The economy and other matters arising

Chairman and President of the Dangote Group, Aliko Dangote, has of late been consistent in his lamentations on the state of the economy. The latest being his observation that the close to 30 per cent (26.25) Monetary Policy Rate fixed by the Central Bank of Nigeria (CBN), at its last Monetary Policy Committee meeting, is too high for local businesses to prosper.

At a three-day policy summit on manufacturing organised by Manufacturers Association of Nigeria (MAN), last week, Dangote decried the economic policies and unfriendly environment under which manufacturers operate, not just in Nigeria, but across underdeveloped economies where governments are busy taking dictations from global policy and monetary bodies.

This time, Dangote refused to be diplomatic when in the preamble of his address he fired this volley: “Nobody can create jobs with an interest rate of 30 per cent. No growth will happen. No power, no prosperity. No affordable financing, no growth, no development.”

Those were forceful and weighty remarks that should not be ignored by political authorities and policy makers. In the job market, the real numbers have been lost since the rebasing of unemployment data, which moved from 33.3 per cent to around 5 per cent. The reality is that the labour market is bursting, with thousands of jobs lost to closures and exit of big-time conglomerates. Those that managed to stay back are grappling with high costs.

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

Before then, the industrialist had attributed 2023 losses in manufacturing to impact of ongoing economic reforms. He lamented: “the biggest mess created was the devaluation of the naira from N460 to N1,400. You can see that almost 97 per cent of companies in the food and beverage business, none of them will pay dividends this year. But we will try and get out of it.” His conglomerate, Nigeria’s largest reported N164 billion FX losses last financial year.

These challenges in manufacturing are not peculiar to one player; they are a reflection of the state of the economy.But when told by a Dangote, the message echoes itself because the man is at the centre of it all, together with millions of Nigerians across different value chains. Since coming on board of the Tinubu Presidency, citizens have lived with diverse pains delivered through excruciating economic reforms.

The unit price of cement has settled around N8,000, depending on the location. Prices of other building materials have similarly jumped, such that investing in the housing sector is a no-go area for many citizens. The multiplier impact on rents is huge for township and city dwellers.

Prices of petroleum products are too high. The Dangote Refinery that was expected to lower the burden has reported difficulties in the hands of IOCs and local collaborators, who would not sell crude at reasonable prices. If Dangote imports crude at the rate of N1,484 to the dollar, it says, there’s no way prices of refined products would be cheaper than they are now. Average retail price of diesel is N1,200 per litre. Add that to the new electricity tariff approved by government, it is difficult for manufacturers, big and small to produce and sell at affordable prices.

For logistics, the situation is tough for everyone who manages an automobile. Routine maintenance is now three times more than the cost two years ago. For big haulage companies, this is a major drain. Prices of lubes and spare parts have jumped three, four times. No thanks to high import duties and sundry levies. The roads are rough, making wear and tear a recurrent experience. Then there are multiple taxes.

So, when big-time players whine, they do so willy-nilly, on behalf of hapless and unheard citizens who are at the receiving end of the racketeering economy. Hopefully, this government will listen and review the trial-and-error efforts of the last one year. The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, initially blamed the poor performance of the naira in the FX market on activities of politicians who mop up dollars for health and education tourism overseas.

He later targeted currency speculators, whose nefarious activities, he alleged, pushed the naira to the worrisome depth it sunk six months ago. The CBN the applied number of instruments to upset their activities. Little respite was achieved. Later, Cardoso said government’s palliative economy (rice, beans and garri sharing) was also fueling for high inflation.

Unconcerned, government has continued to share palliatives without measurable positive impact on the economy. A renewed palliative grant of N50,000 to one million people to alleviate economic hardship is the latest. The Minister of Industry, Trade and Investment, Doris Uzoka-Anite, made this disclosure at the end of June, assuring that almost four million people had already applied, even before the grant was announced.

