Constructive Chaos or Creative Tension

The FGN, with the best intentions, decided to redesign the naira at the most inauspicious time. But as Abbot Bernard said, "The Road to Hell is Paved With Good intentions."

The chaos and the unintended consequences of the policy remind us of the following books: "Thriving on Chaos" (Tom Peters), "There Was a Country," and "Things Fall Apart" (Chinua Achebe). These books are as relevant today as they were when they were authored.

We are 12 days away from a monumental presidential election, and Nigerians are battling scarcity (fuel, cash & forex). Not only are these essential items in short supply, the queues and exorbitant prices accompanying them have worsened the cost-of-living crisis. While inflation dipped in December to 21.3%, it is still at its highest level since 2005 and could be higher in the near term.

Policymakers appear helpless

Consumers are not the only ones feeling the pinch. Retailers are confused, investors are bewildered, and unsurprisingly, policymakers are supposedly helpless, evidently now stuck between a rock and a hard place. Private consumption, which contributes 70% to GDP, is squeezed, and investment inflows, already downhill, could fall further as the crisis of confidence persists. The macroeconomic impact of the downtime due to ATM queues, petrol queues and the cash crunch could result in a contraction of 3 – 5% of GDP in Q1 2023.

PVCs are now steeply discounted

In a perverse twist of fate; the cash crunch has made PVC/vote purchasing cheaper, with the asking price of a PVC or ballot paper now being steeply discounted from N15,000 to N2,000. Unfortunately, a policy intended to be a punitive measure against vote purchasing has now become a “Dream Come True” for the moneybags. How quickly things can change! As Harold Wilson once said, “seven days is a long time in politics”. 

With hindsight, it is clear that some of these problems were self-inflicted and could have been easily avoided. But as Donald Trump said, "it is what it is." Therefore, it is time for “Damage Control”. 

A Runoff is almost imminent

In the end, there is no doubt that this election will be a tight race that remains too close to call, and a runoff is becoming more likely.

In this edition of the LBS breakfast session, Bismarck Rewane and the FDC Think Tank answer critical questions on the Naira crunch, fuel scarcity, investor behaviour and the political risks that lie ahead.