The gale of sack in banks, the real sector and high cost of living which has impoverished Nigerians amid cash crunch, reveals how President Muhammadu Buhari has lost grip of the nation’s economy
By Emmanuel Uffot
Joshua Saviour who had put in 12 years in one of the manufacturing industries was among the hundreds of workers laid off by his company last May in the gale of sack that has enveloped the manufacturing sector in the past one year. The full import of the effect of his current predicament dawned on him when his last child, a two year old not in tune with the reality of the economy started demanding for biscuit, bread, tea and sweet in the morning. A much older of his four children said “daddy I am hungry and there is no food in the house” and he had no money. So he had to give them N100 to buy garri to drink.
Etim Udoh, a business man no more has a television in his house. The reason is that with the lull in business and his inability to access money from bank he had to dispose some of his properties to enable him feed his family of six.
Fact is most workers in the private sector as well as states and local government councils are owed backlog of salaries some running into eight months.
There have also been reported cases of broken homes because of hardship as men are no longer able to fend for the family and pay bills. In other homes, the economy has affected the feeding pattern as some now go on a meals a day.
In Ikorodu a surburb of Lagos last week a couple could have lost their child because the father could not afford N250 to buy cough syrup. The magazine learnt that the nine months old boy had a bout of severe cough and fever when the mother demanded that the husband, a bricklayer provide money for the drugs. The man said he had no money because he had no contract in the last two months and that even the last one he had, he was not paid. It took the kindness of a neighbour who provided N500 for the drugs to save the child and also prevent the couples from going into fist-cuffs over the issue.
Some Nigerians are still alive to recount their tale of woes on the effect of the economic hardship on them and praying for the situation to get better, the same cannot be said about some who could not bear it and decided to take their lives.
For relatives of Olubunmi Uko, a business woman they are still searching for the Forever Living Products distributor who disappeared from her Fola Agoro home with her nine-year old son leaving a suicide note. The mother of three is said to have informed her elderly children and her parents in the suicide note that she was going to jump into a lagoon and end her life following to her inability to repay a bank loan. She was said to have borrowed N500,000 to offset a bank loan but instead plough the sum into her business with the hope to realise profit and pay the loan but business dwindled due to high exchange rate.
If Uko’s family are still searching for their daughter while praying that she change her mind and reunite with the family, the same cannot be said of the family of Olisa Nwakoby, a manager with Lekki branch of First City Monument Bank, who are still in mourning over the deceased who committed suicide a month ago.
The late Nwakoby’s bizarre act was allegedly instigated by the pressure mounted on him by the bank over a N350 million loan he facilitated for a customer who has not been able to pay or service it because of the downturn in the economy which has crippled many businesses.
The 44 year old banker was said to be having emotional challenges over the bad loan and resorted to taking his own life to avoid dragging his family’s name in the mud because of the loan issue if the bank commences action against him which may have led to sack and forfeiture of landed properties.
In Gombe, one Rariya Farouk a middle age man was said to have committed suicide last month because of hardship. Last week also a middle age man reportedly jumped into a lagoon in Lagos due to hardship.
These few cases paint a true picture of the worse state of the economy under President Muhammadu Buhari.
There is general hunger in the land as the cost of food stuff has gone very high beyond the reach of both the low and the middle income earners. And the President who has come under intense criticism over his inability to manage the porous economy which has gone from bad to worse, admitted recently for the first time that he knows that Nigerians are suffering.
The Daura- Katsina state born army General whom providence bestowed upon him the leadership of Nigeria as elected executive president of Nigeria after three futile attempts has now realised that the blame game is over and that the economy he inherited from his predecessor, Dr Goodluck Jonathan on May 29, 2015 has gone comatose under his leadership.
The reality that the nation’s economy hitherto regarded as the largest in Africa is in shambles and has nose-dived into recession under the All Progressive Congress; APC- led leadership was recently confirmed by the International Monetary Fund, IMF
The international financial institution which had earlier in April this year forecaste that the Nigeria economy will expand by 2.3 percent revealed the bad news that the nation’s economy will not only contract by 1.8 percent this year but has already gone into recession due to some factors it listed as dwindling oil revenues, low power generation and weakened investor confidence.
The IMF projection which is contained in its World Economic Outlook update also stated that Nigeria’s Gross Domestic Product, GDP suffered contraction by 0.36 percent in the first quarter of this year.
Before the IMF’s latest update on Nigeria economy sliding into recession, the Governor of Central Bank of Nigeria, CBN Godwin Emefiele had sounded the warning since September last year that the negative economic indices on ground in addition to slow economic growth in the first two quarters of 2015 were pointers to an imminent recession in 2016. He repeated again during the CBN Monetary Policy Meeting, MPC, last May that Nigeria’s economy was sliding into recession given the growing inflation.
While having audience on the state of the economy, the CBN governor reiterated the fact that the nation’s economy was suffering from stagflation which is a period of little or no growth in an economy with a relatively high unemployment rate, accompanied by rising prices, inflation and decline in GDP and warned that if the current trend continues, the federal government might be unable to pay salaries from October.
