Five major economic decisions awaiting Tinubu

Whether it’s how to phase out costly petrol subsidies or deciding who is Nigeria’s central bank governor in 2024, there are at least five major decisions awaiting Bola Tinubu, the president-elect, if he must fix the country’s ailing economy.

Tinubu, the country’s president-elect with the smallest popular vote since 1979, faces an uphill task of reviving an economy where one in every three people is unemployed and inflation is also galloping.

The former Lagos State governor, whose victory at the election is still being disputed by opposition parties, must make tough calls to reset the economy.

Petrol subsidy

Nigeria is on course to spend about N6 trillion this year on petrol subsidies, and Tiuubu has vowed to remove the opaque exercise that cost Africa’s biggest economy billions of naira.

For a president-elect who got 36 percent of the vote, when his main rival Atiku Abubakar polled 29 percent, and Labour Party’s Peter Obi 25 percent, experts questioned how Tinubu plans to address petrol subsidies without facing the ire of labour and civil society groups.

“The most important question facing a Tinubu Presidency is this: how will an unpopular government undertake subsidy removal, which is a deeply unpopular (but necessary) policy?” a senior oil executive in the oil sector asked.

During the campaign period for the presidential election, Tinubu had stated that protests from Nigerians won’t stop him from removing subsidy.

“How can we be subsidising fuel consumption of Cameroon, of Niger, of Benin Republic. No matter how long you protest, we are going to remove subsidy,” Tinubu said during his campaign.

Before Tinubu, President Muhammadu Buhari claimed it was a fraudulent exercise and made a similar promise before he was elected in 2015; however, when he came into power, he kicked the goalpost down the road. So far, he has spent over N10.9 trillion on fuel subsidies.

Experts say Tinubu will face kickback from labour unions, which have continuously argued that the removal of subsidies will raise the cost of living, insisting the government must fix its refineries before there can be a discussion on subsidy removal.

Selecting ministers

The second litmus test facing Nigeria’s president-elect is the quality of technocrats who heads which ministry, particularly key positions like finance as well as industry, trade and investment.

Being a developing country with a history of policy inconsistencies and a public sector that is larger than life, foreign investors typically interface with high-level government officials – a category ministers fall under – to set investment in motion. This way, they hope to get some assurance over the safety of their investment dollars.

Experts say the identity of Nigeria’s next batch of ministers will be critical in attracting some foreign direct investors with potential big-ticket deals.

For most of his eight years in office, President Buhari was accused of favouritism towards Muslims in his appointments.

Also, a six-month delay in the appointment of ministers during Buhari’s first term formed part of the recipe for an economic recession in 2016 after it contributed to a steep decline in foreign investment.

“These delays are becoming the norm in Nigeria and it shows how unserious we are as a nation; hopefully, Tinubu will change this narrative,” a former public official told BusinessDay.

Multiple FX rates

Nigeria’s multiple exchange rate practice, which has deterred foreign investment, has been a stumbling block to the economy, and Tinubu will have to decide whether it needs to go.

The Central Bank of Nigeria is in charge of foreign exchange management and should be independent but the governor is appointed by the President.

The current governor’s tenure ends in 2024, and Tinubu will get a chance to appoint a new governor.

Emefiele is famed for unorthodox policies that have been criticised for being interventionist.

The International Monetary Fund (IMF) has cited central bank interventions in Nigeria’s foreign-exchange market as a hindrance to capital inflows.

Foreign investors held 16 percent of shares on Nigeria’s stock exchange last year, down sharply from 58 percent in 2014, Nigerian Exchange Group data showed.

Foreign direct investment in the West African nation plunged 52 percent to $698 million in the six years through 2021. By comparison, inflows into Indonesia increased 6 percent to $31 billion in the same period.

Attracting foreign investment also holds the key to job creation for Nigeria’s army of unemployed people.

Read also: Tinubu’s N6trn challenge

Rising debt service and loans to FG

The government’s debt service costs will overtake total revenues by 2026, according to IMF’s forecast.

The president-elect will need to decide fast on what to do to avert a severe debt crisis.

His decision will range from what he does to boost revenues and whether he continues to tap the central bank for loans.

Nigeria’s public debt has grown more than six-fold since Buhari became president in 2015, with servicing costs consuming about 80 percent of government income last year.

Cost of governance (Oronsaye report)

Another key decision ahead for Tinubu is whether to implement the well-publicised Oronsaye report that aims to reduce the cost of governance.

Submitted in 2012, the Oronsaye report on public sector reforms revealed that there were 541 — statutory and non-statutory — Federal Government parastatals, commissions, and agencies.

The then-President, Goodluck Jonathan, had in 2011 set up the Presidential Committee on Restructuring and Rationalisation of Federal Government Parastatals, Commissions, and Agencies, under the leadership of a former head of Civil Service, Stephen Oronsaye.

The 800-page report recommended that 263 of the statutory agencies be slashed to 161; 38 agencies be scrapped; 52 be merged, and 14 be reverted to departments in various ministries.

The report also recommended that the law establishing the National Salaries and Wages Commission should be repealed and its functions transferred to the Revenue Mobilisation and Fiscal Responsibility Commission.

It advised the Federal Government to merge the nation’s top three anti-corruption agencies — the Economic and Financial Crimes Commission, the Independent Corrupt Practices and Other Related Offences Commission, and the Code of Conduct Bureau.