President Bola Tinubu’s stabilisation measures, aimed at securing a better future for Nigerians, included the removal of fuel subsidies—a long-contested issue—and the abolition of the complex multiple exchange rate system.
These changes have placed an extra burden on the poor, who are most affected by rising costs.
The saying, “A burden shared is a burden halved,” is particularly relevant for Nigeria; Argentina’s economic crisis teaches us that economic hardships should be shared fairly across society.
“The saying, “A burden shared is a burden halved,” is particularly relevant for Nigeria; Argentina’s economic crisis teaches us that economic hardships should be shared fairly across society.”
Although Tinubunomics shares some similarities with Javinomics, the former does not fully embrace the methodology of the Oronsaye report, which the latter mirrors more closely.
For instance, recent reforms in Argentina offer a valuable lesson. President Javier Milei of Argentina, elected in 2023, has undertaken significant cost-cutting measures to tackle the country’s economic challenges.
In his initial package of reforms, he devalued Argentina’s currency, the peso, by 50 percent, slashed state subsidies for fuel, and reduced the number of government ministries by half. According to The Straits Times, these swift actions have had a profound impact.
The rapid reduction in public spending helped Argentina swing from a fiscal deficit of 2 trillion pesos ($120bn; £93bn) in December last year to a surplus of 264.9 billion pesos in April.
Argentina also reported a surplus in January, February, and March, marking the first time it had achieved this monthly target since 2012. Inflation has slowed, with the month-on-month rate falling to 8.8 percent in April—the first time since October it was not in double digits, as reported by Bloomberg.
Countries like Argentina, which have long struggled with high inflation, are closely watching these measures, according to BBC News.
Milei’s plan to cut $20 billion from public sector spending, reduce operating expenses, and eliminate political privileges sets a notable example. His choice to fly commercial instead of using the presidential jet underscores his commitment to austerity and transparency.
Furthermore, Argentina’s strategy of reducing subsidies and increasing taxes to achieve a fiscal surplus provides a potential roadmap for Nigeria to consider in its own economic reforms.
Every economy faces periods of turbulence, where citizens experience hardship as they adjust to new economic realities. This adjustment often comes with heavy costs that deplete resources and drive up the cost of living.
Is such a period inherently negative? Not necessarily. Economies cannot maintain peak performance indefinitely without experiencing periods of recession or troughs due to economic shocks, as explained by the business cycle.
Read also: What to expect from Nigerian economy in next six months
So why do the masses complain during these times? Often, it’s because there’s a lack of trust in governance and an absence of shared sacrifice. When economic challenges are shouldered disproportionately by the poor while the wealthier segments remain insulated, resentment and frustration grow.
Recent protests about the rising cost of living in Nigeria show this issue clearly. The high cost of living has worsened hunger for many Nigerians, revealing the severe impact of economic struggles.
This situation highlights the need for fair distribution of economic burdens. While perfect fairness is difficult to achieve, greater transparency and responsible spending by the government could help reduce unrest and protests.
In the face of economic challenges, the misallocation of resources is unreasonable, especially when comparing the 2024 national budget to 2023. Millions of dollars were allocated to renovations and a fleet of cars (not to mention jets). Yet we still look forward to foreign investment after such misallocation,” says Tobi Abisoye, a public policy analyst.
“During economic hardship, the focus should be on optimising and efficiently using available resources rather than expanding allocations. Prioritising prudent management of funds is crucial for navigating financial difficulties effectively.
Misallocating funds during these times can exacerbate the financial strain, diverting essential funds from critical areas like healthcare, education, and social welfare.
Instead, the government should focus on austerity measures, reducing unnecessary expenditures, and ensuring that existing allocations are used effectively and transparently.
This approach not only helps stabilise the economy but also builds public trust by demonstrating a commitment to prudent financial management.
Given the current economic conditions, it’s crucial to reevaluate and possibly restructure statutory allocations to reflect our financial reality, prioritising sustainability and resilience over expansion going forward as the citizens are closely watching. He added
Regrettably, the shock therapy intended to create a healthier economy targeted the greed of smugglers and rent-seekers, as outlined in the presidential script addressing Nigerians last Sunday. However, this harsh medicine has proven bitter for millions of Nigerians, forcing them to swallow a difficult pill.
The immediate consequences have been harsh, with soaring food prices driving the cost of living to unbearable levels. Inflation has surged to 34.19 percent, with food inflation reaching 40.87 percent. Nigerians are struggling to endure these challenges, facing the bitter reality of reform while waiting for promised benefits.
However, experts and professionals are questioning whether these benefits will ever materialise. With the number of ministers still increasing and exerting pressure on government expenditure without corresponding revenue, there are growing doubts about whether the economic hardship will ease anytime soon.
Unfortunately, the burden of these painful economic reforms falls disproportionately on the poor.
Yusuf, known as ‘Ecomon,’ a man in his forties who specialises in aluminium construction, reflects on the current hardships: “It’s a very difficult time now. I never thought things would get this bad. In the past, I would have 3 to 5 clients a month needing new roofs for their buildings.
Read also: Nigerian economy to lose N400bn daily to protest – CPPE
Now, it’s a struggle to find even one. And when I do, setting a fair price becomes another challenge because I don’t want to lose the client. As a family man, providing for my family is crucial. Everything is so tight right now.”
The current economic crisis is distressing enough, but what is even more alarming is the administration’s decision to keep appointing new ministers and creating additional portfolios without tackling the root problems plaguing crucial sectors like NNPCL.
The severe issues of oil theft and insecurity have critically disrupted the food supply chain, exacerbating the hardship faced by citizens.
The relentless increase in the number of ministers and the allocation of new portfolios, while essential sectors remain in disarray, is widely viewed as a misuse of public funds. Instead of addressing the pressing challenges that affect revenue generation and food security, these moves appear to be a misguided effort that only adds to the financial strain.
According to a public finance analyst, such actions represent a significant waste of resources, highlighting a glaring disconnect between the government’s priorities and the needs of the people. A sobering reality, while telling the masses to endure.
This misguided priority contradicts the recommendations of the Oronsaye report. The Oronsaye Report, authored by Steve Oronsaye in April 2011, proposed a sweeping restructuring of Nigeria’s public sector.
The report aimed to cut governance costs by merging agencies with overlapping functions, eliminating redundant ones, and streamlining operations to enhance efficiency and accountability.
Despite some steps taken by the Nigerian government to implement these recommendations—such as merging certain agencies and attempting to streamline operations—progress has been slow and incomplete.
Nigeria’s path to economic recovery must be one that shares the burden equitably across society. The lessons from Argentina, where economic reforms have been paired with austerity and transparency, highlight the importance of making sure that the sacrifices required by such measures are not shouldered solely by the poor.
Nigeria must prioritise the efficient use of resources, reduce unnecessary expenditures, and adopt transparent governance practices. Only then can the nation move towards a more sustainable and just economic future, where the benefits of reforms are shared by all.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
Wasiu Alli is a business and finance journalist at BusinessDay who writes about the economy, business trends, and politics. He holds a BA. Ed. and M. Ed. in English Language and Education.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