The CBN governor’s meeting with senators was preceded by that of the Minister of Finance, Kemi Adeosun who also admitted that signs of recession which include prolong decline in industrial production, employment, real income and wholesale-retail trade were visible. According to her the country was in tough times and in recession but express optimism that Nigeria will get out of it. “Technically, in economic terms, if you have two periods of negative growth, you are technically in a recession. But I don’t think we should spend too much times on liable, we are in a tough place, whether you call it recession or not, but the most important thing is that we are going to get out of it. Technically, we are in recession, but I don’t think we should dwell on definitions, I think we should really dwell on where we are going.”
However, the reality Nigerian economy has gone into full blown recession manifested last week Wednesday through the National Bureau for statistics, NBS report for second quarter.
According to the report inflation rose to 17.1 percent in July from the 16.5 percent it measured in June which analyst say is the worst in the last 11years. It also revealed a rise in unemployment rate to 13.3 percent from 12.1 percent in the first quarter and a contraction of Gross Domestic Product, GDP by 2.06 percent.
It said the non-oil sector contributed 91.74 percent to the nation’s GDP but contracted by 0.38 percent inthe second quarter white oil production capacity dropped to 1.69million barrels per day and capital importation slumped to record low of $647.1milllion.
A reputable economist Professor Akpan Ekpo, former Vice-Chancellor University of Uyo, now Director General, West African Institute for Financial and Economic Management, WAIFEM had earlier sounded the alarm at s symposium on the theme, ‘Managing naira’ that the Nigeria economy was going into recession. The University don pointed out that all the variables that constitute an economy in recession like, infrastructural collapse, growing insecurity, decline in productivity, no investment, high inflation rate, high unemployment ratio, increased poverty and general misery among the bulk of the population were conspicuously sticking out like a sour thump to confirm that the economy the government inherited over a year ago has gone into recession. He noted that the remedy was for the president to be honest with Nigerians to agree that things are bad.
For critics of Buhari’s style of leadership especially the Peoples Democratic Party, PDP that has in the past months raised concern over the inability of the All Progressive Congress, APC-led government to put in place any meaningful economic measure to revamp the ailing economy and the looming doom his inaction portends for Nigeria, the chicken has finally come home to roost. Specifically, for Olisa Metuh, former National Publicity Secretary of PDP and Governor Ayo Fayose of Ekiti State that have consistently pointed out that the lack of economic direction of President Buhari since inception of his administration was spelling doom for Nigeria, they now feel vindicated.
Investigations by the magazine have revealed the anger among Nigerians over high cost of living in the past 14 months which has not only led to hunger in the land but has made most Nigerians to become poorer with a precipitated cash crunch everywhere. From electricity which the government is already battling labour and consumers over tariff increase to petroleum which government increase from N87 per litre during Jonathan era to N145 per litre. Findings have shown that the high cost of petrol has caused many car owners to resort to taking public transport than using their cars to work. The effect of this has been felt by the different petrol stations as they witness drop in sales. A petrol attendant who refused to be named told the magazine that business has been dull in recent times. However findings show that cash crunch has been the major factor why most car owners now seldomly take their cars out not necessarily the cost of petrol though it is still a factor according to Joseph Asuquo who works in Victoria Island Lagos. He said the fuel he usually bought for N2000 now goes for close to N5000 and this could be exhausted out in two days due to traffic gridlock in Lagos, wondering where he would get such money to be buying fuel at N5000 every other day in this hard times when there are other pressing matters begging for attention.
Similarly, price of Kerosine and Gas which are basically for domestic use have gone up beyond the reach of most low income earners. Market survey shows that Kerosene now cost between N220 and N250 a litre in filling stations and as much as N300 a bottle by retailers in most part of the country. Before Buhari came into office, price of Kerosene hovered between N50 (official price) and N80 per litre. In the case of gas, the price for 12.5 kilogram cylinder has also gone up to N4000 from N2500. Instructively, the high cost of the two products has led to many households resorting to the use of charcoal and firewood for cooking. In extreme cases, most homes have gone without food because they could neither see firewood nor afford kerosene.
The price of food stuffs have also skyrocketed in the past months. Rice, beans, spaghetti, garri, meat, fruit, vegetables, bread, sugar and cereals which are stable foods have now increased by over 100 per cent. Rice now sells for N18000 a bag and N300 a Derica cup while a bowl of garri that was previously N250 and N300 is now N500 and N600. In 2014 upto May 2015 when President Buhari was inaugurated, rice sold for N9000 a bag and N120 a Derica cup while a paint of garri was N300.
Again in most homes now, meat is luxury as many people now go for hides and skin popularly known as Pomo. Even polythene bag which in the past five years maintained a stable price of N10 now sells for N20.
