2024 Was A Disaster, Govt Must Get Policies Right In 2025 – Economist, Onunaku

The year 2024 rained hardship on Nigerians, including the rich and the poor. There was no food on the table for most families. Widespread hunger, high cost of transportation, costly medicare and pharmaceutical products and inflation were the order of the day in the ended year.

President Tinubu during his first media chat with selected journalists, said his policies were needed to put the nation on the growth part.

Acknowledging the extent of hardship in the country, Tinubu disclosed that his friends who has Royce Rolls has dropped the cars.

Naija News spoke with an Associate Professor, Financial Expert, Business Economist and Strategic Management Expert, Dr. Fabian Philip Onunaku, on the nation’s economy in 2024, Central Bank of Nigeria’s (CBN) policies, 2025 budget and New Year’s economic prospects, and policies the government can take to reduce hardship faced by the citizens.

The Policies That Marred 2024

Onunaku said President Tinubu’s subsidy removal, floating of the naira currency without strategically understanding the effects of such policies and putting in place cushions were responsible for the hardships of 2024.

Though the policies were taken in 2023, Onunaku explained that such policies were ill-timed as the nation was not a producing country. He noted that devaluation of the currency would be an advantage to any country if the country is more export-dependent than import-dependent.

His words: “Economically, 2024 has been a particularly difficult year for a majority of Nigerians, especially for a country with a shrunken middle class, where most of the wealth is concentrated in the hands of the top 2 percent of the population.

“Although, one could argue that the country had been on a gradual economic decline before 2024, but things seemed to take a turn for the worse with the sudden removal of the petroleum subsidy in May 2023 and the switch to a floating foreign exchange rate system.

“For a country that is largely import dependent, the floating of the naira was a disaster. Ordinarily, a cheaper currency would make your goods more attractive to foreigners, but it is common knowledge that our industrial sector is almost comatose. We are practically a one-commodity export economy, with approximately 80 percent of our foreign exchange earnings coming from crude oil.

“The sudden removal of the subsidy, even though many knew that the program was greatly flawed, led to astronomical increases in the price of petroleum products. For a country with an epileptic power supply, where businesses, both small and large, generate their own electricity, this created a domino effect on the general level of prices, with an inflation rate that is close to 40 percent.

“With incessant flooding and widespread insecurity across the land, we can no longer feed ourselves without food imports. Again, anything that is imported has become substantially more expensive with the depreciation of the naira. This is why we have record food inflation.

“When you look at all these points together, it is easier to understand why Nigerians are complaining of hunger and why we are seeing increased incidents of stampedes at palliative distribution points and the resultant and unfortunate deaths, all out of desperation to survive.

“To put things in perspective, the new minimum wage of N70,000 cannot buy a 50kg bag of rice and you know that folks cannot eat just rice alone. People resort to buying smaller portions and for families with children, these don’t last. There is a lot of hunger and suffering in the land. People are really very desperate.”

The 2025 Budget, What Hope Is In It?

Onunaku sees the 2025 budget promises as one that may not birth the expected hope Nigerians yearn for. He highlighted the challenges of the budget including debt servicing, the reliance on crude oil, the crude oil theft and the inability to meet the Organization of Petroleum Exporting Countries (OPEC)’s quota and OPEC’s politics.

His words: “Do I see any light at the end of the tunnel? I am not even sure that I can see the middle of the tunnel, let alone the end. The 2025 budget, even when discounted for inflation, is a very lofty one at approximately ₦48 Trillion, with about 35% of it slated for debt service.

“This deficit budget is based on funding from an estimated revenue stream of N35 trillion and borrowing of about ₦14 trillion. Even with the overhaul of the tax system, I am not sure how we generate ₦35 trillion.

“The government believes it can pump 2.05 million barrels of crude oil per day in 2025, but according to OPEC records, our highest production level in the last two years has been around 1.4 million barrels a day, against our OPEC allotted quota of 1.8 million.

“How do we plan to hit 2.05 million barrels per day when we are unable to meet our current allotment? Let us not forget that we have also pledged a portion of our future productions for payment of foreign loans.

“That leaves us with even less to sell to fund the budget. How well did we do in funding the 2024 budget of ₦28 Trillion? We must also be aware that with any global economic downturn, OPEC will look to prevent any glut in the oil market by reducing production.

“Is it realistic to expect that in such a situation, they would allow us to produce beyond our current quota when other members are taking cuts? Not likely.”

