The UK Exit: The consequences

By Dr. Ahmed Adamu

Picture sourced from masterinvestor.co.uk

The UK were in some ramifications out of Europe already, different currency, different visa, and different people and culture. Immigration policy is the major UK compliance to the union policies, which allowed citizens of poor European countries to overflow the UK seeking for better economic life. Some British would not want too much flow of people into their country, especially of those they consider poor people. The British rather prefer to relate with people from developed countries even within the Europe. So with the exit of UK from Europe, UK will now marginalise the poor European countries in its diplomatic and economic engagement. They will now relate with the developed European countries like France, Germany, Switzerland, Netherlands, Spain etc in a relax manner.

The UK exit from Europe will send large number of the cheap labour forces out of the country, as so many will not fulfill the new UK immigration policy. This will create scarcity of labour in some sectors, especially small skilled labour sectors. Other legal immigrants from other parts of the world will now have to choose among jobs. This will push the labour cost high, which will cause inflation.

Many people who would have freely fly in to UK to spend their money will not be able to do so. This will reduce the demand of the Pounds Sterling, causing it to depreciate relative to Euro and US dollar. Many business will collapse do to the resultant reduction in aggregate demand. The economy will then shrink.

Many of the UK businesses in other European countries will no longer be profitable, or will have to be repatriated. Many of the British air transport businesses will incur losses or may have to close down. The supply of commodities and products from the Europe will reduce as suppliers will find alternative destination of their raw materials. The alternative destination of European commodities will likely be the Paris. So businesses will migrate to France, making the French economy more competitive than the UK's. The UK will face huge reduction in food supply leading to food inflation.

The football stadium may not be that filled again, as the cost and hurdles of coming to UK will increase for the Europeans, so people will rather stay at home and watch matches even with slow motion pictures. The revenue and taxes from sport clubs will reduce. The overall revenue of the government from transportation, education, tourism, VAT, and Taxes will reduce.

With the ongoing European football tournament, one will wonder if England, Wales, Northern Ireland and Scotland will ever play in European tournament again. Or if Leicester City and Arsenal will play the European champions league this year. Anyway, they will, as the UK will not change its geographical locations yet.

The UK has send message to the world that you are better alone. The regional unities that have been promoted across continents are discouraged by this move. Bigger and influential countries in other unions may start thinking the same. This exit is a move to marginalise developing countries. Even though the votes were not inclusive as majority of Scottish and Welsh would have prefer to remain. The English will always have their say and their way.

The UK will survive of course, but difficult survival. However, the referendum has once again showed the strength of the constitutional democracy of the UK, and that the people's voice matters more than anything in governance. The unnecessary Cameron's decision to resign was not a surprise, because he will not be responsible for the aftermath of the decision he was not responsible for and didn't advocate for. He will allow those that promote the agenda to handle the ramification.

Still on UK exit: The Scottish tend to be more accomodating and willing to integrate, but their voices did'nt matter in the referendum. That is why Scotland will repursue their independence so that their voices can matter. This hold same for Northern Ireland. When you go for simple majority, you are bound to be exclusive. The best way is to take the regional voting average. And when 28% of the British didnt vote, the 3% difference is marginal. A sensitive once in a generation voting like this require more than 70% majority. Many British were taken by surprise and some regreted voting to leave. So, they must be given the second chance if they demand for it. If UK eventually divorced EU, then the UK must divorce Scotland at least. So, UK will be disintegrated if it disintegrate from EU. The myth that UK being dragged behind by the slow growth pace of poor European country cannot be true. The UK financial contribution to EU is lower than the benefit it drives from the union. The perceived security vulnerability can be addressed without the need to disintegrate. Already, the UK's allies are shocked and not happy with the leave outcome. The Russia will now have more influence in the EU, as its major competitor exited. The US has lost its puppet in the EU. The trillion dollars lost in financial market has already outweight the financial saving for not contributing to the EU. Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of Commonwealth Youth Council,

University Lecturer (Economics) at Umaru Musa Yar'adua University Katsina.

Critical Review of Government Social Intervention Programmes

By Dr. Ahmed Adamu

It is a welcome development that the government planned to spend N500 billion to implement its social intervention programmes to ease the economic condition in the country. Without going deep into the detail of these programmes, this article raised some issues that need to be addressed to ensure effectiveness and inclusiveness of the programmes. The opportunity cost of this investment is the additional investment in the power sector. So for not investing the money in the power sector, there must be compelling efficiency and higher multiplier effects from these social interventions. So, this article aims to maximize the returns from these interventions by raising some issues that required to be reviewed.

There are some perceived flaws associated to these programmes, which if not addressed will undermine the success of this intervention. First, the Government shall not be hasty in implementing programmes without proper preparations. Too much pressure to do something now or to score political credit can make government to make bad decisions. It is better to make it better than to make it quick.

The first issue is regarding the application process, which is online. Online applications are not always transparent and can give room for unnecessary exploitations, as the computer cannot ascertain the validity of the information provided. Many young applicants who may not be qualified to participate in these programmes will apply and eventually be selected. This means that, some youths who may already have jobs or are already engaged may still exploit these opportunities, and there by denying others who are in serious economic hardship the chance. This causes distortion or misplacement of resources, and will not enable achievement of the set objective.

To address this problem, there is need for a comprehensive Survey that will report on the poverty and unemployment demography in the country before implementing such programmes. There should be a specific database that covey status information of the poor youths clustered based on gender, state, location, physical ability, marriage status, age, qualification, etc. These data should be independently collected to genuinely ascertain the economic conditions of the respondents. The local and traditional institutions should support in ascertaining the information provided by each respondent. This will enable the government to plan for each individual how much he/she may be required to be helped to get out of poverty. The database will collect information on the persons’ preferred level of support and areas of intervention.

With the help of this database, the programme will be more targeted, and specific individuals will receive the suitable and preferable support. Each amount will be allocated strategically based on the information available. Consequently, the participants will not be forced to embrace new economic venture, as they are being supported in their chosen economic activity. This will enable appropriate placement of the resources and will make it more inclusive and easily trackable.

There is also need for some approved indicators and targets that can be used to assess the impact of the investment on each individual. Some of these indicators could be the money spent per day, quality and number of meals per day, clothes, health, etc. The development of the database and evaluation of the project can easily be implemented while engaging other members of the society. For example, University staffs and their students can help in collecting this database and tracking success in each ward. The academic staffs are reliable since they have proved their integrity for effectively discharging a more sensitive responsibility of returning election results in the last elections. So, they can be trusted to compile and report this database and develop the targets and indicators, as well as to track success of the programmes.

