Nigerians’ misery worsens with low oil production, 17.7% inflation and insecurity
There seems to be no end in sight to the growing misery of Nigerians as the country plunges deeper into debilitating conditions of declining oil production, rising inflation and insecurity.
A 2021 Misery Index research undertaken by Steve Hanke, Professor of Applied Economics at Johns Hopkins University, Maryland, USA, which focused on four salient parameters of inflation, loans, unemployment figures and gross domestic product, showed that Nigeria was performing extremely poorly. .
Out of 156 economies assessed in the report, Nigeria was the 11th most miserable country. In Africa, it was better than Sudan, Zimbabwe and Angola.
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Despite the federal government’s efforts to generate revenue from non-oil exports through aggressive taxation by the Federal Inland Revenue Service (FIRS), oil has remained the mainstay of the Nigerian economy on which its budget is based. Poor administration, weak reforms and corruption in the country’s oil sector have resulted in the country not benefiting from oil sales as it should. For example, the country is not reaping the gains due to it in the two main areas of quota production and the rising price of crude on the world market due to the massive theft of oil and insecurity in the first and the import of petroleum products in the second.
One of the main sources of concern for the Muhammadu Buhari administration has been compliance with the Organization of Petroleum Producing Countries (OPEC) quota of 1.7 million barrels per day. As a result, Nigeria lost its status as Africa’s top oil producer to Angola as production fell in May.
OPEC’s monthly report for May showed that while Nigeria’s oil production fell to 1.02 million bpd in May from 1.22 million in April, Angola’s oil production was 1 .16 million bpd in May, compared to 1.18 million bpd in April.
“Crude oil production increased mainly in Saudi Arabia, the United Arab Emirates and Kuwait, while production in Libya, Nigeria, Iraq, Gabon and Iran decreased,” said the oil cartel made up of 13 members.
An expert in oil sector governance, Henry Ademola Adigun, told ICIR: “The implication of not meeting our oil quota is huge. First, low income. Then there is the high cost of business loans due to the high inflationary pressure. You saw the latest figure from the National Bureau of Statistics showing inflation at 17.7%.
Apart from the loss of revenue due to reduced quota production and the consequent loss of precious petrodollars which the country could use to remedy its dire situation, Nigeria has also spent money on importing petroleum products, in particular premium motor gasoline (PMS), widely known as gasoline. Nigeria has four refineries in Port Harcourt, Warri and Kaduna, but grand corruption and lack of maintenance led to their collapse and left the country no choice if it is to meet local demand for petroleum products. than to start importing.
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It was an albatross. The Nigerian is currently spending the whopping N4 million to subsidize oil imports, a situation both the World Bank and the International Monetary Fund (IMF) warn will hamper the country’s growth plan, with so many of money that should be freed up on development projects blocked on subsidies.
Economic mismanagement has led the CBN to lend the Federal Government over N10 trillion in overdraft, which puts the economy under intense inflationary pressure.
The subsidy option is a double-edged sword for the government. With inflation already so high and prices of goods and services skyrocketing daily, the Buhari administration is well aware of the painful effects of removing gasoline import subsidies for the masses. like the World Bank and the IMF, as well as some economists and analysts are urging it to do so, arguing that subsidies distort economic planning and development.
“Already, subsidies are costing the government much more than what is budgeted. This is why you see the long lines in the Federal Capital Territory. Another implication is falling currencies, as the naira keeps falling. Bank lending to businesses will be weak due to double-digit inflation. These are holding back economic growth,” Adigun said, with a note of sadness in his voice that the economic challenges currently being faced would persist into next year, saying politics had already trumped governance.
Agreeing, a financial analyst, Chuka Mbonu, said: “Subsidies distort the economy. People are shouting that we have to keep the subsidies, but all those who are in favor of subsidies are among those who get us into this mess. Those who shout that the subsidies must be kept are also turning around to say that we have bad infrastructures. How do they expect such infrastructure without government borrowing?
“Recall that the Accountant General of the Federation said a few days ago that Nigeria was struggling to pay salaries.”
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The level of misery of Nigerians has also become linked to the movement of the exchange rate as the country remains largely dependent on imports. This means that whenever the naira falls further against the dollar, the prices of items tend to rise. The value of the naira, which opened the year at around 570 naira to the dollar, slipped to over 600 naira. As a result, property prices have risen by more than 30% in the last six months alone.
Analysts have criticized the CBN’s exchange rate regime, saying it has created a huge business around currency back and forth, speculation, overpricing and capital flight.
“What is happening in the foreign exchange market is a consequence of the CBN’s policy choice of a fixed exchange rate regime and an administrative allocation of forex,” said the director general of the Center for the Promotion of Foreign Exchange. private company (PPE), Muda Yusuf. said.
Yusuf, explaining that CBN’s action was tantamount to addressing the symptoms rather than addressing the causal factors, said the bank itself did not believe in the market mechanism.
Another major cause of the growing misery is the rampant insecurity across the country, which has seen farmers abandon farms for security reasons, with the resulting spike in food prices.
In 2016 alone, bandits killed 2,500 people in Nasarawa, Kaduna, Benue and Plateau states, many of them farmers, while 62,000 were displaced. An estimated $13.7 billion calculated on farms, crops, homes and money would have been lost in the tragedies.
In Zamfara and Niger states, bandit attacks have increased every year since 2015, with reports that many farmers are forced by bandits to pay regular fees to enable them to cultivate and harvest their land.
The situation has escalated to such an extent that the CBN has revealed that many recipients have said that they will not be able to repay their loans to anchor borrowers due to the destructive activities of the bandits’ activities in their farming businesses.
In the Southeast, the activities of criminal elements that the media described as “unknown gunmen” have become a misery for the inhabitants of the region.
According to the Nigeria security tracker, in May 2019, the number of deaths caused by insecurity had increased by 8,663. And in May 2020, it was 8,800 deaths, even in a year of national confinement. This time the death toll had become 71,083.
By May 2021, an additional 9,243 people had been killed in Nigeriaand by May 2022 the tally had risen by 9,594, bringing the total number of deaths from violence since 2011 to 89,920.
The President of the Association of Business Development Experts, Franklyn Akinsoloye, expressed concern that insecurity has become a major misery for Nigerians.
“This is a major problem affecting local and foreign investors, and the population in general. The government must make urgent efforts to restore investor confidence and to protect lives and property,” Akinsoloye said.