Nigeria is in good hands as the trio of President Bola Tinubu, Finance minister Wale Edun and CBN governor Yemi Cardoso, attempt to reverse the unorthodox policies of the last ten years that have crippled Africa’s largest economy, according to analysts at US-based Citibank.
“In our meetings, we were continuously reminded that Nigeria has never had such a strong team between the Finance Minister, Wale Edun, the Central Bank Governor, Yemi Cardoso, and the President,” the Citibank analysts said in a note to institutional investors following a visit to Nigeria’s economic capital, Lagos and political capital, Abuja.
“The triumvirate have all worked together in the past, and all have orthodox/private sector backgrounds. That bodes well – reflected in support from the private sector, bilateral and multilaterals,” the analysts said.
Citibank said it came away from Nigeria with more optimism on the team in charge “despite the murmurings of slow reform momentum.”
“Ten years of seriously heterodox policy has created deep distortions in the economy – no small feat to turn-over,” the Citibank analysts said. “If the administration can unwind the policy mistakes of the past over the next 6-12 months, Nigeria could just about balance itself without market access.”
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President Tinubu, who assumed office in May, started off his administration with a bang, after ending a wasteful petrol subsidy and kickstarting badly-needed reforms in the foreign exchange market. The Financial Times in an editorial last week said Tinubu’s reform momentum was slowing.
That’s after Tinubu failed to follow up his subsidy removal with concrete plans on how the near N7 trillion saved from ending the programme will be used to improve the lives of Nigerians who have been hammered by a tripling in petrol prices.
There’s also the concern that the subsidy has creeped back in.
The NNPC argues that the subsidy is not back but the retail price of petrol has barely budged despite the recent rise in oil prices and the steep decline in the exchange rate.
Reforms in the foreign exchange market have also been half-cooked with traders saying the CBN is once again rigging the market and artificially propping up the naira which is around 30 percent weaker in the more accessible black market.
“The pace may be slower than anticipated by President Tinubu’s first aggressive moves on FX and the fuel subsidy, but that is arguably needed considering the depth of various distortions and the risk of piling costs on the average Nigerian,” Ayso van Eysinga, credit analyst at Citibank said in an October 4 note to clients.
Tinubu’s initial steps impressed investors but elicited a public backlash over rising food and fuel costs.
By mid-September, Tinubu had paused the fuel subsidy phase-out and the naira was in freefall on the informal market, frustrating his efforts to close the gap between the currency’s official and unofficial price. He has also had to quell more than three strike attempts by the Labour unions.
“Resolving the current Nigerian economic quagmire is analogous to solving a simultaneous equation with three hundred variables and no constants,” an entrepreneur who runs an agribusiness and internet service said.
Some 40 percent of Nigeria’s 200 million people live in poverty, according to latest data from the World Bank.
Tinubu’s reforms, though tipped to deliver long term gains, have brought pain to Nigerians whose purchasing power has been hammered by the highest level of inflation in 18 years, 26 percent in August.
Food, which accounts for the largest portion of what Nigerians spend cash on, rose by 29 percent in August.
Tinubu may have scrapped the costly petrol subsidy program, but historically low revenues means the health of the government’s finances still leave much to be desired.
Dollars are hard to come by with businesses on an unending queue for the greenback.
Oil production is at a record low, denying government of badly-needed dollar income.
In August, Nigeria pumped only 1.18 million barrels of crude, nearly 500,000 barrels below its allotted OPEC quota, which it has been unable to meet for at least two years.
In June, the World Bank forecast that Nigeria’s gross domestic product would only expand by 2.8 percent this year, barely keeping pace with the increase in the population, and “far slower than needed to make significant inroads into mitigating extreme poverty.”
The IMF however believes the reforms by Tinubu will help achieve faster economic growth.
The economy is expected to expand 3.1% next year, compared with 2.9% in 2023, the IMF said in its World Economic Outlook on Tuesday.