Michael Jackson’s moonwalk was one of his most memorable performances. Watching how his feet kept moving forward even as his body went backward was fascinating. This illusion is visible outside of the realm of dance as well. It is no longer news that Nigeria’s economy is sliding down, and the level of misery is increasing daily. The new government grapples with how to halt the slide, but their approach seems more reactionary or, at best, can be described as a moonwalk. Workers’ wages have been eroded, the naira devalued, manufacturing suffers, and a sense of hopelessness is prevalent, prompting many with means to seek better opportunities elsewhere. While conditions do not appear as bad as in some other countries, the Nigeria misery index may rise further if caution is not exercised. The misery index, which measures how well off a country’s citizens are economically, reached 55.2 percent in February 2023, according to National Bureau of Statistics (NBS) data. Some newspaper headlines already report more Nigerians becoming mentally unstable as the cost of living skyrockets. So, the government has a massive task to reverse the trend.
The government appear to have good intentions and has demonstrated some willingness to address issues. Many ideas and points of view have been expressed. The truth is that all of the opinions expressed are valid. However, when dealing with multivariate problems like ours, you must prioritize critical variables. Export is beneficial, production is fantastic, and self-sufficiency is wonderful. However, these are concerns for the medium to long term. In the short term, the economic system requires stability, and monetary policy is a powerful tool for achieving that stability.
Controlling the exchange rate requires increasing the supply of dollars. To realize this, the government has to combat crude oil theft head-on and criminalize the dollarization of the economy. With the CBN reporting that over N2.7 trillion naira is in circulation, managing inflation will be problematic. Hence, the CBN should reintroduce the cashless initiative promptly and efficiently with the eNaira integrated into the public and government payment system. While short-term monetary stability is achieved, the government can simultaneously develop medium-term and long-term fiscal strategies.
Short-term, low-hanging fiscal moves that the government can make include increasing the minimum wage, providing a tax break or lowering tax rates, such as reducing the PAYE tax on employees, which will serve as a direct palliative. Reduced VAT and WHT on specific services and goods for a limited time will improve businesses’ cash flow. Giving some income tax concession to corporations will also benefit employers of labour significantly. The government cannot have its cake and eat it too. You cannot have a high revenue goal while simultaneously removing subsidies, floating exchange rates, increasing import duties, and VAT. The economic engine is bound to grind to a halt.
The government should think outside the box. Even if IMF recommendations are laudable, contextualizing them will help the country’s competitiveness. The government can raise short-term funds by leasing illegal mining sites to foreign investors and selling moribund assets. Another unconventional approach is engaging Nigerian businessmen and women who have benefited from government contracts to show solidarity by contributing to the nation’s treasury for national reconstruction. Instead of wasting time and resources in court, the government can enter a plea bargain with those accused of looting the treasury to recover as much money as possible and then draw a line in the sand. It’s a carrot-and-stick strategy.
Suppose our current reserve of about $33 billion can increase to $60 billion, along with a good debt restructuring. In that case, the government can defend the naira and invest in productive capacities for export and infrastructure.
Finally, the government must spearhead genuine anti-corruption crusades and cost-cutting initiatives. The president should effectively coordinate all government policies with key performance metrics that are transparent and clear to the public.
