Analyst proffer strategies as Tinubu’s policies push millions into poverty

Sopuruchi Onwuka

Hopes of reprieve from the new administration of President Bola Tinubu take deeper dive as his early economic measures trigger inflation, stifle earning opportunities and erode values from existing wealth.

Since the new government came into effect on May 29, a string of rash economic policies and mindless reforms has fired up price of transportation fuel and triggered galloping inflation in the country. The shrinking effect on existing wealth has left citizens sinking deeper into abject poverty.

The situation is exacerbated by the reforms in the nation’s monetary policy, resulting in the free fall of the Naira after the new government pulled all artificial wedges maintained by the Central Bank of Nigeria (CBN) across a decade to buoy the value of the local currency.  

With the sudden withdrawal of fuel subsidy and devaluation of the Naira, pressure on the value of goods and services has been enormous. From high energy cost, consequent transportation costs through jumps in grocery prices and astronomical rise in the prices of imported goods; the pull on inflation triggers have been sudden and strong. And the value erosion on the Naira has left individuals and businesses counting permanent losses.

According to data from the National Bureau of Statistics, Nigeria’s annual inflation rate accelerated for a sixth month to 22.79% in June 2023, the highest since September of 2005. Expectedly, the biggest upward contribution came from cost of food and non-alcoholic beverages; including oil and fat, bread and cereals, fish, potatoes, yam, fruits, meat, vegetable, milk, cheese.

Compared to the previous month, the consumer price index, or CPI, also soared 2.1%; the biggest jump since May 2016, statistics showed.

And despite the controversial removal of Godwin Emefiele as the CBN Governor, the apex bank has been forced to raise interest rate to 18.75% at the end of July, 2023.

Early this week, the National Social Safety-Net Coordinating Office (NASSCO) disclosed that a total of 15.7 million households of over 60 million individuals in the country have officially registered in the National Social Registry of poor and economically insecure families.

The National Social Registry (NSR) is an aggregated database of all State social registers, and serves as an information system containing data on poor and economically insecure households collected by respective states.

According to NASSCO, the social registries can serve as a credible gateway to select beneficiaries for immediate support especially as government makes efforts to provide fuel subsidy palliatives to households.

President Tinubu is barely months in office but he inherited a country under crushing poverty crisis from his party ally and political benefactor, former President Muhammadu Buhari, whose consumption policies fed from massive borrowing.

Before the highly contested and robustly discredited February presidential elections that brought in President Tinubu, Nigeria was sitting shamelessly at the base of global prosperity ladder, taking the dishonor of the world poverty capital with the highest number of the abject poor on the planet.

A 2022 Multidimensional Poverty Index Survey jointly released by the National Bureau of Statistics (NBS), along with the National Social Safety-Nets Coordinating Office (NASSCO), the United Nations Development Programme (UNDP), the United Nations Children’s Fund (UNICEF), and the Oxford Poverty and Human Development Initiative (OPHI), had indicated that over 130 million Nigerians were living in multidimensional poverty, a figure representing 63 per cent of the entire population.

According to the survey, over 50 per cent of children across the country are affected by poverty.

The report added that the poverty index is mostly domiciled in rural areas, especially in the north with women and children being the most affected.

Statistician-General of the Federation, Mr Adeyemi Adeniran, said the multidimensional poverty index survey reveals that the 133 million people multi-dimensionally poor experience over one-quarter of all possible deprivations.

The report added that significant 86 million people or 65% of the poor live in the North, while nearly 47 million or 35% of the poor live in the South. Poverty levels across States vary significantly, with the incidence of multidimensional poverty ranging from a low of 27% in Ondo to a high of 91% in Sokoto.

The United Nations through its Humanitarian Coordinator for Nigeria, Mr. Matthias Schmale, stated on the UN website that over 4.3 million Nigerians in the North East region, including; Borno, Adamawa and Yobe states are facing severe hunger and malnutrition.

