Many Nigerians were eager to see 2023 run out fast if that will help them forget the economic woes they experienced during the year.
Notwithstanding, as they enter the New Year, there is general excitement across the country, especially for a new dawn.
Nigerians are already optimistic that 2024 would be better than the preceding one, which was marred with violence and economic hardship, largely due to the reforms initiated by President Bola Tinubu’s administration.
Perhaps, Nigeria’s foremost economist and chief executive officer, Financial Derivatives Limited, Bismarck Rewane aptly captured the year 2023, a tumultuous year.
From inception, the year came prepared with a baggage of economic anguish initiated by the currency redesign policy of the Central Bank of Nigeria introduced in mid-October 2022 and expected to be completed by the end of January 2023.
The CBN, had expressed concerns over issues related to the management of the country’s currency, the Naira, noting that banknotes outside the banking system were enormous. The then CBN Governor, Godwin Emefiele, accused Nigerians of hoarding the banknotes, saying “statistics showing that over 85 percent of currency in circulation are outside the vaults of commercial banks.
“To be more specific, as at the end of September 2022, available data at the CBN indicate that N2.73 trillion out of the N3.23 trillion currency in circulation, was outside the vaults of Commercial Banks across the country; and supposedly held by the public,” he said while addressing a press conference in October.
Thus, he set the stage for a currency management scheme that translated to economic stagnation as the redesigned Naira notes were nowhere to be found while the required infrastructure for electronics transactions was non-existent.
The result was that Nigerians celebrated the Yuletide of 2022 hunting for cash in whatever form to make purchases but to no avail.
Hopes that 2023 will bring a charge were dashed early as Point of Sales operators became the new bandits in town charging premium 20 percent in exchange for cash.
“The National Bureau of Statistics in its gross domestic product report for the first quarter submitted that the Naira redesign policy which led to cash crunch impacted the economy negatively”
While Nigerians were unable to access their money in banks due the shortage of cash, the CBN was campaigning for electronic transactions as an alternative for the purchase of goods and services.
Unfortunately, the absence of adequate infrastructure did not help matters as many bank’s customers were losing money as transactions that didn’t go through were in some cases never reversed by the financial institutions involved.
The fact that the Nigerian economy is driven largely by an informal sector with a huge population of unbanked persons cumulated in the Naira redesign policy bringing untold hardship to millions of citizens.
Amidst the economic crisis created by the failure of the policy, the January 31, 2023 deadline initially set to ending the old notes as legal tender was extended to February 10, 2023 as shortage of the new notes supply remained unresolved.
While the dust around the sincerity and intent of the CBN in initiating the policy was yet to settle down, the political class led by the governors of Kaduna, Kogi and Zamfara States approached the Supreme Court on February 3, suing the Federal Government and asking for a reversal of the policy.
Five days later, the court issued an interim order suspending the implementation of the deadline set by the CBN, and directed the continued circulation of the old and new notes pending the resolution of the case.
The Supreme Court in its judgement on Friday, March 3, extended the circulation of the old and new notes till December 31, 2023.
By implication, the first quarter of the year was committed to battling for the cash crunch initiated by the Naira redesign policy.
Apart from hindering business transactions in the form of purchases, the Naira redesign policy had a serious impact on manufacturing activities, as critical factors of production such as energy, petrol and diesel.
The National Bureau of Statistics in its gross domestic product report for the first quarter submitted that the Naira redesign policy which led to cash crunch impacted the economy negatively.
“Gross Domestic Product (GDP) grew by 2.31 percent (year-on-year) in real terms in the first quarter of 2023. This growth rate declined from 3.11 percent recorded in the first quarter of 2022, and 3.52 percent in the fourth quarter of 2022. The reduction in growth is attributed to the adverse effects of the cash crunch experienced during the quarter,” NBS noted.
The report further stated that the GDP performance in the first quarter of 2023 was driven mainly by the Services sector, which recorded a growth of 4.35 percent and contributed 57.29 percent to the aggregate GDP.
But it emphasized that the Agriculture sector declined by 0.90 percent, lower than the growth of 3.16 percent recorded in the first quarter of 2022.
Similarly, the report noted that though the Industrial sector grew to 0.31 percent compared to negative growth of 6.81 percent recorded in the first quarter of 2022, agriculture, and the industry sectors contributed less to the aggregate GDP in the first quarter of 2023 relative to the first quarter of 2022.
