Analysts have predicted that the year 2023 will be tough for businesses and households as the Federal Government seems to be ready to take the bull by the horns as it prepares to implement stringent economic measures.
In 2023, Nigerians expect to see sustained cost-push factors, including a planned fuel subsidy removal, new electricity tariffs and additional taxes, alongside legacy issues, such as increased debt service burden and exchange rate conversion.
Inflation is also to remain structurally high as it currently stands at 21.47 percent as of November 2022.
Segun Owoeye, a phone accessories and gadget devices retailer, said the high inflation rate has hit his business badly.
According to him, the volatility in the country’s foreign exchange market has worsened business.
“I have to check the current dollar rate before giving customers the price of any item,” he noted.
Owoeye explained that customers have been complaining bitterly about the surge in prices. He would have to explain the dollar situation in the country to them.
However, it is no more news that the Muhammadu Buhari administration has been grumbling that the current subsidy regime is no longer feasible going forward and the die will eventually be cast this 2023 and the subsidy on petrol will eventually be removed.
Analysts believe that once the Federal Government hands off from the fuel subsidy, the commodity might be selling for three times more.
This, they said, will leave Nigerians with the simple arithmetic of how that will impact the prices of food, goods and services – and above all – standard of living.
“This is simple arithmetic. All you need to do is to use the current market prices to forecast what will happen when the official high price of fuel takes off”, said Stephen Iloba, a Lagos-based economist.
In support of subsidy removal, former NUPENG Secretary General, Mr. Frank Kokori, said it can no longer continue.
He said, “I will tell you that Nigerians have abused it for so many years. It is because of that, that Nigeria is now almost bankrupt. It is no longer a thing that the country can uphold any longer, unlike in my time. These days, Nigeria has changed.
“Sadly, now in Warri and environs, fuel sells between N230 and N250. It is that bad; so you can imagine how much people in the South-East and the North will be buying fuel. Even in Abuja, I learnt that fuel is being sold at N300. So, I know that they will one day remove the subsidy on fuel.
“But what we are saying is: let there be transparency in doing that. The removal will affect the common man. They have started feeling it right now because fuel is being sold at N240 – N300. So what is the big deal if the subsidy is removed and the pump price is increased? That will be okay as long as we manage our resources correctly.”
Mr. Mike Osatuyi, the National Operations Controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN), believes that the removal of subsidy on fuel is settled.
“We heard it from President Muhammadu Buhari when he said that it would be done in June 2023. Even Asiwaju Bola Ahmed Tinubu and some other presidential candidates have said they would remove subsidies on petroleum products if they win. So, that is now sacrosanct,” Osatuyi said.
Sam Amadi, a former Chairman of the Nigerian Electricity Regulatory Commission (NERC), said Nigerians may face a harsher economic reality in 2023 as prices of products continue to skyrocket.
According to him, the current prices of premium motor spirit (PMS), popularly called petrol, and other products in the market signal a bleak economy in 2023.
He said, “How many people know that in 2023 Nigerians will experience harsher economic realities?
“People are roasting; petrol sells for N400 per liter in most rural communities. A bottle of groundnut is now N1, 200 from N400 minimum”.
Though the GDP recorded some strong showing in 2022, many analysts believe this was not enough considering the enormity of the macroeconomic headwinds and the numerous fiscal and monetary policy shocks it experienced.
The Chief Executive Officer (CEO) of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the economy recorded fragile growth in 2022 and that more efforts are needed to keep the economy afloat.
He said, “The fragile growth performance was a reflection of the diverse headwinds bedevilling the Nigerian economy. These include macroeconomic instability, shrinking fiscal space, soaring public debt, heightening inflationary pressures, currency depreciation, foreign exchange illiquidity, surging energy cost, weakening purchasing power, legacy structural constraints, lingering insecurity and crippling trade facilitation issues. There were global headwinds triggered by the Russia-Ukraine war and lingering supply chain disruptions created by the COVID-19 pandemic.
“Nigeria’s GDP is valued at over N200 trillion [in nominal terms] as of the third quarter of 2022. It grew by 3.11 percent in the first quarter; 3.54 percent in the second quarter and decelerated to 2.25 percent in the third quarter. The World Bank projected a growth rate of 3.11 percent for 2022 and 2.9 percent in 2023.”
On monetary policy, he said the high cash reserve ratio (CRR) has made it difficult for banks to play their primary role of financial intermediation.
“Their profitability is also adversely impacted because of limited room for credit creation activities. Ways and Means finances of the apex bank pose greater liquidity and inflation risk to the economy than bank deposits. We seek a reduction in CRR so that the banks can be better placed to play their primary role of financial intermediation in the economy”.
He added that the Central Bank of Nigeria (CBN) may likely finance the 2023 budget fiscal deficit given the country’s dwindling revenue performance trajectory just as he said the nation’s debt profile may hit N70 trillion by the end of 2023 if caution is not taken.
Hesuggested thatthegovernment should focus on returns on investment from its assets, especially within the maritime, oil and gas enterprises.
“The 2023 Federal Government budget has further amplified the troubling fiscal outlook for the economy. Expenditure continues to accelerate amid consistent weak revenue performance”.