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Economy in Tinubu’s time

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Economy in Tinubu's time

President Bola Ahmed Tinubu

Economy in Tinubu’s time. Several indicators and official comments over the past week show how the economy is becoming more and more unstable, as well as President Bola Tinubu’s disorganized response. While the price of gasoline at the pump increased to N617 per litre and the naira exchange rate to N870 to $1, the inflation rate for June was reported at 22.79%. Food inflation was even higher; and external reserves are headed for another dip on the back of unmet crude production targets. Tinubu then declared an “emergency” in food security, ordered the release of grains, and reviewed his earlier “palliative” plan. Ominous clouds are gathering and the administration may be ‘losing the plot.’

It must adjust its strategies and methods to prevent sending the economy into an unstoppable downward spiral. There are already hints of anarchy. The official Importers and Exporters Foreign Exchange Window of the Central Bank of Nigeria closed on Friday at N777.82/$, but the rate in the parallel market changed from N850/$ to close at N870/$, a difference of almost N100. The idea of combining rates by “market forces” is failing.

The turmoil in the economy brought on by Tinubu’s decision to halt the fuel subsidy in his first hour in office continued into the middle of the week when the price per litre at the pump increased from N500 to N617. This inevitably led to additional increases in transportation costs as well as general inflation.

The National Bureau of Statistics predicts that food inflation will reach a record high this month; it increased by 2.40 percentage points from May to June, from 22.85 to 25.25 percent. The NBS noted rising costs for dairy products, eggs, cheese, fish, meat, potatoes, tubers, oil, and fat.

Media market research indicates higher inflation rates than those reported in the government statistics. Due to exorbitant transportation costs, many commuters in urban areas now walk to and from their jobs and local markets.

According to the CBN, foreign reserves fell further to $34.22 billion on June 26 from $37.07 billion on January 3, despite the expected cost savings from the subsidy removal.

The wretched screams of the masses have been mixed up with those of the business world, which had expressed unwarranted hope in response to Tinubu’s extreme actions.

However, as The PUNCH had previously stated, bold, decisive actions are very desirable to revitalize a gasping economy, but they must be carefully considered, the consequences must be anticipated, and all important stakeholders must be brought along. A crucial aspect of the policies is that they must promote productive actions, protect and create new jobs, and enhance the general welfare of the greatest number of people.

Prior to applying shocks, associated policies must be put in place to help the most vulnerable populations and enterprises, particularly MSMEs, absorb the aftershocks.

Experts advise strong fiscal and monetary policies for an economy stuck in a rut to encourage private sector investment and productivity. According to Investopedia, “Economic stimulus relies on encouraging private sector spending to make up for loss of aggregate demand.”

The government’s rapid elimination of subsidies and the unification of the naira exchange rates show that Tinubu did not conduct a rigorous analysis of the economy or consider the ramifications.

The discredited cash distribution plan under which 12 million “poor households” would receive N8,000 per month for six months was next on his list of demands. He also declared “a state of emergency” on food security and ordered the release of grains and fertilizer to farmers and households “to mitigate the effects of the subsidy removal.” These ought to have arrived earlier.

He decided to reassess the cash transfer strategy over the weekend. As part of the palliatives, the Vice President and the 36 state governors who make up the National Economic Council discarded the fraudulent registry used by the previous Muhammadu Buhari administration in favor of registrations created by the states.

It is risky to lack a thorough plan, an economic management team, and accurate diagnoses. There is a growing sense of panic. Even the optimists who praise his impulsive actions are concerned. The IMF has already predicted that over 7.0 million more people will experience extreme poverty.


The harsh reality has slammed business owners. The OPS issued a warning that if the trend persisted, there would soon be more job losses, business closures, and overall hardship due to exorbitant exchange rates, scarcity, and increasing fuel prices. The disintegration of the Nigerian economy and the refusal to take aggressive and coordinated action could result in perpetual fuel price increases and persistent naira devaluation, as The PUNCH had predicted.

