IMF Downgrades Nigeria’s Economic Growth By 2.9%

The International Monetary Fund (IMF) has downgraded Nigeria’s economic growth by 2.9 per cent for 2023. In July, the Fund had projected a 3.2 per cent growth for Nigeria in 2023. The lender however warned that the growth would be impacted by security issues in the oil sector. In its October World Economic Outlook with the themed, ‘Navigating Global Divergences,’ posted on its website Tuesday, the IMF said, “Growth in Nigeria is projected to decline from 3.3 per cent in 2022 to 2.9 per cent in 2023 and 3.1 per cent in 2024, with negative effects of high inflation on consumption taking hold. “The forecast for 2023 is revised downward by 0.3 percentage point, reflecting weaker oil and gas production than expected, partially as a result of maintenance work.” The International lender, while commenting on its new prediction for the country, said: “ For the sub-Saharan African region, growth is expected to decline to 3.3 per cent in 2023 due to worsening weather shocks, the global slowdown, and domestic supply issues, the IMF said.  However, growth would pick up by 2024 to 4.0 per cent in 2024, which is still below the region’s historical average of 4.8 per cent. It also stated that global economic growth was projected to slow from 3.5 per cent in 2022 to 3.0 per cent in 2023 and 2.9 per cent in 2024, well below the historical (2000–19) average of 3.8 per cent, the IMF declared. “Advanced economies are expected to slow from 2.6 per cent in 2022 to 1.5 per cent in 2023 and 1.4 per cent in 2024 as policy tightening starts to bite. Emerging market and developing economies are projected to have a modest decline in growth from 4.1 per cent in 2022 to 4.0 per cent in both 2023 and 2024″, the IMF said. The global financial institute stated that global inflation is expected to decelerate to 6.9 per cent in 2023 and 5.8 per cent in 2024 from the present 8.7 per cent in 2022.  

