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Nigeria’s Economic Future is at Stake as President Tinubu Responds to the Crisis

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By Oludare Mayowa

In the wake of the COVID-19 pandemic three years ago, Nigeria, like the rest of the world, faced unprecedented challenges that threatened the very fabric of humanity. The global aftermath of the pandemic has led to a surge in remote working, now considered the new normal in many parts of the world.

However, Nigeria’s recent transition from former President Muhammadu Buhari to President Bola Tinubu’s administration has been marked by the removal of fuel subsidies and the abolishment of multiple foreign exchange markets.

The implementation of these policy reforms has resulted in soaring petrol prices and a rapid depreciation of the local currency, causing acute hardship and threatening the essentials of daily living for many Nigerians.

Tempers are being raised among the populace as a result of the rising cost of living and the devaluation of every strata of society as a result of the impact of the economic policy of this administration.

As of Tuesday, the country experienced a fresh adjustment in pump prices for fuel, with prices rising from around N500 per liter to N568 per liter in Lagos and N617 a liter in Abuja, the federal capital.

The devaluation of the naira, trading at around N830 to the dollar on the parallel market and N742.93 to the greenback on the official market, is widely seen as a major contributor to the recent fuel price hikes.

The deregulation of the downstream oil sector necessitates sourcing foreign exchange for refined product imports, putting significant pressure on the local currency and leading to further depreciation.

One major expectation was that the commissioning of the Dangote Petrochemical Refinery by the previous administration would have alleviated the impact of exchange rate costs, freight, and customs duties on fuel pricing. However, despite the commissioning, the refinery is not yet ready for production, and sources suggest that fuel flow may not begin until the first quarter of the following year.

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Additionally, government refineries in Port Harcourt, which have been under refurbishment for the past two years, remain incomplete, leaving no hope for revamping the plants in Kaduna and Warri, which could have eased the pressure on imports and distribution of finished products.

Consequently, Nigeria remains heavily reliant on imported petroleum products, resulting in fluctuating prices tied to exchange rates, international crude oil prices, and the impact of corruption within regulatory agencies.

The volume of gasoline consumed locally has dropped significantly, from around 65–70 million liters per day before the reforms to approximately 46 million liters, indicating a possible exaggeration of local consumption facilitated by subsidy payments that bred corruption in the value chain.

As Nigerians adjust to the new normal, many have begun reducing their activities, particularly travel for work or social purposes, and adopting remote working to mitigate transportation costs. Some companies have implemented rotating office schedules, with staff working from the office three times a week.

The surge in fuel prices has also led to higher costs of goods and services, contributing to soaring inflation rates and a decline in the standard of living for many Nigerians. Nigeria’s headline inflation soar to 22.79 percent in June relative to May 2023 headline inflation rate which was 22.41 percent

While the government attempted to provide palliatives to cushion the impact of its actions, many Nigerians view the proposed conditional cash transfer of N8,000 to 12 million vulnerable citizens with skepticism, fearing potential mismanagement and corruption.

Experts have criticized the government’s hasty approach to reforms, urging a return to the drawing board for a comprehensive review and a more measured and adaptable strategy.

Retracing steps and adopting successful processes from the past could help stabilize the forex market and address the challenges caused by the removal of subsidies and forex deregulation.

With Nigeria’s potential at stake, President Tinubu faces mounting pressure to mitigate the hardships endured by the population by reducing the cost of governance and implementing effective measures to alleviate economic challenges.

Time is of the essence, and the future of the nation rests on the decisions made to navigate these complex economic waters.

(omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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