One Nnamdi Ukoh who works in a business centre said things are so hard that he now goes for beans in place of rice and in some cases adds only salt as the condiment because of limited cash to accommodate the essential cooking items like onions and magi cubes.
Findings have also revealed that the general paucity of funds has led to many Nigerians trading their properties for food stuffs like the case of Nnamdi.
Analysts blamed the liquidity crisis and the stall in sectors of governance on the inability of President Buhari to re-constitute the boards of government parastatals and agencies he dissolved almost a year ago. It could be recalled that the president had in one fell swoop dissolved the boards of over 38 federal parastatals and agencies most of which are drivers of the economy and governance. Among these agencies are cash cows like the Nigeria National Petroleum Corporation, Nigeria Port Authority, Federal Inland Revenue Service, Nigeria Custom Service, Bureau of Public Enterprises, Nigeria Shippers Council, National Maritime Authority, Nigerian Airspace Management Agency, Federal Airport Authority of Nigeria, Securities and Exchange Commission and National Broadcasting Commission among others. President Buhari recently bowed to pressure by constituting the boards.
The instability of the naira which has witnessed a free fall in the last seven months and the inability of government to come up with a suitable monetary policy to arrest the ugly trend is another issue critics have faulted the administration’s economic policies. From an exchange rate of N160 to N197 to a dollar at the interbank market and N210 to N230 in the parallel market (Black market) between December 2014 and May 2015 when former President Jonathan left office, the nation’s currency has nose-dived by over 150 percent both in the interbank and parallel markets.
As at last week the Naira exchange for N315 and N418 to a dollar in the official and parallel (Black market) market respectively inspite of CBN pegging the naira at N290 to a dollar to stem the tide of free fall.
The government had few months ago introduced a flexible exchange rate regime for foreign exchange market to check the huge parity in exchange between the interbank and parallel market. The FOREX policy abolished the N197 official exchange rate, but the growing rate is an indicator that the policy has still not arrest the free fall of the naira against the Greenback as the Dollar is known.
Indeed it is worthy of note that Emefiele led CBN has been coming up with several monetary policies to stem the tide of free fall of Naira against foreign currency but they seem not to have worked.
In July the apex bank retained the Cash Reserve Ratio, CRR at 22.5 per cent as it was before and increased Monetary Policy Rate, MPR to 30 percent.
MPR is the anchor rate at which the CBN in performing its role as the lender of last resort lends to Deposit Money Banks to boost the level of liquidity in the banking system.
The magazine gathered that when CBN wants to increase the level of liquidity in the economy, it reduces the MPR but increases it whenever it desires to tighten money supply.
Apart from tinkering with the interest rates through MPR, one of the significant monetary policies the apex bank had also tinkered with was banning of dollar deposits by bank customers. It also stopped the sale of dollars to Bureau the Change and banned the sale of foreign exchange on 41 items on import list. But all these have brought fruitless result so far.
When Buhari took office as Nigeria’s president a year ago Nigerians had high expectations and drew up a wish list which included stable power supply, food security, employment opportunities/job creations, Naira stability, tackling insecurity and revamping the economy.
However, the scorecard of Buhari in the eyes of many Nigerians after one year has not been palatable as opinion are in unison that his government has lost grip and appear to be helpless in addressing the economic problem the nation is now swimming in. The general opinion is that it has been a ‘wasted one year’.
One of the issues that painted the government in black book from inception was the controversy that trailed the 2016 budget which was the first to be presented by President Buhari. The delay in passing the budget due to needless squabble between the executive and the legislature and the delay in constituting the cabinet which took over five months are seen as some of the factor that affected the ability of the President to effectively steer the ship of governance. Infact to those who hold this view, the president started on a wrong footing primarily because of these two factors.
Concerned Nigerians and analysts have also blamed the worsening economic situation of Nigeria under President Buhari on the lack of a credible economic team to drive the economy. Unlike what was obtained in the past where former Presidents Olusegun Obasanjo, late Umaru Yar’Adua and Goodluck Jonathan put on board credible economic teams made up of technocrats and big players in the real sector, what pass as an economic team of President Buhari is made up of Vice-President Yemi Osibanjo who is head of the team, and Minister of Finance, Adeosun, Budget and Planning Udo Udoma, Solid Minerals Kayode Fayemi, Okechukwu Enelamah, Trade and Investment and Audu Ogbeh of Agriculture.
Beyond this, Nigerians also blamed the rage of divestment that has grown in the past one year of Buhari administration on the lack of economic policy of government, weakened naira exchange rate and the unguarded utterances of the president on his numerous travels outside the country where he always highlight the fact that Nigerians are very corrupt.
The low Foreign Direct Investment, FDI which increased in the past one year is seen as the lowest since the 2007 to 2008 global financial crisis. It is this ugly trend that led to JPMorgan Chase & Co. removing Nigeria from its bond index September last year.
