Operators in the Nigerian economy have expressed fear that there might be further rise in cost of goods and services, and more shutdowns of their operations over the worsening naira value.
They called for urgent intervention in the sector to prevent more hardship on Nigerians.
The National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, said higher prices would be the unavoidable consequence of the current exchange rate.
He expressed dismay that the floating of the naira which was supposed to curb speculation of currency speculation, had consequently escalated the activities of speculators.
According to Kuti-George, unless the government moves swiftly to stem the tide of the naira depreciation especially at the parallel market where more customers access the FX, more factories would be forced to shut down.
He said, “It is ironic that what works in other places don’t work in Nigeria. The cost of production is rising, because we still import a large part of our input, especially equipment. Most of the raw materials that we use are imported.
“So, when the cost of input goes up, the cost of production also goes up. This will happen to the price of products. The question now is – will people be able to afford our products now? Will imported products not be cheaper than our own to the extent that people will be rejecting our products for imported ones? Unless the tide is stemmed, there will be more factories closure.”
The President of the Manufacturers Association of Nigeria, Francis Meshioye, said the current exchange rate would inevitably lead to a hike in the prices of products given the toll it would take on manufacturers to access foreign exchange.
According to him, the floating of the exchange rate will not mean anything to operators if the naira continues the free.
Meshioye said, “It is an unpleasant development because that is the major currency through which we purchase our goods outside the bounds of our nation. It means that the cost of raw materials will continue to skyrocket.
“It is unpleasant. We hope that the government will do something about it. While we float the exchange rate, it should not be allowed to be somersaulting and skyrocketing to unreasonable levels which will not augur well for the country, knowing full well that we are not just trading amongst ourselves.”
He added that, “We have to trade outside of our bounds. The implication of this is that our prices may be unreasonably higher than prices of other countries. That implies, among other things, that our products may be found to be too expensive. If you want to look at the unavailability of disposable income among the citizenry, the choice of buying Nigerian-made products, which may be expensive and foreign products which are cheaper is low. It is pathetic.”
The President, Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, said the volatility of the local currency had continued to underpin the nation’s slow economic growth.
He said, “The high demand pressure at the 1&E window and the parallel market due to lack of sufficient liquidity have been fuelling the widening gap between the I&E Window and the parallel market rates.
“Combination of several factors including the investors’ backlog estimated at $6.8bn and disincentives to bring fresh funds into the economy is one of the major concerns.
“In the same vein the dwindling receipt of Diaspora remittances and resurrection of subsidy on petrol are major deterrents and big concerns to fresh liquidity in the market.”
According to him, the uncertainties and loss of public confidence on the local currency has heightened demand pressure in all segments of the market.
He said, “In addressing the challenges of the I&E window, there is need for the legislation of the willing buyer and willing seller concept. This will lead to enhanced liquidity in the foreign exchange market and enhance public confidence.
“It is also imperative in this regard to recognise the inclusion of the BDCs at the I&E window to continue to play their roles of moderating and correcting the markets.”
He advised the Federal Government on how to bring in more Diaspora remittances.
The CBN had recently announced operational mechanism for the BDCs to trade foreign currencies at similar rates obtainable on the Investor & Exporter forex window.
It gave the directive to all BDCs and the general public in a circular number TED/FEM/PUB/FBC/001/007 dated August 17, 2023, titled, ‘Operational mechanism for Bureau De Change operations in Nigeria’.
The circular stated, “The spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian exchange market window weighted average rate of the previous day.
“Mandatory rendition by BDC operators of the statutory periodic reports (daily, weekly, monthly, quarterly and yearly), on the financial institution forex rendition system which has been upgraded to meet operators’ requirements.”
The Director/Chief Executive Officer, Centre for The Promotion of Private Enterprise, Dr Muda Yusuf, said the new CBN Governor, Dr Olayemi Cardoso, was assuming the leadership of the CBN at a very crucial time in the economic history.
He said, “There is a serious confidence crisis in the foreign exchange market fuelling an unprecedented speculative onslaught on the naira. The economy is grappling with severe adverse effects of depreciating exchange rate, soaring energy costs, ravaging inflationary pressures, huge backlog of foreign exchange obligations that needs to be cleared and debt service obligations that need to be redeemed. Sadly, these outcomes are manifesting at a time when the country’s foreign reserves have been substantially encumbered.
“There is an apparent deceleration in the pace of economic reforms as the outcomes are at variance with expectations. The social costs of the reforms were substantially higher than anticipated, resulting in push-backs from the civil society.”
He said the economic management orthodoxy of market forces was being called to question in the light of the social outcomes of the market-oriented reforms.
He said there was a measured re-emergence of political economy with the reappearance of fuel subsidy and divergence in exchange rates.
