This week witnessed a carnival of official economic figures, with the dominant data being the release of Gross Domestic Product (GDP), which the National Bureau of Statistics (NBS) said grew by 3.13%; and the interest rate, which the Central Bank of Nigeria (CBN) retained at 27.5% for the third consecutive time.
In this interview, one of Nigeria’s finest and well-bred economists, Bismarck Rewane, believes that beyond the celebration of statistics, real economic improvement must be felt by ordinary citizens.
What does the retained interest rate mean for the country?
The market was divided. Some felt that it was time to bring down rates by 25 basis points. Many others felt they should retain it. I think the committee did the right thing. But what you must understand is that in the last two years, there have been 10 meetings, they have increased rates six times, they have maintained the status quo three times and reduced it once.
Cumulatively, interest rates have increased by 8.75% and inflation has come down gradually at this time. A very conservative approach. We have 12 wise men now from what used to be 11 members. The 12 wise men have made their decision.
What the central bank governor and the chairman of the committee said was that the inflationary trends did not give them enough comfort to know that we have enough buffers to withstand shocks.
We have a world of uncertainty out there and a world of vulnerabilities in here. So, the safe thing to do, the cautious thing to do, is to maintain your fire, hold your fire and instead of going precipitously to reduce rates and then change all of a sudden.
If you look at it, you will find clearly that inflation is still a hydra-headed beast. The exchange rate has gained 6.6% in two months. It’s trading at ₦1,528. The Naira is stronger in the parallel market than at the official market. That’s the first time it has happened in about 12 years.
Logistics costs are down. The petrol price in the last month has come down by 4.4% to ₦865 per litre and supply chain disruption, flooding in Mokwa and also money supply growth. But this is not yet Uhuru. No, we have to think outside the box.
Let’s take a look at the GDP figures. It showed a higher figure. But you would want to ask why the MPC still retains or keeps that rate?
Very interesting that you say this because firstly, the social media went on overdrive and misquoted me as saying that I said the economy was leaping while it was limping. So, I need to use this opportunity to correct that. Limping is when you grow slowly into recovery, leaping means when you have a leapfrog, and that is not far from it.
Nigeria’s GDP rebase is approximately $250 billion. Nigeria is still the fourth largest economy in Africa behind South Africa, Egypt and Algeria. In the world, it is number 40. The goal before was for Nigeria to be within the top 20 countries in the world. We are now number 40. The income per head in Nigeria is $1,000 compared to South Africa, where it’s $5,000. Our share of global GDP is 0.23% and our share of the global population is 2.9%. This economic growth shows an upward trend.
Well, we still have work to do. And let me make it clear, the goal, as pointed out by the president, is that we should be at $1 trillion by 2030. Today, we are growing at 3.1%. For us to go from $250 billion to $1 trillion, we need to grow at 15%. That’s not going to happen quickly except certain things change.
The Naira has appreciated marginally in the last few months, but anyone would want to know if this is sustainable.
The Naira has gained 8% year to date, but it’s gaining against a weaker dollar. The US dollar has lost 10%. When you look at it against the pound, it has lost 1%. Right? It’s now ₦2,100 to a pound. But the pound is now trading at about 1.34 to the dollar. Against the euro, it has lost 4%. So yes, it’s good, but it could be better. But what is important is that if the price of oil drops below $65 a barrel, then this currency appreciation could be threatened.
Nigeria is playing very safe. They don’t want to do things, and then the markets begin to flip-flop. So, what we’ve earned is a reputation of being cautious, being stable and being consistent and not going with the flow. I think that is what the MPC is trying to maintain. Price stability is a core mandate.
When you look at inflation and how it affects the common man. Last year, in July, a bag of rice was ₦84,000. It’s now ₦87,000. So, it’s up by 3.57% but don’t forget it had gone down. The price of rice had gone down sometime in the last few months, but it started going back up. Look at wheat flour. It was ₦59,500 by this time last year.
Even though the exchange rate has appreciated, it’s sitting at ₦65,000, up 10%. Chicken was ₦4,500 per kilogram. Drumsticks are now up by 22% at ₦5,500. Eggs are up from ₦5,200 to ₦5,500, up 5.7%. Pepper is up 50% from ₦60,000 to ₦90,000. And tomatoes are up by 83%. The only thing that came down is garri; it was ₦46,000 last year. It’s now down to ₦33,000.
Let’s look at the non-food basket. That’s where it gets very interesting. Four items went up and one declined. Road transport from Lagos to Benin was 25,000 naira one-way last year; it’s now ₦28,250.
Even though the price of petrol has come down, petrol was 770 naira per litre this time last year; it’s now ₦865. Lagos to Abuja round trip was ₦152,000 by air last year in July. It’s now ₦200,000, up 31%. Lonart syrup, which is medication, is up by 21%. Lonart syrup was ₦3,800 a bottle this time last year and now ₦4,600. The only thing that came down was cooking gas. It was ₦15,060 last year. It is now ₦11,875. That’s good, but you have to have the food to cook. Right now, you have the gas, but there’s hardly any food to cook in it.
What we want to avoid are happy statistics and unhappy people. How are we going to do that? You can grow as much as you want. You can do all, it must be about the welfare of the people. The people must feel it, must be happy about it. If not, you will have happy statistics and unhappy people.
How are we going to achieve this inclusive growth? We must make sure we distribute properly, and make sure that the benefits of this get down to the common man to reduce poverty levels and create jobs.