Tinubunomics: An Elaboration of Economist Niran Olayinka’s Analysis

I will first and foremost like to commend our dear brother Mr. Niran Olayinka for penning on page 18 of today’s ThisDay Newspaper, this simply but beautifully written analytical article on President Tinubu’s recently deployed or unveiled economic reform policies. The beauty of the article is its easily accessible language that was devoid of the typical technical arrogance and complexity one usually encounters with seasoned economists of his caliber. His analysis, while being technically sound, adopts a language that is accessible to the “common man”. Contextualized in a church sermon and the well-known story of David and Goliath, the article sets the tone that everyone was welcomed aboard. The analogy of David being mocked by his own brothers is also apt. The most virulent critics of President Tinubu’s policies on social media sadly have been his own kindreds, the Yoruba. Of course, being the cosmopolitan people that we are, we Yorubas do not believe in circling the wagon or being shy to criticize our own, but as is customary with us, some of the Yoruba critics of Tinubu have gone beyond objective analysis and have laced their criticisms with venom, envy and bad belle. Mr. Niran Olayinka’s analysis on the issue of subsidy removal as has been universally acknowledged is long overdue and a no-brainer. Anytime the government places it’s finger and in the case of the oil subsidy scam, the government placed its two feet on the supply-demand-price equilibrium. What results is the mafia-style rent collection behavior and insane corruption that have plundered our commonwealth for decades. With the subsidy removed, we have seen the interplay and moderating power of the market on human behavior, on Nigerian driving habits and our consumption pattern. We have seen drastic drop in our national average petrol (PMS) consumption due to behavioral change but more so, credited to the removal of the incentive to profiteer from oil smuggle across our borders. Our country can no longer serve as the Santa Claus doling out petrol freebies to our neighbors in West Africa. The perennial long queues for PMS have abated and the economy-crushing traffic jams on our urban landscape have reduced. I was shocked that it took me just over two hours to travel from Ibadan to the airport on a recent visit. However, in order for the nation to derive the full- and long-term benefits of the oil subsidy removal policy, government must make as its highest priority, the resuscitation and expansion of our crude oil refining capacity, driven largely by the private sector. We hope the newly created ministry of Marine and Blue Economy signifies a commitment to tapping into all the benefits (up and downstream) of the marine economy including our off-shore oil potentials. On student loan, while it is a welcomed policy to reduce the obscene over-dependence of our tertiary institutions on federal allocation for their sustenance, we will not get to the promised land without major structural reform in our entire education system and specifically our higher education sector. The wasteful misalignment between the products of our higher institutions; be it its graduates or its research output or lack thereof, and the critical areas of needs in our economy must be corrected immediately. Our universities are not churning out the right quantity and right quality of university graduates needed to drive a dynamic 21st century digital economy. Simply put our tertiary institutions are producing square pegs for an economy’s round holes. Many of our professors are still recycling lectures from the dinosaurian age and are therefore impacting the obsolete knowledge to our youngsters thereby causing immeasurable damage to our economy. Furthermore, while Mr. Olayinka drew examples from the US and the UK student loan schemes, we must not gloss over what an intractable and monumental national financial crisis the student loan scheme has become for those countries, especially the US. We need to investigate the crisis in the US student loan scheme for lessons to be learned to guide the deployment and implementation of our nascent program. Millions of Americans have student loan debt, amassing to more than $1.6 trillion by the end of last year, according to the Federal Reserve Bank of New York. The burden of these loans has disproportionately fallen on the shoulders of students from the lower strata of the economy. It’s no use burdening a young Nigerian with a loan of 2 million Naira on a degree that guarantees only a spot in the unemployment market. On forex policy, that is not my forte. However, we have to find the safe middle ground between the corruption-ridden insanity of the round tripping behavior that the CBN forex policy encouraged in which the rich were making billions of Naira from simply converting forex received from the CBN to black market trading, and a free-floating forex market. No sane economy nor a responsible government can afford to leave total control of its currency to the vagaries of an imperfect market where speculative and predatory behavior are rampart. While Mr. Niran Olayinka highlighted the increase in revenue inflow into the different tiers of government as a result of the devaluation of the Naira, it would not translate into better living condition for the populace until we have full local government autonomy. We must rescue our local government administrator from the thieving and predatory fingers of the monarchical governors at the state level who have usurped the citizens’ right to elect the people who have the most direct impact on their welfare, the local government administration. But would rather prefer to impose their hand selected cronies to manage local government allocations as their fiefdoms.  Once we have assured the autonomy of the local given government, we the people must then take the next critical storm to hold them accountable for the judicious use of our commonwealth. We also must elect the best of us to serve at the local government level. That is a challenge the Ijesha Development Council (IDC) and other communities across the country must make

