If there’s any issue in Nigeria today that everyone is preoccupied with, it is the state of the economy. Almost everybody has same answer to the question as to how the economy is performing. It doesn’t matter whether the question is thrown at intellectuals, or the layman on the street. The defining factor that propels responses to the question is the prevailing living standard. It matters very little whether the economy, as it stands right now, was inherited from previous governments. The economy is ‘bad’ is the common response you get from everywhere.
The question is why the economy is so concerning to everyone? The answer is simple. It’s about the food we eat and the cost; it’s also about the work we do and its sustenance. It’s equally about the wares we buy and sell on the street corner shops. Every other thing revolves around it, including paying the rent, children’s school fees and being able to pay the fare that takes one to work.
The economy essentially revolves around the individual and corporate activities that churn out returns, or resources that put food on our tables, pays the health bills, provides stipends and support members of the nucleus and extended family who are in need.
The economy refers to the scope of activities undertaken by corporate organisations in the formal sector, and others in the Small and Medium Enterprises, the Micro, Small and Medium Enterprises, as well as individuals in the informal or unregulated sector engaging in the production and exchange of goods and services nationally. The outcome of the cumulative inputs of the various human commercial efforts, contribute to what is known as the Gross Domestic Product (GDP). If the GDP goes up, the economy is growing; if it goes down, the economy is contracting.
Today, the mantle of the nation’s leadership has fallen on Asiwaju Bola Ahmed Tinubu. He assumed the presidency six months ago. This followed Muhammadu Buhari‘s eight years in the saddle. What the regime left behind in the economic space in the words of many notable and informed Nigerians “was a disaster.”
Senator Adams Oshiomhole, former Edo State Governor and erstwhile chairman of the All Progressives Congress (APC), said this of the economy: “The government inherited a terrible economic situation. It inherited an economy where our total national revenue was barely enough to service our debt burden – spending 96 per cent to service debts, meaning that for every N100 Nigeria earns, 96kobo will be required to service debts, with only N4kobo left to pay all the salaries. Nothing can be worse.”
He, however, added that Tinubu came determined, saying the government will have to do business ‘unusual’ to arrest the drift and stabilise the economy.
Following closely on Oshionmhole’s assessment, Anambra State Governor and one time Governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo, said Tinubu inherited an economy that could be compared to a “dead horse, but standing.” He commended the President for taking some decisions, including the removal of petrol subsidy, and urged the citizenry to support the government in achieving its plans.
The opinion of the Minister of Finance and Coordinating Minister of the Economy, Mr. Olawale Edun, was not any different. It dovetailed with what Soludo and Oshiomhole had said. He said the Tinubu administration met a very bad economy with inflation at 24 per cent.
He painted the picture of what the administration met on ground thus: “Per capital income has fallen steadily, inflation is at 24 per cent, unemployment is high, and youth unemployment is even unacceptably high. These are the key metrics that we have met. We met a bad economy, but the promise of Mr. President is to make it better.”
Many, including key government officials may be overwhelmed at the depth to which the economy has sunk. The state of it, as has been variously painted by those who should know, may have come as a surprise to many, but I dare say, not the President.
His words “don’t pity me,” at the state banquet on the day of his inauguration, spoke volumes, and underscored what he knew awaited him as he took office. One can therefore assess Tinubu’s style of governance and response to issues, so far as flowing from his knowledge and understanding of what is at stake and how hard and fast he must move to prevent a further slide of the economy, and give it the needed push so as to steady it on the desired path, or trajectory for growth.
Tinubu’s bold declarations “don’t pity me. I asked for the job, I campaigned for the job, I’ll live up to expectation,” remain the hope that Nigerians are holding on to in the face of the present economic predicament.
The depth and extent of the measures he has taken so far to revive the economy, though harsh and painful, underscore the sorry state of affairs at this point in time.
The removal of fuel subsidy and abolition of exchange rate control are two major policies that heralded the entry of this administration. These have been variously applauded as needful to raise funds for the government and at the same time curb corruption. On the flip side, they have created the greatest headache for the government given the resultant pain and hardship for the citizenry.
The breakeven point
The economy stands at a crossroads, caught between the weight of inherited challenges and the optimism of a new administration. As the year draws to a close, two prominent economists have offered contrasting perspectives on the current state and potential future of the nation’s economic landscape.