Manufacturers Association of Nigeria President Francis Meshioye acknowledged that “when subsidy was removed, most people were of the opinion that the change was going to be a one-off, not a skyrocketing one.” The Lagos Chamber of Commerce and Industry’s Deputy President, Gabriel Idahosa, continued, “There will be a lot of suffering in the near future. Many tiny firms will entirely fail. The capacity for production will decline. The aftermath is seen by the Association of Small Business Owners of Nigeria as a “sledgehammer” that will destroy SMEs.

However, these were unavoidable. Given that gasoline is imported and that high exchange rates ensure higher domestic pricing, prices will probably continue to be high. In addition, prices are influenced by fluctuations in the price of crude oil around the world. With these matrices in place, gas prices will always be high.

Crude oil is Nigeria’s main foreign exchange export. Even though they only account for 6.63 percent of GDP, the NBS maintains that crude oil and gas still make up 95% of export revenues. Due to the severe restrictions on the export of industrial commodities, the government is by far the biggest provider of foreign exchange to end consumers. This limits the amount of money that is available and makes manipulation easier. Because there is a persistent mismatch between supply and demand, there are no unrestrained market forces to control an acceptable rate.

The free fall can still be halted. Tinubu needs to interact with Nigerians more. For instance, SMEs are more crucial to revitalization and should be thoroughly engaged when making those seismic decisions as they make up 96% of enterprises in the nation, supply 84 % of employment, and account for 48 % of GDP.

Cost-benefit analysis is a component of critical thinking. Petrol prices have a significant systemic impact on Nigeria’s economy, but Tinubu bought into the absurd myth that was peddled by the World Bank/IMF and local “experts” that subsidies did not help the underprivileged. It did so through the inflation rate, transportation costs, and cost of goods produced. The government should have withdrawn it in phases, removed government from the downstream sector, stopped the massive looting of the funds and privatised the four moribund state-owned refineries.

Tinubu should break with the ridiculous dollarisation of the economy where government converts its own dollar earnings to naira and buys dollars back with naira.

The 133 million underprivileged Nigerians are not benefited by the refineries, the Ajaokuta Steel Company, or the ports and airports, which are primarily in the red. To end the fraudulent turnaround maintenance of the refineries and to privatize them, Tinubu’s boldness is absolutely necessary.

Except in times of major disasters or pandemic, an economy is revived by stimulus, not by palliatives. The palliatives are insufficient, unable to reach all people in need, and the money is always stolen. All such previous measures failed, while more people are slipping into poverty. Well-planned and implemented stimulus on the other hand helps achieve recovery.

If the N500 billion the government is borrowing or the $800 million World Bank loan is directed toward SMEs, small-scale farmers, and support for the states’ essential rural infrastructure, they will have a greater impact.

The completion of the Lagos-Ibadan Expressway, power sector reform, and the overhaul of the Apapa Ports access roads, which are used by 65% of the nation’s maritime traffic, are all urgently needed.

Instead of misdirecting loans, Tinubu should stop revenue leakages: many wealthy people pay little or no taxes; over 60 public agencies refuse to transfer funds; the $62.5 billion judgement debt owed by IOCs is still unpaid; Stamp Duty revenue is withheld by banks; and the federal and state governments and legislatures continue to run sizable, ineffective bureaucracies, fleets of expensive vehicles, frequent travel, and live in luxury at the expense of the general public.

In order to put an end to the embarrassment of a big crude oil producing nation importing refined gasoline, Tinubu should move swiftly to introduce a bill to the parliament repealing the Railway Act of 1955 and implement incentives for large, modular refineries. It is necessary to investigate, thoroughly restructure, and remove the leadership of the Nigerian National Petroleum Company Limited.

Although Tinubu was clearly prepared to seize power, he did not make sufficient preparations for leadership. He should shift positively into fast gear; appoint a capable, incorruptible economist as the CBN governor, ministers and a strong EMT.


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