Bola Tinubu, who has emerged as President-elect, will have to confront several economic battles when he takes office on May 29.
The former governor of Lagos will inherit an economy plagued by weak growth, surging inflation and the effects of a chronic cash shortage and rising debt burden.
“My running mate, Vice President-elect Shettima, and I understand the challenges ahead. More importantly, we pledge to listen and to do the difficult things,” Tinubu said on Wednesday morning. “Hold us firmly to account, but please give us a chance first.”
In his manifesto, he pledged to “give economic opportunity to the poorest and most vulnerable among us”, tackle insecurity, expand public infrastructure and fight corruption.
Amaka Anku, Africa director at the Eurasia Group consultancy, said the challenge for Tinubu would include strengthening the economy.
“He needs to create a system that can ensure it can deliver on critical public services: jobs, personal safety, infrastructure, criminal justice,” Anku said.
Tinubu will inherit a huge debt load, soaring petrol subsidy bill, cost of living crisis, and insecurity facing Africa’s biggest economy.
“I hope those who were declared winners by INEC at all levels understand the immense responsibility at hand and also need to make haste to fix Nigeria from a sacrificial standpoint,” said Oluseun Onigbinde, the co-founder and CEO of BudgIT, a Nigerian civic startup.
Below are the battles ahead of Nigeria’s president-elect
Slow economic growth
Data from the National Bureau of Statistics (NBS) showed Nigeria recorded annual Gross Domestic Product growth of 3.1 percent in 2022, down from 3.4 percent in 2021.
A closer look at NBS’s data showed President Muhammadu Buhari holds the worst record out of the four presidents who have led Nigeria since it returned to democracy in 1999.
While President Olusegun Obasanjo can boast of an average growth rate of 6.9 percent during his eight-year tenure, his immediate successor, Umaru Yar’Adua (now late), did even better in a few years as president with an average growth rate of 7.1 percent. Goodluck Jonathan delivered 6.07 percent growth in his four-year term as president.
Under Buhari’s watch, however, the economy grew by an average growth of 1.40 percent.
Increasing debt service
Data from the Budget Office of the Federation show that every year since 2015, the federal government has spent more money servicing debt, and the trend is set to stretch for the ninth straight year, according to the 2023 budget. The government has budgeted to spend N6.31 trillion on debt servicing this year, 75 percent higher than the amount in the 2022 budget and 50 percent more than the actual amount spent in 2021.
Fiscal deficit
For many years, Africa’s most populous nation has struggled to meet its revenue target in its budget, and the variance keeps getting wider ever since the 2014 global collapse in oil prices that sent the oil-dependent nation to its first recession in a quarter of a century.
Prior to 2014, the federal government’s revenue shortfall – that is the variance between actual and budgeted retained revenues – was in the billion-naira range but with the collapse in oil prices, the difference has stayed within the trillion-naira range.
The country plans to spend N21.8 trillion as against revenue of N10.5 trillion, according to the budget signed on Jan. 3 by Buhari, who will leave office in May.
The deficit of N11.3 trillion will be plugged largely by borrowing. The government said N7.04 trillion will be sourced from the domestic market and some N1.76 trillion will be borrowed from foreign sources while an additional N1.7 trillion will come from existing bilateral and multilateral facilities.
In the 2023 budget, the fiscal deficit to GDP amounts to 4.78 percent, and according to Section 12 (1) of the Fiscal Responsibility Act (2007), the fiscal deficit should not exceed 3 percent of the estimated GDP, except there is a clear and present threat to the national security and sovereignty of Nigeria.
Petrol subsidy – eating the future
Another major challenge that Nigeria’s president-elect will face is the decision of a cash-strapped federal government to spend N6 trillion on petrol subsidies in 2023.
Buhari, who came to power claiming there was nothing like subsidy, has presided over the biggest jump in the nation’s subsidy expenditure.
The 2022 Macroeconomic Outlook report by the Nigerian Economic Summit Group showed Buhari’s payment for petrol subsidy grew from N307 billion in 2015 to N1.77 trillion in 2021. This represented a 477 percent increase within seven years.
Experts say the President has done nothing to arrest the collapse of Nigeria’s fiscal buffers on account of the relentless surge in subsidy expenditure, and now he is bidding time, hoping to pass on the burden to his successor.
‘Crude-for-cash’ deal
Despite declining oil production, the Nigerian National Petroleum Company Limited (NNPC) has entered into ‘cash for crude’ deals worth about $5.6 billion with some of its business partners.
For instance, the Nigerian Petroleum Development Company (NPDC), a subsidiary of the NNPC, has a capital commitment contract of $1.04 trillion (N432 billion) with Eagle Export Financing Limited for the forward sale agreement for the delivery of crude oil.
“Under the contract, Eagle Export Funding Limited will make an upfront payment to NPDC for crude in a Forward Sale Agreement. The payment received is required to be settled with the delivery of crude oil volumes,” NNPC’s records showed.
Analysts say the NNPC could be on the hook for penalties if it fails to deliver – a development that is possible, considering Nigeria’s oil production is fraught with uncertainties.
Read also: Crude oil shortage deters Nigeria’s modular refineries’ expansion
Rainy-day fund almost depleted
In a season where other major oil producers like Saudi Arabia and small producers like Guyana and Bahrain are laughing all the way to the banks due to higher oil price, Nigeria has struggled to benefit from surging crude prices due to pipeline vandalism and years of underinvestment that have limited oil exports.
The Nigerian government’s response has complicated matters. On Buhari’s watch, fuel subsidies and big-ticket projects have sapped state coffers including the Excess Crude Account (ECA) in recent weeks.
The ECA was created by the administration of former President Obasanjo in 2004 for the purpose of saving oil revenue in excess of the budgeted benchmark and had a balance of $20 billion as at January 2009.
But the country’s rainy-day fund nose-dived from $2.1 billion to $376,655 as at June 2022 during this administration.
Insecurity
On account of Nigeria’s growing insecurity, the country has been unable to attract the foreign investment it needs to boost its economic activities, and many farmers have been unable to go to their farmlands to produce exportable crops.