This was evidently an economic management quandary that the new economic team would have to manage, and urgently too, he said.
Yusuf said, “Meanwhile, the CBN must ensure strategic and transparent intervention in the forex market to minimise volatility, as far as the reserves can support. In addition to the I and E window, it has become necessary to create an autonomous window in the banking system where the currency can trade freely without any encumbrances. This is necessary to avert the diversion of remittances to other jurisdictions or the black market. We cannot afford to live in denial at this time.
“The clearance of the backlog of forex obligations should be accorded high priority to restore the confidence of domestic and foreign investors.”
2024 Budget: What Average Nigerian Wants?
By Richard Asoge
In line with one of his statutory obligations, President Bola Ahmed Tinubu on Wednesday, 30th November 2023, laid before the joint session of National Assembly the budget for year 2024, indicating his intention to spend N27.5 trillion, given priorities to defence & security, education and infrastructure. From the receipt side, N18.3 trillion is expected from oil, non-oil, tax and other revenue creating a deficit gap of N9.18 trillion which is to be financed by new borrowing and drawdown on multilateral and bilateral loans.
For a very long time, the gap between recurrent expenditure and capital expenditure was always far apart. Sometimes, allocation to the recurrent expenditure will double that of capital. This accounts for a serious and accumulated deficit of basic infrastructures over the years. So, having more in the side of capital expenditure will bring a relative relief if the budget is faithfully implemented without given excuse for non-performance.
FROM THE AUTHOR: Subsidy Removal: A Measure To Re-Jig The Economy [OPINION]
Reflecting on 2023 budget of 24.8 trillion (including supplementary), only 13.7trillion (55.2%) had been spent so far as at September ending, leaving only 3 months for the implementation to be over. The performance was not all that cheering. Various sources of borrowing had been implored and becoming uncertain to get more loans. This is unconnected to the attention given to taxes in 2024 budget as a prominent source of revenue. Agreed that tax is a good source of revenue anchored on production. Tax itself is derived from production. Given so much attention on tax rather than production first may not give desire result at long run. The desire of every serious economy is to keep inflation rate at single digit, unemployment at barest minimum, embarking on policies that would positively influence macroeconomic variables. Most of the advance economies of the world which we copy have robust production system which makes it easy for them to generate much revenue via taxation. Out there, sizeable number of people were engaged in one activity or the other that adds values to the GDP.
Current inflation rate of 27.3% is more of cost push than demand pull. Cost of operation to the businesses and surviving manufacturing firms had gone up exponentially, which made the outputs extremely expensive for a common man to afford. Cost of transportation of items or persons from one point to the other, cost of energy, cost of credit and others drive the inflation. Plans to moderate inflation rate to 21.4% as planned in 2024 budget is attainable, and even surpass it if structural factors that brought about the challenges are holistically tackled. Given domestic refineries and modular refineries the necessary support for production without further delay to meet local demand substantially will bring succor to the citizens and as well beneficial to the nation’s economy. Even if the price of petroleum motor spirit is not all that reduced significantly as being expected by some, whatever reduction will have, will be beneficial and as well add value to us as a nation. Employment generation along the chain of production and the bye products will be an advantage.
Waiting till the third quarter of the year before evaluating the performance of the budget to see if it is tilting toward desire result seems not the best approach but time to time check to deal with any challenge in early stage.
FROM THE AUTHOR: OPINION: The Alarming Naira Depreciation And Way Forward
Allocation of 8% (N2.18 trillion) to education may not up to the recommendation of UNESCO, but there is significant improvement compared to what obtained in the time past. N50 billion student loan is a good move to assist indigent ones but government should not see it as an opportunity to take its hands off subvention or reduce subvention to various institutions of learning. Otherwise, schools will load various charges under school fees to keep their heads above the sea level thereby defeating the principal purpose behind the establishment of such loan.
If data released by NBS is anything to go by, GDP was observed to move up to 2.54% (year on year) in real terms in the third quarter of 2023 from 2.25% in 2022. The growth was driven by service sector. Contribution from agriculture and industry sectors is less which is why agricultural outputs are becoming scarce in the market. Of course, any item short of supply to the demand, price will dictate who get such item. Making agriculture at the forefront of economic drivers toward achieving the 3.75% economic growth in 2024 will not only put an end to hunger but ensures food security. Security of lives and properties propels economic growth. When people can sleep with both eyes closed, economic growth is assured. So, allocation of N3.25trillion to defence and security, making it the sector that got most in the budget seems justified considering the period we are as a nation. However, all those that are concerned in the defence and security of the country must all strive to ensure total security on the land, on the sea and on the air.
