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The withdrawal of fuel subsidies and the revision of the currency rate in the second quarter of 2023—two of the President Bola Ahmed Tinubu government’s major economic policies—caused many people to have an extremely difficult year.
The year in question was difficult for company owners as well as regular Nigerians.
Fuel subsidy removal
Several companies, including Procter & Gamble and GlaxoSmithKline Consumer Nigeria, stated their intention to leave Nigeria in 2023.
The corporations attributed their choices to Nigeria’s economic suffering from the energy crisis, foreign exchange crisis, and various taxation.
This is because, until the Supreme Court intervened, the disastrous cash constraint brought on by adopting Naira’s revised policy started the first quarter of the year on a bad note.
Nevertheless, the sluggish pace of activity in Q1 was also influenced by the general elections held in February and March.
As a result, according to Q1 GDP data from the National Bureau of Statistics, Nigeria’s Gross Domestic Product growth decreased to 2.31 percent in the first quarter of 2023 from 3.52 percent in the fourth quarter of 2022.
The fact that Nigeria’s unemployment rate rose from 4.1% in Q1 2023 to 4.2% in Q2 2023 was one of the problems.
The latter three quarters of 2023 saw a delayed effect from the elimination of gasoline subsidies and the unification of currency rates.
“Fuel Subsidy is gone,” Tinubu declared during his swearing-in speech on May 29, 2023, setting a precedent for the elimination of gasoline subsidies.
The implementation of the policy begins on June 1, 2023. As a result, the price of fuel at the pump increased from N198 to N617 per litre.
The cost of food, transportation, goods, and services increased as a result on a national level.
According to the consumer price index published by the National Bureau of Statistics, inflation increased from 22.41 percent in May 2023 to 28.20 percent in November.
The development caused the cost of living to soar by over 100% in the year under review, including housing rent and school tuition.
The nation’s economy changed dramatically over the last three quarters, going from fragile in the first to maybe the worst.
Throughout the year, the inflation rate, which is a key measure of the well-being of the populace, increased without ever declining.
The National Bureau of Statistics states that in November 2023, the Consumer Price Index reached a high of 28.20 percent, an increase of 6.38 percent. By implication, the cost of living doubled and became unbearable for many Nigerians in the year under review.
Exchange Rate Reform
Naira floating, or the unification of the foreign exchange market is another policy development that impacted 2023.
On June 14, the Nigerian Central Bank instructed commercial banks to permit Naira to be freely exchanged on outside markets.
The move further depreciated the Naira, which in May was worth N461.5/$1, weakening it by at least 49% in the last six months to N907.11 per US dollar.
Consequently, the cost of products and services skyrocketed.
It follows that over the assessment period, the costs of electronics, pharmaceuticals, wheat, minerals, JetA1 fuel, and other consumer goods increased by at least 50%.
Not everything for Nigeria was bleak. Nigerians faced severe economic hardship in 2023, but Tinunu’s audacious measures increased government revenue.
The elimination of fuel subsidies resulted in an increase in revenue to the federation account in the latter half of 2023.
The Nigerian government earned N907.05 billion in June, N966.110 billion in July, N1.1 trillion in August, N903.48 billion in September, N906.955 billion in October, and N1.783 trillion in November 2023, according to DAILY POST.
In 2023, the nation’s financial industry also saw growth.
In 2023, the Nigerian Exchange Limited has grown by 45.90 percent so far this year.
FG’s effort to cushion the impact of hardship on Nigerians
President Tinubu’s administration approved an N35,000 temporary wage increase, a 100 billion naira compressed natural gas bus rollout program, N25,000 cash transfers to 15 million vulnerable Nigerians, and the distribution of N5 billion to state governments as palliative measures in October in an effort to lessen the effects of the economic hardship.
The impact on Nigerians’ lives has persisted despite the government’s band-aid solutions and the detrimental effects of the elimination of fuel subsidies.
Financial analysts, however, believe that 2024 will be a better year for Nigerians.
Speaking to DAILY POST in an interview on the review of Nigeria’s economy in 2023, the CEO of SD & D Capital Management, Mr Idakolo Gbolade said more Nigerians were pushed into poverty during the review period.
According to him, Nigerians struggled to survive the negative impact of fuel subsidy removal and foreign exchange rate policy.
“The economy of 2023 was very challenging. Apart from the fact that it was a transition year, the fuel subsidy removal and exchange rate policy added serious pressure to inflation and caused food inflation to rise through the roof.
“The CBN monetary policies of the past governor also helped to make the economy tighter, which led to serious pressure on various sectors of the economy because the constant increase of interest rates did not help tame inflation.
“Due to government policies, there was an increase in the number of Nigerians thrown into poverty, and purchasing power continually weakened, which caused many people to just manage themselves during the yuletide season.
“There was a sharp rise in the cost of living, and this affected housing both rent and outright purchase. Although the removal of fuel subsidy and exchange rate policy increased government revenue in the second half of the year, it has not resulted in a positive impact on the people, especially through the state governments,” he said.
