The debate about the ongoing economic crisis in Nigeria is often attributed to the question; "who's fault is it"?. Of course we Nigerians always feel the need to blame someone when things don't always happen as they should, I find that quite unfortunate. Due to the economic meltdown Nigeria is facing today, there has been strong arguments about 'Who's fault is it?, Who's responsible for fixing it?, What policies are the CBN, Ministry of Finance and the presidency putting in place to stabilize the value of the naira?'
Barely 9 months since president Muhammadu Buhari's administration began, the value of the Naira has been declining in a free fall. Today, the most popular phrase adopted by sellers and producers in any business or market is "Dollar don rise oh" as an excuse for unnecessary inflation of prices of goods & services. Despite this high inflation level, average income of the workers still remains the same. This simpy means that there's a relative increase in the cost of living of about 90-95% of Nigerian citizens due to the Naira to Dollar ratio, and also shows instability in other economic indicators. The majority being affected by this economic meltdown feel the need to ask "who is to blame?"
The foundation of the new administrations manifesto is to empower the poor, and create jobs for the larger population especially among Nigeria's unemployed citizens. For the opposition, the current state of the Nigerian economy is aiding their opposition strategies to throw criticisms at the current administration. This is a clear indication that Nigerian democratic system is working.
Current statistics of macro economic indicators reveal low output /domestic consumption, increased inflation rate and a threatening increase in unemployment rate. Economic growth in Nigeria needs a model that will synchronize all the macroeconomic indicators, which will in turn stabilize the economy, and develop the country in the long-run. Unlike many other developing countries, Nigeria solely depends on crude oil for national revenue. This implies that a slight shock in the petroleum sector could cause an earthquake in the country's economy. This is what some refer to as the "The Dutch disease".
Nigeria can reinvest the revenue it generates, mainly from NNPC, Customs, taxes from Federal Inland Revenue Service (FIRS) and even foreign capital simultaneously in all the major sectors that develop the economy. This is a development policy referred to as 'Balanced Growth'. And despite the inaccuracy in the statistics reflecting the revenue generated from oil sector, the past governments selfishly ignored the necessary proportional reinvestment in the major sectors that adds to the GDP or national output of the country, most especially the agricultural and industrial sectors.
The lack of industrialization has taken away comparative advantage Nigeria could have over other country's that produce, consume and export. In a country with a population of over 160 million people, almost every good consumed is imported, and the globally adopted international trade currency is the US Dollars. With the drastic fall in the price of crude oil per barrel globally, countries like USA with the largest oil reserve, do not need to import crude oil from Nigeria and other oil exporting countries. This forces oil marketers to create artificial fuel scarcity in the country.
At this point you can see how logical the invisible hand of demand and supply of petrol can impact on the value of naira to dollars on its own, with changes in the macroeconomic indicators. What does Nigeria produce that is enough for domestic consumption and enough to export to other countries?
The argument of who is to blame for the current situation of the Nigerian economy will continue. Many blame the past government who saw the crash coming, but used it to enrich themselves and ignored the damage that was about to hit the country's economy.
The proposed 6 trillion Naira annual budget in a country where the larger population suffer absolute poverty, It makes you wonder, what could be the average annual overhead cost of major projects that the huge portion of the budget is sunk into, which are never completed to develop the economy and maximize social welfare. The direct implication of too much money in circulation is inflation. Meaning the prices of goods only keep rising. One important question is: "Is this going to save the naira, or prevent the economy from crashing"?
In my opinion, the expansionary fiscal policy implemented by the Ministry of Finance and the reasonable and/or rational allocation of the national budget to various ministries and parastatals is the main determinant of economic growth to be efficient. The small and medium enterprises (SME's) should be able to get loans from banks with ease. Financial inclusion strategies implemented by the CBN should be firm and effective. Most importantly, the government should support the mass production of Nigerian made products and services for domestic consumption. And encourage the Nigerian citizens to buy Nigerian and save the Naira.
Khalifa Baba-Ahmed.
Bsc.(Hons) Economics
