Tinubunomics and long walk to economic prosperity

The twin policies of fuel subsidy removal and floating the exchange rate by the Tinubu administration led to a macroeconomic upturn that saw Nigerians’ purchasing power weakened, with most Nigerians struggling to buy food.

A few days back, Nigerians witnessed a stampede of its citizens awaiting a rice charity programme in Ibadan, Anambra and Nigeria’s capital city Abuja,a situation that attested to the inability of most Nigerians to buy affordable food.

To worsen the concern, the Nigeria’s headline inflation worsened to 34.6 per cent in November from 33.88 per cent in October, according to the National Bureau of Statistics (NBS) latest report.

The statistics office further disclosed that food inflation in November rose to 39.93 per cent on a year-on-year, higher than the 32.84 per cent rate recorded in November 2023.

Despite these glaring struggles of Nigerians to feed and meet up with other basics, government officials of the Tinubu administration said Nigerians have to pay the price of the ongoing reforms with temporary difficulties.

“The key lesson that I think I would focus on is that in devising these programmes and carrying out the reforms, what is particularly important — because the benefits over the longer term and the costs are frontloaded, it is important that the social safety nets that will help the poor and the vulnerable cope with the up‑front costs with a spike in their cost‑of‑living is adequately planned for and dealt with,” the minister of finance and the coordinating minister of the economy said while defending President Tinubu’s economic reforms.

Notably, Nigerians have been struggling with the negative consequences of food inflation as the country’s food-belt states are still bedevilled by insecurity.

“If you want inflation to go down, we must be self-sufficient in food. We must bring down the price of food. There are no two ways about that. In most food-belt, farmers go through lots of trouble to harvest their food. The government should tackle food-insecurity and see its impact on food inflation,” a development economist, Kalu Aja said in an X space organised on rising food inflation.UPDATES: SEE HOW GUYS ARE USING LATEST iPHONE 16 Pro Max TO SCAN LADIES AND GET THEIR N4KED BODY. SEE HOW THEY ARE DOING

The statistics office also disclosed that the cost of food in Nigeria increased 39.93 percent in November of 2024 over the same month in the previous year. Food Inflation in Nigeria averaged 13.86 percent from 1996 until 2024, reaching an all-time high of 40.87 percent in June of 2024 and a record low of -17.50 percent in January of 2000.

The ICIR reports that torrential rain and flood in 29 of Nigeria’s 36 states this year have destroyed more than 1.5 million hectares of cropland, making millions go hungry and causing mass displacement. The central bank has hiked interest rates five times this year to try to get inflation under control, yet Nigerians can hardly buy food.

Citing his personal experience, a public servant and resident of Kubwa in Bwari Area Council of the Federal Capital Territory (FCT), Adamu Bello, said the situation was becoming worrisome, especially in local communities where three square meals have now become a luxury.

“It is getting worse daily; people can hardly feed three times a day, even though they try to manage their resources to buy what they can afford.

“Only those with sufficient funds can buy foodstuffs in bulk now to save costs in the festive season, and how many have the money with all the high bills to pay?” he said.

He urged the government to intervene to find lasting solutions to the rising cost of food.

How Tinubu’s reforms fared  in banking sector in 2024

The banking sector witnessed several policy measures in 2024 which were largely influenced by three major factors, namely the persistent rise in the inflation rate, policy measures to reform the foreign exchange market and the recapitalization programme announced for the industry.

On inflation, the steady rise in prices of goods and services worsened in 2024, due to a combination of further increase in pump price of petrol and continuous naira depreciation.

In 2024, the naira depreciated by 34 per cent and 56 per cent to N1,662 and N1540 per dollar in the parallel and official market, from N1, 240 and N988.46 per dollar at the beginning of the year.

The depreciation of the naira combined with fuel subsidy removal led to 76.4 per cent increase in national average price of petrol to N1,184.83 per litre.

Interest rate hikes fail to halt inflation

In response to the persistent rise in the inflation rate, the Central Bank of Nigeria (CBN), implemented measures to reduce money supply in the banking system. The apex bank raised the benchmark interest rate eight times and by 875 basis points to 27.5 per cent in November from 18.75 per cent at the beginning of the year. These measures failed to lessen the inflationary pressure as Nigerians still struggle with high food prices.

“The magic wand is ensuring incentivised food production in Nigeria’s food belts and massive food supply will impact hugely on inflation drop,” a development economist, Celestine Okeke, told The ICIR.

