Nigerians are buffeted from all corners. Inflation is at an all-time high, even as the value of the naira has sharply plummeted, heralding what is probably the worst economic crisis the country has seen. Coupled with the rising wave of crime in the form of kidnapping, armed robbery, and banditry, the general outlook of things is bleak.
Now, with the prices of basic goods soaring above the reach of the average citizen, Nigerians have begun to adjust their lifestyles to suit the times. Non-essential items are ticked off the budget list. Expensive crucial ones are replaced with cheaper, if inferior, alternatives. Movement from place to place is limited, with people cramming several appointments together to maximize transport costs.
Things are hard. The perpetual Nigerian grumbling has given way to the strident cry of complaints and the federal government is in the line of fire for the policies that have left many in the lurch. On assuming power in May last year, the Bola Tinubu administration quickly implemented two economic policies, which have been touted by economists as necessary for the nation’s economic growth and long-term viability.
However, the ‘removal’ of the petrol subsidy and the floating of the Naira, at least in the short term, have worsened the economic crunch and further plunged many Nigerians into poverty. Although data on the latest poverty trend is scarce, the National Bureau of Statistics (NBS) estimated in 2022 when the average inflation rate was 18.85, that 63 percent of Nigerians lived in multidimensional poverty. In June 2023, the World Bank reported inflation pushed an estimated four million Nigerians into poverty between January and May 2023. With inflation reaching the highest levels in decades in December 2023 at 28.9 percent, the Punch newspaper stated that this had contributed to worsening poverty, with major contributors being food and non-alcoholic beverages.
Following the trend of higher inflation leading to higher poverty, any new data on the economy will possibly show an upward trend in the number of poor people and Nigerians being squeezed by the downturn. But, it is reasonable to deduce that causing Nigerians untold pain and anguish is not the intention of the government in implementing these economic ideas.
The orientation of the Tinubu administration appears to be the neoliberal economic model, which in its core principles shares similarities with the Washington Consensus Model. The neoliberal policy recommends market-oriented reforms, the removal of government subsidies, and allowing market forces, rather than government interventions, to determine the prices of goods and services. It emphasizes free markets, limited government interventions, deregulation, fiscal austerity, and free trade, among others. Its central assumption is that free markets are the most efficient and effective way to allocate resources and promote economic growth, leading to prosperity for all.
The two seminal economic policies of the Tinubu administration, at least in their intentions, appear to fit into this free market idea. The government explained that the removal of subsidy on petroleum would promote efficiency in the downstream sector, with the expectation that market-driven fuel prices would lead to competition among private businesses, potentially leading to lower prices; improved service delivery in the long run, and lead to investments in alternative energy sources, and improve fiscal sustainability as the petrol subsidy was costing the country around N7 trillion annually.
The objectives for the ‘floating’ of the naira were similar. Early in the administration, on June 14, 2023, the Central Bank of Nigeria (CBN) simplified the foreign exchange market by merging all its segments into one. This eliminates the previous system of multiple exchange rates, allowing the naira to be traded at a single market-determined rate. In effect, the forces of demand and supply, rather than the government, determine the value of the naira. The touted gains included export competitiveness, attracting foreign investments, and eliminating corruption in the form of round-tripping associated with multiple exchange rates.
These neoliberal economic ideas look good on paper. So did the Structural Adjustment Programme (SAP), the series of economic reforms sanctioned by the IMF and World Bank which was implemented by the General Ibrahim Babaginda administration starting in July 1986. Its key features included the devaluation of the naira, deregulation, and privatization of government-owned businesses, trade liberalization, and fiscal austerity. All drawing heavily from the neoliberal economic worldview.
The expectation was that SAP would lead to economic growth by stimulating exports and attracting foreign investment; increasing employment by improving the efficiency of local businesses; reducing external debts through export earnings and decreased expenditures, and that devaluation and a tighter fiscal policy would lead to lower inflation.
Many economists now say the programme achieved the opposite, with even the IMF coming to agree later that, after the implementation of the structural reforms in several countries, the results were mixed. In Nigeria, the gains of SAP were marginal and short-lived, while its enduring impacts included the worsening of poverty and inequality; increasing significantly the level of unemployment as local businesses folded up, and sparking serious social unrest.
If you asked any Nigerian who is 45 and above, he or she would possibly tell you the most pivotal economic development that caused a dramatic downward shift in standards of living was the Structural Adjustment Programme. It was during this time that Nigerians ceased to buy brand new cars and tokunbo vehicles -imported fairly-used ones- became the vogue. The subsidized feeding of university students stopped this time too. Naira also began its sharp descent with SAP. It is safe to say that Nigeria never recovered from SAP.
Now, again, we are in the throes of economic reforms which are being touted as the next best things. But SAP failed with enduring consequences for Nigerians, why should we expect President Tinubu’s ‘reforms’ to succeed? Already the short-term impact of the president’s policies is leaving Nigerians out of pocket. Tokunbo cars are becoming out of reach as Nigerians are making do with refurbished Nigerian-used fairly-used cars (confusing? I know. This means buying second-hand vehicles that have already been used in Nigeria). Patronage of fairly-used items such as laptops, televisions, and even pots and spoons is increasing rapidly as new ones are beyond reach. This is reminiscent of the SAP era, a seismic shift in the standards of living, for the worse.
Some economists with neoliberal leanings blame the failure of the SAP reforms to achieve their intended outcomes on the Babangida regime, for its corruption and perceived failure to fully and efficiently implement the policy. Sadly, such allegations may hold some water now too. The issue of official corruption is yet a serious problem, but even more troubling, the implementation of the ‘reforms’ seems halfhearted.
When the President declared at his inaugural address that the petrol subsidy was gone, it implied that market forces would decide the price of the product. The cost of PMS subsequently rose quickly to match with market realities. But since then, despite changes in market dynamics, especially the depreciation of the naira, the price of PMS has remained constant at around N600, even when the landing cost has risen to over N1,000! This suggests that the government is secretly intervening by way of subsidy to keep the price artificially low. The IMF confirmed this recently in a statement, even as the government is paying heavy subsidies for electricity consumption.
So what kind of voodoo economics is this? It reminds me of a Yoruba saying, _ko se eku, ko se eiye_ (‘’It is neither a bird nor a rat,’’ suggesting ambiguity). Also, If the government is neoliberal in its economic leaning, it would take two components seriously: fiscal austerity and running a small or limited government. Rather, the administration has the highest number of federal ministers ever and has earmarked billions for the entertainment and travel of the President, and his deputy, as well as for various dodgy social intervention schemes, which are outside the core economy. The National Assembly is also spending like a sailor that just touched the land after many months at sea. This negates every assumption of neoliberalism, which by the way does not mean austerity for the people but enjoyment and the status quo for the government.
Any reform, market-oriented or otherwise, without a fundamental change in how the government conducts its business, especially its budgeting process, and a curb in the lavish spending on key government leaders, would likely fail.
In the end, as with Babangida’s SAP, this administration will not be judged by its intentions or the theoretical merits of its policies, but by where it leaves Nigeria economically. For now, things do not look promising.
