I am not an economist, but I have been in business world long enough to have a fair idea of how some of these things work.
In the last 23years the annual inflation rate has been in double digits except for a couple of years that it was in single digit but still significant. The simple implication of this is that the country’s currency (Naira) loses value at that same rate.
Some thirty something years ago, we had a bubbling and vibrant industrial sector in Nigeria. From Phillips in Ojota to Berec, Aswani, Michelin, Dunlop, Exide batteries, UNTL, KTL etc scattered all over the country. These were companies that employed hundreds of thousands of Nigerians.
But due to infrastructural breakdown and unfriendly financial policies over the years, these companies either shut down or relocated to other investment friendly climes.
Over the years subsequent governments came up with all kinds of financial policies to stop the naira free fall, including a joking government decreeing the value the naira should have, and of course the fantastically corrupt and expensive dual exchange rate.
All the strategies were at best cosmetics in nature and not sustainable because whenever push comes to shove naira will always find its abysmal level in the committee of currencies.
If the government insists that subsidy in the oil sector is a thing of the past, and oil is priced internationally so we should expect the price of finished products to flow with the value of our local currency. If naira gets devalued automatically local pump prices of petroleum products go up and if by any chance naira appreciates when importers buy from foreign refineries the pump price comes down.
Even when local refineries become operational, crude oil will still be given to them at international price and the only benefit will be the removal of the cost of shipping from foreign refineries which might be maybe N10per liter and this is not too significant in the final product price.
The way out of this situation from my Economics 101 perspective is to see how the currency (naira) can be strengthened organically and sustainably.
How do we do this
1. ENERGY: Restoration of the energy sector. If we double our energy generation capacity from the meager 3000 MW to 6000 MW (which is still meager anyway), and every business gets an average of 16hours per day. This will boost small and medium scale industries and major industries will heave sigh of relief. I know organizations that have diesel accounting for 40% of their OPEX. It’s practically impossible for them to expand, every effort is geared towards survival.
2. INDUSTRIALIZE: With one above in place, coupled with the investment friendly initiative that the new government put in place we will have a platform for industrialization to take off. Let the Phillips, Michelins, Dunlops, Berecs, Exides, Textiles of this world come back to life and this will directly impact unemployment status of the country.
3. REVERSE OUR CONSUMPTION/PRODUCTION RATIO: When we start producing the products we normally import, the pressure on our foreign reserve is reduced.
With the 3 issues above properly addressed, the local currency will start getting some genuine lease of life that is sustainable. The process and the result is definitely not going to be immediate, it will take nothing less than 4 years.
If the above issue are not addressed, and our currency continues to face devaluation the prices of petroleum products will continue to go up. Or the government reverts to subsidy which though will give the people some slight and immediate relief but on the long run is more injurious to the country and the people in general
While focusing on the above, there is the immediate need to address food insecurity. In our present situation this can not be separated from social insecurity.
4. SECURITY: In order to address agriculture, this has to be addressed. If what I am reading and hearing is anything to go bye I think Maj. Gen Lagbaja is doing a good job, unless it’s another initial gra gra. Farmers all over the country should be able to go back to farm without any fear of Fulani herdsmen harassing them. There is acute shortage of grains in the country right now that is pushing the poultry industry towards total collapse.
5. AGRICULTURE: With the available arable land in Nigeria, coupled with different weather conditions capable of supporting all kinds of food crops from south west to north east, from south east to north west we have no business importing food items.
There used to be vibrant farm settlements all over the country years back, this settlements actively engaged young men and women, got them into and support them in crop and animal production. I remember visiting Ilora Farm settlement as a secondary school student when one of my uncles was managing the the community. The impression I got in that visit never left me, and it fashioned my interest in agriculture till today.
With good support Maize takes two and a half months to 3 months to mature depending on variety, cucumber takes 45 days from planting to harvesting. These are low hanging fruits that a well planned agricultural program can leverage on to start this process of transformation.
This is just an economic perspective from a non-economist