The financial sector also suffered its fair share of woes as interest rates movement in the money market reflected developments in the banking system credit and liquidity conditions. The CBN raised monetary policy rates from 17.5 percent in January to 18.0 percent in March while cash reserve ratio and liquidity ratio stood at 32.5 percent and 30.0 percent respectively in March.
In the foreign exchange market, the Naira commenced a down slide as it exchanged N460.93 to the US Dollar in March at the official market from N446.47/USD in December 2022.
At the parallel market run by Bureau de Change operators, the Naira depreciated to N752.43/USD from N744/USD in December 2022, thus, setting the stage for Naira depreciation throughout the year as has never experienced before.
In terms of national debt, the Debt Management Office put Nigeria’s public debts at N46.25 trillion ($103.11 billion) at the beginning of the year. Against this background, a budget deficit of N10.8 trillion was earmarked for the 2023 financial year.
But before the close of the first quarter, a new lexicon of Ways and Means was introduced by the CBN into the nation’s debt management system.
The sum of N23.7 trillion was reported to have been issued by the CBN under the approval of the then President, Muhammadu Buhari as borrowings done without appropriation by the nation’s legislative approval.
The first quarter was not all doomed, though the policies and initiatives from the fiscal and monetary regulators posted signs of tough times ahead, the nation’s oil and gas recorded some levels of improvement.
Crude oil production rose to 1.51 million barrels per day from 1.49mbpd recorded in the similar period of 2022.
However, the increase was not enough to meet Nigeria’s OPEC quota of 1.8 mbpd, no thanks to pipeline vandalism and crude oil theft in the Niger Delta region.
By the second quarter of 2023, Nigeria’s economy was almost stagnant with most citizens waiting for the inauguration of the new government.
But in what can best be described as window dressing the outgoing administration of President Buhari embarked on unveiling some key economic projects expected to alleviate the bad situation.
For instance, on Monday May 22, Buhari commissioned the Dangote Refinery amid hopes that the commencement of production by the 650,000 capacity refinery would not only bring an end to the nutty issue of subsidy payment on petroleum products import but transform the country into a net exporter.
Similarly, the immediate past minister of aviation, Hadi Sirika raised Nigerians’ hope of owning a new national carrier, ‘Nigeria Air’ before the inauguration of the President Bola Tinubu’s government on May 29.
Speaking on the economic value of the airline, Sirika said the proposed national carrier will contribute to the country’s GDP, facilitate hospitality and tourism, facilitate growth and development of the agricultural sector, and create jobs around the Agro-Cargo Terminals. Unfortunately, all Nigerians had to show for these promises was the launch of an airline which is yet to come to reality.
However, Nigerians were hopeful of economic transformation and good days ahead as they expected the inauguration of a new government on May 29, to bring with it the magic wands, more so as the incoming government had campaigned on the slogan of, ‘Renewed Hope’.
But it seems the hope was quickly dashed when President Tinubu during his inauguration speech made the infamous declaration of, ‘Petrol Subsidy is gone.’
Although, many Nigerians applauded the president when he made the declaration at the Eagle Square in Abuja, there were reports that some political associates and supporters who travelled to Abuja for the inauguration had to call friends and relatives for bailout as the declaration transformed to petrol pump price hike from N165 to N200 per litre to N615 per litre immediately after the announcement.
In short, if there is anything the Tinubu government will be remembered for in perpetuity it definitely will be the removal of fuel subsidy at a time when Nigerians were faced with a basket of economic woes.
No one framed the impact of the declaration and its impact better than Rewane when he said, “The celebrations that followed the bold reform statements were short-lived. Expectations that subsidy was a silver bullet that solved all problems was followed by frustration and a crisis of false expectations. Most citizens yelled – “take us back to the past.
“The political capacity of the slim mandate of February 25 was now wearing thin. The people felt that palliatives were for the pockets of politicians, and it was more about sharing spoils.”
By the end of July, it was obvious that the government of Tinubu would take urgent steps to address the economic challenges facing the citizens as labour unions comprising the Nigeria Labour Congress and the Trade Congress of Nigeria were spoiling for a showdown.
The government then made an economic reform policy promising to fund 75 enterprises with great potentials with N1 billion credit facilities at 9 percent per annum interest rate with maximum 60 months repayment.
The administration also promised to energize micro, small and medium-size enterprises as well as operators in the informal sector with N125 billion.