‘Tinubunomics’, fuel price hike and market forces

President Tinubu’s government appears to have committed the citizenry to biting the bullet, with the removal of fuel subsidy, all in its bid to rescue the nation from using its revenue to service a fraudulent subsidy regime. However, it is an encouragement for the operationalization of the Petroleum Industry Act 2022, to stimulate investment growth and transparent pricing model in the oil and gas sector. Though a painful choice considering the ripples on the economy, many analysts applaud the government, describing it as a modest approach by Tinubu and his economy team, with the resumption of fuel imports by newly licensed 56 oil marketing companies.  This, in our view, is another fraudulent and cosmetic quick fix, that successive governments’ feeble character established the monsters behind the fuel subsidy regime. Sadly, it was Nigerian masses that suffered, just as they are doing now under Tinubunomics opium that has put every citizen in a sidon look mode.  It was all the Nigeria National Petroleum Company Limited (NNPCL) needed to, tactically hike the pump price of fuel citing ‘market forces’ or what economists regard as ‘market fundamentals’ to justify, free entry and exit in an economy based on the theory of supply and demand, alongside other vague eternal technicality that includes, price elasticity, marginal profit, marginal cost as well as equilibrium principles.  Hence, the NNPCL made mention of market forces behind Petroleum Motor Spirit (PMS) price hike of N617 as against N537. Here, we want to be critical and avoid classroom theoretics, because clarification is necessary. Instructively, with recent development in global crude oil price hitting $80 per barrel and a move from previous shock and pandemonium of the Russia – Ukraine war outbreak which disrupted free flow of energy sources, as well as drastic reduction in imports of wheat and grain, iron and steel across the globe, has led to induced economic downturn, creating headline and core inflation. Those factors made several central bankers the world over to result in hiking interest rates and other tightening monetary measures.  The Nigerian economy was not spared from this global phenomenon with food inflation hovering over us as a nation. Again, the news of the NNPCL hiking fuel price didn’t come as a surprise, going by the prevailing circumstances around activities in Nigeria’s oil and gas sector, that is opaque in operation and a cesspool of corruption. If Nigerians could recall, this same market forces played out under the Buhari administration. For instance, the defunct Petroleum Products Pricing Regulatory Agency (PPPRA) now Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), was fixing PMS Price on a monthly basis on one hand, claiming it was doing price reduction. Suddenly, it said the price would reflect market fundamentals. And this happened in 2020. The Federal Government, through the PPPRA, announced a new fuel price regime. First, it was the reduced price regime from N145 to N125/litre that came into effect on March 19, 2020, followed by the government’s approval of price adjustment from N121.50 to N123.50 per litre of PMS. Then, again, there was the N141.80 to N143.80 per litre of petrol adjustment in June, 2020. Secondly, the  Petroleum Products Pricing Regulatory Agency (PPPRA), said, “Going forward, pricing of the PMS will reflect market fundamentals,” in a circular dated Wednesday, July 1, 2020, to oil marketers, with PMS pump price being increased from N143.80 to N145 /litre.  It noted that the essence of “the price band was to ensure price efficiency that would be beneficial to both consumers and oil marketers, PPPRA will continue to monitor price trends and advise monthly guiding price for all petroleum products, based on prevailing market realities and other pricing fundamentals.” The excuse of then PPPRA now NMDPRA was the plunge in oil price occasioned by the outbreak of COVID-19 which slowed down global oil demand, with direct bearing on petrol, thereby pushing it to a level below the pump price cap of N145/litre.  With the caution that Nigerians should be ready to pay high or low prices for petrol following the price liberalisation scheme currently in place and that what we have in place is a market reflective pricing system,  the fact of the so called market forces increase in PMS (Petrol Motor Spirit) price from N145 to N151.56/litre; was that in reality,  fuel was being sold majorly between N161 to N170/ litre in filling stations across the country then. The import of the foregoing is to draw our attention simply to the action of the past, that same market forces, few years back, were used to exploit Nigerians. Presently, the landing cost of PMS is N565, and various prices across the country posit N588 in Lagos, N617 in Abuja, Port Harcourt N625, Kano N630. More so, from the aforementioned, it stands to reason that there is a glaring contradiction that would be creating controversy and confusion soon especially with the term, “market forces.” The crux of this piece is to deconstruct the ingenuity of market forces that the Tinubu government and NNPCL have so much put their hopes on to drive the pump price of PMS in Nigeria. Accordingly, price will naturally be adjusted to reflect a true picture of market force at any particular period, high or low. The question is how true the above statement is knowing full well that the so called market forces are hinged on supply and demand, anchored on the invisible hand of market forces, embellished in the profit maximization drive of global capitalism.  Regrettably, with the shambles and rot in the midstream and downstream sector of Nigeria’s oil and gas industry, the government throwing the sector up into the risky and uncertain space and manipulative tendency of market forces leaves us with great concern. One great pitfall of market forces is its poor scientific outlook and dangers it will pose to our economy. The petroleum products marketers in this realm would be market forces. To this end, we are confronted with the following questions: Will the market forces not exploit consumers with arbitrary pricing and round-tripping of PMS? Would the market forces not create artificial scarcity