An average man on the street is no longer interested in mathematics of budget or various statistics been churned out. He is after a bag of rice coming down to N30,000 from the current suicidal price of N60,000. An average housewife wants N5,000 in her purse to be enough for a pot of soup for a family of four for at least two days. Everyone is not just interested in the price of basic items to come down but stability in prices. In the past six months or thereabout, nothing harms the economy like price instability. Prices of goods and services were ticking upward every minute as if it were clock causing naira to lose its worth.
Fuel Subsidy Removal Cripples 90% Of Nigerian Businesses – Report
The fuel subsidy removal policy of President Bola Tinubu’s government, which took off in June 2023, negatively affected 90 per cent of businesses in Nigeria.
This is according to a recent report by Fate Foundation, titled “State of Entrepreneurship,” which surveyed over 10,000 businesses across the 36 states of the country and the FCT.
According to the report, smaller businesses were affected more than big businesses, and the policy resulted in high operating costs and lower profits due to weak demand and the loss of customers.
The report further stated: “Entrepreneurs in the South East were the most affected, while those in the South South were the least affected, relative to other regions. The impact of the policy was even for both male and female entrepreneurs.”
The report also revealed that around 89 per cent of businesses in the country were negatively affected by the naira scarcity experienced in the first quarter of 2023, with the agricultural sector being the most affected.
It further explained that the impact of the naira scarcity on farmers led to the contraction of the agricultural sector’s output by 0.9 per cent in the GDP report for Q1. The decline was the first in over three decades.
Regarding Nigerian entrepreneurs’ outlook towards business opportunities, around 86 per cent reported being optimistic about the future. However, the figure is less than the 93 per cent who affirmed their positive outlook in 2022.
According to the report, service sector businesses accounted for the country’s major share of businesses.
“While 35 per cent of businesses offer services, 22 per cent sell goods, and another 42 per cent trade in both goods and services. At the sectoral level, 18.8 per cent of total businesses operate in the wholesale and retail trade sector,” the report stated.
Nigerian Correctional Service Begins Commercial Bread Production In Benin
The Nigerian Correctional Service (NCoS) Zone G, has commenced the production of bread in Benin, the Edo capital, for both its inmates and members of the public.
Speaking at the official handover of the zonal bakery project to First Global Hakitekt Bread Bakery Limited for effective management, the Minister of Interior, Hon Olubunmi Tunji-Ojo, said the project was laudable.
Tunji-Ojo, represented by Mrs Comfort Kabirwa, Director of Special Duties in the ministry, commended the buy-in of the project by the different controllers in the zone comprising Edo, Delta, Anambra, Enugu and Ebonyi.
He stressed the importance of Public Private Partnerships (PPP), noting that a recent decongestion of correctional centres was not government funded but through corporate social responsibility.
“We have to think out of the box to achieve our mandate. The bakery is a laudable project because it will help build the skills of the inmates and give them a source of livelihood and make them employable after leaving the correctional centre,” he said.
He added that charging the name from prisons to correctional was intentional not just for rebranding but to change the way prisoners were treated.
Earlier, Controller General of Corrections, Haliru Nababa, said the Bakery Initiative was a collaborative effort between the NCoS and the First Global Hakitekt Bread Bakery Limited under a PPP arrangement.
Nababa said the project was also supported by the Ministry of Interior, Ministry of Finance, and the Infrastructure Concession Regulatory Commission.
“It is a pilot initiative aimed at enhancing the performances of federal government projects. The First Global Hakitekt Bread Bakery Limited is expected to bring in expertise to allow for a win-win situation for both parties. “
Represented by the NCoS Zonal Controller, Zone G, Assistant Controller General, Friday Ovie, he said that initiative was in line with the mandate of the Service, which included inmates rehabilitation via skills acquisition.
Meanwhile, Managing Director, First Global Hakitekt Bread Bakery Limited, Mr Dare Eluyemi, said the project was not just to equip inmates with bakery skills but also to create jobs in the bakery value chain.
“The bakery project has the capacity to produce bread for more than 32,000 inmates on a daily basis.
“It will help to reduce government effort in meeting the food consumption of inmates in correctional centres and sold to thepublic for income generation.”
On her part, Controller, NCoS, Edo, Philomena Emehinola, said the Bakery initiative was a plus to the state as it would put the state in the limelight.
“We will make the project sustainable to feed our inmates as well as build their skills in bakery.”
She added that the inmates who would undergo skill acquisition in the bakery project would be paid an incentive under the earning scheme but would be given the money at the end of their jail term.
The News Agency of Nigeria reports that the pilot project will run for two years, after which it will be replicated in other zones of the NCOS.
The high point of the event was the inspection of the bakery by the representative of the Minister of Interior and other government officials present.
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