Nigeria is facing a severe economic crisis, marked by high inflation and rising costs of living, prompting the Nigeria Labour Congress (NLC) to organize nationwide protests for government action. A significant rise in petrol prices, following the removal of fuel subsidies by President Bola Tinubu, has led to increased costs across various sectors, further straining Nigerians’ finances. The price of rice, a staple food, has more than doubled, highlighting the extent of the hardship faced by the population.
Merits of the Current Economic Policies:
- The end of fuel subsidies is expected to free up funds for other critical sectors like health and education, potentially strengthening Nigeria’s economy in the long run.
- The decision to let the market determine the naira’s value could lead to a more stable and realistic exchange rate, attracting foreign investment.
- Government initiatives to control food prices and distribute grains aim to directly address the immediate needs of the most vulnerable populations.
Demerits of the Current Economic Policies:
- The sharp increase in petrol prices has had a domino effect, raising the cost of goods and services across the board and deepening the economic hardship for many Nigerians.
- The devaluation of the naira has made imports more expensive, contributing to inflation and further reducing the purchasing power of ordinary citizens.
- Despite government measures to alleviate suffering, the effectiveness of food distribution and economic relief programs has been questioned, with many Nigerians still struggling to meet basic needs.
In summary, while Nigeria’s economic reforms aim to address long-term structural issues, their immediate impact has significantly increased the cost of living, leading to widespread protests and calls for more effective government intervention to alleviate the current hardship.
It has two sharp edges.
Commercial banks will raise savings and fixed deposit rates in response to an increase in the CBN rate, which will draw in more savers who will be committed to 12-month or longer terms.
This will decrease the amount of money that can be spent inadvertently, which will lower demand for numerous things. A decreasing number of individuals will purchase the products of dealers and producers as they wait to take advantage of customers with low prices. They will have to lower prices as their warehouses fill up with unsold merchandise, which will contribute to a decrease in inflation.
The government will be able to issue bonds at rates that will appeal to international investors if interest rates rise. The nation will receive more funds.
The unfortunate news is that
Banks will raise their lending rates in tandem with CBN’s interest rate hike, which is expected to have the following effects:
An increasing number of companies that rely on bank loans may fire employees or perhaps shut down
2. Less money will be invested since companies cannot thrive on loan rates between 33% and 35%.
3. More suffering for the economy as a whole.
Regretfully, the CBN would have to keep raising interest rates due to the quantity of money generated by Mr. Buhari’s administration in order to absorb surplus liquidity and rein in inflation.
In times of crisis, overseeing a sizable economy is like playing a complex game of chess. There are several possible drawbacks for each positive action. Usually, there aren’t any simple answers.
Regretfully for lawmakers, the public expects answers immediately, or else they dabaru everything and even want a cheesy coup.
The general population has little interest in and comprehension of economic theory.