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In his bold move to build a $1trillion economy, President Bola Tinubu has indeed taken some tough and unpalatable decisions in his almost two-year old administration. These decisions include the removal of fuel subsidy, the unification of foreign exchange market rates, floating of the naira and the controversial tax reform bills and others.
Some of his policies have, no doubt, led to rise in transportation costs, high petroleum products prices, rising cost of food items, services and high cost of living. His government has witnessed two major protests, the August 2024 hunger protest and the October 2024 #End Bad Governance protest. His tax reform bills have attracted strong criticisms. They have been vehemently opposed by many politicians in the North.
Despite the impacts of his reforms on the citizens, including economic hardship, growing hunger and misery, the President is adamant on going on with his reform agenda even though he recognized the pains Nigerians pass through, which he says will be temporary. He said this much during his maiden media chat. The President sees light at the end of the tunnel. He sees hope in the midst of adversity. He sees a brighter future after the gloom. He believes that his reforms will lead Nigerians to the Promised Land.
In spite of the President’s optimism, there are some factors that may vitiate the lofty economic vision, if government fails to address them. These include the unstable power supply, poverty, hunger and food insecurity, unemployment, rising insecurity, unstable currency, foreign exchange scarcity and rising cost of doing business. Ensuring adequate supply of electricity to the manufacturing sector and thousands of SMEs will surely stimulate the economy.
Currently, about 92 million Nigerians do not have access to stable electricity. This is in spite of the billions of dollars injected into the sector by succeeding administrations. The Olusegun Obasanjo regime reportedly pumped about $16 billion into the sector with modest achievement. While Nigeria generates between 3,000MW and 5,000MW of electricity for some years now, Egypt generates 58,818MW, South Africa 42,000MW, and Ghana 7,000MW. Outside Egypt and South Africa, Zambia, Gabon, Botswana, Zimbabwe are said to have affordable electricity. Also, in solar energy generation, Nigeria is also not doing well at 70MW. Instructively, South Africa came first in solar energy generation on the continent with 6,642MW.
Arising from the effects of government’s recent economic policies, there has been volatility in the exchange rate, leading to scarcity of forex. This has particularly been inimical to businesses due to unpredictable value of the naira when placed alongside major foreign currencies, especially the US dollar. With import-dependent economy, the costs of goods and services have risen astronomically. Even the industries, which depend so heavily on imported inputs and machinery, the cost of doing business has been on a steady rise.
Moreover, the hike in electricity tariff has worsened the situation. Since most companies depend on self-powered energy for most of their operations, the rising cost of fuel and diesel has increased their costs of production and by extension the costs of their products. Doing business in a challenged economy such as ours is daunting. The Manufacturers Association of Nigeria (MAN) has predicted that forex scarcity and hike in electricity tariff may lead to the collapse of 40 percent of manufacturing plants across the country.
source: thesun.ng
