It’s hard to believe that two years have gone by since that heady day at Eagle Square, Abuja, when President Bola Ahmed Tinubu casually declared ‘subsidy is gone!’ It was a statement that set off reverberations across the country; changing life as we knew it for many Nigerians.
He had promised to take tough decisions to reset the economy and put it on the path to recovery and enduring prosperity. Well, this was as bold as they came! It’s wasn’t for nothing that his predecessors skirted the issue, waiting for the next person to act.
Former Kaduna State Governor, Nasir El-Rufai, once spoke of how he and like minds made the case for removal of petrol subsidy to then President Muhammadu Buhari. He would listen patiently as they made their presentation, nod sagely as statistics laid bare how the country was bleeding to death financially. Still, he did nothing about the killer.
Every administration that tried to terminate the subsidies faced confrontation from labour unions, opposition parties and civil society groups. The average man had come to believe that low-priced petrol was the only way the government was impacting his life. He didn’t care who was paying for the commodity to stay cheap. Taking that away was the most unpopular thing any administration could do. They all chickened away at the first sight of political trouble.
Petrol price in Nigeria as at May 29, 2023 was N198 per litre but would jump to over N500 within days of the removal of subsidies. It would then breach the N1, 000 mark in 2024. This action, along with the unification of multiple naira exchange rates, set off a wild inflationary spiral – the likes of which had not been witnessed for decades.
Many ordinary people could not make sense of the harsh new realities of life. No amount of explanation by officialdom could assuage their pain because someone somewhere in the past had chosen to sustain their false life, paid for with borrowed money.
Anambra State Governor, Chukwuma Soludo, who used to the Central Bank Governor, captured the situation of the country in 2023 this way: “This particular government inherited a dead economy from a microeconomic point of view; this government inherited a dead horse that was seen standing but people didn’t know that it was dead. I think it’s important for Nigerians to understand this.”
He was talking about how the country maintained a fuel subsidy regime that gulped $84.39 billion between 2005 and 2022. The Nigerian National Petroleum Corporation (NNPC), which was the sole importer of petrol, had piled up trillions of naira in debts from carrying the payments in its books.
The nation was spending 97 per cent of its revenue servicing debt, with little left for recurrent or capital expenditure. The previous government had resorted to massive borrowing to cover such costs. Today, that ratio is now in the region of 65%.
To ensure Nigerians continued to enjoy cheap naira, the exchange rate was also being subsidised by the government, with an estimated $1.5 billion spent monthly by the CBN to ‘defend’ the currency.
But this policy led to the abuse of the arbitrage gap, with thousands of BDCs and corrupt public officials feasting on the multiple exchange rates. The power of CBN officials grew as they flexed their muscles in allocating scarce forex to those they chose to. Nigeria was soon failing to fulfil its remittance obligations to airlines and other foreign businesses, such that FDIs and investment in the oil sector dried up.
To address the crisis, the government resorted to floatation of the naira – a move that saw the currency almost breaching the N2, 000 to the dollar barrier. Today, rates have stabilised to a little south of N1, 600. This is still a world removed from the artificial rate of N460 circa May 29, 2023.
To say the first year of the Tinubu administration was tumultuous would be an understatement. The new president was not afforded the customary honeymoon – a period where every sin was easily overlooked. From day one he was in the eye of the storm, fending off attacks from the unions and others enraged by the removal of subsidy. Barely a month in the government was already facing threats of nationwide strikes.
Many battled to feed as outrageous prices kept food out of their reach. Official response was to address the stopgap with a slew of palliative measures while hoping short term initiatives would quickly take effect.
Such was the gravity of the economic challenges in that initial period that the government searched frantically for hope in every new positive economic data. It was hard to imagine that some form of stability could be achieved within four years, such that Tinubu could look voters in the face and say give me another term to finish the job of reshaping the economy.
That’s why, in grading his performance as president, any honest assessor must admit that the storms of the first 12 months have, to a large extent, been stilled. Certain benefits may not have reached the most vulnerable in society, yet there’s no denying that progress is being made.
History will forever record the incumbent as the man who slew the fuel subsidy sacred cow and buried it. This was thought to be an impossible task. Even in the face of intense political pressure and harsh criticism he refused to return to the status quo. Now, the benefits are beginning to show.
Federal and state governments now have more money at their disposal to spend on infrastructure and other programmes. It was recently revealed that public debt had dropped from $113 billion in 2023 to $94.2 billion currently after the central government paid $19.2 billion. States have been able to clear N185 trillion which they owed.
There was even better news from the International Monetary Fund (IMF) showing that Nigeria had cleared her legacy debts. All these things have been made possible with money which would have been frittered away, but is now available to clear the overhang.
It may look like an intangible, but one of the great achievements of Tinubu in his time in office is changing the mindset of people. Gradually, they are shedding the entitlement mentality that assumes that because we produce crude oil refined petrol has to be sold at giveaway prices. Nigerians are adjusting to paying the appropriate price for the commodity and embracing the reality that market forces would determine pricing. That is totally different from a time not too long ago when some anonymous government official would fix prices arbitrarily.
In other positive news, Minister of Budget and Economic Planning, Atiku Bagudu, disclosed that the economy has witnessed four consecutive quarters of growth, exchange rate stability, and resurgence in private sector confidence.
Central Bank Governor, Yemi Cardoso, equally boasts that after a period of turbulence, the economy has stabilised. “Investors don’t go where there is instability. Investors don’t go out to lose money, they go out to invest because of the stability in an economy, and they can plan,” he said.
“We obviously have been through a long period of instability, and I think that clearly what is being recognised is that the Nigerian economy is now stable and there is interest in those who want to invest, to now invest.”
While these statistics may be cheery for the president and his team, his greatest challenge now lies is seeing how the ordinary man can testify of stability and improvement in his own economy. There’s so much that’s been done that’s still not trickling down to the weakest in the population.
That’s something he must address as he enters the critical third year of his presidency.
