At the recently held 2024 Vanguard Economic Discourse, the President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dele Oye, was the Guest Speaker, where he attributed the current crises in Nigeria to botched economic policies of the government, such as the currency redesign, removal of fuel subsidy, and the floating of the Naira.
Below are excerpts of his speech at the event with the theme, "Reforms in an Era of Global Economic Uncertainties, Whither Nigeria".
President Bola Tinubu, after taking office in May 2023, eliminated the fuel subsidy, which had kept petrol prices low but was a significant financial burden to the federal government. This led to a 196% increase in petrol prices, causing a ripple effect on the cost of goods and services, exacerbating inflation, and impacting households and businesses heavily reliant on fuel due to the poor electricity supply.
Further compounding the crisis, President Tinubu allowed the naira to float freely, which resulted in a dramatic devaluation, making imports significantly more expensive and pushing inflation to nearly 30%, with food inflation at 35.4%. This devaluation, coupled with fixed wages, eroded purchasing power and strained businesses that depend on imported raw materials and equipment. The CBN has raised interest rates and sold US dollars to stabilize the currency, but these measures come with trade-offs, such as potential stifling of economic growth and depletion of foreign reserves. The ongoing economic hardship has led to discontent and likely civil unrest, posing a risk of further destabilization if conditions do not improve.
I must confess that when president took over, he was faced with very serious challenges
In fact there were allegations that the previous government kept borrowing to pay salaries. So if he did not remove the fuel subsidy from that day one, we would have had a situation where he would have just taken over, and the whole Nigeria would be at his doorstep the next day because there is no money to even buy diesel for the villa.
So, no problem, he was quite courageous on the removal of the fuel subsidy which was the first thing he did. In fact the president confessed that they did not put it in his speech, that he had to put it by himself, so that when they say don't say it and he did it.
Currency redesign
Nigeria is in crisis due to botched economic reforms including a currency redesign, removal of fuel subsidies, and a currency float.
Nigeria used to be the largest economy in Africa. But I think we are now number three or four. I've not heard any government official acknowledge that Nigeria has gone down, not one. And that was our major selling point, that Nigeria is the largest economy in Africa. We went down through our fault, because of our exchange rates.
Fuel subsidy removal
The first day, when fuel subsidy was removed, one expected the CBN then, on the face of that significant policy, to do what they are doing now on the MPR, which is when they should have kicked in, so that people would not go and borrow and create more problems.
They didn't plan it, in fact, they waited three months before they started working.
The abrupt currency redesign by the Central Bank of Nigeria (CBN), under Godwin Emefiele, caused widespread panic and loss of confidence in the naira (especially in the sahel/Ecowas regions where Naira was becoming the reserve currency), driving people to foreign currencies and cryptocurrencies.
Before the currency redesign, Naira was a very big currency in the West Africa ecosystem, almost about N3 trillion businesses, where people were keeping naira for them to use to buy goods in Nigeria.
So, immediately we changed our currency, they immediately had to dump the naira and go for CFA or dollar.
Just imagine that impact, and nobody has done the research on the impact of that policy change.
If we search all of us in this room together, we may not have N500,000, but the PoS merchant outside can give you N2 million. But nobody has asked, how did we get here? Even the banks don't have cash since they gave the contract for their ATMs to private businesses. So nobody has cash. If you go to collect N5 million, they cannot give you, but the PoS person has.
Floating of Naira
We also have the floating of the naira. And I want to say here, that there are only 10 countries in the world where they freely sell their currencies, and these include the EU.
So you have the US, EU, Japan, Norway, Australia, and others. Then you also have a set of countries that have stronger fundamentals than Nigeria, that is, Qatar, China, and UAE. They don't sell their currencies the way Nigeria sells. You know why? They have governance. The Emir of Qatar can change the price of their currency by decision. So, the investors in the US will not bet on that currency because it's subject to political changes. But here comes Nigeria, with all our fundamentals, we cannot even pay for the goods we import. The CBN is still dodging the people that gave them money for 12 to 18 months, about $2.4 billion. I was at the National Assembly yesterday, and they almost summoned them before they showed up. And we want to sell our money like the EU, Euro. It's like putting Enugu Rangers to go and play in the league in Europe, how many goals, don't you know what the result would be?
I understand that if we have to defend the naira, we need to have a reasonable float. But what is important is that we should know the policies. Let the CBN tell us where this has worked, what they are doing in Nigeria with our currency. Tell us which country you are using as an example.
So, what I'm saying is this, this thing is not by textbook, you have to look at your peculiar situation, and do what you have to do. And I can tell you whoever is asking them to do this, they are not doing it in their country.
Nigeria must defend the Naira
Every country defends her currency. You can see what America is doing to China to slow them down, so that America can continue to prevail. You can see the way they protect their industries. Look at what they did with Huawei. Today, Huawei would have been the biggest telecoms company in the world, they started accusing them of all sorts of things. Look at what is happening to Tik Tok. Countries must defend their own. In Nigeria, there is nothing for the Nigerian businessman. If you doubt me, go and have a problem with a foreigner. Sorry, I'm not discriminating here. Just hold one Lebanese guy, he will use his phone to jail you, because the system does not protect its own. There is nowhere in the world you will not see the government stand to support its own people.
The Dangote example is one. If it was an Indian that owns that refinery, he would prefer to sell everything abroad and make FX. He has told you that by June, "I will stop the importation of PMS". There is nationalism on your own for you first to defend. Because, for any foreigner in Nigeria, the first thing is what he can get, declare profit and repatriate back home. Whether you like it or not, Dangote must do something Kano, you see every year, he will go there and do the foundation. He must do something in Lagos. So, that is why the government must, first of all, take care of its own. And that is what Gowon did for us during indigenization. We are now given it away to the Chinese. They are all in our villages looking for solid minerals. There is no protection, except for the Artisanal Miners Act. Check in all our laws, from even servers or ushers in this event, someone can come from England and be an usher in this place. You cannot try that anywhere else.
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I chair the Nigerian-Turkish Business Council. If you open a company in Turkey, you have to, by law, employ three Turkish citizens, one of them will be an accountant and two other persons. Their salaries are fixed by the government.
Government must support local businesses
So, we must fight for Nigeria, we must fight for our local businesses.
Based on the forex policies, there has been significant inflation or hyperinflation. The figures from the National Bureau of Statistics (NBS) are not in tune with realities on ground. There is no doubt that inflation in Nigeria is more than 100 percent. But I understand, we should have something which we can use to negotiate with others.
And I can tell you that is part of the problem we are having in the oil industry. You ask yourself why the IOCs are leaving, it's simple. When the Petroleum Industry Act was being negotiated, I warned them in the National Assembly to take one percent for the community, they said no, it must be 5 percent, we are the owners! Eventually, they settled for three percent of gross. If you have a budget of $20 billion, you take three percent first and give it to Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the government agency, to keep for the community. Have you heard anywhere in the world where you tax gross? Are you even sure that you will make three percent profit on the entire project?
So, there is hyperinflation because of forex policies. There has been a significant rise in unsold goods, and these are manufactured goods which are fast. These are the goods that the Federal Competition and Consumer Protection Commission (FCCPC) is going to bust the warehouses and say they are hoarding. They cannot sell, and so are they supposed to eat them?
