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2022 outlook: Experts want economy revamped, citizens’ welfare prioritised

By Geoff Iyatse, Assistant Business Editor (Lagos), Collins Olayinka, Joseph Chibueze and Anthony Otaru (Abuja)
02 January 2022   |   4:30 am
The Nigeria Labour Congress (NLC), yesterday, insisted that its opposition to the pending removal of fuel subsidy is rooted in ideological dispositions with emphasis on what it termed...

President of Nigeria Labour Congress (NLC), Ayuba Wabba

Why We Insist On Strike – Labour
The Nigeria Labour Congress (NLC), yesterday, insisted that its opposition to the pending removal of fuel subsidy is rooted in ideological dispositions with emphasis on what it termed “deceit and duplicity associated with the politics of petrol price increase by successive Nigerian governments.” 

The labour union, in its New Year message to Nigerian workers, also decried “missed opportunities and haemorrhaging of potential revenue occasioned by the government’s dismal handling of the current negative narrative in the downstream petroleum sub-sector.”

In the statement signed by its president, Ayuba Wabba, the NLC specifically faulted the renege of the agreement with the government in September 2020, that any further increase in pump price should be shelved until both (government and labour) undertake a review of the state of local refineries among others.

According to the labour union, the perennial increase in pump price is a transfer of government failure and inability to effectively govern the country, and queried why the government cannot rein in smuggling and empirically determine the quantity of petrol consumed in the country. 
What angered the union most was the failure of the Buhari-led government to successfully refurbish any of the ailing four refineries nearly seven years after assuming office, while also revealing that a technical committee set up by the government was designed to fail ab initio. 
The NLC said: “As we all know, the work of the technical committee, like our abandoned public refineries, has grounded to a halt and further negotiations with government adjourned sine die for nearly one year now. As a responsible social partner, we have at different times called on the government to show us what they are doing in response to our demands but silence is the response we get.” 
The NLC alleged that having spent a humongous $9.5b on Turn Around Maintenance (TAM) and other interventions between 2012 and 2021, the country has nothing to show for it.
“The tragedy is that despite these humongous investments of public funds, the government continues to present the crisis of mass importation of refined petroleum products into Nigeria and the consequent import-based pricing regime of refined petroleum products as a fait accompli,” it added. 

The labour union insisted that the country must regain its capacity to locally refine petroleum products, adding that there is no need for sugarcoating the inability of Nigeria to refine crude oil locally after 70 years of exploring the black gold. 
It added: “There is no explaining away through disingenuous PowerPoint presentations, procured rallies and over-rehashed publicity in the media, the simple fact that as a major oil-producing country in the world and after nearly seventy years of oil exploration in Nigeria, our country cannot deliver on efficient and effective public petroleum refineries. Nothing dents the image of Nigeria and presents us as a country incapable of providing governance as the failed narratives in our downstream petroleum sub-sector.” 
It lamented the country’s inability to harness the advantages and multiplier effect of local refining of petroleum products.
“Unfortunately, the comparative advantage that the government has failed to see as a strategic business opportunity, private investors such as the Dangote Group has seen, and has moved mountains and valleys to syndicate finance from institutional lenders to establish one of the largest petrochemical refineries in the world in Lekki – Lagos State,” the union stated while reiterating its determination to go ahead with its planned nationwide protests slated for January 27.
“The protest has been scheduled to take place in all the 36 states of the federation on the 27th of January 2022. The protest in the state would culminate in the submission of protest letters to the 36 state governors. Subsequently, on the 1st of February 2022, there would be a national protest to be held in the Federal Capital Territory. We urge Nigerian workers and people to dust their sneakers and fully participate in the peaceful protests and rallies aimed at salvaging our economic future,” it stated.

The NLC, which held that the Petroleum Industry Act (PIA) does not sufficiently address the deficits of governance, oversight, investment, environmental integrity, local beneficiation and the use of petroleum resources to advance the cause of the ordinary Nigerian worker and citizen, therefore called on the two chambers of the National Assembly to immediately commence the process of reviewing the Act to reflect the aspirations of Nigerian workers and people.

On the implementation of the national minimum wage, the union, which named Zamfara, Taraba, Kogi, Benue, Cross River as states that are not implementing the lawfully legislative framework, hinted that in the South East, the Imo and Abia state governments remain thorns in workers’ flesh, saying apart from refusing to fully implement the national minimum wage and consequential salary increase, they have also been promoting clandestine and rogue labour leaders unknown to the labour movement.

MEANWHILE, renowned economists are of the view that the country’s economic performance in 2022 will be largely dependent on key issues prominent among which, is the full implementation of the 2022 budget recently signed into law by President Muhammadu Buhari.

They also maintain that focus on rapid infrastructure development and improved security would contribute immensely in making the year a great one for the country.

A professor of economics at the Nassarawa State University, Lafia, Prof. Uche Uwaleke, in an interview with The Guardian, stressed that while the full implementation of budget will be of immense benefit to the economy, the huge budget deficit and borrowing component will likely exert pressure on inflation and exchange rates. He added that exchange rate challenge would likely manifest more in the second half of 2022 as 2023 politicking take centre stage.