He explained that princely $1.3 billion in humanitarian funding needed to save some 700,000 children under five from the risk of life-threatening severe acute malnutrition.

“Soaring food prices, fuel and fertilisers have exacerbated the crisis, and the response remains severely underfunded,” he further noted.

Latest World Bank estimates show that Nigeria’s inflation is to reach 25% with the removal of petrol subsidy; and the UN declares that 4.3 million Nigerians ‘particularly in the North East region of the country’ face severe hunger and various forms of malnutrition.

“The removal of the petrol subsidy is anticipated to cause one-time impact on prices, primarily affecting petrol purchases for transportation, power generation, and certain services,” the World Bank stated.

The Oracle Today quotes the Managing Director of Seplat Energy PLc, Mr Roger Brown, as saying that petrol accounts for over 25,000 megawatts (MW) of self electricity generation by homes and small businesses in the country.

The assertion which has been corroborated by the organized private sector deflates the official argument that petrol subsidy benefitted only the ultra-wealthy that parade fleets of high performance cars. And with petrol prices jumping from N195 to N600 per liter, impact on homes and small businesses can be crushing.

With homes and businesses struggling with cost crises, the resulting spate of public outcry is now forcing the hands of government to give back what it has taken: proposing a cash gratuity programme that analysts condemn as another inflation trigger. It would be recalled that free cash distribution as against creation of jobs was the biggest blunder by the erstwhile Buhari administration whose cash grants did not translate to any economic stimulus.

The Tinubu administration has, in response to the cost crises it generated, declared a state of emergency to tackle rising prices and associated hunger. The strategy entails providing farmers with fertilizers and seeds to subsidize food production and also create a national strategic food reserve to guarantee supply of cereals and other foodstuffs. But these measures will take years before yielding palpable reliefs in retail markets.

Like his predecessor, Tinubu proposes cash transfer scheme that would put some N48,000 or $60 in the hands poor Nigerians across six months in compensation for removing fuel subsidy and consequently triggering higher energy cost.

But analysts decry the moves by President Tinubu as disingenuous! Pumping free cash into the market would only worsen inflation, they argue.

The Executive Director of Hobark International Limited, Dr Emmanuel Okoroafor, told The Oracle Today that taming inflation is the only direction for the Nigerian economy under the present economic predicament.

Dr Okoroafor who holds various teaching and research positions in universities in the UK and France made it clear that the greatest task facing the new government of the country is to arrest galloping inflation.

He expressed scare at the continuation of cash distribution to vulnerable citizens, a measure, he noted, that runs in direct contrast with withdrawal of various social benefits including the controversial fuel subsidy.

Dr Okoroafor warns that the proposed wage increase for public servants and cash transfers to millions of people would exacerbate already galloping inflation and further erode the value of the Naira against major international currencies.

The Oracle Today reports that the official exchange rate for the Naira has deteriorated from about N460 for the benchmark dollar to about N800 since Tinubu assumed the office of the president.

In emphasizing the urgent need to bring down inflation, Dr Okoroafor urged the government to work hard to restore the value of the Naira and make the demand for wage increase unnecessary. He said Nigeria could copy from the UK where the central bank was currently battling living cost crisis by controlling inflation.

“So, a good leadership should have the responsibility to control the economy in such a manner that salaries would solve family problems; and low income earners are empowered to take family responsibilities.

“Right now in the UK, inflation is getting bad, people are suffering and there is crisis all over the place. People are now asking for higher salaries because inflation is catching up with wages. But if you give higher salaries, inflation will respond to that. So the UK central bank is trying to bring down inflation, not pay higher wages. That would be a sustainable way to restore value to the wages of teachers, miners, railway workers and make them stop asking for more money.”

He said Nigeria could evolve its own strategies in managing the existing crisis associated with rising cost of living. The most reliable and sustainable measure, according to him, would be to restore value on the Naira and not to pump out more.