Another issue relating to the online registration process is its exclusivity. Online applications automatically exclude those who cannot have access to computer or internet, or the required skills to operate the computer. There are graduates who still cannot operate computer or use internet. There are high chances of ineligible youths registering for this programme, which means youths who are doing well economically may still want to exploit this opportunity and deny other qualified youths the chance, as earlier highlighted.

So, it is better to make the registration offline, just like the voters registration process. This will make it inclusive as youths who may not have the money to buy internet data or do not have the computer operating skills can still be registered.

The programmes also gave more emphasis to graduate unemployed, rather than non-graduate unemployed who have less chances of becoming employed. 500, 000 graduate unemployed will benefit from these programmes and only 100,000 non-graduate unemployed will benefit from it. The proportion should have been equal at least, by adding more slots for the non-graduate applicants. The programmes were well crafted to provide skills for the unemployed, which is commendable. The Nigerian economy requires more of skilled and efficient labour forces, which will help in transforming the economy. Therefore, the graduate applicants should be strongly encouraged to apply for skilled based training, rather than just teaching training.

One of the irresistible questions has to do with the sustainability of the programme, will these programmes be rolling over again? There is no clear sustainable plan yet. Some of the participants will be motivated by the monetary benefits attached to it, instead of the value addition of improving skills and work experience, and once the monetary benefits seized, they may likely abandon  their skills, and will start looking for other jobs that give them money. So, the programme should incorporate reorientation programmes that will change the mindset of the participants, so that they can value skills and self-reliance, not immediate monetary benefit. This will help them in using their acquired skills to set up owned businesses, without waiting for others to employ them again.

Specifically for the Teacher Corps Programme, the participants will be provided with some computing devices to help with their specific engagement and information for their continuous training and development. This particular innovation should be extended to the permanent teachers and existing workers in agricultural extension and health services. The permanent teachers who will train the Teacher Corps Trainees need to be trained on better teaching skills and improve their knowledge too, so that they can train the teacher trainees effectively.

The programme also should be accompanied with some policies that will recognise and professionalised small skilled labour. To avoid marginalisation and contempt of small skilled businesses, there is need to count those small skilled jobs as professional jobs and its wages regulated and/or standardised. This will attract more young people to acquire skills and engage in small skilled businesses. It will encourage and motivate the participants to stick to their acquired skills.

On the feeding programme, the government will have to consider feeding the teachers as well, as the teachers too are hungry. And once food is provided in the schools, then all the Almajiris will drop their bowls and join schools, but the question is, do the schools have the required infrastructures and manpower to accommodate the trooping new entrants, and will it be sustainable? If the feeding budget is for 100 pupils per classroom, once the feeding programme commenced, the number of pupils in classrooms may increase to 200, which bring about the question of whether government can spend extra to feed the increasing number of pupils in schools.

Another concern has to do with process of the feeding. Who will cook the food? How efficient and sufficient will the feeding be? We have seen in IDP camps where huge amount of money is spent on feeding, but the IDPs get little or nothing of the food. Even if this feeding programme must be implemented, the contract for cooking the food should be given to the poor parents to empower them, so that they can afford to sponsor the children for post primary school education.

I totally don’t think the feeding programme will help. The priority in the educational sector is not only the quantity but the quality. The feeding programme will virtually put almost all children back to school, but how many more classrooms, qualified teachers and infrastructures can government put to the schools. If there is no quality in putting people back to school, then the investment will be a loss as the spending will outweigh the resultant benefits. There are children of well doing parents, who get adequate feeding, and will still unnecessarily benefit from the feeding programme. So the feeding programme will subsidize even the middle class and rich parents. So, the investment in the feeding programme will be misplaced.

Generally, I recommend that the feeding programme be stalled or postponed, the money budgeted for this programme should be invested on the poor parents who cannot send their children to school or who cannot feed their school children. The problem was that children refuse to go to school because they have to hawk or help parents to bring money to the family. So, if the family is empowered economically, the children will be spared and will start going to school, and they will bring food to school. So, the objective should be to give job to the poor parents.

The government should train people how to catch fish, rather than giving them the fish. If the children receive fish today, during holiday or when they graduated, who will give them the fish? So, if the parents are empowered to catch fish, they can always give fish to their children.

Finally, the intervention programmes should invest in training young people in energy solution businesses, like solar panel production, installations and maintenance. There should be some selected young trainees who will be trained to engage in advocacies and training others for best practices in energy conservation. This will give them the skills to help address energy crisis in the country.

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of the Commonwealth Youth Council,

University Lecturer (Economics) at Umaru Musa Yar’adua University Katsina.

Petroleum Pipeline Vandalism in Nigeria: Implications, causes and solutions

By Dr. Ahmed Adamu

Vandalized petroleum pipeline

It took Nigeria seven years to subjugate Boko Haram militancy in the north eastern part of the country, and this cost lives of many gallant soldiers and innocent lives, it also cost the country huge amount of money. It caused instability and economic downturn as resources that would have gone for critical sectors were directed toward fighting the insurgency. Now, with relative peace in the North-East and restoration of democratic veracity in the country, one will think the country is on the brink of stability and prosperity. Alas, the re-emergence of the Niger Delta Militancy has cast doubt once again on the ability of the current administration to overturn the socio-economic downturn in the country due to the extensive implications of the ongoing petroleum pipeline vandalisms and destruction of facilities by the Niger Delta militants.

IMPLICATIONS

The effect of this militancy is multidimensional, and include, but not limited to the followings:

1.       Revenue: The Petroleum sector contributes around 98% of the Nigeria’s foreign earnings, as such the country’s economy hugely rely on income from petroleum exports. Any shock in the supply of the petroleum will directly affect the country’s economy. As a result of the recent petroleum pipeline vandalisms, the government revenue drastically reduced by 25%. In the third quarter of 2015, the government revenue was N994.02 billion, and in early this year, it came down to around N746.99 billion. This is a reduction by N247.03 billion in just three months. This monetary loss resulted by the vandalism could have been sufficient to share N1 million each to 250,000 young entrepreneurs in the Niger Delta area. Unfortunately, this is entirely lost, and by extension led to other social cost.

Alternatively, we can look at the volume of the petroleum production to quantify the implication of these vandalisms per day. For example, at the end of the first quarter of 2016, the daily oil production in the country reduced to 1.4 million barrels of crude oil, falling short by 800,000 barrels of the estimated average daily production of 2.2 million barrels. Using the oil price of $50 per barrel, this means that on daily basis Nigeria lose $40 million, which is equivalent to N10 billion daily as a loss.