The CBN also increased the Cash Reserve Ratio (CRR), of Commercial and Merchant banks to 50 per cent and 16 per cent respectively from 32.5 percent and 10 per cent at the beginning of the year. Furthermore, the apex bank conducted a liquidity mop up through regular sale of Open Market Operations (OMO), treasury bills.

The ICIR analysis of data from the apex bank showed that the CBN sold N12.83 trillion worth of OMO Treasury bills from January to December 5, up from N716.7 billion in the whole of 2023.

This development led to acute scarcity of funds in the interbank money market, with banks regularly resorting to borrow from the CBN to meet short term cash needs.

Reflecting this, the interbank interest rate rose to 31.5 per cent on Friday December 13, 2024, from 15.38 per cent on December 29, 2023.

In line with the hikes in the MPR, interest rate on 365-days treasury bills rose 22.9 per cent in December from 12.24 per cent at the end of last year. While the high-interest rate regime triggered by the MPR hikes, attracted criticism from manufacturers and other real sector operators, it however enhanced investors’ returns on fixed income investment like TBs, Commercial Papers, and bonds, as well as on banks’ interest income and profitability.UPDATES: SEE HOW GUYS ARE USING LATEST iPHONE 16 Pro Max TO SCAN LADIES AND GET THEIR N4KED BODY. SEE HOW THEY ARE DOING

Restriction on banks’ FX holdings

The CBN on January 31st, in a bid to improve forex supply, and address excess dollar holdings by banks, ordered the banks to sell their excess dollar holdings within 24 hours. In a letter on Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks, the CBN warned against excess dollar holdings.

“The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks,” the CBN said.

Consequently, the apex bank pegged the Net Open Position, NOP, the difference between a bank’s foreign currency assets and its foreign currency liabilities, to 20 per cent of shareholders’ funds.

Hence it directed that banks with current NOPs exceeding these limits should adjust their positions to comply with the new regulations latest by February 1, 2024.

E-payment for PTA/BTA

In a bid to sanitise the forex market, the CBN on February 14, restricted the payment of Personal and Business Travel Allowances (PTA/BTA) through electronic channels only.

“In line with the Bank’s commitment to ensure transparency and stability in the foreign exchange market and avoid foreign exchange malpractices, Authorized Dealer Banks shall henceforth effect payout of PTA/BTA through electronic channels only, including debit or credit cards. For the avoidance of doubt, payment of PTA/BTA by cash is no longer permitted,” the apex bank stated in a circular.

FX backlog resolving

A major issue that dogged the banking industry in 2024 was the overdue $7 billion foreign exchange forward transactions. In February, the CBN Governor, Olayemi Cardoso, in an interview, said a forensic audit of $7 billion of overdue foreign exchange transactions, the bank has been trying to clear had uncovered irregularities affecting $2.4 billion worth of the transactions.

Following this disclosure, the CBN in March announced that it has cleared all valid FX backlog, including the $600 million belonging to foreign airlines operating in the country. However, members of the Organised Private Sector, OPS, faulted the claim by the CBN saying many businesses still had funds trapped at the banks without any communication from the CBN regarding what constitutes a valid forex request and those deemed invalid.

The national vice president of the Nigerian Association of Small-Scale Industrialists (NACCI), Segun Kuti- George, argued that the claim by the CBN that some of the forex requests were invalid was ‘propaganda’ and that some of the affected businesses were contemplating taking legal action against the banks in order to force the CBN’s intervention in the matter.

” Some of the requests have been cleared, but there are others that they are saying were illegal and did not meet their criteria. But the importers are not aware of the reason why the requests have been rejected. Their money is still with the bank, and they are groaning,” he said.

Following the intervention of the Presidency, the CBN Governor, in October, said that the apex bank had commenced a re-validation exercise to ascertain complaints of manufacturers and importers over foreign exchange claims worth $2.4 billion.UPDATES: SEE HOW GUYS ARE USING LATEST iPHONE 16 Pro Max TO SCAN LADIES AND GET THEIR N4KED BODY. SEE HOW THEY ARE DOING

Speaking at a special summit dinner organised by the Nigerian Economic Summit Group in Abuja, Cardoso said the CBN had finalised its first stage of verification and is currently going through a second stage to authenticate claims by manufacturers...Tap To Read The Full Story Here.