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Nigerian economy and its many problems – Charles Soludo

Former CBN Governor, Professor Charles Chukwuma Soludo, has disclosed that the major challenge facing Nigeria is that it’s economy has a lot of problems.

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The Former Central Bank of Nigeria Governor, Professor Charles Chukwuma Soludo, has disclosed that the fundamental challenge currently facing Nigeria is that the nation’s economy is stuck with myriad of problems.

Professor Soludo, who is also a member of the recently constituted National Economic Advisory Council (EAC), disclosed this on Tuesday at the biennial economic summit organised by the Covenant Christian Centre, Lagos to commemorate Nigeria’s 59th Independence anniversary celebrations.

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Faulty Institutions: While delivering his speech on “economic and institutional restructuring for the next Nigeria”, Soludo first stated that the Nigerian legal and institutional foundation is weak, and it lacks the capacity to contain the current economic realities. According to him, it will be difficult to have a competitive and prosperous post-oil economy with the same legal and institutional foundation designed for consumption of oil rent. Soludo stated “You can’t build a 100 storey-building upon a foundation of an old bungalow.”

[READ MORE: Bismarck Rewane queries CBN and FG, says Nigerian economy in critical times]

  • Addressing the post oil Nigerian economy, the former CBN Governor disclosed that the Nigerian economy needs a national rather than federal response. Soludo stated that the link between law, constitution, institutions, judiciary and economic transformation seems to be the weakest link in the country’s design to national agenda.
  • Soludo stated that every government (past and present) have tried their brand of economic restructuring or diversification and yet, the economy remains tied to life-support of oil, peasant agriculture and largely informal services sector. Professor Soludo disclosed further that Income inequality, poverty, and unemployment remain major defining features of the Nigerian economy.

Population surge: Speaking further, Soludo stated that while oil will be history in less than 20 years, the pressures of population surge builds up. The former CBN governor disclosed that if the current population trend continues, there will be about 400 million Nigerians in 2050. If this happens, Soludo stated that this means 400 million Nigerians will have to survive and prosper in a tiny but declining land mass (923,000 sqkm) and Nigeria will have the highest population density in the world among the top ten most populous countries.

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Nigerian economy

  • While emphasizing that the Nigerian economy is stuck, the former CBN governor said the world is not waiting for Nigeria. Specifically, Soludo stated the Nigeria is still at the low ebb of industrial revolution and struggling with stages of growth and development (Rostow’s growth model), the world is now on the 4th Industrial revolution with digital economy.
  • According to him, while electric cars are fast replacing diesel/petrol cars, Nigerians are still building petrol stations; small shops and huge shopping malls together with e-shopping. Hence, ordinary Nigerians who can’t explain what has hit them, resort to all sorts of criminal activities to survive.

Stuck in Debt Cliff: Providing further insight on the Nigerian economic woes, Soludo stated that repositioning Nigeria requires deploying a gamut of legal-regulatory-governance regimes, macro and sectoral policies and programmes to alter the spatial/geographical concentration of economic activities, structure of production from primary to industrial and post-modern service sectors and dynamic human resource as engine of sustainable development.

[READ MORE: Bill Gates identifies one major challenge facing Nigerian economy]

  • The former CBN governor disclosed that at the macro level, the fundamental challenge currently is that the economy is stuck at a very low speed lane in the context of a debt cliff with little fiscal space, while monetary policy is at near its limits, and low savings-investment trap, with rising unemployment and poverty.
  • According to him, reducing poverty and employment generating trajectory in the short-term requires serious heavy lifting, with major difficult choices and extraordinary coordination ahead.
  • In sum, Soludo stated that the alternative future that we see is one without oil, and where other exhaustible natural resources play very little role.
  • While stating that Nigeria earns almost as much from oil exports as it earns from remittances from its Diaspora, the country cannot export illiterates in a world driven by digital revolution.
  • Soludo stated that the easiest way to waste the future is to continue to churn out millions of semi-illiterate, largely unemployable citizens, most of whom see criminality as the only route to escape the poverty trap or drug as the opium for solace.
  • According to him, with an urbanization rate of over 5%, the conflagration that might ensure when hundreds of millions surge to the cities but can’t find jobs, housing, water and food can only be imagined. “Soon, the rich won’t be able to sleep because the poor, homeless and hungry are awake”. Soludo stated.

What should be done:  While providing details on the possible solutions, Professor Soludo stated that among other things, Nigeria needs to create a productive progressive and construction of a world without oil.

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  • Soludo stated that a stable and more efficient system Political-governance arrangements that ensure participation and ownership of the Nigerian project by all citizens of the federation is required.
  • The former CBN governor also said the devolution of powers according to the principle of subsidiarity and variable geometry is pertinent. According to him, Nigeria must move away from the current system of unitary-federalism, with its choking concentration of powers and responsibilities at the inefficient centre; thereby giving power back to the people.
  • In addition, Soludo stated that the contents of the Nigerian Constitution should define a new fiscal federalism that is consistent with devolution of powers and which alters the incentives faced by economic and political actors.
  • Soludo also stated that the “dining table politics” or “you chop I chop” must stop to fix the broken political ideologies.
  • In his concluding remarks, Soludo asserted that the future without oil is possible, but this will be powered by the country’s greatest asset—human capital plus technology which guarantees security, prosperity and happiness.

