Early Mor-Mor Reflection on the State of Nigeria’s Productive Economy
It is no news that Nigeria’s problem is multi-faceted, there are a plethora of articles written about them in the public space, however this early mor mor reflection is not one of them, I am only trying to explain the economic process of how things are going to get better, so forgive me in advance if I am not all gloomy.
Two days ago, I woke up to a good news; that “NNPC crashes price of diesel to 175 naira across the Nation” that is a whooping 42% , do you know what that means for the economy?
One of the indicators that would reflect the drop in inflation rate in the NBS report for the month of June would be the fall in Diesel price which is not unconnected to the stabilized foreign exchange rate that has helped in reducing the price of goods — albeit mostly imported — Nigeria’s market would always capture the cost of doing business at the black market rate which was as at last year 516 naira to a dollar and now 370 naira to a dollar on the average, I don’t want to talk about how we got into this mess because honestly, I am tired of talking about it.
CBN’s recent foreign exchange policies reflects a conscious efforts by the government to reduce the cost diesel and gas which also reflects the reduction in cost — albeit marginal — of household living standards which had torpedoed over time.
Some people in some quarters are saying that they’d prefer petrol prices come down instead of the new drop in diesel prices, while I predict pms prices falling this fall, I disagree with the premise of choosing reduction in pms price over diesel price just because Nigerians consume more pms.
I mean seriously guys, no matter how much petrol we use in our homes, diesel has more impact on the productive sector of the economy, why? Because that is what most factories use.
Diesel is a major factor in the cost of production for most manufacturers — diesel and gas actually — I was discussing with a twitter follower yesterday who is into bakery, he expressed his delight in the reduction in cost of gas too, when I asked if it reflects on the price of the bread he sells, he said YES.
As at yesterday June 19, 2017, We confirmed that the price of a 12.5 kg gas has dropped from N5000 to N3,800 when we went on a fact finding mission at NIPCO Jabi, Abuja.
While penning this piece, another twitter user confirmed that she bought 20kg gas for 4,500 naira in popc filling station Lafia, Nassarawa State, “it was 7,500 naira for months” she added.
The cost of the products — like bread — in the local market is determined by the cost of energy and the cost of energy is captured in the cost of gas and diesel, it would excite NBS that those items are coming down in terms of prices, we look forward to NBS statistics in July.
What we should also be excited about is the new strategy in form of government policy applied to the power sector; Maximum users (Factories) can directly negotiate with the generating companies within their neighborhood, this means they can buy from GENCOs rather than DISCOs. It is actually cheaper than generating your own power via loud generators that uses diesel.
As for Inflation, I think it would drop by atleast 1% month on month, as evident in last month inflation rate which dropped to 0.99% according to the NBS report.
Nigerians always say that if things go up they never come down but things are coming down, for the first time, gas went to as high as 5,500 for an average home cooking gas, but now it’s between 3,500–3,800 naira within a year, this shows that some policies put in place are actually working, we only need to be less cynical.
Nigeria’s economy has always been predicated and oiled by imports; Nigeria is a curious case to be carefully studied by future economists, why is it that we tend to spend more on imports during oil boom instead of spending on diversification, it is really a curious case and I hope sometime in the future I would find closure.
People tend to forget quickly and I tend to want to remind them that the current situation Nigeria found herself was caused by both leaders and followers, when we begin to take politics serious, it would reflect in our choices of leaders and the level of our participation.