2025 Is Gloomy Unless Something Is Done

Onunaku stressed the need for the economy to be revamped to be manufacturing-centered. He was worried, however, that more resources were allocated to luxury in the 2025 budget rather than to sectors that would stimulate the economy.

He queried why more allocation was given to buying official cars for government personnel amid calls for cutting the cost of governance.

“In terms of what 2025 holds for Nigerians, I don’t want to sound pessimistic, but I don’t see much that encourages me to think otherwise. Ultimately, the solution to our economic problems would be for us to move from a consumption to a production, oriented economy, that is producing more food than we can consume and exporting the rest for foreign exchange earnings.

“We desperately need to revamp and rev up industrial production, but where is the power supply and other aspects of capital formation that will propel us in that direction?

“For the few notable things like automobiles that we produce, we don’t support our local manufacturers. We borrow money from outside and use it to buy imports for government officials and elected representatives, thereby creating jobs in other countries instead of ours.

“There is even more money (₦15Billion) in the new budget for more armored vehicles. Must we buy new vehicles every 4 years? Instead of cutting the cost of governance to match the realities of the day as the president said in his recent media chat, we are pumping more helium to an already bloated bureaucracy.

“When our lowest hanging fruit is crude oil and we can’t even reach it, how do we plan on reaching other things at the upper end of the tree? Tax more and borrow more until we default? Is that the ultimate solution? Only time will tell.”

The Way Forward For Nigeria

With over 30 years of economic development, and fiscal and strategic business management experience across government, manufacturing and industrial business in the United States, Onunaku believes agriculture can turn the fortunes of Nigeria in 2025.

He demanded that the federal and state governments declare a state of emergency on food security. This should be done by addressing with all sincerity all challenges facing farming, including banditry and environmental issues. He called to maximize the potential of the youthful population who are largely unemployed.

His words: “Agricultural productivity is low due to a number of factors such as insecurity, which drives farmers away from their lands and the recent incidents of flooding that have wiped out cultivated farmlands.

“The federal and state governments need to declare an emergency on: (1) insecurity, (2) Agriculture, (3) Flooding. Set up mega farms with appropriate security and cultivate crops that can be harvested in 3 to 6 months.

“You can hire many unemployed graduates and displaced farmers, thereby reducing unemployment and injecting additional disposable income.

“The rainy season is around the corner and nothing is being done to dredge the existing waterways that are connected to the perennial flooding. A big part of the flooding comes from the release of water from the Cameroonian dam.

“When will we declare an emergency on this and complete our own dam for effective flood control whenever Cameroon opens its dam? We have known about this for years, yet nothing gets done about it.”

CBN’s Monetary Policy Cannot Solve Nigeria’s Inflation

As an economist and financial expert, Onunaku said the monetary policy of the Central Bank (CBN) would not be enough to address the country’s economic challenges including inflation.

According to him, under normal circumstances, raising interest rates would be a solution to inflation, but such a policy cannot be effective in addressing Nigeria’s inflation.

This, he said, was because money in circulation was not responsible for the country’s inflation. He called on the CBN to review its policy, noting that it was not encouraging production considering the country’s business environment.

His words: “CBN’s current policy has been focused on tightening the money supply by increasing interest rates. In a normal situation, this is the right thing to do. But, there is nothing normal about the Nigerian situation. One of the reasons given by Emefiele for changing the currency, was that a lot of the money in circulation was outside the banking system.

“So, when you increase the interest rates to commercial banks and they in turn increase rates charged to their customers, it doesn’t have as much effect on inflation because they don’t have control of funds held outside the banking system.

“On the other hand, at a time when the economy really needs a boost, we are reducing the available supply of funds by increasing interest rates. Businesses are already operating in an unfavorable environment of high costs of production with electricity and forex issues at the top of the list.

“I think that high rates of inflation come from two sources. First, food production in the country is below required levels because of the effects of insecurity and flooding. Even in the face of high unemployment, demand for food has exceeded supply leading to higher prices.

“Secondly, our import dependency for intermediate and final goods leads to higher prices when the value of the Naira falls. A one dollar good for which you paid N400 in early 2023 now costs you N1, 650. Will you now resell it for the same 2023 price? The answer is no.

“In an import dependent economy, local price of imported goods will go up whenever your local currency is devalued. It would work in our favor if we were a more product and export oriented country like China. So, a big part of our inflation is tied to our currency depreciation.

“The CBN can help reduce inflation if it can find ways to improve the Naira other than the occasional flooding of the forex market with borrowed dollars. Ultimately, we need to be more productive and export more to increase our foreign exchange earnings. Reduce oil bunkering and export more oil.“