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BEHIND THE FIGURES By Ijeoma Nwogwugwu

ijeoma.nwogwugwu@thisdaylive.com

President Bola Ahmed Tinubu is on a roll. He is basking in the glow of praises that have been heaped on him for the removal of petrol subsidies, reinstatement of a managed currency float at the Investors and Exporters (I&E) window of the foreign exchange market, as well as signing the Student Loan Bill and a new Electricity Bill into law. In the heady euphoria, he has even gone as far as prejudicially declaring the suspended Governor of the Central Bank of Nigeria, Godwin Emefiele, who has been in the custody of the Department of State Service for almost a month without being charged with any offence, guilty.

Without a doubt, the reform initiatives carried out by Tinubu are creditable. International finance institutions and the investor community have all given him the thumbs up for taking tough policy choices that his predecessors in office lacked the political will to implement. Indeed, the return of investor confidence has been evident on the Nigerian bourse where the equities rally in recent weeks has lifted the NGX All-Share Index to over 60,000 points, the highest since 2008. What’s more, not many Nigerians are losing sleep over the suspension of Emefiele, who repeatedly violated sections of the CBN Act and pursued unconventional monetary policies that caused more harm than good, insofar as his rights are respected and he is allowed to defend himself as guaranteed under the law.

But as Tinubu and his minders engage in backslapping over the president’s accomplishments in one month, they must be mindful of the significant impact the needful policy adjustments have had on the livelihoods of vulnerable Nigerians. Tinubu has asked Nigerians to endure the current hardship, saying he is not in a hurry to fix the country’s problems. But does he really have the luxury of time that he seeks?

When Tinubu boldly sneaked in the “subsidy is gone” phrase in his inaugural speech, did he not know that he had to move with a concurrent briskness to announce palliatives for vulnerable citizens that would be most affected by foreclosing on the subsidy regime? Shouldn’t the president and his team have worked on this before his inauguration? Was the removal of petrol subsidy not a hot-button issue that Tinubu and his closest rivals in the 2023 presidential election had all committed to, irrespective of whether it was removed on May 29 or July 1? He even had the benefit of a three-month transition period between the time he was nocturnally declared winner of the presidential poll by the Independent National Electoral Commission and the day he took the oath of office as Nigeria’s new president.

Tinubu probably thought that the end of petrol subsidies would immediately give him the fiscal headroom to embark on social investment programmes to lessen the policy impact. He also probably thought that investors would come flocking in with dollar-laden briefcases once a currency float was reinstated in the FX market. But much to his disappointment, the results he had immediately hoped for would take some time to crystalise. Now, he is asking for patience and more time.

Already, the World Bank has warned that four million Nigerians were pushed into poverty in the first six months of this year, with another 7.1 million expected to be plunged into poverty if properly targeted measures are not taken to manage the impact of fuel subsidy removal. Add to this the millions of Nigerians who may be forced to take their children out of school, or children that will become malnourished because their parents can no longer afford to give them three meals a day, or even the Kwara and Edo State Governments that have reduced the number of working days for public sector workers in their states to three days, effectively reducing productivity. It is apparent, therefore, that compensating transfers will be urgently needed in helping to shield households from the initial price impacts of the petrol subsidy reform.

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Instructively, former President Muhammadu Buhari, before his departure, had sought and obtained the National Assembly’s approval for an $800 million loan from the World Bank. The loan was targeted at supporting 10 million households or 50 million Nigerians that would be adversely impacted by the removal of petrol subsidies. Yet, no word has been heard from Tinubu and his men on when cash transfers will be disbursed from the buffer provided by the World Bank. Right now, all we’ve been told by the president’s minders is that a committee headed by his Chief of Staff, Femi Gbajabiamila, is working on a social investment plan that will be implemented only God knows when.

Then there’s the unification of exchange rates due to the currency float which is expected to lead to a significant rise in government debt in naira terms by some N12 billion to N90 billion. As a consequence, debt to GDP is expected to rise to 46%, just as debt service in naira terms will also rise.      