The effect of income reduction has extended to the feeble state governments, most of whom were recently rescued. And now, they had to share the lowest allocation in recent years. The state governments shared N281.5 billion in May 2016, which is 28% lower than what they shared in the month of May last year. So, the revenue reduction as a result of the vandalism will again affect the Niger Delta states.

2.       Political: The reduction in income will entirely affect the implementation of the 2016 budget, and government will have to prioritise and leave other projects. This will reduce the performance of the current administration. The political implication will be that the people will be disappointed given the higher expectation on the current administration, and voters may try other options in the next election. An average Nigerian has high tendency of blaming government for his plight, and with the current economic hardship, the government is becoming helpless especially at state levels. The implementation of the expansionary fiscal policy will be less effective, which will make the economic recovery even stickier. The popularity of the current administration will reduce if this continues.

3.       Expenditure: The cost constructing and laying down of petroleum pipeline in any oil and gas venture is huge. It will cost $82,000 to construct a gas pipeline per kilometre in Nigeria, which is equivalent to N20 million. Now, for every one kilometre vandalism, the government will have to spend N20 million to reconstruct and it may take long time to fix depending on the enormity of the destruction. This will add to the overall government expenditure in the petroleum sector and undermines its expenditure in other sectors.

4.       Default in Contractual obligations: Some of the Petroleum Fiscal Regimes require contributory payments to operator who fund the petroleum production on behalf non-operating partners in JOAs. Nigeria has so far being unable to answer operated cash calls of $7 billion as contributory payments to oil and gas operators for the risks and cost incurred in petroleum production in the country. And this was caused by reduction in the government petroleum revenue and increase in petroleum expenditure as largely caused by vandalisms in recent months.

The expensive LNG business is hugely affected. Some of the LNG supply are time, volume and destination specific, and once the contract is signed the entire risk is on the supplier. These pipelines vandalism has reduced supply of gas to the NLNG plant in Lagos, which may delay fulfilment and add to the cost and risks of the business on the Nigerian government.

5.       Environment: The aftermath of most of the petroleum pipeline vandalism are associated with environmental costs due to the oil spillage or gas emission or explosions. These cause both water and air pollution, which affect the health and economic activity of the affected community. This externality is costly and may not easily be quantified. The activity of reconstructing the damage facilities also adds to the pollution.

6.       Investment: At this important economic turning point, when Nigeria needs more investment in other sectors of the economy, the pipeline vandalisms add to the country’s business risks and sends bad signals to potential investors, not necessary in the petroleum sectors, but other sectors. So, there will be reduction in capital transfer to the country. This will weaken the effectiveness of the country’s economic diversification programme.

7.       Energy: From the beginning of this year to date, the total electricity generation has reduced on average by 30%, and this was caused by the sharp reduction in the gas supply to the power plants as a result of these vandalism. The gas powered plants provide up to 80% of the country’s power generation capacity, and they are operated mainly with gas. Any shock in the supply of gas will make these expensive power plant redundant, which will affect their viability and put the nation in darkness. The vandalism has contributed to making cost of production more expensive due to the electricity shortages that it caused. This is tantamount to discouraging local entrepreneurs and reduce their efficiencies. It will also lead to inflation as energy is an integral part of the factors of production. Any reduction in the supply of electricity will add to the cost of energy in production, as producers have to spend extra for autonomous energy supply.

8.       Refining output: With the recent deregulation of the downstream petroleum sector, the petroleum pump price has increased up to N145 per litre. However, for a litre of petrol refined and transported within Nigeria, it can cost as low as N60/ per litre. Efforts have been made to revive the existing refineries in the country so as to improve local supply and reduce cost of petrol. However, the operation of this refineries have drastically reduced as the supply of crude oil to the refineries have reduced due to the oil pipeline vandalism. This made the refineries redundant, and make the country rely more on the imported refined petroleum, which will eventually lead to further depreciation of Naira.

CAUSES

Now, one will be curious to know what motivates these militants to engage in this kind of activity that is tantamount to national destruction. So, before addressing the problem, there is need to identify the causes:

The militants are not asking for money or amnesty, they are only asking for sovereign state. They don’t want to belong to Nigeria again. But, what make them want to have a separate nation? Maybe, they think, they are politically irrelevant within the current country settings or they think someone from their region is more deserved to rule the country. The current leader of the country defeated the former president who came from the Niger Delta area, some believe that, it is a deliberate attempt to scuttle the current administration that defeated the candidate from Niger Delta. This is just a theory, and it has not been substantiated yet.

It is apparent that the militants have political motive, and is likely that they act on their own to protect the interest of some of their leaders and agitators from their region. These leaders may not have to give them orders. The representative of the region in the central government, Hon. Rotimi Amaechi lacks the command to convince the militants, because, he is considered a political sell-out.

The current administration is committed to arresting some of the former leaders of the Niger Delta agitators, prominently Mr. Tompolo, for alleged corruption in some petroleum contracts during the last administration, and despite some bloody attempts to arrest him, the government was not able to achieve that yet. The government accused him of diverting the sum of N45.9 billion belonging to the government during the last administration. However, Mr Tompolo said, it was a legitimate contract and due process was followed before he was granted the contract to protect petroleum facilities in the region, and his services were effective as there were no vandalisms or destruction at that time. If there is any question regarding the legitimacy of the contract, he said, the Economic and Financial Crime Commission (EFCC) should summon the government officials that granted the contract first. So, Mr Tompolo felt aggrieved that his Business bank accounts were frozen, and he thinks that he is innocent and the government owes him.

Mr Tompolo has an unyielding command among the armed agitators and militants in the region, and by seeing that the government is against their idol, the militants don’t need command from him to retaliate. And for them to see their mentor humiliated unduly, they rather separate from the country. There are anticipations that more leaders from the region are likely to be arrested and tried for corruption charges. The militants will do everything to protect their leaders or retaliate. That is why they first attack, because, attack is the best way of defence.

It was not coincidence that few weeks after declaring Mr Tompolo wanted, the vandalism resurface in the region. So, the vandalism is aimed at avenging the harassment on their leaders.

During the last administration, the government signed a contract with the militants that they will drop arms and stop vandalism in return for pipeline protection contracts. With the coming of this new government, this contract was cancelled, and the pipeline protection is now saddled with the Nigerian army. Despite the presence of Nigerian army in the oil production region, the militants still vandalise pipelines, because, the creek is their home, and they can navigate and ambush soldiers. The militants can even stay inside water for three hours and some believe that they use magic in their fight.

So, the justification of this fight from the militant perspective is that, their leaders were granted the contract through due process, and now the contract is reversed and their leaders are hunted for crime they did not commit. This to them, is a breach of the contract terms, and as such the condition of peace cease to exist as well, and they will have to avenge. That is why they have no further confidence on the government and the country.

