Nigerians face bleak Christmas over soaring inflation
A market in Nigeria


Nigerians have been warned to brace for a tough time in the new year as the nation’s economy crisis is expected to worsen.

This is the consensus of economic experts, who in their 2023 projections for the nation, warned that the economy will practically shut down in the first half of the year, fueled by several factors, especially the distractions brought about by electioneering campaigns and lull in activities prior to transition of power to newly elected leaders.

Business Hallmark recalled that 2022 was one of the most difficult years for Nigerians on many fronts.

For instance, millions of Nigerians grappled with a mix of economic hardship and worsening insecurity. While inflation, high unemployment rate, low wages, weakened naira and a debilitating fuel crisis, which surfaced towards the end of 2023, drove millions into poverty, worsening insecurity, especially armed insurgency, banditry and the business of kidnapping led to the killing of thousands of Nigerians, with the lucky ones only parting with ransom payments, valued properties and lost limbs.

On December 16, 2022, the National Bureau of Statistics (NBS) acknowledged that Nigeria’s inflation rate rose for the 10th consecutive month to 21.47 percent in November 2022, the highest in 17 years, due mainly to soaring food prices and supply chain disruption caused largely by the activities of bandits and kidnappers that have forced many farmers out of their farms.

The Consumer Price Index (CPI) for December 2022, which is expected to be released later in the week is expected to further rise.

Unfortunately for millions of already battered and wearied Nigerians, the day of redemption is still far away, going by the negative economic outlook for 2023 by experts who warned of tougher days ahead.

An economist, Dr. Deji Togun, in his own submission, said Nigeria’s economy will continue to be in doldrums, at least till after June 2023, as lots of ground will be lost to inactivities in the build up to the February 25 and March 11 general elections and the May 29 handover date.

According to Togun, many public officers will be distracted by electioneering activities to the detriment of project implementation and economic growth, while economic players and businessmen with the much needed funds to reflate the economy will rather wait until June to have an idea of the policy direction of the new administration before making more commitments.

“The present economic situation will worsen before it can get better. As you know, the election period is marked by increased spending by governments in power, from the local, state and federal, and their political parties who will pump more money into the system in an attempt to win over voters.

“In order words, we are going to have an expansionary budget. This excess liquidity in circulation will further elevate inflation figures with more money chasing limited amounts of goods”, the economist warned.

Business Hallmark recalled that President Muhammadu Bihari had on January 3, signed the 2023 Budget of N21.83trillion along with the 2022 Supplementary Appropriation Bill into law. The 2023 budget is an increase of N1.32 trillion over the initial proposal of N20.5 trillion.

Speaking during the budget signing ceremony, the president said his administration would speed up critical infrastructure projects nationwide as the countdown to May 29 handover date draws near.

Some political analysts who spoke on the huge funds voted to completing critical infrastructures such as the 2nd Niger Bride, the Lagos-Ibadan Expressway and the Oyo-Ogbomosho-Ilorin Expressway, agreed that the government hoped to gain huge political mileage by completing some of its iconic projects before handing over power on May 29.

In his own submission, political economist, Prof. Pat Utomi, warned that the current inflationary trend and high unemployment will be sustained in 2023.

Utomi, who is the founder of the Centre for Values in Leadership (CVL), disclosed that the 2023 budget recently passed into law by President Buhari will lead to massive inflation, loss of jobs and collapse of the naira.

“This budget will lead to loss of jobs, massive inflation. It will lead to a collapse of the exchange rate. The reasons are very simple, this is a budget of debt service.

“What is the goal of the Buhari administration, he says he wants to create 100 million jobs in ten years and I ask, can this budget create jobs?

“They project revenue of N9trillion and expenditure of N21 trillion. You are already in an unsustainable debt situation. This doesn’t make any sense to anyone who understands economics.

“If it were a situation where people are rushing in to invest in Nigeria, you would say revenues from taxes that flow in would accelerate production. There is an optimal rate of trying to collect taxes when people don’t invest.

“Nigeria already suffers from a problem, a situation described by Forbes Magazine in 2019 as Africa’s money losing machine. Typically, nobody wants to invest and money has been leaving Nigeria.

“I absolutely blame Buhari’s government for the economic woes we are going through. What they have done in the last eight years has not worked.

“The biggest problem of the government is ways and means from the Central Bank and currently, 2,900 per cent in printed money from the Central Bank without equivalent value”.

Utomi, while describing the management of economy as not people friendly, not job creation sensitive, and not economic growth oriented, maintained that the government had become too bloated.

“The problem I have is with the civil service and this is why it is important to rebuild the civil service.

“In the early days of this administration, nobody was managing the fiscal policy, then the Central Bank started managing both fiscal and monetary policy, and it went overboard going above its own limit”, Utomi declared.

