Economy and other related issues

Dangote Group Chairman and CEO Aliko Dangote has been consistently complaining about the state of the economy recently, most recently when he pointed out that the monetary policy rate set by the Central Bank of Nigeria (CBN) at its last Monetary Policy Committee meeting is too high for local businesses to thrive.

During a three-day political summit on manufacturing organised by the Manufacturers Association of Nigeria (MAN) last week, Dangote criticised the economic policies and hostile environment in which manufacturers operate, not only in Nigeria but also in underdeveloped economies where governments are busy taking diktats from global political and monetary bodies.

This time, Dangote refused to be diplomatic when he fired the following salvo in the preamble to his speech: “Nobody can create jobs at 30 percent interest. There will be no growth. Without power, there will be no prosperity. Without affordable finance, there will be no growth, there will be no development.”

These were stark and important observations that political authorities and policymakers should not ignore. The real numbers in the labor market have been lost since the rebasing of unemployment data, which has risen from 33.3 percent to about 5 percent. The reality is that the labor market is cracking, with thousands of jobs lost due to the closures and exits of large conglomerates. Those who have managed to remain are struggling with high costs.

Africa’s richest man also lamented plots by local and international oil cartels to sabotage his $19 billion refinery project. He spoke at an Afreximbank event where he revealed: “I knew there would be a fight. But I didn’t know the oil mafia was stronger than the drug mafia. I can tell you that. Yes, it’s a fact.”

The industrialist had earlier attributed the loss of production in 2023 to the impact of the ongoing economic reforms. He lamented, “the biggest mess was the devaluation of the naira from N460 to N1,400. You can see that almost 97 percent of the food and beverage companies, none of them will pay dividend this year. But we will try to come out of it.”His conglomerate, Nigeria’s largest, recorded foreign exchange losses of N164 billion last financial year.

These challenges in production are not just about one player; they are a reflection of the state of the economy. But when Dangote talks about it, the message resonates because the man is at the center of it all, along with millions of Nigerians in different value chains. Since President Tinubu took office, citizens have lived with various pains caused by painful economic reforms.

The unit price of cement has stabilized at around N8,000, depending on location. The prices of other building materials have also increased, meaning that investing in the housing sector is an area that many citizens cannot navigate. The impact of the multiplier on rents is huge for residents of cities and municipalities.

Prices of petroleum products are too high. The Dangote refinery, which was supposed to ease the load, has reported difficulties in the hands of the IOCs and local collaborators who would not sell crude oil at reasonable prices. If Dangote imports crude oil at N1,484 to the dollar as it claims, there is no way prices of refined products can be lower than they are now. The average retail price of diesel is N1,200 per litre. Add to this the new electricity tariff approved by the government and it is difficult for producers, large and small, to produce and sell at affordable prices.

When it comes to logistics, the situation is difficult for anyone managing a car. Routine maintenance now costs three times more than it did two years ago. For large transport companies, this is a serious drain. The prices of lubricants and spare parts have increased three to four times. No thanks to high import duties and various fees. The roads are bumpy, making wear and tear a recurring experience. And then there are the numerous taxes.

So when the big players complain, they do so without reason, on behalf of the unfortunate and unheard citizens who are the recipients of this forced economy. Hopefully, this government will listen and analyze the trials and errors of the past year. Central Bank of Nigeria (CBN) Governor Olayemi Cardoso initially blamed the naira’s poor performance in the foreign exchange market on politicians who squander dollars on health and education tourism abroad.

He later targeted currency speculators whose nefarious activities, he said, had driven the naira to the alarming lows it sank to six months ago. The CBN deployed a range of instruments to disrupt their activities. Little relief was achieved. Cardoso later said the government’s palliative economy (rice, beans and garri sharing) was also fuelling high inflation.

The disinterested government has continued to hand out mitigation measures without any measurable positive impact on the economy. The latest is the renewed N50,000 mitigation grant for one million people to ease economic hardship. Minister of Industry, Trade and Investment, Doris Uzoka-Anite, disclosed this in late June, assuring that almost four million people had already applied, even before the grant was announced.

