DISTRIBUTION OF PALLIATIVES NOT SOLUTION TO NIGERIA PRESENT PREDICAMENTS; RATHER REQUIRES PATRIOTIC AND KNOWLEDGEABLE ECONOMISTS TO ADDRESS………..Akinyemi Akinlabi

 

A frontline politician and former Local Government Chairman in Oyo State, Mr. Akinyemi Akinlabi has X-rayed the Nigeria current economic realities and anticipated predicament of depreciating exchange rate. In a well packaged article made available to Asako news, titled:” The Naira, Importation of Refined Oil and Nigeria fiscal
Federalism”, he lament that the situation demands wake-up calls for urgent economic restructuring and trade diversification.
According to Akinyemi, the mono-cultural nature of the economy coupled with importationof everything including refined petroleum is major sources of worries andinstability in the country. The persistent falling value of Naira and its concomitant effect on high inflationary rate are issues any government should prioritize because dividends of governance are measured by these indicators. The relationships between Premium Motor Spirit (also known as petrol) and the Naira value in the international market are major determinants of derived demand.
In his analysis, he maintained the demand for a product is derived when the institution or firm demanding the product or service uses the product or factor of production as a tool for profit making rather than for its own consumption.

Referencing from Stastia (2022) which clearly shows that in 2021, Minerals, Fuel, was the major imports product with the value ofUSD16.14billion; followed by Machinery and Nuclear Reactor with imports value of USD7.40 b and vehicles and
automobile c with imports value of USD3.44 billion. The year 2022 showed a
similar trend with oil and gas accounted for 31% of Nigeria’s total importation,
while the contribution of Machinery and Nuclear Reactors was 14% and Vehicles
and Automobile followed closely with 6.6% contribution.

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With the same vein, depreciating value of Naira at international market increases
the cost of importing petrol. Double jeopardies as an increase in either volume or
cost of imported PMS exert pressure on inflationary rate and thereby cause
economic disequilibrium.

According to Akinyemi, currently in Nigeria, the presence of different markets for foreign currencies transactions makes the determination the applicable exchange rate to businesses very difficult. Different exchange rates for government businesses Vis a Vis private businesses complicate the effectiveness of any macroeconomic policies. According to Stastisa, the official exchange rate of Naira to Dollar was N305.8 N in 2017, N325 in 2019, N359.2 in 2020 and N381 in 2021. In 2023, the Naira value has depreciated to the Ranges of N800 to N900 Naira to USD1.

These analyses he referenced (stastia 2022) clearly show that the government policy of market determined exchange rate of Naira to US Dollar needs re-consideration. The price mechanism of Adam Smith’s invisible hand in an unpredictable macroeconomic environment needs cautionary approaches. Nigeria fiscal environment is currently suffering from what he termed as fiscal hydrocephalus i.e Imbalance fiscal structure with heavy “top” and smaller “down”.
Mr Akinlabi lamented that the local government that is closer to the people and with programme that can alleviate people’s sufferings is deprived of both human and financial resources, whereas the federal government that is far to the grassroot controls a lot of these resources. This gives room to wastages and inefficient and ineffective macroeconomic policies. The basic challenge therefore is what is the way out?

Nigerians cannot do without petroleum products either for consumption or for
production. The first suggestion from any average Nigeria would be that government should stabilize and regulate price of petroleum product and exchange
rate to guarantee economic, social and political stability.
To Mr. Akinyemi Akinlabi, the basic recommendations are as follows:

a. There is urgent need of complete repair- and turnaround of all Nigeria
refineries. This should be supported by giving incentives to the private
sector to get involved in the oil market. Repair and productive use of at least
two of the nation’s four refineries should be within two years. There should
be a conducive environment for the establishment of modular refineries in
the country too.
b. The production base of the country needs to be expanded. Production should
be encouraged towards self-sufficiency, import substitution and exportation.
This can be achieved by creating enabling environment for businesses to
strive and also go by government encouraging localization of agro allied
industries in each of the 774 local governments based on agric produce they
are comparatively endowed.
c. Concerted efforts should be on provision of basic infrastructures especially
power to reduce costs of doing business. This will make Nigeria’s products
to be competitive and increase the supply of foreign currencies in the
market,
d. Encouragement and Facilitation of Diaspora Remittances through juicy
incentives
e. There is a need to readjust our fiscal federalism by giving adequate
treatment of the disease called fiscal hydrocephalus. There is the need to
empower other federating units with more fiscal responsibilities to undertake
production and infrastructure development activities to boost the revenue
base of the country. The Federal government should encourage production
of non-oil products by encouraging each of the 774 local governments to
establish a small or medium scale agro-allied industry based on their
comparative advantages.
f. Financial resources from the subsidy removal should be channeled to the
establishment of productive ventures and youth empowerment to create
employment, improve living standards and increase our nation’s production
base.
g. Reinvigoration of Nigeria tax regime to eliminate tax invasion, reduce
double and multiple taxation and as well intensify progressive taxation
among the rich and wealthy.

There is the need to learn from history. Distribution of palliatives is not a solution
to any of the Nigeria present predicaments. It is even far from being a temporary
solution. It can only be seen as another version of “Udoji Award’ of General
Gowon’s era which created artificial fund to government workers from oil windfall
instead of investing the excess crude oil income and reserve in economic
diversification, job creation and boosting or our production base. Permanent
solutions for consideration are economic reengineering, economic restructuring,
and rededication within the framework of well-aligned macroeconomic policies.

Finally, Nigeria is faced with economic challenges s which requires highly
patriotic and knowledgeable economists to address. This team of professionals is
needed to conceptualize ideas and implement relevant socio-economic policies.