Hours after it was announced that inflation had accelerated to a fresh 18-year-high of 24.1%, he suspended increases in gasoline prices, while the acting central bank governor this week warned foreign-exchange traders to stop betting against the naira.
According to Bloomberg the moves appear to undermine the two biggest steps he took after taking power in May: doing away with fuel subsidies that had cost the government billions of dollars a year and allowing the currency to trade more freely.
Both of those policy decisions are in the interest of the long-term health of the sickly Nigerian economy, yet they have emptied the pockets of ordinary Nigerians. The pump price of gasoline has more than doubled and that, together with the plunging naira, has sent food and other goods prices higher.
While the government has been scrambling to soften some of that pain, including handing out subsidized grain and deferring taxes, investors — initially enthused by the president’s decisiveness — have taken a dim view of his wavering. The nation’s dollar debt was the worst emerging-market performer on two days this week after the fuel price was capped.
As far as inflation is concerned, the damage has been done. The spending power of Nigerians has been severely eroded.
Now, unless he can extricate himself from the trap that he’s created, Tinubu will have both angered his citizens and disappointed the markets.
A week ago, Nigeria announced it will suspend raising gasoline prices even as crude rises in a bid to slow accelerating inflation.
The move to halt raising fuel prices comes nearly three months after President Bola Tinubu scrapped costly subsidies spurring a jump in prices of everything from food to transport costs.
“Mr. President is convinced based on information before him that we can maintain current pricing without reversing our deregulation policy,” said Ajuri Ngelale, spokesman for the president. That will happen “by swiftly cleaning up existing inefficiencies within the midstream and downstream petroleum sector,” he said, without giving details.
Tinubu moved hours after the inflation rate in Africa’s biggest economy climbed to a fresh 18-year high. Consumer prices rose an annual 24.1% in July, compared with 22.8% in the prior month, the National Bureau of Statistics said on Tuesday.