Uwaleke noted that in order to rein in inflation, as well as reduce pressure on the forex market, the CBN would likely tighten the monetary policy by raising the monetary policy rate, a development that would further increase the cost of borrowing and reduce access to credit by businesses. “When this happens, banks are likely to reprise their credit facilities, which may worsen the position of non-performing loans in the banking sector.

The Chief Executive Officer of Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, in his 2022 Economic Outlook sent to The Guardian, said he expects that the average oil price in 2022 will exceed the budgeted benchmark of $62 per barrel, offering some fiscal headroom.  According to him, “This would be powered by higher energy demand driven by the recovery of economic activities globally. This trajectory is expected to impact our foreign reserve and strengthen the capacity of the Central Bank of Nigeria (CBN) to support the foreign exchange market.  “The service sector of the Nigerian economy will continue to outpace the real sector in 2022.

In the third quarter of 2021, service sector contribution to GDP was 50 per cent and the growth of the sector was 8.41per cent, oil sector contribution to GDP was 7.5%, the non-oil sector contribution was 92.5per cent, while the industrial sector growth contracted by 1.63 per cent, and agriculture grew by 1.2per cent.”  He said the reason for this was that the service sector is less vulnerable to structural constraints bedevilling the economy, particularly the real sector. The infrastructure demand in the services sector is much less than that of the real sector of the economy, he said.  On the downside risks to the economy in 2022, Yusuf said the seemingly intractable problem of insecurity remains a significant risk to the economy and the impact on some sectors, especially the agricultural sector will be profound.   He said there are also concerns about the effect on the perception of Nigeria as an investment destination and implications for Nigeria country risk rating.  

“Monetary and foreign exchange policy rigidities may also pose a risk to the growth outlook as there are no indications of any significant shift in monetary and foreign exchange policy stance in the near term. Consequently, the distortions inherent in the foreign exchange market will persist in 2022,” he said.  The CPPE boss, who said that the aggressive drive for revenue by agencies of government would mount enormous pressure on investors in 2022, noted that beyond the regular tax authorities, other agencies of government may become more aggressive in their revenue drive. This will constitute an additional burden to investors…But investors have a responsibility to construct their business and corporate strategies to manage the inherent risks,” he said.  

ON his part, Partner/Chief Economist, PwC Nigeria, Andrew Nevin said: “We want to see the GDP grow faster than population growth. We know it has been below population growth for about seven years now. From the PwC’s perspective, the actual numbers don’t capture the true size of the economy. We all know that more than 50 per cent of the economy is not all captured in the official statistics.”  He said that the GDP is growing faster and larger than people think. “So, we believe that the NBS is going to rebase the economy in 2022 or 2023.

When we rebased the economy about a decade ago, it was larger. Countries like South Africa just did a rebase and declared it 11 per cent larger. And, I think if the economy is rebased, it could get significantly larger perhaps 20 or 25 per cent.”So with that, I am optimistic that the economy will get better and better, but I don’t want to give a growth rate against an efficient GDP that’s already a suspect.” Another professor of economics, Sheriffdeen Tella, however, lamented deepening insecurity, unemployment, inflation and poverty, adding that the “seeming incompetence in economic management creates fears that 2022, despite being a campaign and consequent show off by ruling party that they can manage the economy, maybe worse off for the citizens.   

“Unless the government changes its mind on the pronounced hike in taxes, fuel prices and electricity tariffs but focuses on assisting income generation by productive sectors, which will eventually improve employment and revenue to the government, things might worsen,” Tella, a diehard advocate of social welfare, told The Guardian.  Reflecting on the previous year, he noted: “We started on high hopes that effects of COVID would subside early and our economy would pick up with the rest of the world. The global economy truly improved fairly well but we failed to move along due to high debt service that took virtually all our revenue from external sources leaving little or nothing for development but dragging us into more debts.

The exchange rate devaluation and further depreciation made import of raw materials expensive and difficult with negative effects on industrial output and capacity utilisation… Education and health sectors witnessed huge waste of man-hours due to strikes and threats of strikes, which culminated in low productivity.” Against all odds, a member of the Monetary Policy Committee (MPC) and professor of economics at the University of Ibadan, Adeola Adenikinju, said that the country might rise above its challenge this year, adding that the international oil market and intra-party activities are key indicators to watch out for.   He linked the modest growth recorded last year to global recovery, rising oil prices and domestic policies, including interventions by the Central bank of Nigeria (CBN), which he described as “very useful.”     

The professor, however, said the projected annualised growth rate of about 2.8 per cent was not enough to stimulate the desired economic development. He is counting on the medium-term economic development plan, which is to be partly driven by the private sector, to trigger the next phase of growth.   He said continued intervention in key sectors of the economy would continue to support the positive growth trajectory, calling for urgent a check of infrastructure, insecurity and subsidy and sovereign debt to aid fiscal stability.