The hopelessness of the government in addressing the current economic challenges facing the country prompted Nobel Laureate Professor Wole Soyinka to advocate for the convergence of an economic summit where experts and technocrats would be assembled to proffer solutions to the economic challenges. Though government took the initiative by convening a two- day economic retreat in March. The objective of the retreat which centered on ways of stimulating the economy ended up as another of those talk shows.
A cross section of Nigerians have described the 14 months of President Buhari’s government as characterised by many industries and organisations closing shop, some retrenching staff, many state governments, government agencies and private enterprises owing staff salaries, epileptic power supply or slashing salaries, high cost of living, hike in fuel price through removal of fuel subsidy, inflation galloping to double digits, unprecedented divestment of investment in Nigeria by investors and free fall of Naira rate among others.
His tenure so far has witnessed a high gale of sack in the banking sector, the oil sector and manufacturing sector due to the porous economy and unfriendly government policies.
Perhaps what could pass as some policies taken by government in the past one year to stimulate the economy include the Treasury Single Account, TSA that came into effect on September 2015. Under the policy all funds of government ministries, agencies and departments domiciled in commercial banks were withdrawn into a designated account which is said have yield over four trillion naira to governor.
Another policy the government took in the last one year as regard the economy is the blanket ban CBN placed on 41 items from being imported by investors. The policy has visited untold operational difficulties on Small and Medium Scale enterprises and manufacturers leading to most of them either closing shop or embarking on massive retrenchment because of lack of raw materials for their production.
One sector that has been seriously hit by the current economic crisis amid some unfriendly policies of the CBN and federal government is the banking sector. In the past one year the rate of retrenchment of staff by banks has been unprecedented.
The liquidity crisis facing the banks which deepened during the current government was ignited primarily by the introduction of TSA which caused most banks to lose many major clients. Under the policy which government said is aimed at blocking leakages, all funds of federal government ministries, departments and agencies MDAs domiciled in commercial banks were transferred to a single dedicated account in the apex bank.
Because of the policy, most of the banks that were exposed to MDAs funds for survival are now starved of funds. The implementation of the policy deprived the banks over N1.3 trillion public sector funds to TSA. Specifically Nigerian National Petroleum Corporation, NNPC funds in banks put at N400 billion was transferred to the CBN account. To worsened matters some banks were fined billions of Naira for withholding NNPC funds which also ate into their liquidity profile.
In dripped situation CBN, recently barred nine banks from the foreign exchange market.
Before the implementation of TSA last year, the Federal Government had earlier instructed MDAs to maintain only one account in a bank as against the previous practice of having multiple accounts in several banks. This policy signaled the liquidity crisis in the financial sector which magnified with the full implementation of the policy which cost them most of their viable corporate customers.
This policy has put the banks into serious cash crunch having lost accounts of government parastatals and many have either sack hundreds of staff or cut down salaries and allowances.
Few months ago, Ecobank Nigeria Plc laid off 50 management staff in what it termed a restructuring agenda but which findings showed was not unconnected with the harsh business environment confronting the sector. The last time the bank carried out such a major retrenchment of workers was in 2010 when it acquired Finbank.
Before then, FCMB owned by the revered banker, Michael Subomi had in February this year laid off hundreds of staff and also closed some branches and merged the Business Banking department with Retail department.
Last year Zenith Bank also laid off hundreds of workers as part of their cost cutting measures. Before now prominent banks like Union Bank, Access Bank, Skye Bank, Diamond Bank, UBA and the three nationalised banks namely Mainstreet, Keystone and Enterprise banks have prosecuted their own share of downsising of staff.
The financial fortunes of Unity Bank has also come under radar going by the decision of the bank to relocate its headquarters from Abuja to Lagos in a strategic move observers interpret as geared towards weathering the liquidity problems facing them like others.
Before now, a renowned economist, Bismarck Rewane, Managing Director of Financial Directives Company Limited, FDC had predicted that banks would commence massive retrenchment in the second quarter of this year because of the worsening business environment instigated by the dwindling oil price and depreciating Naira value.
The banks liquidity has also been strained by CBN directive mandating them banks to stop charging commission on turn over, COT which is said to be one of the revenue sources of banks.
Another factor that is strangulating the banks is the huge debts owed by the oil companies whose fortunes have depleted in recent times due to the dwindling global oil price.
Even the policy of N50 stamp duty charge on every N1000 deposit initiated by government as an economic policy to augment revenue from non-oil sources has discouraged deposit inflow in banks.
Even though this policy emanated from government, most customers have taken the battle to the banks accusing them of illegal charges. The magazine gathered that the stamp duty charge and other hidden bank charges have made some bank customers to contemplate withdrawing their money from some banks.
The falling oil price has negatively affected bank’s earnings because of their huge exposure to the energy sector which is groaning under the effect of continuous downward movement in crude price is another factor affecting the banks because the companies are heavily indebted to the banks and have not been able to service the loans because of their poor financial fortunes instigated by falling oil price
Again, most state governments that were key clients of banks are now broke due to lean revenue and her currently indebted to most banks. Some have even had to close some of their accounts in banks which have left some losing out.