Under the circumstances, the central bank and Tinubu’s economic handlers cannot afford to take their precious time and will have to redouble efforts to tackle the effects of subsidy removal and FX reforms on government, households and businesses through a combination of monetary policies and supportive fiscal policies targeted at reducing inflation. In this regard, market analysts hold the view that the while the central bank should use monetary policy to manage economic fluctuations and reduce prices, there are several structural adjustments that must be implemented on the fiscal side to complement the efforts of the CBN.

For the likes of Zeal Arikawe, CEO of Graeme Blaque, who appeared on the Global Business Report programme on Arise News last week, reducing inflation should not be the sole responsibility of the CBN. He was of the view that the mistake Nigeria’s economic managers have made over the years is to treat inflation as strictly a monetary problem, but that should not be the case because using monetary tools alone would not work. He noted that inflation in the country is more structural than just one for monetary policy to tweak and whose transmission often has a limited impact.

Arikawe pointed to low productivity in the economy relative to rising money supply in recent years as a problem that must be addressed by both fiscal and monetary authorities. He said more efforts will be needed from the government to eliminate distortions in fiscal policies, review export regulations, improve security, and implement business-friendly policies that encourage the agriculture and manufacturing sectors to respectively produce more food and goods that Nigeria has no business importing. Similarly, he advocated for value addition to oil and non-oil exports which attract higher FX inflows than primary products whose pricing in international commodity markets is beyond our control.   

The need to reform the public sector through the rationalisation of numerous ministries, departments and agencies that duplicate and triplicate one another’s functions is another area that the government has kicked down the road for far too long. Implementation of the Oronsaye Report has resurfaced time without number, yet no one has summoned the political will to implement the document. Should Tinubu accomplish this task, not only will it improve efficiency in the public sector, it will help to reduce public sector expenditure that could be deployed in healthcare and education, and to some extent, rein in corruption. 

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Belt tightening by elected officials (including extortionist members of the National Assembly) and senior appointees of government is just as equally important. It’s a crying shame that the monetisation policy introduced by the Olusegun Obasanjo administration to cut recurrent spending has been gradually clawed back by its successors. Today, elected officials and unelected appointees of the government drive around in large motorcades made up of exorbitant armoured vehicles, commute all over the world solely in private airplanes, and surround themselves with a retinue of aides that must be catered to by the treasury for doing nothing. In some states, governors are known to appoint over 150 personal aides that are assigned portfolios with comical nomenclatures all in the name of creating “jobs for the boys”. Some of these states, mind you, can barely meet the salary obligations of their workers, much less provide assistance to the most vulnerable.

Agencies such as the Nigerian Customs Service (NCS) and its supervisory finance ministry have also come under the spotlight for concentrating mainly on revenue generation while relegating one of its primary functions of trade facilitation as a framework for the simplification, harmonisation, standardisation and modernisation of trade procedures in the interest of reducing transaction costs between government and businesses in international trade. Despite this core responsibility, the NCS and finance ministry have focused more on imposing high duties on raw materials needed by businesses to produce certain goods, while keeping duties on finished, imported variants of the same goods low. How then can Nigerian businesses compete under such distortionary fiscal policies?

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Long and short, Tinubu cannot afford to relax or tarry a while. Nor can he afford to embark on what many consider a premature victory lap. After eight years of a rudderless Buhari who set the bar so low, followed by one month of painful but necessary policy adjustments, Tinubu must sustain the momentum by implementing more policies to stop poverty in its tracks and grow the Nigerian economy. As one market analyst succinctly put it a few days ago: “It’s funny how subsidies and hikes are taking place without telling us anything concrete that will be done with the savings and timelines to expect any succour… Textbook economics is different from practical economics. Showering praise on a ruler after one week because the stock market is going up is knee-jerk.”

QUOTE

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When Tinubu boldly sneaked in the “subsidy is gone” phrase in his inaugural speech, did he not know that he had to move with a concurrent briskness to announce palliatives for vulnerable citizens that would be most affected by foreclosing on the subsidy regime?… Was the removal of the petrol subsidy, not a hot-button issue that Tinubu and his closest rivals in the 2023 presidential election had all committed to, irrespective of whether it was removed on May 29 or July 1?

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