deeper in debts. Already, as at December 31, 2023, Nigeria’s total debt stood at $106billion, while the 2024 budget of N28.7 trillion projects a deficit of N9.8 trillion to be debt-financed.
When public debt grows fast ahead of GDP growth rate, mounting debt service costs under-cut funds required for investment. That became the plight of Nigeria from Buhari’s era, when from 2016 to 2022 public debt grew by yearly average of 52.4 per cent, and GDP below 2 per cent. In that fateful 2022, debt service cost exceeded government revenue, which is why we are where we are.
The International Monetary Fund projects that Nigeria’s reserve would plummet to $24billion by end of 2024. Meanwhile, a nation’s FX reserve reflects the country’s balance of payments and its ability to settle international obligations. Severe declines in reserve may erode investor confidence and lead to downgrading of its credit ratings, which further worsens the nation’s borrowing costs.
Therefore the current approach towards buoying the Naira through loans can not be any other thing, but a gamble.

By: Joseph Nwankwo

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Opinion

Fubara: Another Landmark Decision

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On Friday August 16, 2024, at the swearing-in of six new permanent secretaries in the Executive Council Chamber, the Executive Governor of Rivers State, Sir Siminalayi Fubara said that his government will no longer approve contract services for retired Permanent Secretaries in the State so as to give room for others on the line to progress. According to the Governor, if the government continues to give contract to retired permanent secretaries there won’t be room for those who are coming behind, adding that as soon as any permanent secretary retires a new person will be appointed to replace the office. The Governor Fubara’s decision is a “Daniel come to judgement”. It is a commitment to seamlessly drive succession in the civil service. In my considered opinion, it also demonstrates the end of unnecessary bureaucratic gaps in the chain of progression in the civil service.
The civil service as an organised, structured and well coordinated machinery, helps every government in power to achieve policies and Programmes. This however, cannot be achieved if the machinery of government is ineffective and inefficient. A situation where those who are supposed to have left the civil service having attained the statutory retirement age and service years are still being retained in the service speaks volumes of lack of functional succession plan in the service. In the Civil service, ranking is transitional such that a staff on a rank today is expected to transit to the next level in three or four years if he or she meets the promotional requirements. By this subsisting policy there should not be a lacuna in the chain of progression in the service. The functionality of the arrangement makes training and retraining of staff inevitable to enable staff meet the statutory requirements of their anticipated job.
Where there is regular manpower or capacity development training for staff the civil service cannot suffer dearth of efficient and qualified personnel that will necessitate the retention of a civil servant who ought to have retired from the civil service. Retention of retired civil servants implies that those retained are indispensable and that no person in the service was qualified enough to assume that position. The tacit belief that the exit of a retired staff will create a vacuum in the chain of production only reveals a systemic dysfunction. It shows that the exit of such “indispensable” staff was not anticipated so that any vacuum that the absence of such staff would create would have been taken care of well ahead of retirement of such staff. Nothing happens fortuitously in an Organised, functional system.
Retaining those who have retired on their position while there are undoubtedly, staff who are qualified for the same position, does not foster career progression in the service. An efficient and effective service should ensure that no succession gap exists in an organization. And this is achievable by the training and retraining of staff in anticipation of their next level job roles and demands. If a superior officer proceeds on an annual or casual leave any person who acted in his or her absence should be deemed eligible to fill that position when the substantive officer retires. Some civil servants rarely proceed on annual leave because of the false beliefs that the absence of such officer would affect the smooth running of the office. The false belief that a staff is indispensable unwittingly shows that someone has not done what he or she was supposed to do to fill the gap. Should such officer die, will the office be closed? Will someone next in line not be posted to take charge?
Another reason why retention of some categories of staff seem inevitable is when there is lack of manpower in that area. To check such situation, service providers and employers of labour should identify areas where there is lack of manpower and fill them early enough, so the newly employed will understudy their superiors and acquire the desired relevant knowledge on the job that will make them progress and assume a higher responsibility. After all knowledge can be generated informally on the job, as the workers are trained and understudy their superiors.The Governor’s decision should serve as a wake-up call to train and retrain workers. Funds should also be made available to the manpower development experts in the service to end the retention of staff who have retired.

