President Bola Ahmed Tinubu’s exclamation that “subsidy is gone” in his inaugural address shortly after he was sworn in as president on May 29, 2023, represented a great moment of decisiveness against the background of decades of vacillation and equivocation. No matter what critics and political opponents might say, the Nigerian economy was at the brink of a fiscal collapse and a cataclysmic economic crisis when that decision was taken and was therefore justifiable, as painful as it was. The time has now come for the president to rise up to the occasion once again. The markets for foreign exchange and refined petroleum products have been liberalised, but we are not getting the desired results, even with the coming on stream of Dangote Refinery, which was expected to impact both markets positively. The economic situation has been compounded by the repeated collapse of the national power grid and unprecedented energy crisis. The naira has come under severe pressure due to spurious and frivolous demand for foreign exchange, with the drying up of foreign exchange supply largely due to the weakness of the naira, the crisis in the power sector, which is driving away foreign investors, and poor foreign exchange earnings from crude oil and solid mineral exports, largely due to large-scale mineral theft. The foregoing is a gloomy picture of the Nigerian economy, but we know the factors that are responsible, as the statistics below reveal.
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If there is only one phrase that summarises or epitomises the present dire situation of the Nigerian economy, it is the travails of the naira, which has been under intense pressure since the introduction of the economic liberalisation programme of the Tinubu Administration in May 2023. In the last year alone, the naira has depreciated by 51 percent from N820/US$1 on November 21, 2023, to N1,679/US$1 on November 21, 2024, making it one of the three worst-performing currencies in Africa in 2024, according to the World Bank. Partly because of the weakness of the national currency, headline inflation increased to 33.88 percent in October 2024, from 32.70 percent in September 2024, compared to 27.33 in October 2023.
“ But the situation is entirely and certainly within the President’s ability to turn around significantly in the next twelve months, which is the only window of opportunity he has before the next election season sets in.”
Our public power supply is in a seemingly irredeemable crisis. Instead of improving, our national power supply has stagnated in the past ten years, and the national grid has collapsed 11 times in 2024 alone and 105 times in the last 10 years. While China produces 8,839 terawatt hours (TWh) of electricity (1 TWh = 1,000,000 megawatt hours (MWh)); the USA, 4,287 TWh; India, 1,858 TWh; South Africa, 239 TWh; Egypt, 201 TWh; Nigeria only produces 37 TWh. That means China produces 239 times more power than Nigeria!
Nigeria is estimated to lose about $8 billion to crude oil theft per year, and the House of Representatives Committee on Solid Minerals estimates that Nigeria loses about $9 billion to illegal mining every year. So, the combined effect of crude oil and solid mineral theft on the Nigerian economy is roughly about $20 billion dollars lost every year—more than enough to stabilise the naira exchange rates. Nigeria’s non-oil exports have also declined at a time Nigerian exporters should be taking advantage of the African Continental Free Trade Agreement (AfCFTA)—due largely to the power crisis, which is making Nigerian manufacturers uncompetitive. The value of Nigerian exports of manufactured goods decreased in five years by 166 percent between 2019 and 2024—from N2.1 trillion to N778.4 billion.
Against the above-mentioned, one cannot but sympathise with the president because of the enormity of the economic situation. But the situation is entirely and certainly within the President’s ability to turn around significantly in the next twelve months, which is the only window of opportunity he has before the next election season sets in.
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First, since the foreign exchange market has become a key anchor of the economy, everything should be done by the president and his economic team to turn it around without tampering with the free market mechanism—by stopping the unnecessary importation of petroleum products, all in the name of deregulation, at a time Nigeria has achieved self-sufficiency in their domestic production. Deregulation does not necessarily mean you must import if there is sufficient local production, especially if a local producer is a monopolist by default because of the failure of a major supplier or suppliers—in this case, the government-owned Nigerian National Petroleum Company Ltd. (NNPCL) and its subsidiaries—to repair their four refineries and bring them back into production. The continued importation of fuel when there is sufficient local supply is tantamount to economic sabotage. The irony is that for so many years we banned the importation of a staple food like rice to encourage local production. But here we are with sufficient local production of petroleum products, and some people, with the support of government agencies, who should be protecting the national interest, are still importing petroleum products with the spurious argument of deregulation of the downstream petroleum sector.
The President should initiate an executive order to sanitise the downstream oil and gas sector and put an immediate end to the importation of petroleum products. Second, give NNPCL marching orders to get its four refineries working within technically feasible dates; and thirdly, ensure that all local petroleum products marketers are able to purchase fuel directly from local refiners to ensure market prices are competitive. The overall effect will be to reduce the pressure on the foreign exchange market and trigger a significant appreciation in the naira exchange rate, which will in turn impact positively on fuel prices and other commodities, thereby reducing inflation and the cost of living.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos
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