The plan, according to the government, is to spend N50 billion on Conditional Grant to 1 million nano businesses between August 2023 and March 2024.
“Our target is to give N50, 000 each to 1,300 nano business owners in each of the 774 local governments across the country.
“Ultimately, this programme will further drive financial inclusion by onboarding beneficiaries into the formal banking system. In like manner, we will fund 100,000 MSMEs and start-ups with N75 billion. Under this scheme, each enterprise promoter will be able to get between N500, 000 to N1million at 9 percent interest per annum and a repayment period of 36 months.
“To further ensure that prices of food items remain affordable, we have had a multi-stakeholder engagement with various farmers’ associations and operators within the agricultural value chain.
“In the short and immediate terms, we will ensure staple foods are available and affordable. To this end, I have ordered the release of 200,000 Metric Tonnes of grains from strategic reserves to households across the 36 states and FCT to moderate prices. We are also providing 225,000 metric tonnes of fertilizer, seedlings and other inputs to farmers who are committed to our food security agenda,” President Tinubu said in a nationwide broadcast on July 31.
Meanwhile, the President who believed in the pursuit of foreign investors took to foreign trips in search of foreign investors.
Some of such visits generated more criticism as many citizens did not perceive any prospect from them.
One that readily comes to mind was Tinubu’s meeting with the leadership of the United Arab Emirates in September. The meeting was said to have resolved the Emirates Airline flight suspension to Nigeria.
Although the president embarked on over five foreign trips between June and December in search of foreign investors, only promises have been extracted.
Unfortunately, multinationals such as pharmaceutical and consumer goods giant, GlaxoSmithKline and Procter & Gamble announced their decisions to exit the Nigerian market due to the harsh economic climate.
This situation has led to critics calling on the president to rather focus on creating a conducive environment by tackling the issues of insecurity across the country, multiple taxation, provision of electricity and investors will come calling.
In what can be best described in the words of late Afro music king, Fale Anikulapo, as ‘double wahala for dead body’, while the nation traverses the excruciating economic pathway, the CBN under its new Governor, Oluyemi Cardoso announced a new exchange rate market structure driven by the market principle of “Willing Buyer – Willing Seller.
The policy otherwise known as the devaluation of the Naira helped reinforce the economic woes initiated by the removal of petrol subsidy.
Again, Rewane’s summation is apt, “The leadership team had vigorously marketed the reform agenda across most financial centres in the world. At first, in what sounded like a fairy tale, like most frontier market currencies, the Naira rallied temporarily to N900/US$ based on promises of new money during the Independence Day broadcast. It finally fell to N1, 250/$, which is less than its real value (PPP) of N810/$. Many investors have moved from renewed hope mode to saying, ‘whatever’.”
In the New Year, the Naira crunch is back with banks unable to payout cash while POS operators are back in charge.
Although the CBN in a statement cautioned banks and POS operators on the availability of banknotes the announcement has failed to make any meaningful impact.
Your money is safe – CBN tells depositors
The CBN also assured depositors that their funds in the banks are safe.
The apex bank said it noticed reports in certain media outlets about recommending the Federal Government take over some CBN-supervised financial institutions.
“For the avoidance of doubt, Nigerian banks remain safe and sound,” the CBN said in a statement signed by Sidi-Ali Hakama, acting director of corporate communications.
The statement encouraged the public to continue their regular activities without being alarmed by reports that have not emanated from the CBN about the health status of Nigerian banks.
According to the statement, the apex bank is fully equipped to carry out its statutory duty of upholding a stable financial system in Nigeria.
“We assure the general public and depositors about the safety of their funds in Nigerian financial institutions.
“Bank customers are therefore advised to proceed with their banking transactions as usual, as there is no cause for concern,” the statement read.
Growing unemployment
The NBS also painted a similar picture in the area of employment when it confirmed that unemployment level grew by 0.1 percent between the first and second quarter of 2023 in its latest labour force report released on December 21.
Worst still, the fear of the gloomy picture of the Nigerian economy has led to a new trend in the labour force known as “Japa Syndrome”. Speaking of the impact of the development on the nation’s economy, a former Vice Chancellor of Adekunle Ajasin University, Akungba, Prof Femi Mimiko blamed the poor work ethics in the country’s public sector which crept into the university for the youths leaving the country in droves.
