In light of this week’s thunderstorm in the economic landscape due to the ongoing petrol crisis, economy and finance experts have outlined a bleak outlook for the short and medium-term effects of the Federal Government’s economic policies and reforms.
“This comes amid the Federal Government’s ongoing assurances of a forthcoming turnaround, urging citizens to endure and be patient. Experts predict that it may take until 2027 to see any recovery from the current hardships.
However, they caution that such recovery may be jeopardized if the government fails to implement essential measures to alleviate the widespread difficulties faced by society.
Earlier this week, authorities in the petroleum sector announced a new increase in fuel pump prices, following a seven-week-long scarcity that shows no signs of resolution as of this report. With current prices ranging from N900 to N1,200 per litre, many analysts foresee another wave of economic downturn, further exacerbating hardships for citizens.
Key economic challenges include inflation, rising unemployment, decreasing purchasing power, escalating utility bills, and an overall increase in the cost of living, all contributing to a steady decline in living standards.
Looking ahead, analysts assert that the prospects for economic recovery hinge on several critical factors, including the recovery of the oil sector, stability in foreign exchange and interest rates, and improvements in agricultural productivity. However, they also emphasize that the odds are heavily stacked against positive outcomes across these factors.”
“In a stark confirmation of this grim reality, Nigeria’s crucial economic backbone—crude oil exports—faced a major setback this week, with the price of its Bonny Light crude plummeting to $73 per barrel, marking the largest decline so far this year.”
“Nigeria’s budget implementation is at risk due to the current crude oil price, which has fallen below the budgeted $77 per barrel. This decline adds to the ongoing challenges of meeting the budgeted oil production benchmark of 1.7 million barrels per day (mbpd).
The country has been struggling to maintain an average production of 1.4 mbpd this year. The combined effects of these issues are severely undermining the fiscal plan for 2024, with less than four months remaining in the year, effectively derailing the economic recovery targets.
The performance of the oil sector is crucial, as it drives an economy that is approximately 80 percent dependent on oil. The decrease in oil revenue severely impacts the external sector, particularly foreign reserves, which recently dropped by over $500 million in the last week of August 2024, falling to $36.3 billion.
This situation is also exerting significant pressure on the exchange rate, with the Naira depreciating to N1,630 per Dollar this week, compared to an average of N1,570 recorded in August 2024. This development is closely linked to inflation, as the external sector continues to exert upward pressure on the imported inflation component of the composite consumer price index.”
“Given these developments, analysts contend that short- to medium-term recovery appears challenging, with some expressing uncertainty about the precise timeline for economic recovery, which will largely hinge on the successful implementation of reforms, global economic trends, and domestic stability.
However, many believe that significant improvements could start to emerge within two to three years if the government effectively tackles critical issues such as infrastructure development, inflation control, currency stabilization, and enhancing local production. They caution, though, that any turnaround is likely to be gradual and may not offer immediate relief.”
“Prof. Uche Uwaleke, President of the Association of Capital Market Academics of Nigeria (ACMAN), expressed skepticism about any turnaround occurring in the next two years.
He stated, ‘I fear it will take a considerable amount of time to resolve these issues. Certainly, we should not expect improvements in the next year or two. The inherited legacy challenges are immense, particularly in the power and petroleum sectors, and are further exacerbated by insecurity. Until these structural constraints are addressed, inflation and exchange rates are likely to remain high in the short and medium term.'”
“David Adonri, Analyst and Executive Vice Chairman of Highcap Securities Limited, a Lagos-based finance and investment firm, shared his perspective on the ongoing economic hardship, asserting that the government’s approach to economic reform is misguided.”
“He remarked, ‘There are short-term pains associated with demand management reforms. However, the Federal Government’s approach to the situation is misguided, potentially prolonging these pains beyond what is typically expected. The government is not applying these reforms to public spending, which should be in austerity mode to help reduce inflation. Furthermore, there is a lack of serious effort from the government to address the severe rural insecurity that is hindering agricultural production and other rural-based activities. As a result, communities in these areas are resorting to self-defense to protect themselves, as the government has abandoned them.
To date, the Federal Government has failed to mobilize the country’s idle resources to create wealth and generate productive employment domestically. Due to these shortcomings, it may be challenging to foresee any economic revival, even in the next five years.'”
“In response to the economic hardship facing the country, Clifford Egbomeade, a public analyst and communications expert, stated: ‘The economic difficulties in Nigeria have been worsened by certain government policies. While the government calls on citizens to be patient and looks forward to a future turnaround, the current reality remains challenging. It’s hard to pinpoint the exact timeline for economic recovery, as it hinges on the successful implementation of reforms, global economic conditions, and domestic stability. Typically, significant improvements could start to emerge within 2 to 3 years if the government effectively tackles critical issues like infrastructure development, inflation control, currency stabilization, and enhancing local production. However, these changes are likely to be gradual and will not provide immediate relief.'”
“Commenting on the ongoing hardship and the prospects for a turnaround, Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria (ASBON), emphasized that the level of poverty and hardship is worsening daily and urged the federal government to revamp its economic team.
He stated, ‘People’s disposable income is being eroded; many are hungry and frustrated. Local businesses are shutting down, while international companies are relocating out of Nigeria. We are facing a multitude of challenges. This clearly indicates that there is something fundamentally wrong with our fiscal policies, macroeconomy, and, predominantly, our policymakers.'”
“For Nigeria to achieve a lasting turnaround in its economic fortunes and improve the lives of its citizens, Mrs. Toyin Sanni, Group CEO of Emerging Africa Capital Group, underscored the importance of the government enhancing security in agricultural regions, investing in infrastructure development, improving policy coordination among government agencies, encouraging private sector investment, and fostering the development of technology while promoting economic inclusion for women and youth.
She also stressed the necessity of fostering societal and socioeconomic cohesion, strengthening sociocultural ties, and pursuing long-term economic diversification, among other critical initiatives.”
“Regarding recommendations for a potential turnaround, Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria (ASBON), stated: ‘My immediate recommendation is for the government to restructure its economic team if we genuinely expect different results. There is also a pressing need for the government to prioritize the immediate and long-term welfare of its citizens, particularly addressing their most urgent needs.
The government must take a decisive stance against corruption, as it is the root cause of many challenges we currently face and poses a significant obstacle to the implementation of effective policies.
‘Combating corruption will enhance government transparency. When citizens can see and understand how the government operates, they are more likely to engage in the development agenda and cooperate with initiatives. The government should concentrate on improving the ease of doing business and developing key economic sectors, particularly the MSME sector, which accounts for 96% of businesses and employs 84% of the workforce. This sector, including agriculture, must be supported to grow and scale to meet local production demands and enable active exports to generate sufficient foreign exchange for the country. We must focus on enhancing and supporting non-oil exports.'”