The decline in bank deposits in recent times as well as the policy that banned dollar deposits in banks which was later reviewed has also been identified as one of the many problems confronting the banks in recent years
Another government action that has compounded the many problems of banks is the Economic and Financial Crimes Commission, EFCC consistent probing of corporate and individual customers’ accounts and transactions in banks. This ugly trend has scared many genuine customers from doing business with banks to avoid the prying eyes of the ant-graft agency
The liquidity crisis facing the banks has made them unable to advance loans to people
The problem in the sector has got a boomerang effect on the stocks of banks in the capital market as investigation shows that most investors are shunning bank shares which have led to banks recording huge losses in the market.
Ambrose Omorodion, a capital market analyst, paints the picture of the situation attributing the heavy loss recorded by banks in the capital market to the dumping of the banks’ shares by investors.
The economic recession affecting Nigeria has also taken a heavy toll on the real sector of the nation’s economy as they grapple with cost cutting measures that have seen some sacking staff in order to stay afloat while most have close shop.
One of the companies already feeling the pangs of the worsening economic problem in the country which has fuelled high operational cost is a renowned food and beverage giant, Flour Mills Nigeria Plc.
The challenges the company is facing in recent times manifested in its financial results ended December 31, 2015 which showed that high costs of operations impacted negatively on the bottom line of the company. In a bid to reduce costs, the company last year merged five of its wholly owned subsidiaries-Golden Noodles Nigeria Limited, Golden Transport Company Limited, FMN Cement Industries (Nigeria) Limited, New Horizon Flour Mills Limited and Quilvest Properties Limited. Investigation by this magazine reveals that the fall out of that merger was the retrenchment of some workers.
The multinational companies are equally affected by the economic crunch now facing Nigerians. Just recently, Unilever Nigeria Plc and Guinness Nigeria Plc voiced their predicament, complaining that the prevalent shortage of dollar caused by the crash in oil price is forcing local suppliers to buy foreign currency at the parallel market, which they lamented has further worsened their operational costs. Yaw Nsarkoh, Managing Director of Unilever Nigeria Plc who reiterated the adverse effect of dollar shortage on their business explained that majority of Unilever’s production is done locally while some other materials that are not available in the country has to be imported through foreign exchange.
Beyond the dwindling global oil price, slide in Naira value against foreign exchange, multiple taxes and epileptic power output which have been the bane of manufacturing companies in recent years, but one government policy that visited untold hardship on the Organised Private Sector, OPS which constitute the manufacturing industries and Small and Medium Scale Enterprises was the CBN’s blanket ban of 41 items from the import list.
It could be recalled that the CBN had in June 2015 exclude the importation of 41 products from accessing foreign exchange at the official FOREX market. CBN had argued that the policy was part of the measures to preserve the country’s depleting reserves and protect local industries from influx of imported products some of which are readily available in the country.
They affected items on the CBN import restriction list include rice, cement, oil extract products from palm kernel, palm oil, vegetable oil, processed meat products, toothpicks, glassware, kitchen utensils, tableware, ceramic tiles textiles. Plastics and rubber products, sauced tinned fish like sardine, roofing sheets, poultry products, steel products and tomatoes paste.
Investigation has further revealed that faced with the imminent exhaustion of their raw materials amid their inability to access more for their local production, local manufacturers are now rationing what they have to stay afloat as they cannot access foreign exchange for some of the raw materials and products affected by the policy.
Findings also revealed that the pharmaceutical sector is seriously hit by the economic recession and they have warned that if the ugly trend continues unabated, the country is bound to witness acute drug shortage and scarcity which could result in morbidity and mortality of Nigerians. Their worry in particular is the high exchange rate and scarcity of foreign exchange. National President Pharmaceutical Society of Nigeria, PSN Ahmed Yakassai lamented that it was impossible to transact pharmaceutical business at the prevailing rate of N400 to a dollar.
Apart from the local manufacturers, the oil sector is equally feeling the pinch of the the economic recession. Beyond the foreign exchange factor that has been the headache of the manufacturers in recent times; the immediate problem now confronting the oil sector revolves around the dwindling global oil price and low value of Naira against the dollar. Findings indicate that major oil producers are already contemplating laying off hundreds of workers apart from shutting down some operational platforms. The financial crunch affecting the oil sector has snow balled on their credit exposure to the banks as most of them indebted to the banks have not been able to pay and have instead pleaded for loan restructuring with affected banks.
The spate of bombings of oil facilities in the Niger Delta by the Niger Delta Avengers has also worsened the revenue profile of the country. The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, stated recently that Nigeria’s crude oil export volume has fallen below 1.3 million barrels per day. He stressed that with the 2.2 million barrels per day projection in the 2016 budget which has now dropped to 1.692 million. Kachukwu confirmed that the dwindling export level in Nigeria is already affecting the 60 percent to 40 percent joint venture agreement of the federal government with multinational oil companies.