With the economic hardship and unemployment in the region, it is very easy to recruit and brain wash new members in the struggle. Even though, some of the leaders are literate, but they leverage on the illiterate ones to add more forces. And it is very easy to convince new recruit by preaching political and economic isolation of the region, due to apparent infrastructural deficit and poverty in the region.

SOLUTION

So, knowing some of the causes, we can easily draw the solutions:

The government must plan for short term, midterm and long term measures. In the short term, the previous contract signed by the previous administration should be revisited with a view to identify exaggerated figures and suspicious clauses, and then sign a reviewed contract within weeks. The government must drop all charges against Mr Tompolo, and reinstate his business accounts. If government still find any foul play in the execution of the previous contract, should invite government officials from the previous government for inquiries. In addition, heavy military power has to be deployed to prevent any further destruction.

In the midterm, the President must personally meet with the influential agitators from the region. The President should not rely on the regional representatives in his cabinet, he must engage with the former president and invite all the agitators for a peace talk. The president must agree not to arrest or try anyone of them for any crime committed in the past. The president should consider some political appointments to few of their respected leaders, whom they listen to. In return, they must drop arms and help the Nigerian army protect the pipelines and other petroleum facilities. The President should use power to convert enemies to loyal friends.

Any special consideration for the militants has to be done moderately and strategically not to promote violence for economic benefit. The special consideration will have to be through investment in education, agriculture, and environment to increase the inclusive economic participation of the young people from the region. The Amnesty programme of President Yar’adua was very effective and it has addressed the economic motive of the militancy. The current vandalism is politically motivated, so there is less need of monetary investment on the militants.

There is need for general awareness and campaign for social cohesion and tolerance, as well as regional integration. The six regions are integral part of each other, and the young generation must appreciate the contribution each region give to achieve the Nigeria of today.

There is need for awareness to understand the national and international laws of land and natural resources. All minerals and natural resources on land and in sea belong to the Nigerian state, not to any particular state or region. And the sea where the oil and gas operation take place belong to the Nigeria, because, nobody can own a sea except the government. Nigeria is lucky to own a longer nautical miles in the sea because of its wider land mass. So, even the north that contribute 72% of the land mass, which resulted to wider sea ownership to Nigeria, cannot claim ownership of the petroleum deposit in the sea. So, petroleum resources within the country’s territory belong to Nigeria exclusively. 

The theory that groundnut money were used to build oil wells may not be substantiated, as the beginning of petroleum industry in Nigeria was based on concessionary fiscal system, where international oil companies invest their money in exploration, development and production of the petroleum resource. Commercial discovery and production of oil was first made in 1956 in Oloibiri (in present Bayelsa state) by Shell D’Archy, not by Nigerian government.

In the long-term, the Nigerian economy must be independent of petroleum sector, to avoid being vulnerable to any shock in the sector. Alternatively, petroleum deposits can be explored in other parts of the country to diversify its sources of supply. Development of renewable energy sources can be another option.

It is just my opinion!

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of Commonwealth Youth Council,

University Lecturer (Economics) at Umaru Musa Yar’adua University.

                                             

President Buhari’s One Year in office: Economic assessment and public opinions on national and states’ performances.

President Buhari immediately after taking
oath of office, 29th May 2015.

By Dr. Ahmed Adamu

The following article reviews the economic performance of President Buhari in his first year in office, but it first reports and analyses the outcome of a public survey I conducted to crowdsource public opinions on the one year performance of President Buhari and state governors.

The survey was conducted online and lasted for 48 hours. The participants in the survey came from across the 34 states in the country, even though some 24 of them withheld the name of their states. The outcome of the survey differ from states and regions. There were some discrepancies in national and states outcomes. Only Oyo, Ondo and Ebonyi states did not participate in the survey.

Starting with the aggregate outcome, 53% of the respondents are satisfied with the President Buhari’s one year in office, and most of them think his policies are not extremely effective, but just effective, and 18% of them think his policies are not effective. 43% of the respondents think his policies are inclusive, while 15% of them think they are not inclusive. 86% of the respondents still have hope for the future under President Buhari. There are more of the respondents who think their state governments performed poorly or could not decide yet.

Majority of the participants from 9 states out of 13 southern states are not satisfied with the administration of President Buhari in its first one year. However, majority of respondents from 10 states out of these (southern) states think that their state governments performed either excellently or good. However, 100% of respondents from Bayelsa state think that their state government performed poorly. Likewise, 55% of respondents from Delta state think their state government performed poorly, and 66% of respondents from Abia state either think that their state government performed poorly or are indecisive. Majority of respondents from 5 southern states are still not hopeful for the future under President Buhari, and some majority from 7 states in the south do not have confidence in the competence of political appointees under President Buhari’s first one year in office.

All the 19 northern states participated in the survey, and majority of the respondents from 16 of these states are extremely satisfied with the first one year of President Buhari in office.  However, 100% and 77% of participants from FCT and Jigawa state are moderately satisfied with the government of President Buhari in the first one year respectively. Furthermore, 43% of participants from Taraba state are not satisfied with President Buhari’s one year in office, and another 43% of the participants from the state are moderately satisfied.

In terms of states performances, majority of participants from 10 northern states think that their state governments performed poorly. The poor performing northern states from the responses of this survey include Bauchi, Benue, Borno, Jigawa, Katsina, Kwara, Plateua, Taraba, Yobe, and Zamfara. Specifically, 100% of respondents from Zamfara state think that their state government performed poorly.

Respondents from Adamawa, Kaduna, Kano, Kebbi, Kogi, Niger, and Sokoto think that their state governments did not perform excellently, but performed just well. There are more perceived poor performing states in the north than in the south in the first one year of the current administrations, but they are largely more hopeful for the future and they are confident in the competence of the political appointees.

There are few shocks in the above discoveries, and that is important in identifying areas of weaknesses and strengths. The survey was based on general performance devoid of specific sectors. 

Even though there have been social and print media reports scoring the performance of the current administration in various sectors, I think they are not without sentiments. There are sectors that require intensive and strategic planning and implementation before witnessing any progress. So, it is not fair to judge the current administration on some major development indicators considering the fact that, it has not implemented any of its blue prints and plans yet, as the first budget of this administration has just been approved. Similarly, considering the economic situation inherited by the current administration, it will take time and patience to fix some of the infrastructural deficits and economic downturn.

The porous Nigerian economy has already responded to the global economic slowdown and have already imported inflation and unemployment. Of course, the current administration was not responsible of making the economy porous. It is the effect of long term mismanagement of resources and reliance on one sector i.e. Petroleum Resources. And recovery from this resource curse will definitely be long and slow. It is going to be a slow growth. The pace of economic downturn is always faster than its recovery.