There were reports earlier in December 2023 that some departments in Lagos University Teaching Hospital, University of Nigeria and others have shut down due absence of manpower. No thanks to Japa, Nigerians quest for greener pastures.
Nevertheless, there are rays of hopes that the economy may be turning the curve for good in 2024.
The news of Dangote Refinery receiving about a million barrels of crude oil and the Port Harcourt Refinery wrapping up turnaround with assurance to commence production after Christmas, the implication is that local production of petroleum products is guaranteed by January.
Though local production of petroleum products may not reduce the current price of the petrol, diesel and others immediately, there is the assurance that the foreign currency used for the importation would be saved, and thus beef up foreign reserves.
Senate increases, passes N28.77trn 2024 budget
The Nigerian Senate, on December 30, passed the 2024 Appropriation bill totaling N28.77 trillion after it was read for the third time.
The Bill which was passed by the Senate after also considering and approving the report of the joint committee on Appropriation indicated an increase by over N1.2 trillion from the N27.5 trillion appropriation which President Bola Tinubu laid before the joint sitting of the National Assembly on November 29.
In summary, the Senate approved the Bill for an Act to authorize the issuance from the Consolidated Revenue Fund an aggregate expenditure of N28.777, 404, 073, 861 which includes N1.7 trillion for statutory transfers. N8.76 trillion for recurrent expenditure, N9.99 trillion for capital expenditure, and N8.27 trillion for debt service. The Gross Domestic Product was set at 3.88%.
Olamilekan Adeola, Chairman, committee on Appropriation while presenting the report of the Committee informed that most of the sub committees during budget defence complained of inadequate funds and decline in budgetary allocation to Ministries, Departments and Agencies under their purview in addition to the rising costs in the polity and the continuous devalue of naira.
He also disclosed that the executive forwarded a request for additional funding and some items of Expenditure to the committee which were not included in the bill the President had submitted.
In order to accommodate the request, he said the committee made adjustments on Foreign exchange differential, Government Owned Enterprises revenue increased, GOE personnel reduction, Service wide vote wage adjustment , and a reduction from service wide.
“Multinationals such as pharmaceutical and consumer goods giant, GlaxoSmithKline and Procter & Gamble announced their decisions to exit the Nigerian market due to the harsh economic climate”
In preparing details of the 2024 Appropriation Bill, the Committee adopted the Medium Term Expenditure Framework/Fiscal Strategy Paper (MTEF/FSP) approved by the National Assembly which includes basic assumptions and parameters for the 2024 fiscal year
Crude oil price was pegged at $77.96 per barrel, crude oil production at 1.78 million barrels per day.
The NASS approved an increase in the exchange rate to $800/$1 as against the N750/ $1 rate proposed by the executive.
A GDP Growth Rate of 3.88% and Budget Deficit 9.18 Trillion were also approved by the National Assembly.
The 2024 Appropriation bill was presented late to the National Assembly which is against the Fiscal Responsibility Act that requires the Bill to be presented not later than three months before the next financial year.
Despite the late submission, the red and green chambers of the National Assembly was determined to maintain the January-December budget cycle
After its presentation by the President, the Senate debated the general principles of the bill on Thursday, 30, November; and Friday 1 December, 2023, respectively.
The Bill was read the second time on Friday, 1st December, 2023 and consequently referred to the Committee on Appropriations for further legislative action.
The Ministry of Defence got N1.3 trillion as recurrent expenditure and N339.2 billion for capital expenditure. Police Affairs got 869.1 billion as recurrent and 100.5 billion as capital expenditure; Education got 857.1 billion as recurrent, and N417.5 billion as capital expenditure.
In addition, Health and Social Welfare got N667.5 billion as recurrent and 417.5 billion as capital; Agriculture and Food Security was allocated 857.1 billion as capital and N110 billion as recurrent expenditure
The Ministry of Works got N892.4 billion as capital expenditure and 4.3 trillion as recurrent; Finance got N463 billion as capital expenditure, among other allocations.
President Tinubu, on Monday, signed the 2024 Appropriation Bill into law in keeping with his avowed commitment to maintaining a timeous, predictable, and efficient budget cycle.
President Tinubu assented to the bill in his office at the Presidential Villa State House, on Monday, shortly after returning to Abuja from Lagos.
Obviously, there must be some goodies on the way in the New Year as the likes of international rating agency, Moody’s Investors service upgrades Nigeria’s economic outlook from stable to positive even though the credit rating is still far from where we should be.
