While all renowned Economist and Financial Analysts in Nigeria and beyond are in agreement about the cause of the astronomical rise in cost of living,they tend to have varied views on what the government needs to do or should have done to make economic disruptions more bearable on the citizens.
The removal of fuel subsidy and discontinuation of payment for subsidy on PMS was arguably a very good step taken by the Tinubu administration and it was strategic that it was done on the first day after the President took over the mantle of leadership.We are however living with the unintended consequences of the removal of the fuel subsidy with astronomical increase in the cosy of transportation with it ripple effect on inflation and the increase in the cost of good and services
The second major policy decision undertaken by the Tinubu administration that also contributed to the inflation Nigeria is experiencing and the acute cost of living crisis among most households in Nigeria is the harmonisation of the Foreign exchange regime by the Central Bank of Nigeria(CBN)).The policy is undoubtedly also a good policy on its face value especially when we juxtapose the policy on the basic economic tenet that henceforth the principle of willing buyers and willing sellers will determine the value of Foreign currencies to the Naira.This is what happens when market forces are at play in classical economic theory.
However,Since the beginning of the implementation of the policy,the Naira has continued to depreciate against Foreign currencies and considering that we are an import dependent economy,this has exercabated the cost of living crisis by eroding the income of several families. This has plunged several families to fall within the poverty bracket and make them to live in misery.
Economists ,financial experts and Analysts have criticised the commencement and implementation of the FOREX harmonisation policy of the Tinubu administration for a number of reasons. First is the commencement of the implementation with the Central Bank not having a substantive Governor that is legitimately appointed in accordance with the provision of the CBN Act 2007.They are of the opinion that the President Tinubu administration should have hold on and started the implementation of the unified FOREX regime after appointing a substantive CBN Governor who should be charged with coordinating Nigeria’s monetary policy with a clear Presidential mandate to oversee the diligent and effective implementation of the FOREX harmonisation policy.
The second reason advanced by those criticising the implementation is the assumption by the government that market forces are “perfect” and if left alone it would result in stability of the FOREX regime.This is a wrong assumptions especially in the economy of developing countries where extraneous factors including saboteurs and some unpatriotic elements come in to distort the “market forces” mechanisms.Infact,it is well known fact that even in developed countries,markets mechanism could fail indicating that market forces are not always perfect and market failure could happen with the need for government to intervene.
It is therefore unwise for government to fold it arms and allow for the free fall of the Naira because the consequences on inflation,livelihood and cost of living crisis are enormous to the citizenry. The solution some Economist proffered is that the government can save and protect the citizens from the inflationary pressures resulting from the deteriorating value of the Naira by using a modest exchange regime in all it receipt of FOREX earnings when it transact business or recieve revenues from individuals and corporate organisations. This will go a long way in curtailing the galloping inflation that has resulted in a very cost of living,food insecurity and misery amongst Nigerians.
The third reason advanced by Analysts that resulted in the the rapid deterioration of the value of the Naira as a consequences of the FOREX unification policy is the absence of the appointment of Ministers of finance and the economy who should have provided direction for the management of the government fiscal policy. Effective Synergy in the management of a government monetary and fiscal policy is critical in engendering price stability and curtailing inflation in an economy..it is also essential for a more stable FOREX regime.
It is the hope of most Nigerians that as President Tinubu presents his Ministrial list to the National assembly for screening and confirmation in the coming days ,competent persons with the requisite economic and financial management expertise and cognate experience would be appointed to serve as ministers of Finance,economy and National Planning. This will enable the President to finally constitute an expanded economic team and a think tank that will hit the ground running to take Nigeria out of its current economic doldrum.With the enormous human and Natural resources that abound in Nigeria and with purposeful and efficient leadership,Nigerians ought to live a happy,prosperous and fulfilling lives.
Dr Mijinyawa Bashir is a Consultant Physician and a Public Policy Analyst.
He writes from Abuja Nigeria…
He can be reached on [email protected]
