AS fiscal 2022 gets underway, developments in the domestic and international arenas have raised strong concerns over Nigeria’s economic prospects. Maintaining its growth forecast at 2.6 per cent, the World Bank has repeated its dire warnings over the sharp drop in public revenues, exchange rate volatility, fiscal deficits, and the COVID-19 trajectory. Its sister lender, the International Monetary Fund, and domestic private sector operators fret over the over N3 trillion cost of subsidizing petrol this year, worsening insecurity and unsustainable debt and servicing. All are alarmed that weak governance accentuates the problems and casts doubt on the leadership’s ability to weather the storm.

By all accounts, 2022 will be rough. The IMF projected that debt servicing could swallow all government revenues. It restated that almost 93 per cent of revenue would be spent on repayments, sustaining a three-year trend where debt servicing-to-revenue was 85.5 per cent in 2021, and 97 per cent in 2020. Higher oil prices fuelled by the Russia-Ukraine war spell bad news, says the World Bank which forecasts petrol subsidies to rise to over N4 trillion. This translates to more borrowing, less income for the three tiers of government and critical social sectors denied funding.

Already, the President, Major General Muhammadu Buhari (retd.), has asked the National Assembly to approve additional N2.56 trillion spending to defray the N3 trillion subsidy bill presented by the Nigerian National Petroleum Company for which N443 billion had initially been provided in Budget 2022. While a deficit of N6.25 trillion, debt servicing of N3.8 trillion are already in-built in the N17.13 trillion spending plan, projected revenues of N9.12 trillion are under threat.

Among the daunting headwinds is, ironically, the spike in crude oil and gas prices that ordinarily should have been a boost for a major exporter. But as the country irrationally relies wholly on imports for refined petroleum products, higher prices mean higher costs of imports, and higher subsidy costs, which planned stoppage the government shifted by another 18 months. Also, because significant associated gas in crude extraction is still flared, and the government’s dominance of the gas sector crowds out competent private players and entrenches inefficiencies, gas exports are hamstrung. The domestic economy has been badly hit by shortages.

At least 14 gas-powered generating plants are down, depriving the national grid of over 4,000 megawatts of power. In short supply for over four decades, power shortages have in the last two months worsened. Transportation costs have risen sharply, impacting consumer prices and upturning poverty-reduction measures. Inflation that had dropped to 15.6 per cent in January is projected to rise again.

Corruption, fiscal recklessness by the government and external pressures have, combined with its own incompetence, defeated the monetary authority’s efforts to effectively manage the exchange rate. In freefall, the naira dropped further to trade at N581 to US$1 at the parallel market and to N416/$1 at the official Investors and Exporters window. For an import-dependent economy, this courts disaster. Foreign reserves with which the Central Bank of Nigeria “defends” the naira dropped to $39.98 billion in January. Continental rivals, South Africa and Egypt had $57.69 billion and $40.98 billion respectively.

Expect further job losses, says the Lagos Chamber of Commerce and Industry, citing high prices, subsidy burden, the recent 10 percent per litre excise duty on non-alcoholic carbonated beverages, and increased borrowing. Youth unemployment, already at 55 per cent, could worsen, admits the Labour and Employment ministry.

Really, this year will be critical to Nigeria’s survival as a viable entity. Impacted by the global COVID-19 pandemic, the raging insecurity across the country has compounded recovery efforts. Whole swaths of the country have been rendered unsafe for farming, the main occupation in the vast hinterland, for commerce, travel, and social activities. In the week to February, 138 persons were murdered and 101 kidnapped, reported the Nigerian Security Tracker. Some 14.4 million persons in 21 states face food crisis, adds the FAO.

Investors are taking flight. Forbes magazine described the country as “Africa’s money-losing machine,” where foreign investors’ interest dropped by 27.5 percent in Q1 2021. In the first seven months of 2020, foreign portfolio investment fell by 228 percent. Worse is expected this year.

Buhari and the 36 state governors should shift to emergency mode. To save money, the government should immediately transparently sell its four disastrously-run and moribund refineries to reputable global brands. Adopting targeted sales that will disqualify emergency, incompetent consortia, it should similarly concession commercial operations at the airports and seaports. Buhari should terminate the still-born arrangement with Russia, now a pariah state, over the Ajaokuta Steel Company and sell it to any of the world’s leading steel makers. It should also consider an international IPO to reduce its 49 per cent stake in the NLNG. Privatisations will not only raise desperately needed cash; they will also free funds for critical infrastructure and social spending.

There should be a moratorium on debts; government should block fiscal leakages, collect all its revenue scrupulously and compel revenue-generating agencies to remit all funds in real time. The chaotic forex market should be reformed. Drastic measures should be adopted to solve the power crisis.

Federal and state governments should drastically reduce their battalions of appointees, cut down perks and compensation and downsize the bureaucracy. Buhari should immediately reduce the size of the presidential air fleet; ministers, governors and senior officials should slash their luxurious living.

Government should reform the tax system and raise the dismal tax-to-GDP ratio of 6.1 percent to meet and surpass the African average put at 16.5 percent by the OECD.

The central and state governments must devise policies to liberalise the operating business environment to attract foreign and domestic investment in agriculture, mining, manufacturing, power, downstream oil and gas and infrastructure. States should each have economic programmes; invest in rural infrastructure, education, health, and sanitation.

Nigeria faces an emergency; Buhari should rally the organised private sector, experts, and the large informal sector to manage the crisis and navigate the country out of the woods.

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