It is not clear the methods used to disseminate notice of this particular grant for citizens to apply. As far as the minister is concerned, four million applicants have shown interest and only one million of them will get the grant. Nothing is said of the remaining one hundred and thirty-two million multi-dimensionally poor Nigerians.

It is hoped there are sufficient guardrails this time, to avert a replica of the simmering corruption disaster at the Humanitarian and Poverty Alleviation Ministry. It is hoped the CBN is monitoring these disbursements that have no “repayment obligations”, in case they may have inflationary impact in the market.
Now that the private sector players have spoken, that the economy is not working and the policies are unrealistic, it is hoped that the government will listen and review their partnership with the World Bank and the International Monetary Fund (IMF).

The World Bank is of the strong opinion that local refineries are not profitable in Nigeria. They may be profitable in other countries from where NNPCL imports costly fuels, but not here. The failure to get local refineries working since this government came on board is thus suspect.

Three times, this government promised to resume local refining. They have failed three times and have now issued a fourth timeline of January 2025. The Vice Chairman, Downstream Committee of the Senate, Jide Ipinsagba, made the promise last week, claiming that the retrofitting of the Kaduna, Warri and Port Harcourt refineries were at completion stage. Completion stage never ends. Everything seems to fit well into the Dangote oil mafia theory.

Here is what Dangote told manufacturers as well as government: “In every economic regime, including the most advanced, investment projects in manufacturing and industrial sectors need time and a conducive environment for them to mature, build capacity and scale, to become competitive against those in older and more mature markets.

“But since the mid-1980s, non-industrialised countries and their leaders have been discouraged from protecting and supporting such investment and are forced to expose them to unfair competition from stronger, older competitors in their own internal market, even before the newcomers are commissioned. Yet, these same older/bigger players are well supported in their own home markets.

“We must look to leading countries in the West and East who are actively protecting their domestic industries. We must similarly enact policies to protect our domestic industries and nurture them into homegrown champions that will create the jobs and prosperity we desperately need.”

Last week, apparently tired of lamentations from outside, President Tinubu finally inaugurated the 31-member Presidential Economic Coordination Council, three months after it was named in March. The council has Dangote; UBA chairman, Tony Elumelu; BUA Founder, Abdulsamad Rabiu and other notable players in and out of government, as members.

The promise is that very soon, the economy will experience accelerated turn-around, with the council now in place. As desirable as this intervention is, some fear that undue influence by private sector monopolies could yield more profit in their pockets and a further pauperisation of citizens. That fear is supported by the fact that this government is not known to defend the poor. That will be some argument for another day.

Meanwhile, a report by Reuters last week, indicated a looming fuel crisis over a certain $6 billion debt. According to the story, Nigeria’s debt to petrol suppliers had surpassed thresholds acceptable to suppliers’ creditors, just as NNPCL is struggling to absorb the difference between fixed pump prices and the reality of international market prices. The implication is that government is paying fuel subsidy, expected to cost around $3.7 billion this year. Government and NNPCL continue to live in denial.

Let citizens not be surprised that government is still romancing 2023 Supplementary Budget (N2.1 trillion), at a time lawmakers should be gathering materials for 2025 budget.

That 2023 Supplementary Appropriation was approved for urgent intervention in defence and security; critical infrastructure in Works and Housing, FCT and wage award to Federal Workers and cash transfers. Government has since pocketed more than enough revenue to put that budget to a close.

Whatever they’re doing now is abracadabra.In the absence of critical intervention by the National Assembly, citizens must be vigilant. In the days when there was a modicum of self-restraint in the Senate, the Appropriation Committee chair was yielded to the opposition, at least, to create a semblance of probity. The was before they invented total state capture.

Lest we forget: The Lagos University Teaching Hospital (LUTH, CMUL), was severed from public electricity supply by Eko Electric, because of N252 million debt. Is LUTH a profit-making venture? The University of Benin was shut last week,due to protests over electricity bills. The university is charged between N200-280 million monthly. Absurd.

There’s fire on the mountain. This government must wake up!

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