Looking specifically at the inflation index, when President Buhari came on power, the inflation rate was around 9%, and at the end of his first one year it rose to 13.7%. This could be the repercussion of the much helpless economy built over the years and its vulnerability to foreign currency exchange shocks. With the recent sharp depreciation of Naira resulting from rising importation, the cost of importation became higher, and this caused increase in general price levels. Similarly, payments for some contractual obligations in foreign currency especially for foreign capitals invested in the country have become more expensive (due to Naira depreciation), causing increase in the cost of goods and service provisions especially in power sector. And this significantly affected prices. So the inflation is explained by the resultant effect of a porous economy (Naira depreciation) built over a decade. So, the currency depreciation was not caused by effects of the current economic policies, it is the remanence of the long ineffective policies.  

In terms of Job opportunity, the current administration promised to create 3 million jobs in a year during their campaign, but the unemployment rate has increased by 4.6% within a year, with new unemployed people numbering around 1.5 million joining the labour market in just the first quarter of 2016. This is not surprising due to the delay in the implementation of the expansionary fiscal policy, which the Buhari’s administration has to be responsible for. Likewise, job creations by organised private sector has dropped due to increasing cost of production and delay of investment as a result of recent political transitions and uncertainty in the new economic policies. Similarly, the proposed fiscal policy that will convert unemployment cannot be fully implemented without the passage of the budget. These explained the negative economic growth in the first quarter of this year.

The Central Bank of Nigeria has already injected close to N2 trillion in to the economy, and some banking population already possess enough resources to create jobs. Even though, the effect of this cannot be visible immediately, as people make investment decision as when they deemed optimal. However, with the recent passage of the budget, the government spending will commence, which will immediately create jobs and put more money on the hands of common man, which will increase their purchasing powers. So, there is need for at least a year to generate more jobs and distribute money through government expenditure within the framework of the first budget of this administration.

Within one year of President Buhari, the foreign reserve has declined by $5 billion, which can easily be explained by steep reduction in the crude oil prices and reduction in production of the crude oil due to vandalism. In addition, the rising importation and slow global economic growth has resulted to more utilisation of the reserve to offset local and international liabilities in foreign currency. So, any inability that reduction in the reserve may cause was apparently not as a result of the recent economic policy, but external factors.

In terms of electricity generation, it is evident that in just 2016, the average power supply has declined by 30%, this was largely caused by the shortage of gas supply to power plants as a results of gas pipeline vandalism. It is significant to note that the highest ever electricity generated in the history of the country was 5,074MW, which was generated on 2^nd February 2016. But period after this was characterised by some few inevitable system collapses and pipeline vandalism, which lowered the generation to around 3,000MW daily at maximum.

It is apparent that some of the setbacks above are caused by some externalities and inherited weak economic systems, which the current administration must strive to address before building a new economy. So, this will require tough decisions and slow growth before the economy can pick up. This underpins the necessity to have more of economic advisers than luxury or political aids. The government must have the guts to tell the negative truths, and explain clearly and specifically the situations, and what the government plans to do to address them. Apology and keeping hopes alive cannot serve well, we have to be honest to ourselves and face our challenges together.

Some of the first year assessments of President Buhari are myopic and misguiding. For example, the Punch newspaper illustrated that, President Buhari performed poorly in electricity sector. This is not valid assessment due to above explanations under electricity generation. Even if this government will have to improve in electricity generation, it will take 2 to 3 years and huge amount of money to install new generation and transmission capacities, which the government cannot finance alone. Funds for power projects must be appropriated, and private investors must be wooed, which all cannot yield result in just a year.

It is apparent that, the economy is not so attractive, and giving excuses and blaming the past should not distracts the government. The government has done well in the area of tackling corruption, which made all other gained achievements possible, including security, financial prudence, efficiency of public institutions, patriotism etc. It requires an honest leader to fight corruption, which President Buhari is, so it is easy for him to fight corruption, and this is why he performed well in fighting corruption. 

Finally, it will take pains and patience to see the much needed positive change. Priorities must be set especially in energy and transportation, which is why there is need for separation of duties. No matter how much government want to minimise cost, it must share responsibilities to optimise quality outcome. It will be better to have separate ministries for power, housing, works, and youth. Similarly, the petroleum ministry require robust attention, as such it requires a substantive minister whose specific assignment will be the petroleum sector. 

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of Commonwealth  Youth Council,

University Lecturer (Economics), Umaru Musa Yar’adua University Katsina.

President Buhari's One year assesment Form

President Muhammadu Buhari

29th May 2016 is the one year anniversary of Muhammadu Buhari as President of Nigeria. This evaluation helps to review government performance, and crowdsource opinions and reaction of the citizens on the current administration in the last one year. To participate in this voluntary and independent assessment, fill the following form.

This  survey is closed. No further submission will be valid

How satisfied are you with the one year of President Buhari’s administration?

How would you assess the effectiveness of the government policies in the first one year?

How inclusive do you think of current government policies, programmes and approaches?

How confident are you in the competences and abilities of the political appointees?

Do you have hope for the future under the current administration?

How would you rate the performance of your state government in the first one year?

Which state are you from?

Implications of Nigeria’s Floating Exchange Rate Regime: Way out

By Dr. Ahmed Adamu 

Following the decision of the Monetary Policy Committee (MPC) to fully implement the floating exchange rate regime in the country to allow competitive access to foreign currency and introduce flexibility in the currency exchange market, the economy will face certain shocks, which if not carefully managed will further endanger the economy.

With this new policy, the value of Naira in relation to foreign currency will be determined by demand and supply, which means the new value of Naira will be closer to, if not exactly as its value in the parallel market. The parallel market have been influenced by the forces of the demand and supply. So, there will be relatively similar naira values in the Forex markets. The government will not therefore fix the exchange rate, which normally distort the currency exchange market at the expense of the government.

Therefore, the value of Naira will immediately depreciate since at the parallel market which is the proxy competitive market, the Naira is sold around N350 per US dollar. This will mean Naira will now reach a market value of not less than N300 in the short term, which is up to 76% increase. This market adjustment will cause uncertainty and speculations, which will further depreciate the value of Naira. However, this policy will motivate more supply of foreign currency, making currencies like US dollars and Pound Sterling overflowing the market, because of the profit motive. The foreign reserve which has depleted by more than 130% in eight years, will then be relieved, as the resulting increase in interbank and Bureu De Change (BDC) transactions will cause increase in currency supply, which will offset the rising foreign currency demand. The increase in supply will also make importation easier but not cheaper.

