The removal of fuel subsidy and the move to merge foreign exchange rates, two headline reforms introduced by the Tinubu administration since late May, triggered problems such as high fuel prices and the depreciation of the naira, two monstrosities which combined to cause a general spike in costs of services and goods.
Today, many Nigerians complain of a rise in the cost of living.
According to the latest NBS report, Nigeria's inflation, which rose to 26.7 per cent in September, again rose to 28.2 per cent in November from 27.33 per cent in October. Food Inflation remains untamed, rising from 31.52 per cent in October to 32.84 per cent in November 2023.
To compound the economic problems, few multinational companies such as GlaxoSmithKline, Procter & Gamble have announced their exit from our country, complaining about the difficult operating environment and the scarcity of dollar.
The truth is that the new policies alone are not solely responsible for the economic problems we are facing today. We were destined for the tough and rough patch, where we are today because of the prevailing conditions before Tinubu took over on 29 May.
As at June 2023, budget deficit was N10.8 trillion. Actual Debt service was 98.95 per cent of revenue, far higher than the projected 59.37 per cent. Inflow into the country's foreign reserve came in trickles. And so bad was the state of affairs that Nigeria could not remit about $800 million fund of foreign airlines. JP Morgan exposed our near insolvency by claiming in a report that our net foreign reserve was just about $3.7 billion, not the $33 billion-plus flaunted by Emefiele's CBN.
President Tinubu, who promised during the campaign to take hard and difficult decisions, moved to tackle the economic problems from Day One, by first dispensing with the wasteful fuel subsidy that was billed to consume about N7 trillion this year, five times more than what was provisioned for capital spending.
President Tinubu is quite aware of the side effects of his move to reset our economy. Though his administration has earned plaudits from the World Bank, the IMF and rating agencies such as Moody's and Fitch, he is not carried away by the praises.
He is focused on turning the economy around for growth, development and prosperity.
The moves are yielding some good effects. Amidst what some sections of the media perceive as general gloom, some silver linings are emerging, signposting that with a little more patience, our material conditions will improve and inflation will be tamed. For businesses, operating conditions will also improve.
In its third-quarter report for the year, the NBS reported that GDP grew by 2.54 per cent. In a similar period in 2022, GDP recorded a growth of 2.25 per cent. To demonstrate that the sun may be shining on us again, the 2.54 per cent GDP growth recorded in Q3, was also higher than the 2.51 per cent recorded in Q2.
The service sector, made up of information and communication, financial and insurance, was responsible for the growth witnessed in Q3. It had a 3.99 per cent growth, contributing 52.7 per cent of the aggregate GDP. The agriculture sector declined from 1.34 per cent growth in Q2 to 1.3 per cent in Q3.
Growth was also recorded in construction and real estate, metal ores (69.76%), coal mining (58.03%), chemical and pharmaceutical products (6.77%), Cement (4.2%) and construction (3.89%). Oil reported a negative growth of 0.85%, a major improvement to the negative 22.67% recorded at the same period last year. It was -13.43 in Q2 of 2022.
The improvement in the oil sector and its contribution to GDP has been attributed to the improvement in the security of oil infrastructure and operations, leading to increased production. Going forward in this Q4 and 2024, the NNPC Limited is confident that the sector will continue to climb the curve.
In the same Q3, according to NBS, the Industrial sector grew by 0.46%, an uptick compared with Q3 2022, when it had a negative 8% growth, even in the era of P&G and GSK exit.
An interesting revelation in the NBS Q3 report was the big jump in the volume of trade, from N12.16 trillion in Q2 to N18.8 trillion. Trade volume in the same period in 2022 was N12.28 trillion. We also recorded a trade surplus of N1.89 trillion in Q3, an increase from the N708.8 billion in Q2 2023. In Q3 in 2022, we recorded a trade deficit of N409.39 billion.
The value of exports in the third quarter was N10.35 trillion, far higher by 60.78 per cent than the N6.44 trillion posted in Q2 2023. Crude oil dominated the export, accounting for 82.5 per cent, a confirmation that our country is pumping out more oil for export, unlike the previous years.
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Just as our exports increased, imports also increased, rising from N5.73 trillion in Q2 2023 to N8.46 trillion in Q3, a rise of 60.8 per cent. The imports recorded in the quarter were also higher in value compared to Q3 2022, which was N6.34 trillion.
As the Minister of Budget and National Planning, Atiku Bagudu noted in a recent report, economic prosperity in our country will be achieved with the reforms being implemented, supported by strong monetary and fiscal policies, food supply management and other intervention programmes.
President Tinubu, who has never shied away from acknowledging the temporary pains triggered by the reforms, gave an assurance in a recent newspaper interview that his Administration will continue to take proactive measures to wrestle with the problems. Many of these measures are already being taken and in the New Year, we expect the silver linings, which are at present understated, to blossom into rays of sunshine to be experienced by all Nigerians.
Onanuga is the special adviser Information and strategy to President Bola Tinubu