Nigeria is reported to have recorded a loss of N60 billion in oil revenue to the destruction of the Forcados Oil Terminal alone by Niger Delta militants according to Nigerian National Petroleum Corporation, NNPC report.
The 48-inch FOT export line was vandalised in February 2016 and crippled Nigerian Petroleum Development Company (NPDC) and all Joint Venture (JV) Partners’ ability to export crude oil from the terminal.
The drop in the oil revenue which experts had predicted early this year that the economy is sliding into recession in second quarter of the year has already manifested as revenue shared by the Federal, state and local government which have been dwindling over the months.
Royal Dutch Shell who had severally declared force majeure on some of its pipelines attacked by militants is already tinkering with the idea of exiting 10 countries with Nigeria falling in line.
The NNPC said the shut-in of the pipeline had led to the declaration of force majeure by Shell Petroleum Development Company of Nigeria (SPDC) occasioned by production shut-in of about 380,000 barrels of oil per day.
The dwindling oil revenue has muscled Nigeria to seek help from the World Bank to stem the tide of a complete collapse of the economy amid the renewed hostilities of the Niger Delta militants and continuous slide in global oil price.
The World Bank and International Monetary Fund, IMF have reportedly recommended that Nigeria devalue her currency as condition for their yielding to the loan demand.
Kemi Adeosun, Minister of Finance disclosed that Nigeria is planning to borrow as much as $5 billion to help fund a budget deficit due to the slump in oil revenues of which $4 billion might come from international institutions and the rest from Eurobonds.
When President Buhari was campaigning, he promised that he would ensure security by ending insecurity in his first three months of leadership, but 14 months in office apart from the Boko Haram insurgency which the government is still battling, the resurgence of militancy in the Niger Delta in the past five months is causing headache to government and the international community.
However, critics still put the blame of the resurge of militancy on Buhari’s style of leadership. For instance, instead of heeding the advice of dialogue with the militants he vowed to crush them which is said to have embolden the militants.
The Nigerian real estate market has been hampered by the general lull in the nation’s economy with most operators now struggling to remain in business.
Omo Aisagbonhi, Chairman and Chief Executive Officer of OMAIS Investment Group, developers and owners of Trinity Mall said the harsh economic situation has become so critical that the concern of most Nigerians today is how to get food to eat and be well but not how to buy property either for investment or to be occupied by them.
According to Aisagbonhi, lack of liquidity and harsh economy climate experienced in the country have made many property investors to be struggling for survival now, while would-be house owners, property retailers, renters, and others are not considering investing in properties.
“Nigerians have drastically reduced their spending and investments in real estate. The disposition of the government to some of these things has not been encouraging to property investors, especially with some of the policies which have done more harm than good for the real estate sector”. Investigation by the magazine have shown that vacant apartments are now lying begging for would be tenants that are not forth coming in major cities across Nigeria especially Lagos. A landlord in Alagbado area of Lagos, confided in source that since last year November, when two flats in his four flats one storey building apartment were vacant, nobody has been able to request for them unlike before when a vacant apartment rarely stays for a month without people rushing for it. He attributes it to the harsh economic crunch in the country. Elsewhere in a street named Egbado, in Ogun state, The Source could count up to seven buildings with ‘TO LET” inscription conspicuously hung on their respective gates. The same scenario is playing out across Lagos. Even sitting tenants are now having squabbles with their landlords or landladies because of their inability to pay rent as at when due because of the current economic situation which has made must employers unable to pay salaries in time even as some companies have been embarking on series of retrenchment of workers.Gregory Isaac who work in a manufacturing firm told the magazine that his rent expired last May and he had to appeal to the landlord to renew the subsisting rate of N150,000 a year in installments because salaries in his company is no more regular. Even at that he says he is grateful to God because he is still in the employ of the company unlike many other workers that have been laid off in the past six months due to the bad economy.
The heat of the gloomy economy has also manifested in the aviation sector in Nigeria, apart from local operators that have been grappling with high operational cost instigated by scarcity of JET A-1( aviation fuel) and dwindling naira value, 14 foreign airlines are reported to have exited Nigeria. The affected airlines that have withdrawn their services from Nigeria blamed it on low patronage and the bad economy. The prevalent high cost of aviation fuel in Nigeria which goes for N200 to N250 per litre as against N110 per litre in Ghana
and low passenger tonnage has caused many foreign airlines to relocate to Ghana where they can get the product at lower prices. The magazine gathered that this among others has made Ghana the bride of many foreign airlines who are planning to leave Nigeria in droves to Ghana to operate.
The magazine gathered that before their intention to relocate, some of the foreign airlines were taking their passengers to Ghana to fuel because of the high cost in Nigeria and scarcity.
Chairman, Airlines Operators of Nigeria, AON Captain Nogie Meggisson, said that more foreign airlines were likely to follow suit because of the high cost of aviation fuel which was affecting air travels in the country.