Also speaking, the International Monetary Fund (IMF), in its just released World Economic Outlook, warned that at least 31 of the 72 world economies forming a third of the global community may enter recession this year due to rising inflation and energy crisis.

The bank’s Managing Director, Kristalina Georgieva, while speaking on the 2023 IMF prediction, said: “For much of the global economy, 2023 is going to be a tough year as the main engines of global growth – the US, Europe and China – all experience weakening activity.

“The new year is going to be tougher than the year we leave behind. Why? Because the three big economies – the US, EU and China – are all slowing down simultaneously.

“We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like a recession for hundreds of millions of people”, she noted

Though, the IMF boss excluded Nigeria from the list of countries that its economy will enter recession in 2023, she, however, warned that it’s GDP will contract sharply from 3.6% in 2021, 3.2% in 2020 to 3.0% in 2023.

“This is far ahead of South Africa whose economic growth will drop from 2.1% in 2022 to 1.1% this year”, the IMF stated.

In its New Year statement on the economy, the Lagos Chamber of Commerce and Industry (LCCI), warned that the manufacturing sector would be severally hit in 2023.

It projected that the sector’s contribution to Nigeria’s Gross Domestic Product (GDP) may fall from the 8.2% recorded in the third quarter of 2022 unless the government intervenes in the sector.

LCCI’s Director-General, Chinyere Almona, therefore called on the government to save manufacturing from decline by offering it financial support and improving the operating environment.

LCCI identified factors that will drive the major economic indicators as rising inflation, tight monetary policies, an unstable currency, foreign exchange scarcity and debt burden.

It also noted that currency management, food supply disruptions, exchange rate volatility, and election spending would also influence the economy in 2023.

The chamber projected that the CBN may further review upward the current interest rate of 16.5% upward during its Monetary Policy Committee meeting in January to 17 per cent in an attempt to slow down spiralling inflation.

However, it warned that interest rate adjustment alone would not tame the rising inflation.

“In other to achieve that, factors such as food supply disruptions, high energy cost, scarcity of forex and the security challenges around agricultural production locations, which triggered low production and high logistics cost must be addressed”.

The LCCI also advised Nigerians to brace up for the shocks expected from the planned removal of fuel subsidy by the incoming administration.

“If the new administration removes fuel subsidy, there will be some shocks to the economy in the short term with the possibility of adjusted pricing and demand in response to market forces in the long run”, it stated.

Meanwhile, the year won’t be all gloom for Nigerians in the as the Managing Partner and Chief Executive Officer, Comercio Partners Asset Management, Tosin Osunkoya, predicted that inflation will begin to moderate as the year progress.

According to Osunkoya, there would be moderation of inflationary trends and forex scarcity which were the major challenges to the economy and Nigerians in 2022.

“I think 2023 is going to be an interesting year. I think inflation will begin to moderate. I think moving into the first quarter of 2023, we will peak inflation and will begin to see moderation for two reasons.

“One reason will be that the base effect will come into play. Then energy prices and food prices will begin to moderate. I think that there are nuances between Russia and Ukraine trying to soft pedal. I think it was last week that Ukraine sent another shipment of grains into Europe. So, I think we would begin to see that moderation coming into 2023.

“I also think that the U.S. government will begin to taper the incessant hike in interest rate. Consequently, you will see asset prices beginning to move up.

“The local equities in Nigeria will pick up and I will tell you why. You have an interest rate on our government securities in double digit right now, between 14 and 15%, so the banks technically will benefit from that.

“Secondly, because of the redesigning of the currency and after the announcement, some of the money that was outside banking circulation. has come into the banks. That means the deposit of banks will go up. When the deposits of banks go up and it is a rising interest environment, it accounts for some reward for the banks.

“So, I see the banks’ earnings moving up as well. And when the banks’ earnings move, the movement in the banking sector will filter into FMCG or into Oil and Gas.

“I see Nigerian equities doing well in terms of earnings. I see Q1 2023 numbers doing better, I see Q2 showing better numbers as well. When that happens, you will see the capital market moving up because of the good numbers coming out of Q1 and Q2.

“You might see the fixed income market easing up in terms of yields because of the liquidity we are experiencing in Q1.

“We will see trillions of liquidity coming in Q1, and you will see those monies going after the bond market. And when the bond market goes down, people will naturally move into the equities market. So, I see the equities market doing well in the first two quarters of 2023.

“In terms of exchange rate, as we move towards the election, there will be the parallel market trending towards N800/$, I hope it does not break at N800/$. But it is not going to stay there as there is going to be a retracement because it is a one-off event, there is no real demand backing it up.

“Consequently, after the election, I think it is going to come down depending on what the FG or the CBN decides to do, I think there is going to be a retracement. Most of what will happen will be driven by speculators”, Osunkoya noted.

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