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Nigeria’s economy on life support as infrastructure crises worsen

By Omodele Adigun, Bim­bola Oyesola and Blaise Udunze
NOTHING best captures the hard times Nigerians are pass­ing through now more than the double digit inflation figures just released by the National Bureau of Statistics (NBS) .
According to the NBS report for last month, the Consumer Price Index (CPI), which mea­sures inflation trend, recorded a significant leap from January’s 9.6 per cent to the current 11.4 per cent, about 1.76 per cent jump.
This hardly came as a surprise, going by the hardship in the land. For instance, the NBS data state that “the new figure is at a two-year high, last seen in December 2012, while the pace of accelera­tion has been one of the fastest in decades.”
Commenting on the state of the economy, the Director Gen­eral of West Africa Institute for Financial and Economic Man­agement (WAIFEM), Prof. Ak­pan Ekpo, said the nation ßis suf­fering from stagflation, a prelude to recession.
According to him, relevant macroeconomic and social indi­ces show that the economy is in distress.
Hear him: “The high rates of unemployment combined with reduced output in two quarters of 2015 suggest an economy in the sphere of stagflation, a prelude to recession.”
Ekpo noted that the nation’s economy was at the verge of recession because the global environments, such as the slow growth in China and the sluggish recovery in Europe, have further worsened the already bad situa­tion, noting that certain policies could cushion the effect of such a recession.
But Mr Johnson Chukwu, the Managing Director of Cowry Asset Management Limited, reasoned that the crash in the oil prices, from about $115.09 on June 19, 2014 to about $34.83 now (Brent crude), seemed to have worsened the nation’s eco­nomic crisis.
He added: “One of the most commented economic policies of the current administration is its decision to continue with a fixed exchange rate in spite of the pre­cipitous drop in foreign exchange earnings as a result of the decline in crude oil prices. While the CBN has effectively maintained the official exchange rate at N197 per dollar, it has been impossible to meet all so-called legitimate demand at the official window at the stipulated official rate hence a backlog of unmet demand which has spilled over to the shallow parallel market and driven down the Naira to between N372 per dollar and N385 per dollar.
“With legitimate importers of raw materials and equipment mi­grating to the parallel market to satisfy their demand, the parallel market has effectively become the ruling market for pricing of imported goods and services within the country, with the ex­ception of refined petroleum products, which seem to enjoy some preference in the alloca­tion of forex by the central bank. “Unfortunately, the shallowness of supply in the alternative mar­kets and huge demand is driving importers to a state of hysteria, as they seem to be ready to pay any price to meet their demand.
“According to the Central Bank, Nigeria’s current monthly import bill is about $4billion while earnings is less than $1bil­lion, it then means that if we limit ourselves to the current sources of inflow, which is principally crude oil sales, the price of crude oil in the international market must rise from the current level of about $30 per barrel to about $120 per barrel before we can balance our international trade.”
Recounting his company’s experience as far as the forex palaver is concerned, Mr. Taiwo Adeniyi, the Group Managing Director, Vitafoam Nigeria Plc, said it has been tough, adding thatß “It is one thing we are bat­tling with as a company.”
He explains: “Eighty per cent of the materials we use for pro­duction is sourced outside the country. Eighty per cent in the minimum. What that means is that, constantly, I need to have ac­cess to foreign exchange (forex) to remain in business throughout the year. Even though, for us in the foam sector, we were not in the list of those that can’t ac­cess forex from the CBN. But then, the question is, where is the forex? It is not available.
“In the past, it was easy to do an LC (Letter of Credit), and within two weeks, you get your LC. But these days, it can be on for months.
“The LC request to banks, some of them have been there for the past three to four months. And yet, we have not been able to establish it.
“And even when you get it, when you have estab­lished an LC and you need to fund it, you are told to make cash available for bidding 48 hours. These are govern­ment policies that banks can not do anything about. Forty eight hours, you have to make the cash available, for you to even be considered for bid­ding. You can imagine where in an economy that is practi­cally run by buying and sell­ing – you give your goods to customers, they bring money. That is when you can spend the money. And then CBN is saying 48 hours, before you spend that money, make it available. It is a tough one! It is one thing we are battling with as a company.” Speaking in the same vein, Mr. Nnamdi Okafor, the Managing Direc­tor of May & Baker (M&B) Plc, lamented that the the cost of doing business in the country is very high. “To pro­vide power, we spend about N350million every year; just to provide electricity for our plants to run. In advanced countries, even in some other developing countries, they are the things you take for granted. As I am speaking to you today, I am not sure that I will run my factory because I am not able to access forex to buy the raw materials that we would need. It is as bad as that.”
However, the concern among most Nigerians is that even the critical services like electricity has already going extinct with pitch darkness in cities like Abuja, Lagos and PortHarcourt to mention just few, while the long fuel queues that we managed to avoid for some years are al­ready resurfacing across the country.
Regrettably, Nigeria’s ad­ministration folks have failed to give plausible explanations for those embarrassing epi­sodes in a country rated as the largest economy in subsaha­ran Africa.
For the organised Labour, the general apathy and present silence over the shortcomings in the electricity, fuel crisis and other issues of national development indicated that the ministers appointed by President Muhammad Buhari are practically not living up to the expectations.
Wondering why the Minis­ters of Power, Petroleum have failed to address Nigerians in spite of the problems in their sectors, which have brought untold hardships to the citi­zens and practically crippled the nation’s economy, labour said it shows that the min­isters, either by omission or commission, don’t seem to be on duty.
Issa Aremu, the General Secretary, National Union of Textile Garment and Tailoring Workers of Nigeria (NUTGT­WN), said the situation would further worsen Nigeria’s in­dustrial situation as it would make Nigeria’s products less competitive.
“The situation has always been bad, but this time around now it would further impover­ish Nigerian workers whose income would be worsen further. There is no doubt our government need to put an end to all these crisises”, he said.
Aremu insisted that it is high time the Minister of Power, Housing and Works, Babatunde Raji Fashola, ad­dress Nigerians on the reasons why the whole country have been in darkness for almost two weeks with no visible so­lution in sight.
He noted that the Power Minister was always ready to speak for the Gencos and Discos on why they should in­crease electricity bills, but has never, for a day since he took up appointment, addressed Nigerians on his plan to im­prove electricity.
”All the ministers are hardly to be seen where they are needed, whereas they all took an oath to protect this country. They should make the foreign exchange avail­able to fix the refinery, instead of making case for those who import what we already have in the country. The Minister of Industry, Okechukwu Enela­mah must also ensure that our industries are back on track”, he stated.
He, however, warned Presi­dent Buhari to be cautious of the body language of some of his men, stating that the sabo­teurs may be within his cabi­net directly or indirectly.
He maintained that the Petroleum Minister of State, Ibe Kachikwu’s preference for importation of petroleum rather than fixing the refinery was equally condemnable.

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