There has been an increased call for the reversal of some reforms made by the President Bola Tinubu government some 14 months ago as they have escalated a cost of living crisis in the country and plunged over 80 million into poverty.
But these policies are not without gains. Within a year, Nigeria’s crude oil exports grew by over 200 percent, federal allocation to states increased by almost 140 percent.
In the first quarter of 2024, total foreign investments tripled and hit a four-year high of $3.38 billion, data from National Bureau of Statistics shows. But ordinary Nigerians are groaning in hunger buoyed by weakened purchasing power.
“The rollback of the reforms will be unfavourable to Nigeria”, said Tajudeen Ibrahim, director, research and strategy at Lagos-based investment bank Chapel Hill Denham.
“The government was able to generate higher revenue on the back of the reforms, truncating the policies may lead to new borrowings to maintain subsidy”.
Ibrahim also said a reversal of the economic reforms would send a wrong signal to the international community in terms of the country’s policy consistency.
“Credit agencies rated our economic outlook to be positive on the back of the reforms, so if we roll back, it will negatively impact our credit rating as a country and that will limit our ability to borrow for economic growth and development,” the research analyst said.
In his view, Samuel Sule, the chief executive officer of Renaissance Capital Africa said the issue is not really about the reforms but its executions, calling for more fiscal prudence.
“It’s balanced that the pains of the reforms should be seen across all facets of leadership, just like we saw in Kenya, a reduction in government spending would add more credence to the policies,” he said.
The policy expert said “fiscal measures determine the price of bread rather than monetary,” stating that the country is in an emergency situation and speedy execution of actions are required.
Tinubu, in a widely televised broadcast last week, said his plans will fix the myriad problems of Africa’s most populous country. But with rampant inflation forcing many citizens to let go of basic necessities, they’re low on patience.
The Nigerian leader cancelled a costly yet popular fuel subsidy that kept prices artificially low on the day he was handed the affairs of the country, loosened currency controls thereafter, sending inflation to its highest in nearly three decades while eroding household incomes.
But with July’s consumer prices slowing for the first time in nearly two years to 33.40 percent and food inflation easing to 39.53 percent, Nigerians may begin to witness a respite.
Uche David, a Lagos-based business owner at the popular Alaba market said removing subsidies and devaluing the currency at the same time almost made him close down his trade.
“Our logistics fee tripled and the exchange rate crisis made me lose a fortune,” he lamented, adding that business owners are passing down the burden on consumers even as patronage dwindles.
“You can’t predict what you will get in the market. So we’re always conscious of the exchange rate. Inflation is equally eroding our incomes”.
A new report by PwC Nigeria revealed that about 67 percent of Micro, Small, and Medium Enterprises (MSMEs) in Nigeria, have experienced declining demand over the past two years due to rising inflation.
“These challenges are compounded by macroeconomic headwinds such as inflationary pressures, currency depreciation, and slow economic growth,” it added.
Samson G Simon, chief economist ARKK Economics & Data Limited said scrapping subsidies and floating the naira almost at the same period were a “grievous mistake”.
“Reversal of the reforms will be way costlier,” he said, stressing that provision for domestic refineries should have been in place before ending the subsidy regime.
“The subsidy is actually a means to an end. What the ordinary Nigerians need now is a lower refined fuel prices which could be done by shoring up domestic refineries, luring in investors and boosting supply of crude oil,” the Abuja-based economist said.
Tinubu has stood firm so far on his decision to ease foreign-exchange restrictions, a move that sought to secure an influx of foreign capital and make Nigeria a more attractive investment destination.
It has however led to an almost 50 percent slump in the naira-dollar exchange rate this year, placing it as the second worst currency in the world after the Lebanon pound, according to Bloomberg.
Though Tinubu acknowledged hardships caused by the reforms, which also include higher interest rates and the partial removal of electricity subsidies, he said this would create a stronger foundation for future growth.
He added that the reforms saw the federal revenue increase to N9.1 trillion in the first half (January- June) of 2024. This is over 100 percent higher than N4.06 trillion generated in the first half of 2023.
Rafiu Adesina, a senior civil servant with a family of three said he could barely buy personal items from his salary, lamenting how transport fare and soaring prices are shrinking his former worthwhile income.
“I used to be very happy at the end of the month before, but the thought of how what you have laboured for 30 days will finish in a twinkle of an eye on food and transport fare is alarming,” Adesina, a teacher in a government-owned school in Lagos said.
As part of the measures to ameliorate the hardship occasioned by these reforms, the government resumed a N25,000 cash transfer program which was earlier rocked with irregularities for the vulnerable, targeting about 12 million households.
It also began a social security program for unemployed youth and graduates, alongside a consumer credit scheme to boost affordability and economic recovery.
Recently, the federal government approved a 150-day duty-free window to allow the importation of maize, husked brown rice, and wheat as part of measures to combat rising food inflation across the country.
It also distributed 740 trucks of rice to states as palliative measures which some states said they are yet to receive. Despite these cushionings, prices still remain elevated amid low spending power.
Oluseun Onigbinde, global director and co-founder of BudgIT said on X recently that the government needs to “share a plan to rebuild the productive engines of the economy, tackle food inflation and ensure equitable power tariff,”.
He also urged the government to manage the exchange rate crisis and be wholly transparent on fuel subsidy for an economic rebound.