Therefore, as the foreign currency supply curve shifts outward, its demand curve will follow it outward, moving the new equilibrium value at a higher position. And this may continue in the midterm except drastic structural economic changes took place, which will include measures to reduce importation especially of refined petroleum, which constitute the largest share of import to the country.

Under the previous fixed exchange regime, the central bank had to use the foreign reserve to meet up the market gap (excess demand) caused by import demand. The fixed exchange regime is not realistic for importing countries like Nigeria, as the continues oversupply of the country’s currency will continue to depreciate the value of the currency. And this leads to increase in the inflation and depletion of the foreign reserve.

So, setting the Naira at competitive value will cause depreciation of the currency, due to continuous rising importation in the country, every other thing being equal. So, we should expect further sharp decline in the value of Naira, which may likely reach somewhere around N500 in the midterm, and then it will stabilise.

Another implication of this is the suppression of the black market, as buyers and sellers can accept the interbank equilibrium rates, which are not so much different from the black market value. So, buyers and sellers will avoid the street and walk into banks for any transaction. The BDC will now compete with the banks, giving customers supplier options. Even though, the black market will not seize to exist yet, as they will still push frontiers of their prices no matter the efforts and there will not be convergence.

The need for strict regulation is imperative under the currency competitive market to ensure fair play, so that the economy will not be jeopardised for the benefit of profit seekers. Similarly, the cost of importation will immediately increase as more Naira is required to acquire a unit of foreign currency. In addition, the country will be more vulnerable to foreign inflation (imported inflation). These will lead to cost-push inflation, and with the already 13% inflation rate, the inflation may reach 15% in a near future. Consequently, local industries will underperform due to expensive factor inputs.

The prices of goods and services will continue to skyrocket, and no matter how much efforts are put in place to bring prices down, the price downward slope is going to be sticky and slow. Even though, the government will have window opportunity to acquire foreign currencies at concessionary rate to settle some critical responsibilities, still the cost of government will increase, as government will have to spend more in paying its local and external liabilities.  As a result, the performance of the government will reduce.

With the recent removal of subsidy, the cost of importing petrol will increase, which will push the ceiling price from N145/litre to around N160/litre depending on the crude oil price and stability of the exchange rate. The electricity tariff may also increase as more Naira will be required from the Discos to settle payments to some foreign Gencos in foreign currency.

So, this is Naira devaluation in disguise despite the president’s outright rejection of devaluation. However, whether to devalue or not to devalue, the economy is in danger due to continues reliance on importation of almost everything. So, the expansionary monetary policy will not alone stabilise the market unless it is accompanied with strategic public and private investment in critical areas like refineries, agriculture, automobile and machines production, technology, textiles, education and health. Once Nigeria can independently meet its local demand for these goods and services, the value of Naira can appreciate to even N100 per US dollar. Nigeria has the potential to achieve this, since the country’s exports still outweigh that of its import. Even though, the country is the 52^nd largest importer in the world, but with its average annual import growth of 3.2%, this position may reduce over time.

Finally, strong measures must be in place to encourage local investors and producers, and provide the environment for their prosperity, importantly adequate provision of energy. In addition, the MPC should consider increasing the Monetary Policy Rate (MPR) to catch up with the inflation. The MPR should be increased to encourage savings, and reduce money in circulation to quell the pending rise in inflation. 

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of the Commonwealth Youth Council,

University Lecturer (Economics) at Umaru Musa Yar'adua University Katsina.

Petroleum subsidy saga and solutions

Picture of a government owned
filling station selling at new
ceilling price

By Dr. Ahmed Adamu

Recently, the Nigerian government once again removed subsidy on petroleum consumption in the country, on the account that setting the price at equilibrium will ensure optimal supply, competition, and end the illicit trade of the Nigerian subsidised products in the neighbouring countries. This sparked lots of comments and different opinions, and this article will shed more light on the subsidy and its flip side with some recommendations.

Petroleum subsidy existed for long time and in many countries, especially oil rich countries as it serves as the direct benefit citizens drive for having petroleum deposits in their countries. Initially, the subsidy was economically introduced to support structural changes in economies, and encourage usage and shift to more efficient technology and fuels. It was introduced in petroleum sector to enable access to cheaper factors of production, so that factories and industries can buy petroleum products and transport their products cheaply. This helped in quelling inflation, and increased investment. The subsidy also protected consumers from the volatility of the petroleum products prices.

Nigeria being one of the leading oil rich countries in the world introduced subsidy for over two decades, and for many Nigerians, they do not know how to live without the subsidy. As a result, any attempt to remove the subsidy is followed by protest and unrest. Recent of which is the 2012 subsidy removal. With the latest removal, some Nigerians still think, it is a wrong decision or bad timing, and may consider going to the streets, and the Nigerian labour union has already expressed dissatisfaction with the decision.

However, within Nigerian context, the subsidy was considered unbearable due to the increasing consumption of the petroleum products, which make the government spend up to a trillion Naira in just a year for subsidy payment. The petroleum subsidy regime had created avenue for corruption adding more to the subsidy cost. The subsidy payments keep increasing year by year, which could reach N2 trillion in two years time due to the increasing demand for local consumption, corruption and illegal exportation of the subsidised product. This has affected the government’s performance in major sectors of economy, and if allowed to continue will affect future economic growth. This can be worse if Naira continue to depreciate, as Nigerians have to pay more in local currency to import a unit quantity of the refined petroleum product.

The petroleum subsidy in the country was not targeted as even the rich people who could comfortably buy at competitive price still enjoy the subsidy, and yet, they consume more than the poor. So, the subsidy benefited the rich more than the poor.

Similarly, providing the subsidy has caused market failure as setting prices below the equilibrium, will cause excess demand, where consumers will be willing to buy more than the suppliers are willing to supply. Supply of petroleum products under regulated petroleum prices are discouraged as the suppliers are attracted to higher or competitive prices. So, the subsidy causes market imbalance, which is not desirable.

With the recent reduction in crude oil prices, the Nigerian foreign earnings reduced drastically, which depleted its foreign currency reserves, and resulted to its failure to meet local hard currency demand. This affected supply of the petrol, as marketers could not secure sufficient US dollars for the importation. This has caused further market imbalance, as it caused lower supply. So, the government is left with no option than to allow marketers with autonomous sources of foreign currency to import and sell at competitive price. Even though, access to local currency is not lacking, but lack of its convertibility has compounded the situation. So, foreign currency shortages made the market monopolistic, as only few marketers with independent sources can import, and this elongated the distribution chain, and increased the pump price.

