‘Negative impacts of Tinubu’s reforms’ll worsen in H2’23’
Perhaps, Nigerians should be bracing for more difficult times in the months ahead, as analysts at CardinalStone Research have said that they expect the negative effects of the key reforms introduced since the country’s new President, Bola Tinubu, assumed office in late May, to worsen in the second half of this year.
The analysts stated this in their recently released report entitled, “Consumer Goods Sector Mid-Year Outlook – A Tale of Currency Woes and Inflationary Fears.” They said: “The negative impacts of a weaker currency and stubbornly high inflation will likely worsen in the second half of 2023. The naira devaluation at the Investors and Exporters’ (I&E) window that trailed the monetary policy reforms could drive the costs of imported raw materials higher and stoke material foreign exchange losses.
“In addition, even though most consumers are insulated from the impact of the depreciation at the I&E (as they mostly access FX at the parallel market), the combined impact of subsidy removal and the potential increase in electricity tariffs suggests that discretionary income could become weaker. Notwithstanding, the ongoing moderation in select commodity prices and companies’ strategic responses could act as offsets.”
In his inaugural speech on May 29, 2023 Tinubu announced the immediate removal of the costly subsidy on Premium Motor Spirit (PMS) and also stated that his administration was also aiming to harmonise the country’s multiple exchange rates as part of its broad plan to transform the economy A fortnight after the President’s speech, the Central Bank of Nigeria (CBN) announced new reforms to the foreign exchange market, which saw it collapsing the multiple exchange rates into the Investors and Exporters’ (I&E) window rate, resulting in the weakening of the naira against major currencies. Although the reforms have been widely welcomed by international investors, concern is growing about their inflationary impact on the economy.
For instance, in a report released last Thursday, Financial Derivatives Company Ltd (FDC) stated: “We expect inflation to increase further on the back of recent reforms (fuel subsidy & naira devaluation) before falling rapidly in 2024. Since May, PMS price has jumped by 212 per cent to N617/litre. Transport costs rose sharply before declining due to consumer resistance.”
It was reported that following the hike in the pump price of fuel, occasioned by the removal of the fuel subsidy, telecoms operators have called on the regulator, the Nigerian Communications Commission (NCC), to urgently intervene and allow them review their service tariffs upward so as to avert crisis in the sector.
