“Failure is not fatal; but, failure to change might be” – John Wooden.
Nothing substantiates the Pareto Principle better than the structure of the Nigerian economy which is composed of the vital few organisations and the trivial many. According to Pareto principle, twenty percent of our activities account for eighty per cent of our results. Four entities determine Nigeria’s economic fate: Ministries of Petroleum Resources and Power, the Central Bank of Nigeria, CBN, and the Ministry of Finance.
Irrespective of how well other contributors perform, the vital four inevitably determine the aggregate macro-economic performance of the nation. At the moment, the only one whose performance can be rated fair is the CBN. Performance by the remaining three ranges from very poor to awful. On a scale of one to ten, where 10 is excellent and one is very poor, only the CBN can obtain over five on the whole. The rest can hardly collect three. Despite the attempt to hoodwink Nigerians with re-basing and reducing inflation, consumers know how much they are paying and tenants cannot be deceived. The economy is in a mess.
To understand to what extent the four entities have created the current economic quagmire, from which Nigeria might not be extricated any time soon, you only have to ponder the implications of a few facts which are inexplicable.
Over 7m small businesses shut down in 2 years – NESG
(VANGUARD, March 10, 2025)
The report by Yinka Kolawole also pointed out that “N94trn lost to divestments, business closures”. Pause a moment and try to wrap your mind around that figure N94trn. It is larger than the national budget for 2024 and 2025 combined. The budget for N2024 was N24trn and that for 2025 is N54trn; total is N78trn. More concerning is the fact that the 2024 target was not achieved and the 2025 budget is so unrealistic, it might as well be regarded as another Federal Government joke.
Already, January and February are finished and two unpleasant truths stare us in the face. The budget was premised on production of 2.04 million barrels of crude oil per month and priced at $75 per barrel. January result is in already and February’s will soon follow. What happened? Nigeria has produced less than 1.8 mbpd each month at less than $75 per barrel. Furthermore, by listening to “the voice of the people” (which is akin to lunacy), the FG had sold nearly 300,000 barrels to local refineries in naira consequently reducing its dollar revenue even further.
So, for the first two months, dollar revenue estimates were not achieved. The critical economic conditions which led to the closure of 7 million small businesses have not been addressed. The repercussions of that calamity are obvious. Even if each business is a one-man enterprise, at least 7 million more Nigerians have been rendered jobless. Some actually engage two or three people; thereby making the unemployment situation a lot more precarious than most people would suppose. Thus, between them and on account of poor formulation and implementation of fiscal and monetary policies, they have deepened poverty – which is synonymous with joblessness.
‘Nestle Nigeria posts N165bn loss amid naira devaluation’ (VANGUARD).
On the same day, another report announced that Nestle Nigeria posted a major loss. MTN and Dangote Sugar also sustained huge losses in 2024. If they are not companies with huge financial resources as well as abundant reserves, none of them would be open today. But, even a giant can only bleed so much before throwing in the towel. The intolerable exchange rates, induced hyper-inflation and high interest rates are still posing great challenges to several companies.
Chatham House warns FG against strengthening naira, says Nigeria more competitive – Cable, March 10, 2025
General Babangida, rtd, when the Structural Adjustment Programme, SAP, was not delivering the results envisaged, once asked: “Why is it that economic principles which work elsewhere don’t work in Nigeria?” My answer to him then was simple: “Economic principles assume that the people are reasonable and patriotic. Nigerians are neither reasonable nor patriotic.” Every major reform invariably involves sacrifices by all the stakeholders – bankers and government officials included.
Reforms in Nigeria fail mainly because banks and government officials sabotage the effort. Each time government imposes import prohibition on some products, the staff of the Nigerian Customs Service are ready to cash in on it by allowing client-smugglers to bring the items into the country. My family ran a hotel at Idiroko up to the end of the Abacha regime in 1998. Right there, at the bar, large scale smugglers and NCS officials sit and negotiate openly about how to handle contraband coming in. Sitting with them were the branch managers of the banks situated at the border.
The Know Your Customer rule was always observed scrupulously. Custom staff and the bankers knew they were dealing with economic saboteurs. Yet, they still did. Strengthening the naira apparently is an objective now being pursued by the CBN. In any economy governed by honest people, there would be no problem with it. The measure makes imports cheaper – if that is the goal of government policy. The problem arises when the CBN seeks to reduce imports and lower exchange rate at the same time.
Economics is full of paradoxes, but, Nigeria is turning the entire thing into self-contradiction. Exchange rate can be reduced either by exporting more, or importing less or both. Either way, there must be a favourable balance of payments. Nigeria is now gradually experiencing balance of payment surplus on account of trade. Unfortunately, the outflow of foreign exchange is still unfavourable. There is a huge backlog of dollar-denominated debt to be discharged. Additionally, the FG and state governments benefit from devaluation of the currency. It enables them to change dollars into more naira – which is needed to pay their domestic bills. A stronger naira will make it impossible for governments to fulfill their financial obligations.
Our nation’s dilemma on oil
Governments’ interests and the people’s are opposed. High crude price benefits government, but, increases fuel price. Low crude price imperils government dollar revenue but it brings down the price of fuel. That is the stack reality facing the Nigerian government and the people. Nigeria is now the only country which enjoys no absolute benefit from the price of crude – whether up or down.
For years, the conventional wisdom had it that refining crude in Nigeria to supply the domestic market will be beneficial to us. On that assumption, Dangote established the largest single train refinery in the world. Government-owned refineries, which hitherto had been shut down, were hastily re-opened. Small mini-refineries also came on stream. They need crude oil. FG promised to supply crude for naira late last year. There were two revelations in March this year. One, Nigeria is still importing fuel. Two, the naira-for-crude deal was only for six months. Dangote and others might soon have to start paying dollars.
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