The recorded
growth in inflation rate, as even acknowledged by market men and women, came as
a result of reactions of the market to the relationship between the Naira rate
and the United States dollar. The market is reacting to the fact that the rate
at which Naira can buy one dollar has significantly increased from about N176
to over N197 per U.S. dollar in the official foreign exchange market. The
variation in the parallel market is even much higher at over N300 per U.S.
dollar. It is not even a surprise that the impact of the rise has been
witnessed more in food and household items – one reason Nigeria must begin to
focus on food sufficiency and export of surpluses.
Nigeria,
being an import-dependent country, prices in the open market are expected to
rise as a result of market reaction to the exchange rate of the local currency
against those of international trading partners. However, whether one buys
foreign or locally made good, because all are buying from the same market and
expect to replenish stock at ruling market prices, increase in prices is
expected when exchange rates go against the local currency.
Indeed,
given the variance between the official and parallel market rates of naira to
the U.S. dollar, it is fair to acknowledge that the reported rate of inflation
is very moderate, having increased by only 176 basis points. There is no doubt
that this rise followed the official exchange rate status. If the parallel
market rate in the country was used as the basis for the measurement, the rate
of increase would have been much higher.
What has
happened or is happening is instructive and it is hoped that good enough
lessons can be drawn from it. First, it confirms that Nigerians’ high
dependence on foreign goods and services is very unhealthy for economic
stability, growth and sustainability. Nigeria’s business relationships with
other countries have consequences for the economy and society. Second, once
again, it draws attention to the need for self-dependence and self-sufficiency,
at least in food, to prevent exogenously induced economic shocks. Third, policy
frameworks, irrespective of how robust they may be, can be defiled by market
expectations of, and reactions by economic agents. It is, therefore, not a
surprise that, despite the Central Bank of Nigeria’s price and exchange rate
stabilising policies and activities, prices rose in February alone by 176 basis
points, thus returning the country to double-digit inflation rate which was
last witnessed in December, 2012.
The
Muhammadu Buhari administration, and indeed, all Nigerians, should appreciate
that a major problem is at hand and join hands together not only to work
against further increases in the rate of inflation but a return to single digit
inflation rate. This is very important if the declining rate of economic and
social progress must be decelerated for all Nigerians to find credible reasons
to hope for a better tomorrow.
There are
ways out, if only the government would see solving the problem as a priority
and act quickly. The approach that will produce the fastest beneficial results
is getting all Nigerians that should be economically active to be productive.
The current very high unemployment rate in the country is unacceptable as it
weighs adversely on the productive capacity of the nation. If all able-bodied
Nigerians can be made to be gainfully employed and be proud in their
engagements, the level of production – goods and services – and productivity
will rise. Subject to the areas where the energies are directed, the country
can realise enough goods and services meant for domestic market to curtail
importation and exports even to earn the needed foreign exchange for the
rebuilding and sustenance of the nation’s foreign reserve.
Government,
in this regard, must find innovative and exciting ways to cause the vast
unproductive land capital to be productive. This can be started by making it
easy and highly rewarding for the populace to engage in the exploitation of
land resources. As had variously been pointed out, no one can beat properly
made, supervised and monitored investment in agriculture.
Unfortunately,
when emphasis is laid on the importance of agriculture as a redeemer to the
recessing Nigerian economy, many look back to the days of cutlasses and hoes as
the operational agricultural tools and equipment. They look at peasant farming.
No! What is being canvassed is contemporary, modern and hi-tech mechanised
agriculture, where nothing produced is wasted and even seemingly waste outputs
become the input for other valuable goods, an agricultural value chain for both
raw materials and value added finished products. Nigeria should be looking at
kick-starting industrialisation afresh with what it has abundantly but has
sidelined over the years. With dormant and unproductive land many resourceful
and idle hands that today run into several millions across the country
appropriately harnessed, empowered and deployed, outstanding contributions to
productivity will follow.
Government
should start by developing a peoples’ economic agenda with practicable
operational or implementation framework. That is, the agenda must be built
around the self-determined needs of the people so that they can take ownership
of ensuring realisation of the intended objectives. To attain such agenda will
require a bottom-top approach beginning with all the local governments being
required to come up with their economic development plans. State governments
collate, fine-tune the outcomes from their local governments and produce state
economic development agenda. All the states will submit their agenda to the
Federal Government, which collates, fine-tunes and harmonises the issues
nationwide. It is imperative that what is unique to each state is retained for
the state. The harmonised position at the federal level becomes the national
economic agenda. This then should be implemented, across the length and breadth
of the country, under an easy-to-understand practicable framework, with
in-built performance milestones, measurement criteria, monitoring and feedback systems.
To make it more manageable, the agenda can be crafted to focus on short, medium
and long-term deliverables.
Besides
using this approach to enlist the citizens as de facto owners and drivers of
the agenda, the government should recognise and address the needs of human
capacity building and reorientation. It should also quickly address the
recurring progress – obstructing issues of inadequate and non-functional
infrastructure as well as ensure that monetary and fiscal policies have
supportive handshake towards the realisation of the citizens’ economic agenda.
The outcome
from such citizens developed, owned and implemented agenda, will not only
enhance productivity and cause inflation rate to trend downwards, it will also
impact positively on other economic and social indices, including foreign
exchange rate, interest rate and unemployment rate. (Guardian)
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