Do you know that we log about 1 million views on Linkedin weekly? And in #Nigeria, we have one of the most engaged feeds by miles. Yes, our community here is very robust and dynamic. This is the power of building an organic community where every follower is REAL. I thank our community for considering a village boy from Ovim as being worthy of your follow and time. Thank you, and also LinkedIn as its products have scaled missions.

To appreciate more, I am open to support young people who want to productively get together, to expand the business-oriented playbooks which LinkedIn offers us here, in Aba, PHC, Kano, Lagos and Abuja. You can get an experienced person in the community to speak on Jobs, Careers, Tech, Opportunities in Nigeria, and similar topics. If you have no idea, feel free to check names here https://school.tekedia.com/faculty/ (I will ask the person to make time to speak in your meetup).

I will contribute towards the lunch. Organize yourself, and connect with Eyitayo Adeleke; his total budget is N1 million. Again, thanks and keep coming. When I write, I have liberation – and the fact that many read makes it amazing.

LinkedIn link

The African Development Bank (AfDB) has issued a stern warning regarding the potential for social unrest across Nigeria due to increasing commodity and fuel prices, particularly in response to government policies such as subsidy removal.

The bank’s latest macroeconomic performance and outlook for 2024 highlight potential challenges for Africa, despite projecting higher economic growth compared to the previous year’s 3.2% recorded growth.

In its report, the AfDB emphasized Africa’s vulnerability to global supply chain disruptions, citing ongoing geopolitical tensions in Eastern Europe and the Middle East, as well as the El Niño phenomenon. These disruptions, it warned, could exacerbate energy and food inflation, posing significant consequences for social stability.

The report further cautioned that regional conflicts and political instability, often triggered by disruptions in constitutional governments, could divert vital resources away from development and social support towards security and defense.

“Internal conflicts and violence could also result from rising prices for fuel and other commodities due to weaker domestic currencies and reforms,” the report stated.

It also highlighted the negative economic implications of any unconstitutional takeover of government, which could lead to severe sanctions.

The warning comes at a crucial time for Nigeria, Africa’s most populous nation, which recently faced significant public outcry over the removal of fuel subsidies. This move, aimed at addressing economic challenges and fiscal deficits, has led to widespread protests across the country.

“For instance, the removal of fuel subsidies in Angola, Ethiopia, Kenya, and Nigeria and the resulting social costs have led to social unrest driven by economic hardship,” the report said.

The consequences of these policies are already evident, with ordinary Nigerians bearing the brunt of the economic hardships. High fuel prices have cascading effects, impacting transportation costs, food prices, and overall living expenses. For many Nigerians, already struggling to make ends meet, the removal of subsidies has exacerbated their financial burdens.

In urban centers like Lagos and Abuja, where the cost of living is already high, the sudden spike in fuel prices has further strained household budgets. Commuters face increased transportation costs, as public transportation operators pass on the higher fuel costs to passengers. This, in turn, affects businesses reliant on transportation for the movement of goods and services, leading to higher prices for consumers.

Rural communities are not spared from the economic fallout either. Farmers, who rely heavily on fuel for agricultural machinery and transportation of produce, find themselves grappling with higher operational costs. As a result, food prices surge, pushing many families further into poverty.

Moreover, the removal of fuel subsidies has a ripple effect on other sectors of the economy. Industries reliant on fuel for power generation or as raw materials experience cost escalations, potentially leading to layoffs and reduced production.

In response to the economic hardship, civil society groups and labor unions in Nigeria have announced plans to embark on a two-day warning strike, demanding a reversal of the subsidy removal and greater government accountability. There are concerns that the protest has the potential to escalate social unrest if the government fails to address the underlying economic grievances effectively.

The AfDB’s warning comes amid others, urging policymakers across Africa to consider the broader socio-economic implications of their decisions to mitigate the risk of unrest and ensure sustainable development for all citizens.

Between 2011 and 2015 when the exchange rate was largely stable, what was happening in Nigeria? Understand that in May 2015, in the black market, Naira exchanged at N197/$; then the official rate was around N167/$. The same team in charge towards the end of that era was still in charge; yes, Emefiele was still the boss of the Central Bank of Nigeria.

The implication is massive: between 1999 to 2015, per USD, Naira moved from N22 to N197; and then from N197 to N1600 in 2024!

In my analysis, something happened from Jan 2016; Nigeria changed policies and went big on Ways and Means (unconstrained printing of money with no fiscal discipline).  Quickly, the apex bank lost control. From my data, CBN got so much into the bureaucracy of the executive that it stopped publishing Working Papers. From Feb 2016 till today, CBN has not published any working paper. That obscurity happened because it could not really defend whatever it was doing. With no working papers, we went big on circulars, directives, etc, and no one understood the reasons behind those directives. 

While some of us note the perilous nature of the Naira, understand that Naira was destined to weaken immediately the newly printed Naira (from 2022 Naira redesign) and existing Naira were normalized as legal tenders. Have you considered how much cash we pushed into the system in months after that normalization? The current administration cannot be blamed for everything of course. My only issue was that it did not consider those factors when it put frontal and flank attacks via new policies on the Naira.

I also want to address the point on domiciliary accounts. Good People, Nigeria did not invent dorm accounts. All major economies allow dorm accounts in their banking sectors. In Canada, you can get USD-bank accounts. Most banks in Kenya offer those. HSBC China can open nine currencies for you within hours. And for decades, we have been running dorm accounts; they never blew Naira off paths.

More so, what is $30 billion accumulated over decades in these dorm accounts? Yearly, I posit that about $2 billion are transactional. Assuming we have no dorm accounts and the $2 billion yearly is made available, is that enough to deal with close to $70 billion of yearly imports?

Please note that if Nigeria disbands dorm accounts, we will create problems for our banks. Dorm accounts support our banking sector since without them most correspondent banking will not have any meaning. In other words, without dorm accounts, our banks will struggle internationally. When you send $10k to a Nigerian bank from New York, they credit that bank’s account with a correspondent bank like UBS or JP Morgan. With that fund, our banks can play internationally. (Of course if people are doing illegal things in dorm accounts, prosecute them.)

The debate about Naira and Nigeria will continue but one thing I know is this: people know the right things to do, but we lack the boldness to do them. That explains why the team which managed a stable Naira was also the team which destroyed it because we hate to say “No Sir, that will not happen under my watch”. With our “Yes Sir” syndrome, we allow politicians to have their ways, and at the end, the denominator becomes what the politicians want.

If you look at data, and question why it took Naira more than 40 years to move from N1/$ to N197/$, but nine years to move from N197/$ to N1600/$, it is possible that you can see we could have done certain things differently. And that “differently” is what we are making a case that the government can do because Nigeria is a democracy and the voices of the citizens matter. To start with, can we make Ways and Means printing illegal, today and tomorrow?

Between 2011 and 2015 when the exchange rate was largely stable, what was happening in Nigeria? Understand that in May 2015, in the black market, Naira exchanged at N197/$; then the official rate was around N167/$. The same team in charge towards the end of that era was still in… pic.twitter.com/KJ00nfRhW4

— Ndubuisi Ekekwe (@ndekekwe) February 18, 2024