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Nigerians’ misery worsens with low oil output, 17.7 inflation, insecurity

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THERE seems no end in sight to Nigerians’ growing misery, as the country plunges deeper into debilitating conditions of lower oil output, rising inflation and insecurity.

A 2021 research on misery index undertaken by Steve Hanke, a professor of Applied Economics at Johns Hopkins University, Maryland, United States, which focused on four salient parameters of inflation, lending rate, unemployment figures and gross domestic product, showed Nigeria performed abysmally poor.

Out of 156 economies assessed in the report, Nigeria was the 11th most miserable country. In Africa, it was better only than Sudan, Zimbabwe and Angola.


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Despite efforts by the Federal government to generate earnings from non-oil exports through aggressive taxation by the Federal Inland Revenue Service (FIRS), oil has remained the mainstay of Nigeria’s economy upon which its budget is benchmarked. Maladministration, weak reforms and corruption in the country’s oil sector have ensured the country is not benefiting from oil sales as it should. For instance, the country is not reaping its due gains from the two major areas of quota production and rising crude price in the global market due to massive oil theft and insecurity in the former, and petroleum products importation in the latter.

A major source of worry for the Muhammadu Buhari administration has been meeting up with the Organisation of Petroleum Producing Countries (OPEC) 1.7 millions barrel per day quota. Nigeria has as a result lost its status as Africa’s top oil producer to Angola as output declined in May.

The OPEC monthly report for May showed that while Nigeria’s oil production reduced to 1.02m bpd sometime in May, from 1.22m in April, Angola’s oil production stood at 1.16 million bpd in May, down from 1.18 million bpd in April.

“Crude oil output increased mainly in Saudi Arabia, the UAE and Kuwait, while production in Libya, Nigeria, Iraq, Gabon and Iran declined,” the 13-member oil cartel said.

An oil sector governance expert, Henry Ademola Adigun, told The ICIR, “The implication of not meeting up to our oil quota is huge. First is low revenue. Then there is the high cost of lending to businesses because of high inflationary surge. You saw the latest figure from the National Bureau of Statistics of inflation rising to 17.7 per cent.”

Besides the loss of earnings from reduced quota output and consequent loss of valuable petro-dollar that the country could use in addressing its misery situation, Nigeria has also been expending money on importing petroleum products, especially premium motor spirit (PMS), widely known as petrol. Nigeria has four refineries in Port Harcourt, Warri and Kaduna, but grand corruption and lack of maintenance led to their collapse and left the country with no option if it must satisfy local demand of petroleum products than to start importing.

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Food prices

That has been an albatross. Nigerian currently spends the huge sum of N4m subsidising petrol imports, a situation both the World Bank and the International Monetary Fund (IMF) warned would be hindering the country’s growth plan, with so much money that should be freed on developmental projects stuck on subsidies.

The poor economic management has led to the CBN lending the Federal government over N10 trillion overdraft, which subjects the economy to intense inflationary pressure.

The subsidy option is a double-edged sword for the government. With inflation so high already and prices of goods and services spiralling everyday, the Buhari administration is not unmindful of what would be the painful effects of removing petrol import subsidy for the masses as the World Bank and IMF, as well as some economists and analysts are urging it to do, arguing subsidy distorts economic planning and development.

“Already, subsidy is costing the government much more than what is budgeted. This is why you see the long queues in the Federal Capital Territory. Another implication is the currency slide, as the naira keeps tumbling. Bank lending to businesses will be low because of double digit inflation. These are dragging down economic growth,” Adigun said, with a note of sadness in his voice that the economic challenges currently being experienced would linger till next year, saying politics had already taken over governance.

Agreeing, a financial analyst, Chuka Mbonu, said, “Subsidies distort the economy. People shout we must keep subsidy, but anybody who is a proponent of subsidy is among those putting us in this mess. Those who shout we must keep subsidies also turn around to say we have poor infrastructure. How do they expect such infrastructure without government borrowing?

“Recall that the Accountant-General of the Federation said a few days ago that Nigeria is struggling to pay salaries.”

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The misery level of Nigerians has also become tied to the exchange rate movement as the country remains largely import-dependent. What this means is that every time the naira collapses further against the dollar, there is the tendency for prices of items to go up. The naira value, which opened the year with about N570 to one dollar, has slid to over N600. As a consequence, prices of goods have risen over 30 per cent in the last half-year alone.

Analysts have faulted the CBN’s exchange rate regime, maintaining that it has created a huge enterprise around foreign exchange round-tripping, speculation, over-invoicing, and capital flights.

“What is happening in the foreign exchange market is a consequence of the CBN’s policy choice of a fixed exchange rate regime and administrative allocation of forex,” the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (PPE), Muda Yusuf, said.

Yusuf, explaining that the action of the CBN amounted to tackling the symptoms rather than dealing with the causative factors, said that the bank itself did not believe in the market mechanism.

Another major cause of the growing misery is the ravaging insecurity across the country, which has seen farmers abandon farms for safety, with its attendant surge in food prices.

In 2016 alone, bandits killed 2,500 people in Nasarawa, Kaduna, Benue and Plateau states, many of them farmers, while 62,000 were displaced. An estimate of $13.7 billion calculated on farms, crops, houses and cash was estimated to have been lost in the tragedies.

In Zamfara and Niger states, bandits’ attacks have been growing every year since 2015, with reports that many farmers are being forced by the bandits to pay regular levies to enable them cultivate and harvest their lands.

The situation has escalated so badly that the CBN disclosed that many beneficiaries had declared they would not be able to service their Anchor Borrowers loans because of the destructive activities of bandits’ activities on their farming ventures.

In the South-East, activities of criminal elements that the media have tagged “unknown gunmen” have become a misery to the people of the region.

According to Nigeria’s security tracker, by May 2019, the number of deaths caused by insecurity had risen by 8,663. And by May 2020, it was 8,800 deaths, even in a year of national lockdowns. This time, the death tally had become 71,083.

By May 2021, an additional 9,243 people had been killed in Nigeria, and by May 2022, the tally had increased by 9,594, bringing total deaths due to violence since 2011 to 89,920.

The president of the Association of Business Development Experts, Franklyn Akinsoloye, expressed worry that insecurity had become a major misery for Nigerians.

“It’s a major problem affecting local and foreign investors, and the people generally. There must be urgent efforts by the government to restore investors’ confidence, and to also protect lives and property,” Akinsoloye said.

 

Author profile

Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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