Why hardship may not end till 2027 — Economy experts
Why hardship may not end till 2027 — Economy experts
Against the backdrop of this week’s thunderstorm across the economic space over further spike in petrol crises, economy and financial experts have painted a grim picture of the short and medium-term outcomes of the Federal Government’s economic policies and reforms.
This is also coming against the backdrop of FG’s consistent promise of a turn-around soon urging the citizens to endure and wait for the turn-around. The experts, looking into the immediate future, indicated that it may take up to 2027 to begin to see recovery from the present hardship.
However, they also indicated that such recovery and the time frame may still fail if the government does not take certain measures to stem the tide of hardship currently pervading society.
The petroleum sector authorities had earlier in the week effected a fresh hike in the pump price of fuel amidst a seven-week-long scarcity which appears unending as of the time of filing this report.
With the current pump price at between N900 and N1,200 per litre, many analysts are predicting a further round of economic downturn leading to further hardship for the citizens.
The key economic pain points include inflationary pressures, rising unemployment, declining purchasing power, rising utility bills and cost of living all of which have combined to create a steady decline in standard of living. Looking into what the future holds for Nigerians, the analysts noted that the economic recovery would largely depend on key factors such as oil sector recovery, foreign exchange and interest rate stability, and agricultural productivity.
However, they also said that on all the factors odds are stacked much higher than positive expectations. As if in confirmation of this grim reality, Nigeria’s key economic power base, the crude oil export, suffered a significant setback during the week when the price of its crude oil grade, Bonny Light, tumbled to $73 per barrel, the biggest drop so far this year.
Nigeria’s budget implementation is threatened at the current price as the budget revenue was based on $77 per barrel. The crude oil price slump is an added headache to the persistent difficulty in reaching the budgeted oil production benchmark level of 1.7 million barrels per day (mbpd).
The country has been struggling to produce an average of 1.4 mbpd since this year. The combined impact of these circumstances in the oil sector is an abysmal performance of the fiscal plan in 2024, less than four months to end. This also means that the economic recovery target for the year is already lost.
The significance of the oil sector performance is that it determines the performance of the economy which is about 80 percent oil dependent. In particular, the drop in oil revenue means a blow to the external sector, especially the foreign reserves which had just lost over $500 million in the last week of August 2024, slipping back to $36.3 billion.
This also puts significant pressure on the exchange rate with the Naira falling to N1,630 to a Dollar this week, against an average of N1,570 recorded in August 2024. Connected to this development is the impact on inflation where the external sector is now piling much pressure on the imported inflation component of the composite consumer price index.
With these developments, analysts believe short to medium-term recovery is difficult, while some of them said it is difficult to predict the exact time frame for the economic recovery as this will depend on the successful implementation of reforms, global economic trends, and domestic stability.
However, for most of them typically, significant improvements may begin to manifest within two to three years if the government effectively addresses key issues such as infrastructure development, inflation control, currency stabilization, and boosting local production. But the turnaround, according to them, will likely be gradual and not provide immediate relief.
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