Also, Prof Godwin Oyedokun, a don at the Lead City University in Ibadan told DAILY POST that Nigerians experienced challenging times in 2023.
He noted that the biggest loss in 2023 was the erosion of people’s disposable income due to the rising cost of essential goods and services.
According to him, “In 2023, Nigeria’s economy faced significant challenges in several key areas. The country has experienced high inflation rates, fuel and food price hikes, transportation difficulties, energy shortages, fluctuating foreign exchange rates, and increasing housing costs.
“These issues have put immense pressure on the average Nigerian citizen, causing financial strain and diminishing their purchasing power.
“One of the major losses in 2023 has been the erosion of the people’s disposable income due to the rising cost of essential goods and services.
“The average Nigerian has had to spend a significant portion of their earnings on fuel, food, and transportation expenses, leaving less money for other needs and investments.
“Moreover, the energy crisis has negatively impacted businesses, reducing productivity and job losses.
“Industries heavily reliant on consistent power supply, such as manufacturing and technology, have struggled to operate efficiently.”
Meanwhile, a renowned economist and former President and Chairman of the Council of Chartered Institute of Bankers, Prof Segun Ajibola, said President Tinubu, in the last quarter of 2023, made bold attempts to challenge the status quo.
He described the twin policies of fuel subsidy removal and unification of exchange rates as desirable for the long-term good of the country’s economy.
According to him, radical economic policies attract immediate pain.
“Things may get worse before getting better”, he said, adding that, “the year ushered in a peaceful transition from one political leadership to the other at the national level, though within the same party.”
“The change brought in several radical reform policies, bold attempts at challenging the status quo. Indeed, feasting where angels had feared to tread.
“The policies on removal of fuel subsidy, unification of exchange rates though desirable for the long term good of the economy, came with some immediate pains, occasioned by rising inflation and cost of living.
“The good aspect of the policies is seen in the fight against economic rent seekers, currency speculators and other vampires.
“Policies capable of attracting foreign investments are noticeable. National and sub-national governments are also seen battling poverty, disease and squalor through palliatives and other measures.
“The unintended consequences of some of the policies are profound, as food inflation, cost of doing business, infrastructures and landing cost of imported items are getting out of reach of an average Nigerian. Ordinarily, radical economic measures impose immediate pains. Things may get worse before getting better”, he told DAILY POST.
Nigeria’s economic prospects in 2024
2024 portends a lot of potential for Nigeria’s economy. With President Tinubu signing the N28.7 trillion budget into law on Monday, with a projected Gross Domestic Product at 3.88 per cent, the Government had set the baseline for the country’s economic recovery.
Earlier, Tinubu, in his New Year message, had assured Nigerians that worse times don’t last.
The President promised constant power supply and food security, boosting foreign direct investment, restarting local refining of petroleum products and implementing key priority areas in the 2024 budget.
According to Gbolade, if the Government faithfully implements its promises, 2024 will be a great year for Nigerians.
“The Government of President Tinubu made some policy pronouncements like declaring a state of emergency in agriculture, provision of loans to various sectors and SME, provision of welfare to the extremely poor and elderly and wage awards for Federal government workers, which some states have emulated.
“The Government also proposed provisions for CNG buses, conversion kits from petrol engines to gas at subsidized rates and starting work for the usage of electric vehicles in the country.
“These policies, if properly implemented, will shape how the economy will fare in 2024.
“In 2024, the economy can slowly start recovering, and inflation could slow down before the year’s first half.
“More economic activities occasioned by the provision of single-digit interest rates loan facilities to various sectors and SMEs will stimulate the economy, and the coming on board of Dangote refinery, Port Harcourt refinery and other private refineries providing refined petroleum products would also affect the economy positively in 2024”, he said.
Ajibola believes the challenge for 2024 will be for the government to adequately implement its proposed promises to impact ordinary people’s lives.
“The challenge for 2024 is for the government to implement the policies on the ground properly, transparently coordinate them and pursue accountability for optimum results.
“Policies that will stem inflation, strengthen the Naira, eliminate economic wastes, ensure food security, assure the security of lives and properties, provide a more investment-friendly atmosphere, and reduce importation of refined petroleum products and other essentials in favour of local production are required both in quantity and quality in 2024.
“The 2024 fiscal budget seems to contain several desirable policies awaiting faithful implementation. The overall expectation in 2024 is improved living conditions of the citizenry”, he noted.
Oyedokun, on his part, said Nigeria’s economic prospects will remain uncertain in 2024.
“Looking ahead to 2024, Nigeria’s economic prospects remain uncertain.
“The Government needs to implement comprehensive policies to tackle inflation, promote agricultural productivity, and diversify the economy beyond oil dependency.
“Creating an enabling environment for businesses to thrive and attract foreign investments will also be crucial.
“However, the success of future economic developments heavily depends on factors like political stability, effective governance, and the ability to manage external shocks.
“Ultimately, if these challenges are addressed properly, Nigeria has the potential to bounce back and achieve sustainable economic growth in 2024,” he further told DAILY POST.