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Over 600,000 jobs from both private and public sectors will be lost to unfavorable government policies soon this fiscal year in Nigeria, studies have revealed.
Bemoaning the government’s seeming insensitivity to the challenges in the real sector, the Manufacturers’ Association of Nigeria (MAN) recently stated that the manufacturing sector would lose 500,000 jobs to the recent ban imposed on spirit drinks in sachets and PET bottles less than 200ml.
Meanwhile, over 100,000 jobs out of a total of 720,000 federal civil service jobs will be lost soon to the implementation of Steve Oronsaye report of civil service reforms.
The Federal Government on Monday in pursuit of fiscal prudence and efficiency in the service resolved to reduce 263 statutory agencies to 161, abolishing 38 and merging 52, as 14 agencies were proposed to revert to departments within ministries.
In the same vein, the Monetary Policy Committee of the Central Bank of Nigeria(CBN) has voted to increase the benchmark interest rate by 400 basis points to a record 22.75 per cent.
The MPR was at 18.75 per cent. The MPC also made a bold move to restrict money supply by increasing the Cash Reserve Ratio to 45 per cent, maintaining a liquidity ratio at 30 per cent while the Asymmetric Corridor was also raised to +200/-700. The CRR was at 32.5 per cent.
The CBN Governor, Olayemi Cardoso, disclosed this while reading the communiqué of the first MPC meeting of the year on Tuesday in Abuja.
He said, “All 12 members of the committee decided to further tighten monetary policy by raising the MPR by 400 basis points to 22.75 per cent from 18.75 per cent. Adjust the asymmetric corridor around the MPR to +100 to -700 from +100 to -300 basis points. The committee also raised the cash reserve ratio from 32.5 per cent to 45 per cent while retaining the liquidity ratio at 30 per cent.”
However, members of the private sector and economists have faulted the MPC decision, saying it would lead to fresh job losses and possibly lead to recession.
Reacting in separate interviews,with MMS Plus and The Punch, members of the organised private sector have stated that harsh economic policies from the government have exacerbated country’s unemployment rate.
They warned that if the poor economic policies are not quickly addressed, more businesses would fold up and it would worsen the country’s unemployment.
The President of the Nigeria Employers’ Consultative Association, Adewale-Smatt Oyerinde, warned that the repercussions of inadequate economic policies and a hostile business climate would compel numerous businesses to cut their workforce to mitigate costs.
He recommended that the government implement optimal measures to enhance the business environment and bolster production within the private sector.
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“Since the beginning of 2023, the government has been instituting policies unfavourable to the operations of the private sector, which happens to be the largest source of employment in the country,” Oyerinde said.
According to the National Bureau of Statistics in its Labour Force Survey, in the third quarter of 2023, the country’s unemployment rate rose to five per cent from 4.2 per cent in the preceding quarter.
The labour force participation rate, which gauges the proportion of the working-age populace actively involved in the labour market, declined to 79.5 per cent in Q3 from 80.4 per cent in Q2.
According to the National Bureau of Statistics’ updated methodology, Nigeria, home to over 200 million people, experienced a decrease in unemployment from 5.3 per cent in Q4 2022 to 4.1 per cent in Q1 2023.
The NECA boss asserted that several policies were impeding businesses, including the elimination of fuel subsidies, the adoption of a floating foreign exchange rate, the currency redesign initiative by the Central Bank of Nigeria, the imposition of multiple taxes and heightened excise duties on imported goods.
According to Oyerinde, other government policies that have been affecting businesses are the upward adjustment of foreign exchange rates for import clearance by the Nigeria Customs Service, and the recent prohibition of alcoholic beverages in sachets and PET bottles smaller than 200ml.
Also, the Distillers and Blenders Association of Nigeria warned that implementing the ban was going to damage local manufacturing and negatively affect the economy, as well as the social well-being of the people of Nigeria.
According to the latest Manufacturers CEOs Confidence Index report, Manufacturers’ employment rate would dip to 48.8 points in the first quarter of 2024.
The new figure represents a downward spiral from the 49.2 points obtained in the preceding quarter.
Also, the Deputy General Secretary of the Nigerian Union of Banks, Insurance, and Finance Institution Employees, Shola Aboderin, stated that the banks’ dependence on energy to power their branches had shot up their operating costs.
He noted that the removal of fuel subsidies had led to a drastic increase in fuel prices and adversely affected the banking sector and other sectors.
