• Tuesday, May 28, 2024
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Managing the fallout of economic reform: the need for speed, integrity, and compassion

Tinubu’s economic Odyssey: From promises to perplexities in Nigeria’s delinquent economy

This article takes the position that, yes, the current economic reform programme is necessary and inevitable. President Bola Ahmed Tinubu should be commended for his political will. However, political will is not enough. Political sensitivity and adroitness are also necessary. People are the subjects and objects of economic development—the initiators and ultimate beneficiaries of economic and political reforms. Where the pains or unintended consequences of economic reform are excruciating or difficult to bear in the short run for a large segment of the population, the need then arises for timely and adequate responses. The reality of economic reform is that there will be costs, but it will be justifiable if the benefits at the end of the day far outweigh the costs. Also, there will be winners and losers, but it will be justifiable if the winners far outweigh the losers. This is the concept of Pareto optimality.

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Nobody could have envisaged the extent of the ripple effects of the president’s decision to phase out fuel subsidies and merge the foreign exchange rates. It simply goes to show how dire and complex our economic situation is. Most of the economic crises we are presently grappling with are the consequences of many years of policy void, the accompanying fiscal recklessness culminating in a N23 trillion-naira ways and means bill (the printing of money for the government to spend), and the effect of widespread insecurity that has denied farmers access to their farms. Excessive government spending not backed by tax revenue is the easiest way to spike inflation and trigger a steep depreciation of the national currency.

True, the economic reform agenda of the president, which was inevitable, prompted the current economic hardship. But any responsible president would have done the same thing. The factors actually responsible for the current economic hardship are the pre-existing conditions of the economy prior to the introduction of economic reform: excessive government spending, multiple exchange rates, import dependency, currency speculation, a collapsed industrial sector due to poor electricity supply and lack of access to foreign exchange, massive crude oil and solid mineral theft, the flight of capital due to hostile economic policies, and insecurity, among others. None of these is the president responsible for, but it is going to be a hard sell trying to convince a cross-section of Nigerians or the proverbial man on the street that the president is not responsible for the hardship they are currently experiencing.

 “Excessive government spending not backed by tax revenue is the easiest way to spike inflation and trigger a steep depreciation of the national currency.”

Thus, President Tinubu must take political responsibility and act fast and decisively, especially to bring down food prices. In addition, it is absolutely necessary to cut down on the cost of governance. I leave it to the president and his team to determine the configuration of costs to be streamlined, but it is a fact that our approach to public governance in Nigeria is excessively costly. As a rule, any economic reform programme that does not cause policymakers and implementers some tangible pain is not likely to succeed. The primary reasons the Structural Adjustment Programme (SAP) of General Ibrahim Babaginda failed were: first, excessive government spending, contrary to the requirement to scale down the government deficit; second, government officials and policymakers, including the military top brass, refused to make sacrifices; they continued with their opulent lifestyle. Thirdly, the rank and file of the people bore the brunt of the economic reforms. Many people lost their jobs due to the collapse of import-substitution industries that depended on cheap foreign exchange, and the cost of living skyrocketed due to imported inflation. Indeed, almost 40 years after the introduction of SAP on July 1, 1986, the structure of the Nigerian economy has essentially not changed, and history is repeating itself.

The way forward:

The president must be swift and decisive. A comprehensive set of short-term policies to bring down food prices and prices of other essential commodities must be embarked upon, including importation, in the short term. Ongoing collaborative efforts with local producers and manufacturers to bring down prices should be enhanced; and bottlenecks hindering production removed. The Federal Government’s short-term efforts to significantly expand food production is commendable. Also, the decision to expand the number of households to benefit from the cash transfer programme from three million to fifteen million is highly applaudable. However, the central government cannot do it alone. There is a great deal that can be done at the subnational level. Other state governors should take a cue, for example, from the comprehensive welfare package announced last week by Governor Babajide Sanwo-Oiu of Lagos State. In fact, there should be a Presidential Council on Economic Welfare to be headed by the president himself, with all state governors and the minister of the Federal Capital Territory as members; and that council should meet every month.

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The management of economic reform is just as important as the reform programme itself. There should be a robust communication strategy to market the reform programme in a manner that carries the people along and also that addresses their concerns in tangible ways. At the Federal Government level, all key economic line ministries and their agencies should form an implementation task force to manage economic welfare and moderate prices of essential commodities without resorting to price controls. That arrangement should be replicated at the subnational level.

President Tinubu is not responsible for the present economic crisis, but he has a duty to fix it, working with other stakeholders including state governors.