Igbiki Benibo

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Opinion

Mrs Fubara: Model Of Selfless Leadership

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In recent years, Nigeria has faced a persistent challenge that has significantly impacted the cost of living for its citizens—the fluctuating price of Premium Motor Spirit (PMS), commonly known as petrol. The direct correlation between the price of PMS and the overall cost of living has become increasingly apparent, prompting a crucial need for measures to stabilise these fluctuations. The socio-economic implications of this phenomenon highlight the urgency to explore the impact of volatile PMS prices on the cost of living in Nigeria and advocate for strategies to stabilise these prices for the benefit of the entire nation.The price of PMS plays a pivotal role in shaping the economic landscape of Nigeria. As a major source of energy for transportation and power generation, any fluctuation in petrol prices has a ripple effect on various sectors of the economy. The transportation industry, in particular, heavily relies on petrol, and any increase in fuel costs leads to elevated transport fares, directly impacting the cost of goods and services.
One of the primary consequences of volatile PMS prices is the inflationary pressure it imposes on the economy. When the price of petrol experiences sharp and unpredictable increases, it triggers a chain reaction, causing the prices of essential goods and services to rise. This inflationary spiral, in turn, erodes the purchasing power of consumers, making it increasingly challenging for them to meet their basic needs. Additionally, the impact of fluctuating petrol prices extends beyond the immediate economic realm. It affects businesses’ operational costs, leading to reduced profit margins or, in some cases, business closures. This, in turn, contributes to unemployment and economic instability, amplifying the socio-economic challenges faced by the nation.
To address these issues, it is imperative to explore strategies to stabilise the price of PMS. One key approach is to enhance transparency and accountability in the pricing mechanism. A transparent pricing structure that reflects global oil market dynamics and eliminates hidden charges or subsidies can contribute to a more stable and predictable pricing regime. The earlier the government considered diversifying the energy mix to reduce over-reliance on petrol, the better. Investing in alternative and renewable energy sources can help mitigate the impact of petrol price fluctuations and create a more resilient energy sector. This approach aligns with global trends towards sustainable and eco-friendly energy solutions.
Moreover, regulatory measures should be implemented to curb hoarding, smuggling, and other illicit activities that contribute to artificial scarcity and price manipulation in the petroleum market. By enforcing stringent regulations and penalties, the government can create a more competitive and fair marketplace, fostering stability in PMS prices. Collaboration with key stakeholders, including oil marketers, transport unions, and consumer advocacy groups, is crucial in developing and implementing effective policies. Engaging these stakeholders ensures that the perspectives of all parties are considered, and policies are crafted to address the diverse challenges associated with petrol price stabilisation.
Also, investing in the expansion and maintenance of domestic refineries is essential for achieving a more stable petrol pricing environment. By reducing dependence on imported refined products, Nigeria can exert greater control over its energy security and insulate itself from external market fluctuations. On the international front, diplomatic efforts to negotiate favourable terms with oil-producing nations can also play a role in stabilising petrol prices. Establishing strategic partnerships and agreements that provide Nigeria with a more stable and predictable supply of crude oil can contribute to maintaining stable petrol prices domestically.
Howbeit, stabilising the price of PMS is a critical step towards alleviating the burden of the rising cost of living in Nigeria. The government, in collaboration with relevant stakeholders, must adopt a multi-faceted approach that encompasses transparency, regulatory measures, diversification of energy sources, and international collaboration. By doing so, Nigeria can create a more resilient and sustainable economic environment that benefits its citizens and fosters long-term growth and prosperity.