“The repercussions of this policy shift were evident as many banks struggle to sustain unprofitable branches, resulting in closures and substantial job losses among thousands of workers,” he said.
Aboderin urged the government to devise more favourable economic strategies, including reducing multiple taxes and addressing power challenges, to foster a conducive environment for businesses to thrive and mitigate the escalating unemployment rates.
He emphasised that implementing the right policies could yield substantial positive outcomes for the economy.
On the raising of the MPR, Chief Economist at SPM Professionals, Paul Alaje, said that while the measures might tackle inflation, they might not create respite for Nigerians.
He said, “The implications are not going to be as comfortable as we thought. Businesses that are funded by banks or businesses that are on bank loans will have to brace up for a major increase in bank rates that they will be receiving possibly from this week or next week from their respective financial institutions.
“The implication is that unemployment will increase. If businesses find it so hard to do business because of increasing bank rates as induced by high MPR and CRR, we have to brace for the challenges. Inflation is expected to go slowly. However, despite these adjustments, inflation will still grow. It might not be as sporadic as it is growing right now. Time will tell. What we are saying is that we have still not dealt with the cost-push inflation that is currently a major factor of the current inflation in Nigeria. And you know that inflation in Nigeria is driven by food inflation and imported inflation. The exchange rate is a major factor as well as prices of commodities.”
Also, a professor of Capital Market at the Nasarawa State University, Uche Uwaleke, said, “Jerking up the MPR by 400 basis points in one fell swoop is simply an overkill. Why not by not more than 200 basis points since they have another opportunity to meet next month and review the impact?
“They didn’t stop at MPR, they also jerked up the CRR to 45 per cent which at the previous level of 32.5 per cent was among the highest in Sub-Saharan Africa. The CBN governor had assured Nigerians that the policies of the bank would be evidence-based. Which empirical results support this aggressive move?”
“I pity the real sectors of the economy. The implication is that for every deposit in the bank, CRR takes 45 per cent of it while the Liquidity ratio takes 30 per cent. So it is only 25 per cent of the deposit that banks can lend! This has negative implications for access to credit, cost of capital for firms, cost of debt service by the government and asset quality of banks.
“Expect banks to quickly re-price their loans with negative consequences for non-performing loans and financial soundness indicators. By this overkill on the economy in a bid to crash elevated inflation which by the way has numerous non-monetary factors driving it, output is bound to shrink. So, expect lower GDP numbers, especially from agricultural and industry sectors as well as a surge in unemployment levels. This is not a welcome development.”
However, a former President of the Chartered Institute of Bankers of Nigeria, Okechukwu Unegbu, welcomed the rate hikes, saying it was a step in the right direction to curb inflation.
He said, “What the central bank wants to do is to control the level of cash in the system. What they want to do is reduce inflation in the economy because there have been disruptions. It’s to encourage people to reduce dependency on cash.
“What they have done is very effective. I think they have done the right thing with the appointments of the members of the MPC and they have hiked the MPR to control inflation. Making sure that the outflow of foreign currency is reduced. I think that’s their plan. Let us give it three months and see if it will work. There is too much cash flowing in the system, cash released during the time of (former president Muhammadu) Buhari and that was why I was not happy with the President (Bola Tinubu) when he floated the Naira. Before you float a currency, you must have strong reserves to back that currency. When the currency was floated. There was no reserve.”
However, a professor of Economics at Olabisi Onabanjo University, Sheriffdeen Tella, faulted the MPC decision.
He added that the increase would constrain the capacity of banks to support economic growth and investment, especially in the real sector of the economy because the increases are quite significant.
Yusuf argued that although the decision was consistent with the typical policy response of the Central Banks globally, it failed to reckon with domestic peculiarities.
“We recognise that the primary mandate of the CBN is price stability, but numerous headwinds had posed significant risks to this critical objective. Some of these include the surge in commodity prices and impact on energy cost, disruptive effects of insecurity on agricultural output, and global supply chain disruptions.
“The surge in ways and means finance also makes the CBN a culprit in the inflation predicament over the past few years. The hike in MPR or CRR would not change these Variables,” he said.
Also, the Chief Executive Officer, Economic Associates, Ayo Teriba, said, “After six months of the Monetary Policy Committee not meeting, and inflation has gone up to a few decimal points below 30 per cent, and now the hike in the monetary policy rate.
“For you to observe the impact of the monetary policy rate on inflation, this increase might, depending on the transmission lag, begin to have a bite in March.”.