[READ MORE: Nigerian economy could slide into financial crisis – Finance Minister]

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Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

1 Comment

1 Comment

  1. Stanley

    October 2, 2019 at 11:55 pm

    Like prof said the necessary first step is to overhaul the institutions, judiciary and upgrade, implement the constitution as appropriate. And I would like to include holding public officials fully accountable. But this will involve stepping on powerful toes for any govt that decides to embark on this important task. The alternative is to continue to avoid offending a few at the expense of the majority, and perhaps allow the likely consequences of his predicted future doomsday and population explosion scenario to force thru these changes.

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Coronavirus

Lagos to open churches, mosques from June 19, limits gatherings to 40% capacity

Religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.

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Lagos state governor issues new guidelines for lockdown, consider full reopening of its economy

Lagos State government says religious gatherings would be allowed to reopen on June 21, 2020. This was disclosed by the State Governor, Babajide Sanwo-Olu on Thursday during a press briefing at Government House, Marina.

According to the Governor, mosques are to reopen from June 19 while churches are to begin services from June 21 and only Friday and Sunday services should be held for now, as other regular services, including night vigils, must be put on hold.

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He said, “There will now be restricted openings of religious houses based on compliance that we have seen and reviewed with the Safety Commission.

“From 14 days time, precisely on the 19th of June for our Muslim worshippers and from the 21st of June for our Christian worshippers, we will be allowing all of our religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.

“But we know that these places of worship have different sizes but even if your 40% capacity is really so large, you cannot have beyond 500 worshippers at once, and keeping that maximum 40% capacity is really important.

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“We will be encouraging people to have more than one service and ensure that they keep their premises clean, disinfect before another round of worship can take place.

“We will also be advising that there should only be mandatory Fridays and Sunday services. All other night vigils and services must be put on hold for now until we review our current situation.

Sanwo-Olu added that the state will also be advising that persons below the age of 15 because of how well they walk around should be excused from the places of worship and citizens that are above the age of 65 should not be allowed into these places of worship.

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Coronavirus

FG may lift ban on interstate movement on June 21

Interstate movement may resume on June 21.

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interstate, NURTW and Universal Insurance, NURTW insurance partnership, Commercial buses in Nigeria

The Federal Government may lift the ban placed on interstate movements on June 21, 2020.

This was disclosed by special adviser to President Muhammadu Buhari on new media, Bashir Ahmad on Thursday via his Twitter handle.

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He stated, “Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr Dani Aliyu, gave the hint recently, as domestic flights expected to resume on June 21.”

 

READ ALSO: U.S dollar gains, America sanctions Chinese Airlines from flying into the U.S.

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Meanwhile, the FG last Monday, June 1, 2020, announced a cautious advance into the second phase of the national response to COVID-19. As part of the measure in the new phase, the FG has announced the full reopening of the financial sector.

This was announced by the national coordinator of the presidential task force on COVID-19, Dr Aliyu Sani. He said that the banks will now be allowed to operate at normal working hours five days a week as against the restricted time of 2 or 3 pm that was announced during the first phase of the easing of lockdown.

READ ALSO: Osinbajo sets up committee on reopening of Nigerian economy, suspends loan deductions for states

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The Presidential Task Force also gave the green light to hotels to reopen but must do so based on the guidelines rolled out by the National Centre for Disease Control (NCDC). They are to maintain non-pharmaceuticals intervention. However, gyms, cinemas, parks, nightclubs and bars are to still remain closed until further evaluation.

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The restaurants, other than those in hotels must remain closed to eat-ins but are allowed to prioritize and continue to practice the takeaway measure that has been in place since the first phase.

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Business News

The conundrum in the retail pricing of PMS

Considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol.

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PPPRA, NNPC, Reduce funding oil subsidy - IMF to Nigeria , Oil marketers, PENGASSAN call for subsidy removal 

The decision of the Petroleum Products Pricing Regulatory Agency (PPPRA) to reduce the pump price of Premium Motor Spirit (PMS), also known as petrol, to N121.50 per litre from N123.50 per litre has been met with stiff resistance from oil marketing companies (OMCs). The Independent Petroleum Marketers Association of Nigeria (IPMAN) have also stated that it impossible for its members to sell petrol at the new price floor of N121.5 per litre.

We recall that on 18 March 2020, the Federal Government (FG) reduced the retail price of Premium Motor Spirit (PMS) by c.14% to N125/litre from N145/litre, following the global pandemic which led to an unprecedented decline in oil prices and by extension a reduction in the landing cost of petrol. Subsequently, the FG announced a further reduction to N123.50 which took effect on April 1, 2020. Earlier this month, the FG directed a reduction in the pump price of Premium Motor Spirit (PMS) for the third time to N121.50 per litre. We note that the adjustments in the retail price is in line with the directive from PPPRA on a monthly review of the pump price, depending on prevailing market realities.

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READ MORE: The good, bad and ugly of low oil prices for Nigeria

In our view, considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol. With the gradual relaxation of lockdown measures by countries who are starting to reopen their economies alongside the historic production cuts of OPEC+ which took effect last month (a 9.7mb/d oil production cut for May and June), we think the risks to oil prices are tilted to the upside in the near term.

Since hitting a two-decade low of US$19.33 on 21 April when the retail price of petrol was pegged at N123.50, brent crude prices have gained c.105% to close at US$39.54 on 3 June. Against this backdrop, we expect that the retail price of petrol should rather be adjusted upwards to reflect current market realities. The current situation appears no different from historical trends where the FG becomes reluctant to effect an upward adjustment in the retail price of petrol during periods of rising crude prices. This has often resulted in the renewed payments of the age-long fuel subsidy. We also think oil marketing companies (OMCs) who have only recently begun to import petrol alongside the Nigerian National Petroleum Corporation (NNPC) due to more favourable pricing could halt importation once again if domestic retail prices become unfavourable.

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