Being someway monopolistic market, the anticipated competition may not come easily due to the reliance on few ways to acquire foreign currency, and due to the capital intensiveness of the petroleum importation. So, there might be cases of collusion to exploit consumers, which has started manifesting in some parts of the country. So, the country is seriously hit by resource curse, since despite its resource availability, it heavily imports most of its consumables, making supply of its local currency higher than its demand. Similarly, the too much sentiment and profit seeking in the industry make distributors aim for higher profit above the normal profit. The marketers must be sincere and sympathetic, as they are leaders in their own right, they should go for as minimal profit as possible. The consumers can play their role, by boycotting any filling station selling above the ceiling price.

Without the subsidy, any future inflation of petroleum products will be transferred to the citizens. However, if there is deflation, the government will not have the chance for over recovery, so the citizens will enjoy the price reduction directly. The removal of the subsidy will relief the government and enable it reinvest the saving on social responsibilities. It will set prices at equilibrium, and allow for free market. Suppliers will now be more motivated to import, and as a result, there will be more supply of Naira, which will further depreciate Naira. This will make the country spend more for every import, making factor inputs more expensive, leading to inflation.

 However, the removal will ensure energy conservation and efficiency, which will be useful to environment. Without the subsidy, unnecessary consumption of petrol will be reduced, which will lead to reduction in aggregate petroleum demand, and in the long run lead to petroleum price reduction. So, even if the price is high, people will reduce their consumption, and may not have significant effect on the total spending.

Despite the historical unrests and protests resulted from past subsidy removal, the country may not experience serious protest this time around, due to the unyielding trust and confidence on the current leader of the country, but the question to ask is, how would the Nigerians cope with the subsequent increase in price of petrol and other commodities, since incomes did not appreciate in the same proportion. Similarly, the resulting inflation will add to the cost of production and unemployment. So, to avoid serious hit on citizens, measures must take place to alleviate the looming catastrophe.

The removal of subsidy should have been systematic and gradual in phases, this will then prepare the consumers and make them adapt to new prices gradually. The continuous saving should then be reinvested in physical social projects that will justify the opportunity cost of the fuel subsidy. The price control measure must be in place and compliance enforced. The price of petrol should be flexible to reflect the volatile crude oil price timely, this will avoid over and under recovery. There must be strict supervision to checkmate cost composition and price compliance.

For example, this week, the NNPC announced that the maximum price of petrol is N145, which is the peak price. Even though the allowance is huge, but it does not mean all filling stations must sell at this price. The price at each filling station must be determined by their specific landing cost and other associated cost, but not above the N145 presently. This means, the price can be far lower than N145, and still viable. This peak price should be reviewed regularly. So, each supplier should declare their cost composition and selling price, and supported with evidence before acquiring a selling clearance, this will help avoid excessive maximization of profit.

In addition, the government should design programme (palliatives) to offset the price shock, for example, provision of monthly subsidy ticket for 60 litres per eligible consumer/car can be provided for at least six months in the beginning. The eligibility to benefit from this subsidy ticket is subject to economic status of the consumer and per vehicle. Ticketing shops can be established in each town, and this should be secured and trackable. For vehicles to benefit, they must be properly registered and renewed with the Road Safety Commission for verification. The beneficiaries must be honest, and only purchase the subsidy ticket if they are eligible, and they should not go beyond the 60 litres per month. The commercial vehicle subsidy quota can be extended to 200 litres a month. The filling stations can cash the served subsidy tickets at the relevant government agency. The transport fare must then be regulated per kilometre, this can change based on the prevailing peak price. The provision of convenient public transport, within and between states and towns must be provided, so that people can start selling their cars and go for these conducive public transport options.

The default long term solution will always be to sufficiently refine the Nigerian crude oil within its territory. This will evade the exposure of the fuel price to the exchange rate fluctuations and shortages in foreign currency reserves. It will also drastically reduce the refinery acquisition price and eventually the pump price. If Nigeria can sufficiently meet local petroleum demand without the need to import, the fuel pump price may reduce to about 30-40%. This can be much lower if government will consider subsidising the refining by then.

Currently, it will cost N138.26 to bring a litre of petrol to a filling station in Nigeria at the current crude oil price and exchange rate. So, it will still be profitable even below N145. So, it is a policy that, no litre of petrol should be sold above N145. Unfortunately, I just took petrol at N150 per litre. And I asked the manager of the filling station, why he sells at higher price than the peak price, and he said he bought it at higher price from a dealer. So, there is need to reduce the chain of supply to reduce too much profit seeking. Allocation or wholesale of petroleum products should only be to owners of filling stations, and they must show evidence of sale at their filling stations before they can be sold again.

Many countries that were providing subsidy have now removed it, for example, Venezuela provided the cheapest petrol in the world as a result of its petroleum subsidy. Despite having the world largest oil reserves, Venezuela stopped providing subsidy, and as a result, the price of petrol in the country rose by about 6000%, which is the first rise in 20 years. Though, 95% of foreign income of the country come from crude oil exports, the country had to use the revenue to subsidise consumption of petrol, which reduced the government capacity to invest in other sectors of the economy. Now Venezuela is facing economic recession, inflation of around 95%, hunger and unemployment.

Finally, since people are used to subsidy, removing it will be very sensitive, as such, the removal must be democratic to engage and convince citizens on the need to remove it. There should be immediate manifestation of resulting benefits after removing the subsidy, and the removal has to be gradual and targeted. It was envisaged that no country will give fuel subsidy in the next 10 years, due to increasing demand for petroleum products and the need to diversify the energy mix. So, the Nigerian subsidy removal should be restructured and revisited to make it systematic, gradual and clearly beneficial, targeted and inclusive. 

Dr. Ahmed Adamu

Petroleum Economist and Development Expert

Pioneer Global Chairperson of the Commonwealth Youth Council

University Lecturer (Economics) at Umaru Musa Yar'adua University, Katsina.

The need for a bill to lift the ban on land importation of Rice

Nigerian Customs officials intersecting truck full of imported rice

This is the letter I will send to a Senator requesting him to present a bill before the national assembly on the need to lift the ban on land importation of rice. Let us discuss it and have more suggestions before I deliver it to the National Assembly.

Dear Senator

In one of my recent articles titled: “Rising Inflation and Unemployment: The Answers” (Here is the link to the article: http://ahmedadamu.blogspot.com.ng/2016/04/rising-inflation-and-unemployment.html ), in the article I raised the issue of the recent food price crisis and unemployment in the country. I mentioned that the Nigerian inflation rate is now 12.8%, which is higher than what it was (8%) in 2014, this is evident in the prices of common consumer goods. Now, household commodities like tomatoes, rice, egg, milk, spaghetti, maize, matches etc. have all risen, some even doubled their initial prices.