Meggisson warned that Nigerian passengers may be forced to travel to Ghana to fly directly to their various international destinations if most of the foreign airlines finally relocate to Ghana. According to him, domestic airlines would also lose connecting passengers from other destinations to Lagos and Abuja where they board international flights.
Bankole Bernard president National Association of Nigeria Travel Agencies, NANTA bemoans the current development as it affects airlines. He blamed the relocation of some foreign airlines on the inconsistency policy of government especially the new foreign exchange policy and economic recession which has impacted negatively on both the travel agencies and airlines.
He corroborated Meggisson fears that more airlines might quit flying the Nigerian routes. He also revealed that some travel agencies are already considering relocating to Ghana is gradually overtaking Nigeria as the hub of aviation activities in West Africa.
These tales of woes recounted by airline operators in the country particularly in the area of low patronage is also felt in the road transport sector. Findings at the major commercial bus operator’s stations in Lagos indicated a general drop in passenger traffic unlike the usual hustle and bustle that always characterised the area.
The Information and Communication Technology, ICT sector has not escaped the fangs of the harsh Nigeria economy presently. For instance at SLOT, a popular phone dealer shop in Lagos, products on their shelf has grossly depleted with a drop in consumer traffic as was previously the case. Juliet Anammah, CEO said people now priorities their wants because there is no disposable income like before. She said that most customers now go for cheap phones while a manager with Revive Technologies, another leading mobile phone outlet said people are no longer buying phones like before. Most of the players blamed the lull in their business on prevailing the high exchange rate.
Penultimate week, Sun International, a renowned South African Hotel and gaming group announced its intention to pull out of Nigeria citing weak economic growth and clashes with regulators and shareholders.
Sun International bought 49 percent stake in Tourist Company of Nigeria, TCN which owns and operate the 5-Star Federal Palace Hotel in Lagos 10 years ago.
The company reported a 58 percent drop in its operational earnings in the 12 months ending in June.
Last January, the company came under the search light of the EFCC. The anti-graft commission had launched a probe into its initial investment in TCN. Graeme Stephens, CEO of the hospitality firm who said the exit plan would be gradual also attributed their setbacks in the country to the ongoing shareholder dispute with the Ibru family whom he accused of frustrating all their attempts to develop and improve Federal Palace Hotel..
Other South African companies that have left Nigeria in recent times because of the poor economy and unfriendly business environment include, retailers Woolworths Holdings Limited and Truworths International Limited
The negative economic fundamentals overshadowing Nigeria’s business environment is now telling on the financial results of corporate entities like oil and gas, banking and conglomerates in the stock market which has shown in their third quarter earnings of this year. According to the results released recently, in the oil and gas sector, Oando Plc led the pack in corporate downturn with a monumental loss of N35.1 billion loss in its interim 2015 results. Other big players followed same trend with Mobil Oil Nigeria Plc announcing a third quarter result that showed a slide in revenue from N60.718 billion in the corresponding year to N43.326 billion in 2015 while its profit declined by 33.5 percent from N7.895 billion in 2014 to N5.248 billion.
All the companies blamed negative economic environment and global oil price crash for their declining performance. They also cited foreign exchange related losses, products subsidies to downstream operators as leading causes of their bad fortune.
The banking industry which is crisis ridden due to unfriendly policies from the government also presented a similar picture of sharp decline in their financials.
The consumer goods and conglomerate segment also followed the decline trend with key players posting significant decline in profit.
Cadbury Nigeria Plc and UAC Nigeria Plc led the pack in both sectors with Cadbury recording a massive 98.27 per cent decline in profit while UAC suffered equally heavy drop of 58 per cent in profitability.
Curiously, criticism of the government ineffective economic policy has also come from previous supporters of the government. Junaid Mohammed, a social critic and a known critic of previous government who spoke in glowing terms of President Buhari when he assumed leadership is currently angry with the president especially the way he has lose grip of the economy. Mohammed recently described President Buhari is an economic illiterate. Dr Oby Ezekwesili, former Education Minister and convener of Bring Back Our Girls, BBOG did not also have kind words for the president in his handling of the economy. She was quoted saying that President Buhari is running an achaic and opaque economy policy. For her what is on ground as an economic policy of the administration is a command and control economic system. Professor Pat Utomi, a renowned Economist and scholar says the president has a medieval mindset and is living 30 years behind. Another notable Nigerians who has criticised the president for destroying the nation’s economy both through bad policies and lack of a clear remedial economic policy is constitutional lawyer and leader of Patriots, a political pressure group, Professor Ben Nwabueze. The Anambra state born professor of law has lampooned those arguing that the administration is too early for Nigerians to expect much from. He argues that even if the president should be given 20 more years, the current Nigerian problem will still be beyond him given his pedigree and disposition to governance.
The Emir of Kano, Alhaji Lamido Sanusi is also worried over the state of the economy under the leadership of President Buhari. Sanusi has warned the President to retrace his steps if he does not want to fail. According to the monarch some policies of the government were bad for the economy. He said even when the government tried to get it right, it failed to follow up which contributed to the ongoing economic downturn. He said the current administration ignored earlier warnings of looming recession which is what has brought Nigeria to the present state.
