Category: Comments

• By Ademola Oshodi

While it is true that citizens across all economic strata are feeling the pinch of the government’s reforms, the reality is that the Nigerian economy is long over-due for major surgical operations as successive governments at the federal level have lacked either the courage or the conviction to take the difficult decisions that would have positioned the country for sustainable and inclusive economic growth. This may not be unconnected to the need for political correctness as against economic pragmatism. In other words, Nigeria has lived a lie for too long and the chicken has come home to roost. The nation’s economy is in intensive care and requiring of life-saving surgery – an unfortunately painful exercise that must be undertaken to stand a good chance of survival.

The situation in Nigeria is not peculiar as many countries have had to embark on painful economic reforms during difficult periods. Twentieth century history is replete with leaders who have transformed their nations’ economies through tough reforms that were initially painful but eventually beneficial. Some of these leaders include Margaret Thatcher (Britain), Den Xiaoping (China) and Boris Yeltsin (USSR/Russia). Are there any significant parallels between these leaders’ economic policies and those of Nigeria’s President Bola Tinubu? Should Nigerians be hopeful of light at the end of this dark tunnel? Let us examine the economic reforms of these former leaders vis-à-vis President Tinubu’s reforms.

 Margaret Thatcher’s most famous legacy is her commitment to free-market economics. During her time as UK Prime Minister (1979–1990), she implemented radical economic reforms that emphasized reducing the role of the state in the economy, promoting privatization, cutting public spending and reducing the power of trade unions. 

Thatcher’s policies often referred to as “Thatcherism,” aimed at reducing inflation and curbing the state’s involvement in economic management. Industries like telecommunications, gas, water, and electricity, previously controlled by the state, were sold off to private investors. This was done to improve efficiency, increase competition, and reduce the financial burden on the government. While President Tinubu has not yet embarked on a sweeping privatization campaign as Thatcher did, his removal of fuel subsidy is a step toward reducing government spending on public consumption. Unlike Thatcher whose reforms were marked by a strong market approach, the Tinubu’s reforms are laced with social policies for groups like students, traders, farmers, etc. Nonetheless, Tinubu’s broader vision, like those of Thatcher involves encouraging the private sector to take a greater role in the economy, particularly in sectors like power, infrastructure, and agriculture.

 Deng Xiaoping’s reforms took place in a China that was transitioning from a strict, centrally planned economy under Mao Zedong’s Communist rule to a more open, market-oriented system. Deng recognized that China needed to open to the global economy to improve its growth prospects. His reform policies were driven by the need for modernization in industry, agriculture, science, and defence collectively known as the “Four Modernizations.”

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Deng introduced market elements into China’s socialist economy, allowing for private enterprise, foreign investments, and decentralized economic planning. His reforms were gradual, beginning with agricultural reforms (the Household Responsibility System) that gave farmers incentives for higher productivity. Later reforms targeted industries, leading to the establishment of Special Economic Zones (SEZs) to attract foreign investment.

 Local governments were given more autonomy in economic decision-making, enabling them to promote regional growth based on local conditions. Deng’s reforms were famously pragmatic. His mantra of “It doesn’t matter whether a cat is black or white, as long as it catches mice” encapsulates his approach. He was less concerned about ideological purity and more focused on results. Tinubu’s reforms on the other hand are grounded in a more liberal, market-oriented ideology. Nigeria’s reforms are driven by the need for economic diversification, fiscal prudence, and attracting foreign investment. His agenda reflects a capitalist outlook aimed at reducing state intervention in critical economic sectors and empowering private enterprises, although he operates within a democratic political framework unlike Deng’s China.

One issue that also aligns with Deng’s decentralised approach to development is Tinubu’s power sector reforms. The amendment of the Electricity Act breaks decades of federal government’s monopoly in the generation, transmission and distribution nationwide, allowing states and the private sector to more freely participate in the sector. Fast forward, states like Lagos have committed to investing in the sector. In early November, the Lagos State Government invited energy solution firms and independent power producers to bid for gas-fired power plants. Similar invitations are happening in other states. It is expected that the deepening of the power sector reforms will fast-track the expansion of the country’s power generation, transmission, and distribution.

While Deng’s reforms in China lifted millions out of poverty, they also created stark regional inequalities as coastal areas grew richer faster than inland regions, which led to social tensions. Deng’s reforms allowed economic liberalization, but the Chinese Communist Party maintained strict political control. The challenge was to maintain this balance without encouraging political liberalization.

In Nigeria, the removal of fuel subsidies and foreign exchange reforms led to an immediate rise in inflation, causing significant hardship for ordinary Nigerians. Managing the political fallout and ensuring that reforms are inclusive remains a significant challenge. Indeed, politicians that supported the reforms being implemented by the Tinubu administration have rephrased, repudiated, or rejected their pre-election stance.

Boris Yeltsin, who was president of Russia between 1991 and 1999, took radical steps to transition Russia to a capitalist economy after the fall of the Soviet Union. His reforms, popularly referred to as “shock therapy,” liberalized prices, privatized state-owned enterprises, and dismantled state control over industries. These reforms were rapid and led to hyperinflation, inequality, and economic instability, but they moved Russia toward a lasting market economy. The extreme outcome of this administration was his prescribing the rapid and controversial privatization of Russia’s state-owned assets. This created a class of oligarchs who accumulated vast wealth from former state enterprises, leading to deep inequality and concentration of wealth. His policies aimed at dismantling the remnants of the socialist economy and establishing a free market. In doing this, the Yeltsin administration created monopolies rather than a competitive market system.

Ultimately, the Tinubu reforms are confronted with the same two options that confronted Yeltsin. As the Columbia University scholar, Padma Desai, pointed out in an article entitled ‘Russian Retrospectives on Reforms from Yeltsin to Putin’ written in 2005, the alternative option to Yeltsin’s shock therapy characterised by “sweeping changes” was to adopt “slow-paced reforms that wait for a political consensus.” This second option “can prolong the resulting costs and dislocations long after politics had turned ‘ordinary,’ giving opponents of reform a chance to regroup and counterattack—with the result that reforms may never actually occur.”

In Nigeria, the removal of subsidy has been criticized for its timing, and the unification of exchange rates criticised for its trickle-down impact on cost of imported and local items. Yet, there is no agreement as to what time is the best time to implement such necessary reforms. Not kicking the can down the road, the Tinubu administration took a difficult decision that previous government had either been reluctant to take or delayed. In other words, just as Yeltsin decisively announced the shock therapy in October of the year he became Russia’s President, President Tinubu expressed his support for the end of the subsidy regime on the day of his inauguration in May 2023.

In some sense, Tinubu’s reforms are essentially like those of Thatcher, Deng, and even Yeltsin. But he differs from them in many respects, and this is not unexpected. For one, scholars of comparative studies agree that it is difficult, if not impossible, to find cases that are exactly similar or totally different.

Despite negative perceptions by some, Tinubu’s approach is more incremental than sweeping, perhaps, trying to balance economic restructuring with political stability. Unlike the ruthless reformer, his investment in social interventions through direct cash transfers, distribution of palliatives, introduction of students’ loan scheme, free vehicle conversion to condensed natural gas (CNG), consumer credit scheme, etcetera, are all geared towards alleviating the immediate impact of his policies on consumers. In this sense, Tinubu’s approach is far from a ruthless embrace of market transformation. Instead, he is more like a traditional welfarist confronted with dire situation that requires shock therapy, but he has sought to simultaneously administer crucial reforms alongside social interventions that can make the impact less painful.

 •Oshodi is Senior Special Assistant to the President on Protocol.