Nigeria and Nigerians have been relying on subsidies since immediately after the civil war.
The oil boom came, we joined OPEC, and suddenly, our issue was how to spend, not how to earn.
White elephant projects sprung up, and the notion that we must directly benefit from the oil wealth introduced all sorts of subsidies to make life easier for Nigerians.
Power, fuel, education, creative arts, and health sectors were heavily subsidized and funded by a very buoyant government.
This fast-tracked corruption and inefficiencies, which came to a head during the Shagari government, was the first to feel the economic pinch, resulting in austerity measures aimed at curbing excesses, reducing government expenditure, and pushing the private sector to the forefront.
Since then, every successive government has rolled back subsidies, leading to hardship for a population accustomed to government-paid basics.
Every successive government has rolled back one subsidy or another as revenues dipped, meeting serious resistance from the people.
Obasanjo succeeded to a large extent in rebuilding the middle class through a series of pension, banking, and telecom reforms and an effective fight against corruption. However, on the matter of fuel subsidy, he lost woefully.
Buhari did not even dare to touch it, instead going on a cash-printing spree, which ignited a vicarious inflationary trend unprecedented in scale.
So Tinubu’s task was clear from day one. He had to pull back government spending by removing the levers that held down fuel and the dollar exchange rate.
He had to free up funds by rolling back the remaining subsidies, especially on fuel and the exchange rate.
These are theoretically perfect policies. Let the forces of demand and supply take over, let fuel and the dollar find their true essence, and then divert the savings to other areas.
This was done, and the markets went crazy. They either forgot to put in place speed breakers or neglected to, and inflation flew to another level, poverty indices went crazy, the Naira took a beating, and the government panicked.
Today, the performance indices of this government are the worst in peacetime Nigeria. Even Awolowo managed the economy far better during the civil war than what we are seeing today.
To mitigate this, the government has had to ramp up its revenues, and rightly so. What was gained by the removals was being lost to erratic government expenditure, corruption, and a robust rent system that has been in place to reward operatives who have fought to stabilize a wounded president who faced one of the most damaging presidential runs ever.
Taxes have gone up, the tax net has been widened, and collections have improved due to increased efficiency. A top government official claimed that tax is now the government’s top revenue earner.
And now here lies the issue. Much as the government has shown strong capability in understanding the upstream issue pulling back from subsidies and allowing for market forces interplay it has shown grave ineptitude in building a welfare buffer to act as a bridge until equilibrium is achieved in the markets and the economy.
It has shown grave ineptitude in tackling the initial surge in indices, rendering itself incapable of assuaging the sufferings of the masses.
Unemployment is grave, inflation is on a Malthusian scale, the Naira is beaten to a pulp, and the government looks dazed and wobbly as economic ill winds tear through it and its policy of containment.
What we now see is a trial-and-error, or what in street parlance is called ‘start and quench,’ approach to the economy by an economic team that is beholden to the president and made up of economic mid-level players who now seem overwhelmed.
Policies are announced and pulled back, and everything is being thrown at the fire, but it is still raging. The president remains absolutely confident, and I like him for that, but his people are shaky and afraid, which shows in their public engagement.
Wale Edun, the finance chief, in a TV interview, was far from composed. His answer to the question about why multinationals were leaving met with a very wobbly response. He fumbled and wobbled all over the place without really saying anything.
But then again, it’s not all bad news. Edun mentioned the gains with CNG, the next massive revenue earner, the agreements signed, and the immense accruable benefits in the immediate future.
But if you ask me what the quick and immediate solution to all this is, I will smile and say: very simple.
Cut government spending by over 40%. You can’t be spending billions on unnecessary travel and expect the NLC to listen to you.
Engage very directly with multinationals and big businesses, offering them waivers, grants, and middle-of-the-road solutions like with the airlines. Make them partners, and pull them into top-level meetings so they know they have your ears.
Reform the multiple tax regimes that are stifling SMEs and give them an easy reign.
Increase more taxes on the rich and hold taxes on low earners to increase their purchasing power.
Engage foreign lenders much more purposefully. Build stronger economic ties with the West US, France, UK, and Germany to secure debt forgiveness, waivers, and interest-free loans.
This may be difficult considering the personal circumstances of our president. The VP or a well-respected international statesman like OBJ, Emir Sanusi, or AFDB Adeshina could be appointed for this purpose.
Shake up the cabinet and bring stronger people into ministries like Foreign Affairs, Solid Minerals, Power, Petroleum, Communications, and Finance because these areas, if functioning, can rev up revenue inflow.
Continue the good work on infrastructure development due to its potential in job creation, government revenue, and easing economic movement, among other benefits.
Deepen FG’s stake in the Dangote Refinery, not controlling but as a dividend-earning position, and work with him to open up more markets due to its obvious economic benefits.
Bring back IBB’s economic diplomacy. Be the Nigerian business international chief marketing officer, especially for export-oriented businesses.
Open up international markets, sign trade agreements, and very importantly, bring back the ease of doing business, especially for inflow trade and business partners.
Government leakages must be blocked. Technology must play a crucial role in this, leading to a more robust approach to the fight against corruption.
Collapse the rent system. Weed out political jobbers, remove any second-term ambition, and make decisions that will not augur well for the political class but will be best for the economy—decisions like sponsoring Hajj, and the welfare of NASS members, among others, are ill-timed.
With three years to go, the president still has enough time to put us on a clear path to recovery. He can only achieve this if he has the political will and, more importantly, the integrity to push patriotic policies, eschewing all personalized benefits in governance.
There is still hope. Let’s not lose hope yet.
Thanks,
Duke of Shomolu
Duke. Get your facts straight.
Buhari printed naira post covid.
Tinubu is on record calling on Buhari in 2020 to ” PRINT NAIRA and reduce VAT. Please Google it.
Under Buhari, The money supply grew from N 20 trillion in 2015 to N 55 trillion on the 29th May 2023.
That’s 35 trillion in 8 years.
From 1st June 2023 to January 2024, the money supply grew to N 95 trillion.
That’s N 40 trillion in six months.
Comparing the two, which one is unprecedented?
In summary, the devaluation of the naira created a rate of money supply growth that is sixteen times .ore than the Buhari era.
Simply admit the policy was wrong and reverse it. Stop trying to justify a bad policy.
We did this in 1986 when we tried the same.pioicies without boosting production, and by the time IBB was done he had trashed local production, devalued the naira tenfold, reduced purchasing power by over 75% etc.