SylviaThankGod-Amadi

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Opinion

Curtailing Wastage In Governance

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After the election of Bola Tinubu as the President of Nigeria, his highly elated wife, Oluremi, told the nation that her family is rich and does not need the wealth of the nation to survive. She said, “Nigeria’s wealth is the commonwealth of all. It belongs to everyone. God has blessed my family. We don’t need the wealth of Nigeria to survive but to do the right thing. And I promise you on this altar, that with your help, with the help of God, we will set this nation on the right path.” As a matter of fact, many Nigerians rooted for Tinubu as the president because they believed that he was very wealthy and would have no need for the nation’s wealth. Some say he was richer than the country and that there was no better person to manage and grow the country’s economy than Tinubu, a “successful business man.”
Incidentally, the administration’s persistent habit of extravagancy belies these claims. From the reforms that have impoverished millions of Nigerians, to the budgeting of billions of Naira for the purchase of presidential yacht, luxury vehicles for the president, his wife, the vice-president, renovation of the VP’s official residence in Lagos and now the purchase of a multi-million Dollar presidential jet, it seems like our billionaire president, his family and hangers are actually there to use the taxpayers money to maintain their lavish lifestyle despite the economic pain of such to the nation.For ten days at the beginning of this month, Nigerians were on the streets across the country protesting bad governance, hunger and economic hardship.
They made several demands, which include a return of fuel subsidies, improvements in living standards, cuts in the cost of governance, reduction in electricity tariffs, and solutions to escalating insecurity, among others. Not less than seven people died during the protest. And the government that could not meet these demands, went ahead to purchase a jet for the president? If that is not the height of insensitivity to the citizens’ plight then tell me what to call it.The same government that lavishes money on things that do not align with the needs and priorities of the people have been choking the people with all manner of taxes and has been preaching to the citizens to endure the hardship and consider it as a sacrifice being made for the nation’s brighter future.
The worst is that the authorities keep taking the citizens for granted. When the idea of a new presidential jet was muted by government officials who claimed that Boeing B737-700 (BBJ) was in bad shape and no longer safe for the president, Nigerians opposed it on the basis of the harsh economic realities of the country. But the government, as usual, neglected their opinion and went ahead with the purchase secretly. Perhaps, Nigerians would have still been kept in the dark about the purchase of the Airbus A330 but for the Nigeria-Ogun-Chinese Company embarrassing controversy. No transparency. No accountability.Expectedly, the presidency has been defending the purchase of the jet. The Special Adviser to the President on Information and Strategy, Bayo Onanuga wants Nigerians to jubilate because, “The new plane, bought far below the market price, saves Nigeria huge maintenance and fuel costs, running into millions of dollars yearly.”
Onanuga and some other government officials have also justified the purchase of the jet based on the age of Boeing and safety of the President and other of its users. Nigerians love their president and other leaders and wish them well but Nigerians also expect their leaders to show leadership by example and sacrifice for the betterment of the country. They want the president and other leaders to prioritise the welfare of the people over short-term political gains. Nigerians want their leaders to prioritise the needs of the country in view of the nation’s scarce resources. And in doing that, food, security, power, functional government refineries, welfare of workers, good roads, adequate power supply and other basic needs of the masses should be given utmost attention than a presidential jet.
Nigerians want their president to be transparent and accountable to the citizens that put him in power. As the 2023 Presidential Candidate of the Labour Party, Peter Obi admonished, “Now that the jet is here, Nigerian taxpayers whose money was used to purchase it need to be privy to how much it costs, how old the aircraft is and how long it’s been in operation. “In addition, Nigerians also deserve to know about how the old jets are being disposed of, how many of them, how old they are, and why they are being sold. Transparency and Accountability should be the hallmark of any genuine leadership.” And talking about age, reports have it that the Boeing B737-700 (BBJ) which has operated for 19 years is just four years older than the new jet which is 15 years old.
This makes one agree with the opinion of some experts that age should not be a detrimental factor as long as the maintenance schedule is strictly adhered to and spare parts are provided as at when due.  Isn’t the Boeing 747 (the Air Force One) used by the US President, said to be 34-year-old and has served no fewer than six Presidents, including the incumbent Joseph Biden? Therefore, without a good maintenance culture, the new aircraft will not last as long as expected. We must discard the habit of handling government’s property with negligence. People must be made to sit up and carry out their duties diligently to avoid the wastage of scarce resources.Wasteful spending not only drains the nation’s coffers but also erodes public trust in the government.
When citizens witness the lavish lifestyles of public officials—characterised by fleets of luxury vehicles, endless foreign trips, and grandiose state events—they justifiably question whether their leaders have their best interests at heart. This erosion of trust can fuel public discontent and even destabilise governance. The economic repercussions of wasteful spending are severe. Every naira spent on unnecessary luxury is a naira that could have been invested in critical sectors like healthcare, education, infrastructure, and security. Nigeria’s infrastructure deficit is estimated to be in the billions of dollars. Yet, instead of channeling resources towards closing this gap, successive administrations have prioritised short-term, high-visibility projects that offer little long-term value.
Furthermore, wasteful spending contributes to the nation’s growing debt burden. Nigeria’s debt profile has ballooned in recent years, with a significant portion of the national budget now dedicated to debt servicing. This leaves little room for capital expenditure and social programmes that could uplift millions of Nigerians out of poverty. The cycle of borrowing to finance wasteful projects is unsustainable and jeopardises the country’s economic future. To curtail wasteful spending, the budget process must be overhauled to eliminate non-essential expenditures. This means cutting down on excessive allowances for public officials, reducing the number of government agencies and the president announced, and prioritising spending on projects that have a clear, measurable impact on the populace.
Strengthening institutions that monitor and evaluate government spending is crucial. Agencies like the Economic and Financial Crimes Commission (EFCC) must be empowered and adequately funded to carry out their mandates. Public access to government spending data should be improved, allowing citizens to track how their money is being used, while lawmakers at all levels must wake up to their responsibilities of checking the excesses of the executives instead of acting like partners in crime. Reducing wasteful spending is not just a matter of fiscal prudence; it is a moral and economic imperative that could determine the future trajectory of the nation. As President, governors and local government chairmen, our leaders have the power to set the tone for the nation’s administration. By adopting a modest lifestyle and eschewing unnecessary extravagances, they can send a powerful message that wasteful spending will not be tolerated. This could inspire a broader culture of prudence within government circles and can restore public trust.

By: Calista Ezeaku

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