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No substitute to boosting productivity in managing inflation – Chizea

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Why I didn’t become CBN deputy governor - Chizea

Economist and business development consultant, Dr. Boniface Chizea, has stressed the need for Nigeria’s monetary and fiscal authorities to direct their policy steps towards encouraging productivity, saying that is the only sure way to rein in the nation’s rising inflation. 

Although the headline inflation decelerated to 32.14 per cent in August from 33.4 per cent in July, the second consecutive monthly decline after 19 months of persistent increases, the drop has been attributed to seasonal decline in the rate of increase in the average prices of food crops, as a result of produce harvests..

Since the inception of the administration of President Bola Tinubu, Nigerians have had to grapple with all-time highs of inflation and naira volatility, no thanks to the removal of petrol subsidy and exchange rate unification.

In response to the rising fuel costs, the Nigerian National Petroleum Company Limited (NNPCL) announced a fresh hike on Wednesday, increasing the price of petrol again in one month to N1030 per litre from N898 per litre.

The development saw the naira weaken significantly, closing at N1625.13 per dollar on Wednesday, compared to N1561.76 exchanged on Tuesday, according to data from FMDQ.

Chizea, who spoke with Business Hallmark’s team in an exclusive interview, argued that while the policy decisions (subsidy removal and naira floatation) were wrong considering the realities of the time, measures being adopted by the government to tackle the effects have compounded the situation with no end in sight.

Tinubu had in his inaugural speech on plans for the economy said: “On the economy, we target a higher gross domestic products (GDP) growth and to significantly reduce unemployment.

“We intend to accomplish this by taking the following steps: First, budgetary reform stimulating the economy without engendering inflation will be instituted. Second, industrial policy will utilize the full range of fiscal measures to promote domestic manufacturing and lessen import dependency.

“Third, electricity will become more accessible and affordable to businesses and homes alike. Power generation should nearly double and transmission and distribution networks improved. We will encourage states to develop local sources as well.”

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However, Chizea said, ‘’anything you do beside the fact that you must be productive, you must earn the dollars, you’re papering  the surface. ”

The Chief Executive Officer, ‎BIC Consultancy Services, regretted that Nigeria missed the opportunity of taking the Dangote Refinery as a low-hanging fruit to end her lingering energy crisis.

He said; “When these things were happening I did some writings and I said to them, yes, there’s problem with subsidy; there’s embedded corruption in the subsidy process. People were taking advantage of the subsidy to take the product across the borders. So, the subsidy you were trying to do within the economy was being taken elsewhere. We have all these problems.

‘’But if you remove subsidy the way we did it, that’s one of the things that can make inflation escalate in Nigeria and, in fact, in any environment.  Because once you did that, the effect it has will run completely through the entire system.

“What we should have done, instead of doing that…at that time we kept on shouting that we have Dangote Refinery, it was like a low-hanging fruit. What Tinubu and Co. should have done, when they came in was to have put all efforts concentrated, focus on that to remove whatever obstacles it was encountering.

“But, of course, what is coming out now is conflict of interest. That’s exactly what is coming out. That’s why all the refineries we have in this country are not producing. And we’re spending so much money on recurrent expenditure – paying salaries, paying all sorts of things, and we’re not producing. ‘’

While describing persistent interest rate hikes by the Central Bank of Nigeria (CBN) as an attempt to attract portfolio investments, Chizea lambasted the fiscal authorities whom he said are confused, with policy thrust not aligning with the fight against inflation.

”So the CBN doesn’t have option. What it is trying to do is to attract portfolio investors. Since we’re not as attractive, we’re not a beautiful bride; they’re trying to hike the thing so speculators, who have hot money and looking for where to put it will bring the money. But that money is not money, it’s not patient money. It’s not money that will come and you put in stocks. That is what they’re trying to do.’, he said.

“’Their core mandate is price stability, and price stability is about exchange rate. But overall, price stability should be inflation, because that’s what measures the rate of change, increase in price in an economy. So they (CBN) should be concerned about it.”

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Speaking further, he said: ”Fiscal authority is confused. They caused all this problem, in the sense that even in trying to float the exchange rate, I know that if Tinubu said no to Cardoso, he would not do it. It’s not anything new, we’ve tried it several times and it has failed. We’ve been trying it calling it all sorts of names, and we’ve not tried anything new.

‘”If we’re saying we have inflation, to what extent does their own policy thrust align with or show some sensitivity to the fact that we’re trying to manage inflation? They’re not doing it. Look at the deficits. One of the things they (fiscal authorities) should do if you’re trying to manage inflation is to reduce deficit. Because deficit is that you’re borrowing money, while good house-keeping is that you’re keeping a close tab on your money.’’

He lamented the hike in electricity tariff, which he said is crippling businesses and households.

‘’And you look at so many things – you look at electricity, now you have B and A, Band B, and so on. Businesses have closed, because of that singular measure. Some businesses cannot cope.

”Suddenly you find out that you’re paying a bill of about N500, 000, some even up to N5 million. Even at the individual level, people are complaining – those who’re on Band A properly. You do N50,000, before 10 days the thing is gone.”’

President Tinubu has borrowed $6.45 billion from the World Bank in just 16 months, according to a document on the global lender’s website. The amount increased to the new figure following the recent approval of three new loans totaling $1.57bn from the World Bank for various projects in Nigeria and is expected to increase further in the coming months.

Nigeria’s public debt stock currently stands at N121 trillion comprising a domestic debt of N65.6 trillion and a foreign debt portfolio of $42.1 billion or N56 trillion, according to the Debt Management Office (DMO).

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