It is not clear what methods were used to disseminate information about this particular grant so that citizens could apply for it. As far as the minister is concerned, four million applicants have expressed interest and only one million of them will receive the grant. Nothing has been said about the remaining one hundred and thirty-two million multidimensionally poor Nigerians.

We hope that this time there will be enough safeguards to prevent a repeat of the corruption disaster at the Ministry of Humanitarian Aid and Poverty Alleviation. We hope that the CBN monitors those disbursements that have no “obligations to repay” in case they could have an inflationary impact on the market.
Now that private sector representatives have spoken out, saying the economy is not working and the policies are unrealistic, there is hope that the government will listen to them and review its partnership with the World Bank and the International Monetary Fund (IMF).

The World Bank strongly believes that local refineries are not profitable in Nigeria. They may be profitable in other countries from which NNPCL imports expensive fuels, but not here. The failure to start local refineries since the accession of this government is therefore suspicious.

Three times this government has promised to resume local refining. Three times it failed and now the fourth schedule has been issued for January 2025. The Vice Chairman, Downstream Committee of the Senate, Jide Ipinsagba made the promise last week, claiming that the modernization of refineries in Kaduna, Warri and Port Harcourt is at the completion stage. The completion stage never ends. Everything seems to fit in well with the Dangote oil mafia theory.

Here is what Dangote told producers and the government: “In any economic system, even the most advanced, investment projects in the manufacturing and industrial sectors need time and a conducive environment to mature, build capacity and scale to become competitive with those in older and more mature markets.

“Since the mid-1980s, however, non-industrialized countries and their leaders have been discouraged from protecting and supporting such investments and have been forced to expose them to unfair competition from stronger, older competitors in their own domestic markets, even before the new players are hired. Yet these same older/larger players are well supported in their own domestic markets.

“We need to look to leading countries in the West and East that are actively protecting their domestic industries. We need to similarly implement policies to protect our domestic industries and develop domestic champions who will create the jobs and wealth we desperately need.”

Last week, apparently tired of outside grumblings, President Tinubu finally inaugurated the 31-member Presidential Economic Coordinating Council, three months after it was established in March. The council includes Dangote; UBA chairman Tony Elumelu; BUA founder Abdulsamad Rabiu and other prominent players in and out of government.

The promise is that the economy will soon experience accelerated recovery, and the council will be in place. While this intervention is welcome, some fear that undue influence by private sector monopolies could bring them more profits and further impoverishment of citizens. These fears are supported by the fact that this government is not known for defending the poor. That will be an argument for another day.

Meanwhile, a Reuters report last week pointed to a looming fuel crisis over a $6 billion debt. According to the story, Nigeria’s debt to gasoline suppliers has exceeded acceptable levels for creditors of suppliers, while NNPCL is struggling to cover the difference between fixed pump prices and actual international prices. This suggests that the government is paying fuel subsidies that are expected to cost about $3.7 billion this year. The government and NNPCL are still in denial.

Let citizens not be surprised that the government is still romancing the 2023 supplementary budget (of N2.1 trillion) when legislators should be collecting materials on the 2025 budget.

This supplementary budget for 2023 was approved for urgent intervention in defence and security; critical infrastructure in Works and Housing, FCT and allocation of salaries of federal employees and cash transfers. Since then, the government has collected more than enough revenue to close this budget.

Whatever they are doing now is abracadabra. In the absence of critical intervention from the National Assembly, citizens must be vigilant. At a time when there was a modicum of self-control in the Senate, the chairman of the Appropriations Committee was handed over to the opposition, at least to give the appearance of honesty. That was before they came up with the idea of ​​total state takeover.

Lest we forget, Lagos University Teaching Hospital (LUTH, CMUL) has been cut off from public electricity supply by Eko Electric over a N252 million debt. Is LUTH a for-profit venture? The University of Benin was closed last week due to protests over electricity bills. The university charges between N200-280 million per month. Absurd.

There is fire upstairs. This government needs to wake up!