Professor Uche Uwaleke of Nasarawa State University paints a stark picture, describing it as struggling under the burden of sluggish growth, high inflation and a crippling public debt. He highlights the devastating impact of inflation, which has eroded purchasing power and pushed millions into poverty.
On the other hand, Gbolade Idakolo, Managing Director/CEO, SD&D Capital Management Limited, acknowledges the difficulties, but nevertheless emphasises the potential for improvement under Tinubu’s leadership.
He points to the bold policy decisions taken by the new administration, encompassing the fuel subsidy removal and foreign exchange adjustments, saying they are necessary steps towards long-term stability, even if they have caused short-term hardships.
Both economists agree, nonetheless, that overcoming these challenges require decisive action. Uwaleke advocates swift implementation of the recommendations from the Presidential Committee on Fiscal Policy and Tax Reforms, aimed at reducing the fiscal deficit and achieving financial consolidation, while Idakolo urges government to aggressively pursue its “Renewed Hope” policy and in addition, aggressively implement the 2024 budget.
However, the path forward is not without its obstacles. They say there’s need to address sector-specific challenges, such as those faced in agriculture, manufacturing and aviation. Idakolo cites the closure of major companies as a stark reminder of the impact that the current economic climate is having on businesses.
Another cause for concern highlighted by Uwaleke is the high inflation rate, which peaked at 27.3 per cent in October 2023. This has significantly eroded the purchasing power of Nigerians and increased the poverty rate.
The inflationary pressures can be attributed to various factors, including the abuse and failure to comply with, or apply corporate governance principles at the CBN on the usage of ways and means in the past.
This practice, which involves the government borrowing from the CBN to underwrite its expenditure per time, has increased money supply and contributed to rising inflation. Addressing this issue requires comprehensive fiscal and monetary measures, including reducing government spending and ensuring a more disciplined approach to managing public funds.
In addition to inflation, Uwaleke highlights the forex crisis as a major concern. The scarcity of foreign exchange has negatively impacted businesses, especially those relying on imports. The shortage of dollars has made it challenging for companies to engage in international trade and attract foreign investment.
Resolving the forex crisis requires an improvement in forex inflows, which can be achieved through diversification of the economy, boosting exports and attracting foreign direct investment. The government should also explore policies that promote local production, import substitution, and encourage investors to repatriate their funds.
The shameful narration that Nigeria’s oil was being stolen to the tune of over 400,000 barrels daily, is an economic crime that should be investigated and perpetrators consigned to jail for a long time.
Uwaleke stresses the importance for macroeconomic stability and fiscal consolidation, saying the establishment of the Presidential Committee on Fiscal Policy and Tax Reforms is a step in the right direction. This committee should focus on reducing the fiscal deficit and ensure efficient use of public resources.
However, achieving fiscal consolidation requires more than just committee recommendations. It demands a broader commitment to cut the cost of governance and eliminate wasteful expenditure. This can be done through stricter budgetary control, transparency in public procurement processes, and a focus on delivering value for money in government projects and programmes.
Shifting the focus to Idakolo’s assessment of the economy in 2023 provides additional perspective on the challenges faced during the transition year from the Buhari to the Tinubu administration. He acknowledges that the performance of the economy in 2023 was below 50 per cent which was expected, given the transitional nature of the period. Politicking took the better part of the year, and regrettably, is still continuing.
Sectors like manufacturing, agriculture, aviation and oil and gas, faced significant challenges, leading to negative impact on the overall economy. The issues of food inflation and scarcity of Naira further exacerbated losses experienced by the country.
Idakolo emphasises the need for the administration to tackle these challenges head-on and implement their Renewed Hope policy. This policy, if properly executed and accompanied by the aggressive implementation of the 2024 budget, will have the potential to bring about improvements.
However, it is crucial for the government to closely monitor and evaluate the impact of these policies on the economy to ensure their effectiveness in achieving the desired goals.
Going forward, it is crucial to recognise that the economy is multifaceted and interconnected. Addressing the challenges requires a comprehensive and integrated approach. This includes efforts to enhance the ease of doing business, promote entrepreneurship and innovation, and investment in critical infrastructure. It also necessitates a focus on human capital development and improving the quality of education and healthcare services.
Moreover, fostering a conducive investment climate by reducing bureaucratic bottlenecks, ensuring policy stability, and fighting corruption will attract both domestic and foreign investors. These investments drive economic growth, create employment opportunities and contribute to sustainable development.