Former Military Head of State –General Yakubu Gowon is equally disturbed about the current state of the nation. He has also advised President Buhari to urgently address the economic and other problems ravaging Nigeria. General Gowon said the federal government should do everything possible to find lasting solutions to the numerous problems confronting Nigeria in order to boost the citizen’s confidence.
Ekpo said the President should put in place an economic blue print that supports a developmental-state approach to changing the structure of the economy with focus on creation of jobs, qualitative human capital and provision of constant power supply to ensure that at least 85 percent Nigerians enjoy the resources.
The Sultan of Sokoto, Alhaji Muhammadu Sa’ad Abubakarhas warned government and Nigerians to stop the blame game and face the reality on the bad state of the nation’s economy. He said unless political leaders abandon their political affiliations and come together to fix the economy, Nigerians will continue to groan.
Chukwuma Soludo, former CBN governor said for Nigeria to come out of its current challenge, there should be a coalition of economic policies that can deal with socio-economic issues. He recommended the restructuring of the economy from consumer driven to production based and consistency in micro economic policies.
Alhaji Mohammed Tukur, former Assistant Secretary of AON said truly Nigerians are suffering and government should do something to cushion the effect.
Former Managing Director, Neimeth Plc, Mazi Sam Ohuabunwa and Chairman, African Centre for Business Development, Strategy and Innovation urged the government to create an economic team that initiate policies and decisions that would salvage the nation’s economy.
Ohuabunwa wants the government to initiate policy of economic diversification to boost said the nation’s economy.
Defending President Buhari, Garba Shehu, Senior Special Assistant to the President on Media and Publicity said critics of the president are unfair given the enormous rot he inherited which he is doing his best to cleanse. He said the government has put measures in place to not only revamp the economy but cushion the effect of the current recession on Nigerians especially the disadvantaged groups like the poor, jobless and widows among others. He said Nigerians should not lose hope but give the president time because he is a victim of high expectation and has brought positive intention, commitment, honesty and personal integrity into governance.
Amid the growing concern among Nigerians over the state of the economy and non circulation of cash which has impoverish the citizenry, the President wants to send a bill to the National Assembly which will give him emergency powers to tackle the economy without a recourse for the legislatures consent. Although the proposed bill tagged ‘ Emergency Economy Stabilisation Bill 2016’ which Laolu Akande, Spokesman of the Vice-President said is still in the embryo stage has received the blessing of the Lagos Chamber of Commerce and Industry, MAN and NLC but the legislatures are kicking against it. They argued that the bill will not only erode the powers of the National Assembly but may turn the president to a dictator.
President Buhari and the Finance Minister have insisted that government is working hard to stabilise the economy and make it return to investors haven in 2017.
Olusegun Adeniyi, former Special Adviser on media and publicity to the late president Yar’Adua captured the minds of many Nigerians that are unhappy with the current leadership of the country and how the economy has been run aground in his column entitled ‘ Buhari and the troubled economy’. He wants President Buhari to sit up, take the bull by the horns by putting machinery in place to manage the economy instead of continuously blaming his predecessor for posterity sake. “Sadly after a year spent blaming others, we are yet to see the economic direction of the Buhari administration or the policies and ideas that can justify the endless aspersions on the past. Yet, whether his handlers realise it or not, this presidency will be judged not by how bad a leader Dr. Goodluck Jonathan was but by much of a better leader he (Buhari) ends to be”.
Indeed with the economy now in recession with fears of it going into depression without any definite action by the government to ameliorate the problems beyond the pre-election promises of palliatives like 500,000 jobs, one million skill acquisition, N5000 unemployment stipends which are yet to be implemented and the reported injection of N400 billion into projects according to the finance minister, there is a state of hopelessness and helplessness among Nigerians and the league of local and multinational manufacturers and banks as they all look forward to what the last quarter will bring.
Comparitive Analysis of Economic Indices and prices Pre-May 29, 2015 and after till date.
Indices/Prices Before May 29, 2015 Now
Inflation 7.7 % 17.1 %
Unemployment 7.5 % 13.3 %
Foreign Direct Investment $1381.02m $ 887.32m
GDP 5.6% growth 2014 0.36 % contraction
Petrol N87 a litre N143-N145 a litre
Kerosine N50- N80 a litre N200-N250 a litre
Rice N8000-N9000 a bag N16,000-N20,000 bag
Garri N300 a rubber paint N500-N600 a rubber
Naira Exchange N190/ N220 to a dollar N315/N414 to a dollar
Power Generation 4000 megawatts Below 2000 MW
Economy place in Africa Nigeria the largest South Africa now largest
Aviation hub in West Africa Nigeria Ghana overtaking Nigeria
Oil production (Africa) Nigeria highest Angola now highest prod