Nigeria’s Reform Transfers Wealth to Government –Review
Wealth is shifting base from the private sector to the government due to ongoing reforms across the markets. Due to subsidy removal, the three tiers of government have been able to increase their revenue sharing.
The allocation was even increased further due to exchange rate gains, according to latest report from the Federal Account Allocation Committee (FAAC) where about N1.5 trillion was shared among states and federal and local government councils.
On the other hand, private sector players are groaning with rising inflation, foreign exchange losses and higher energy costs which have reduced production capabilities. Large numbers of small and medium-scale businesses are scaling back while governments increase budgets.
True reform should be holistic, experts said while reacting to changing market dynamics as the Nigerian government continue to make certain adjustments to drive the local economy albeit without consideration on how to reduce high governance costs.
Recall that in June 2023, President Bola Ahmed Tinubu launched twin reforms which in actual sense affected Nigerians without means more than the one percentile.
The decision to remove fuel subsidies has worsened the cost and standard of living of people. Then, the pain was garnished with a devaluation of the local currency, the naira.
Though a slew of experts across walks of life lauds the President’s move, some critics believe the decision to devalue the naira has no economic relations with those without a need for the dollar.
Since then, the naira has not recovered, and the effects of reduced purchasing power have eclipsed the nation’s economic strength. Key indicators have plunged to worst level ever seen in the history of the country.
Like individuals, companies are struggling with rising costs of production and low volume sales. Across the markets, inflation has sent price stability a great that such that Apex Bank is again expected to increase interest rates.
“Nigerian elites have ways to hedge their exposure than normal citizens who barely survive on $2 per day”, analysts said. Recently, the Nigerian senate demanded to buy land cruisers worth #160m each. They also claim to prefer foreign automobiles to local ones.
Speaking about this, a member of the upper chamber justified the need for bullets Proof auto on the ground that Nigerian roads are bad.
To analysts, Tinubu’s economic reform is one-sided until governance cost is brought into the forefront.
“There has been no economic reform really and truly…what we have is merely a selective approach to getting things right for the government”, a research analyst at LSintelligence associates said.
The government must review its spending to show seriousness about getting the economy on track.
The latest data from the statistics office showed that Nigeria’s economic growth slowed down to 2.74%. In 2022, gross domestic product increased by 3.1%. A year later, it dropped behind despite a series of economic politics which analysts believe has not had effects
The outlook for Nigeria’s economic prosperity has become dicey given low spending across the nation. Inflation and exchange rates have tempered productive activities and could drive a hammer through the projected economic growth for 2024.
Post impacts of petroleum subsidies removal and naira devaluation hurt people on the street more than Nigerian elites, MarketForces Africa gathered. One side can still afford to live right. On the other hand, those in a multi-dimensionally poor category are finding living unbearable’.
By consensus, experts believe a reduction in governance costs will do the nation good in terms of fiscal performance. In their respective outlook, investment banking firms are positive about government policies. However, this has driven the nail through the heart of individuals and companies operating in the country.
If the reform is anything to reckon with in good faith, it has to be holistic, an economist said in a chat with MarketForces Africa. Government policies that reduce citizens’ prosperity, and standard of living in exchange of higher allocation to states, FG and local government are noted to be a negative redistribution of wealth.
Analysts guide that the economy is unlikely to achieve target growth until there’s improvement in key macros, especially job creation. #Nigeria’s Reform Transfers Wealth to Government –Review
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