People now adjust their life styles and downgrade the quality of foods they eat, and this affect the performance of the economy as the aggregate demand keep reducing. In addition, the increase in inflation supposed to have been triggered by increase in employment opportunities in the short run, but that is not the case in Nigeria, as the unemployment rate increased together with inflation.

We are concerned with the potential hardship that people may face if this price increase prolong. Particularly concerned with how government’s decision of banning land importation of rice has caused the scarcity and price increase of the rice, which is essential food item among average household. This made some of the poor to switch to lower food options or pay extra money from their savings to pay for the rice. This affect the general aggregate demand in the country.

Therefore, to address part of the food inflation, the government should lift the ban on land importation of rice. If rice is still imported through the sea, then it should be allowed to be imported through the land. What the government should do is to take measures to track and organise the land rice importation, so as to generate revenue from import taxes. Before the banning of land importation of rice, the Nigerian government receive huge amount of revenue amounting to close to N300 million per month, which is around N3.6 billion per year. So, now government is loosing this amount due to the ban.

Even if some of the importers avoid payment of tax, that will still benefit the economy, because, if they did not pay the tax, they will be able to save some money for other expenses, which will improve aggregate demand and help other businesses grow. The tax evaders may likely reduce the price of their rice due to the reduction of the landing cost following tax evasion. This will help in bringing the price of rice down. However, government should take extra measures in the midterm to ensure compliance and payment of tax by those tax evaders.  

However, there should be provisions and incentives for rice farming locally. The price of domestic rice should be subsidised so as to discourage buying foreign rice. The local farmers shall be incentivised to have easy access to capital and suitable farming locations for rice, so as to encourage local rice production and discourage its importation. If there is abundance of local rice production, then the entire rice importation can be banned. The current ban on land importation of rice has led to the scarcity of rice, unemployment and rise in rice price. It is discriminating to ban small-scale importation through the land if large sea importers are still allowed to import. Therefore, government should lift the ban on land rice importation in the short term before the effects of new measures and investment in local rice farming start to manifest. This will evade the expected acute increase in rice price, ahead of the fasting period.

I hope you will accept this propose bill and present it to the National Assembly for Consideration.

Dr. Ahmed Adamu

Petroleum Economist and Development Expert

Pioneer Global Chairperson, Commonwealth Youth Council

University Lecturer (Economics), Umaru Musa Yar’adua University, Katsina.

Rising Inflation and Unemployment: The Answers

By Dr. Ahmed Adamu

Indicator of trend fluctuation as
characterized in the inflation trend

The Nigerian inflation rate is now 12.8%, this is higher than what it was (8%) in 2014, this is evident in the prices of common consumer goods. Now, household commodities like tomatoes, rice, egg, milk, spaghetti, maize, matches etc. have all risen, some even doubled their initial prices. This is on top of the scarce and expensive petrol. It is also happening at a time when there are more money in circulation. Currently there are close to N2 trillion in circulation, which means people have more money, but the question is how many of these people possesses the money. Despite the increasing money in circulation, people still struggle to afford the expensive consumer goods.

People now adjust their life styles and downgrade the quality of foods they eat, and this affect the performance of the economy as the aggregate demand keep reducing. In addition, the increase in inflation supposed to have been triggered by increase in employment opportunities in the short run, but that is not the case in Nigeria, as the unemployment rate increased together with inflation.

This indicates that there are more people without jobs, and prices of goods and services have increased. People can easily think there is stagflation in Nigeria, but that is not the case. If the natural rate of unemployment in the country is known, we would have been able to discover if there was trade-off between slight reductions in natural unemployment rate with the increasing inflation rate. However, with very little increase in the unemployment rate, which is a marginal 0.5%, we can assume there is reduction in the rate of natural unemployment.

This is because, the number of people without job due to lack of skills or due to the waiting period have reduced. Even though, there are increasing number of unemployed people due to low growth of the economy at the interim.  This is possible because the speed of the economy has reduced by 0.73% within the period of last quarter of last year and first quarter of this year. So, the marginal increase of unemployment rate was a result of slow growth of the economy, though the natural unemployment can be said to have reduced slightly.

Therefore, we can conclude that increase in inflation in Nigeria was as a result reduction in the natural rate of unemployment within this period. Because, demand for higher wages and external factors like the sudden shock in petrol price, higher import cost and sharp reduction in electricity supply might have triggered the recent increase in inflation. However, if the trend continues, the increase in inflation will cause more unemployment in the future, as producers will find it difficult to acquire factors of production and make their profit low due to the resultant low consumption.

Even through, there is more money in circulation, but yet, there is less money in the hands of average Nigerians, and the effect of reduction of money in circulation will be minimal as it will further reduce the money in the hands of the average citizen. So, the monetary policy shall not affect the money supply, but reduce the interest rate to encourage more investment. Reduction of the interest rate will compel the few that hold so much money to bring out their money from the bank and invest, and if they invest, they will employ labour, and this will address the unemployment. In addition, there have to be measures to checkmate inflation sentiment and undue maximization of revenue by suppliers. The price of petrol has to be strictly regulated to ensure affordable competitive price, so that raw materials can be acquired cheaply.

The recent depreciation of Naira to US dollar has made the cost of import prices higher, so, importation especially of refined petroleum products should be totally eliminated in midterm. This will drastically reduce the inflation rate, and provide more employment. Since there is no effect of wage increase on the current inflation rise, the regulated wages shall be maintained for now until when inflation rate is cut down to about 5%.

With the current China/Nigeria currency deal, we will expect cheaper cost of production and reduction in inflation, as cheaper raw materials can be imported from China at the short term. However, if this is also prolonged, there will be resurgence of inflation as cost of importation will be higher with continues overdependence on China raw materials.

Finally, on a related note, to address part of the food inflation, the government should lift the ban on land importation of rice. If rice is still imported through the sea, then it should be allowed to be imported through the land. What the government should do is to take measures to track and organise the land rice importation, so as to generate revenue from import taxes. However, there should be provisions and incentives for rice farming locally. The price of domestic rice should be subsidised so as to discourage buying foreign rice. The local farmers shall be provided with capital and suitable farming locations for rice, so as to encourage local rice production and discourage its importation. The current ban on land importation of rice has led to the scarcity of rice, unemployment and rise in rice price. It is discriminating to ban small-scale importation through the land if large sea importers are still allowed to import. Therefore, government should lift the ban on land rice importation in the short term before the effects of new measures and investment in local rice farming start to manifest.

Dr. Ahmed Adamu,

Petroleum Economist and Development Expert,

Pioneer Global Chairperson of Commonwealth  Youth Council,

University Lecturer (Economics), Umaru Musa Yar’adua University Katsina.