Nigeria’s economy, the largest in Africa, experienced a decline in 2014 as demand for crude oil in the international market slumped. In part, this was due to the resolve of the United States of America to supply shale oil to her domestic and world market in what was regarded as a deliberate policy to cut the Organisation of Petroleum Exporting Countries’ members to size in international political gamesmanship.
Nigeria was (and is still) running a mono-product economy despite the diversification policy adopted by the present administration, which is yet to have any impact on the living standard of Nigerians. Crude oil is still the largest foreign exchange earner, grossing more than 90 per cent of Nigeria’s earnings.
Nigeria was, therefore, pushed out of her comfort zone and forced to run the gauntlet of dwindling foreign exchange reserves inconvenience, decreasing gross national products and bleak fortune for her citizenry.
Total dependence on shrinking oil revenue had reduced the amount of foreign exchange earnings. Consequently, the reduced earnings from foreign and internal sources had hamstrung the Federal Government in its financial obligations on several fronts, especially to some of its important departments and parastatals. In some cases, workers’ salaries suffered frequent delays.
The domino effect of this unsavoury development is a large reduction in disposable income. This engendered a fall in demand for goods and services across the country, as Nigerians lost their purchasing power. This, no doubt, triggered the economic recession Nigerians are experiencing now. More worrisome is the worsening inflation, despite the fall in demand for goods and services.
This is not unconnected with reduction in foreign exchange reserves, falling value of naira vis-a-vis stronger foreign currencies in the Forex market.
Manufacturers, who source crucial raw materials for their production from abroad, buy the U.S dollar, pound sterling and other currencies at higher prices, while many who could not cope with the choky forex market, simply went under and closed shop. That again, swelled the labour market further.
The inability of the DISCOs to supply steady, uninterrupted electricity, for industrial and domestic uses is another minus. This challenge has also had its ripple effect on the economy as it has snuffed life from the SMEs across the land. This has, inadvertently, also raised the crime index in the country.
To obviate most of the challenges, the President Muhammadu Buhari’s administration signed a jumbo N6.1 trillion budget for this year. It has a large deficit of N2.2trillion, programmed borrowing, laced with fiscal measures that should pull the economy out of recession.
However, the delay suffered by the budget, the reluctance of the Federal Government to let market forces determine the true value of the Naira in the Forex market, and the Niger Delta Avengers’ onslaught on oil installations and pipelines, which has kept the nation in near perpetual darkness, are among factors that are making inflation to defy counter measures.On another hand, the result of the diversification policy enunciated in this year’s budget, such as a boost to agriculture production and exploitation of solid minerals, among others, will take some time to manifest. Yet, Nigerians want immediate solutions to the myriad of socio-economic challenges.
In solving the quagmire the nation has found herself, the federal government must be cautious to avoid being coerced to adopt the “cure-all” economic package which the IMF often dangles to troubled economies.
IMF, one of the Breton wood financial institutions set up by the Allied Forces after their victory over the Axis Forces in the World War II in 1948, to protect the economic interests of the Western European countries and the USA, is always an unsolicited economic adviser, especially in Africa, the Americas and, to some extent, in Asia.
IMF has an unenviable history of advising countries with vulnerable economies, many of which had rather than recover, slumped further into mass poverty and truncated growth.
With honesty of purpose, the Bank Verification Number that is reducing diversion of government revenue into private pockets, intensification of revenue and tax collection across board, efforts at increasing power supply to drive industrialization and SME activities, the government’s resolve to diversify the economy and, of course, the sustained crackdown on corruption, Nigeria appears ready to work her way out of the present economic quagmire, for good.
