Nigeria is grappling with profound economic challenges, including the sharp depreciation of the naira, declining purchasing power, and eroding confidence in the economy. To reverse this trajectory, a bold, collective effort – akin to a “People’s War” approach – is required. The reliance on neo-liberal solutions promoted by institutions such as the IMF and the World Bank is exacerbating the problem rather than providing a remedy. Without a change in strategy, the naira could plummet further, possibly depreciating beyond N2,000 = 1 USD. The time has come for Nigeria to implement a comprehensive stimulus program modeled after the successful strategies being employed by nations like China.
Current Situation Analysis
Multiple interrelated factors drive the ongoing economic crisis:
Misdiagnosis of Economic Issues: The focus has been disproportionately placed on inflation, while other pressing issues, such as shrinkflation, are overlooked.
Shrinkflation: Reduced output and purchasing power are weakening the economy.
Loss of Confidence in the Naira: Many Nigerians prefer holding US dollars over the naira, undermining the currency.
Economic Shocks: Events like border closures, the COVID-19 pandemic, and the naira redesign have destabilized the economy.
Unintended Consequences: Policy shifts, such as subsidy removals and currency flotation, have triggered further economic uncertainty.
Policy Recommendations
Revise Monetary Policy : Shift the focus from solely combating inflation to addressing shrinkflation. The Central Bank of Nigeria (CBN) should release adequate naira for cash transactions while outlawing the use of foreign currencies, such as the USD, for domestic transactions. This will help restore confidence in the naira.
Stimulate Domestic Production and Consumption: Implement a stimulus program similar to China’s economic model. While China has focused on real estate to spur growth, Nigeria’s immediate priority should be food security. The stimulus package should focus on agriculture—specifically cultivation, livestock, food processing, and recycling.
To combat food insecurity, the President should fulfill his campaign promise to recruit 50 million youths into a ‘Production Army.’ This program, which could be a Public-Private Partnership (PPP) and include the involvement of correctional centers, aims to transform insurgency hotspots into agricultural production zones, thereby addressing both food and physical security. After six years of service, these youths could be transitioned out to make room for recruits, ensuring a continuous and impactful initiative.
Assert Monetary Sovereignty
Nigeria should exercise its monetary sovereignty by printing ₦5-10 trillion yearly to fund all the military-production complexes to be established in every state of the federation, particularly in areas impacted by violence. This will stimulate local economies, boost productivity and check banditry/insurgency.
Prioritize Strategic Projects
Develop a “white list” of critical projects—such as petroleum refining, manufacturing, and renewable energy—that will be eligible for preferential financing. These sectors are pivotal to sustainable economic growth.
Restoring Confidence in the Naira
Controlled Currency Reform: Rather than abrupt currency flotation, Nigeria should pursue gradual and controlled reforms. This will allow the economy to adjust to changes while minimizing shocks.
Incentivize Use of the Naira: Create policies that encourage the holding and use of naira in transactions, making it more attractive for individuals and businesses alike.
Strengthen Forex Market Oversight: Enhance regulatory frameworks to curb speculative activities in the foreign exchange market, which contribute to the naira’s volatility.
Invest in Construction and Infrastructure: Support housing development programs and prioritize investment in key infrastructure, such as power, transportation, and digital connectivity. This will lower production costs, improve efficiency, and spur economic growth.
Encourage Foreign Investment and Diaspora Remittances
Simplify Investment Procedures: Streamline the processes for foreign direct investment (FDI) and offer targeted incentives to attract international investors.
Tap into Diaspora Wealth: Introduce diaspora bonds and investment schemes to channel the financial resources of Nigerians living abroad into productive ventures at home.
Social Welfare and Job Creation
Create a Social Welfare Reserve Fund: Establish a compulsory savings scheme that helps citizens accumulate wealth for critical needs, such as healthcare, education, and asset acquisition. This will provide a safety net during times of economic hardship.
Skill Development Programs: Launch comprehensive job training and skills development initiatives to address unemployment and equip the workforce for emerging sectors of the economy.
Implementation Strategy
Form an Expert Task Force: A task force comprising seasoned economists, policy experts, and representatives from key sectors of the economy should oversee the implementation of these policies. This task force will be responsible for ensuring the effectiveness of the proposed measures, providing expert guidance, and fostering collaboration among stakeholders.
Set Clear Timelines and Metrics: Establish measurable goals and timelines for each initiative to track progress and ensure accountability.
Transparent Communication: Regular and transparent updates on economic strategies will help rebuild public trust and ensure stakeholder buy-in.
Regular Policy Reviews: Constantly review and adjust policies based on evolving economic indicators, allowing for flexibility and responsiveness to changes in the financial environment.
By adopting this comprehensive, multi-pronged approach, Nigeria can stabilize the naira, revitalize domestic production, and restore economic confidence. The proposed measures will not only address short-term pressures but also lay the foundation for a resilient, diversified, and sustainable economy.