BOLA TINUBU AND THE TASK AHEAD

President Bola Tinubu’s first two weeks in office reflects a familiar African fable, epitomized by Roger Bannister, and popularized by Thomas Friedman. According to the tale, every morning in Africa, a gazelle wakes up, knowing it must outrun the fastest lion to survive. Simultaneously, a lion wakes up, aware it must outrun the slowest gazelle to avoid starvation. The moral is clear: regardless of being a lion or a gazelle, one must keep running when the sun rises.

It remains uncertain whether President Tinubu is the hunting lion or the fleeing gazelle, but what is evident is his sprint in the right direction. However, while the markets are responding positively to his critical decisions, it is important to emphasize that escaping the economic pit dug by the previous administration will require more than mere policy announcements. It demands a Marshall plan and the political determination to follow through.

The tumultuous monetary policy and incoherent fiscal strategy of the past eight years have left Nigeria with the world’s highest unemployment rate, the highest inflation rate in over two decades, and 133 million citizens living in multidimensional poverty. Fortunately, Tinubu recognizes the urgency and appears to have a clear plan to address these issues, albeit underestimating their complexity.

Within two weeks, Tinubu has reversed two of Nigeria’s worst economic policies seen in the past two decades, and he has removed the fuel subsidy that has strangled the nation. Eliminating the petrol subsidy and striving for exchange rate unification are crucial steps to attract investors and gain international attention. However, the inability to manage the social impact of these shock therapies could lead to unintended consequences, further stifling growth and worsening poverty.

Undeniably, removing the petrol subsidy and unifying exchange rates will attract significant dollar inflows, improve government finances, and encourage foreign direct investment. Most importantly, it signals that Nigeria is open for business. While these signs are encouraging, it is equally important to consider that these decisions will exacerbate inflation in the short to medium term, raise interest rates, and erode citizens’ purchasing power.

As prices of petrol, transportation, and food inadvertently rise, household consumption will significantly shrink. Household consumption expenditure accounts for the largest share of GDP. Consequently, if household consumption diminishes significantly, the economy will struggle to achieve the proposed 6% GDP growth set by Tinubu’s economic team. The situation could worsen, as lower purchasing power and stagnant wages will make it harder for many Nigerians to afford necessities, pushing them below the poverty line.

Nigeria’s economic history over the past four decades has shown a strong correlation between currency devaluation and increased poverty. As the Naira weakens against the dollar, poverty levels have risen. The reason is simple: Nigeria lacks an export-driven economy where a weaker currency enhances global competitiveness. Therefore, beyond the optimism, the unification of exchange rates will likely weaken the Naira in the short to medium term, plunging more people into poverty.

To contextualize this issue, Nigeria sees approximately 10.6 million pregnant women annually, many of whom travel 12km to the nearest primary healthcare centre. The cost of this trip is the primary deterrent preventing many of these women from accessing those facilities, resulting in one of the world’s highest maternal mortality rates. Consider the challenges faced by women who now must pay three to four times more for transportation and food.

Therefore, for the Tinubu-led administration to achieve its ambitious goals of doubling GDP within eight years, creating 50 million jobs, and lifting 100 million people out of poverty, it must prioritize the short-term survival of Nigerians. As the renowned economist John Maynard Keynes once said, “In the long run, we are all dead.” Consequently, in collaboration with sub-national governments, this administration must make massive investments inthe agriculture sector and public transportation systems to reduce transportation and food costs effectively.

Furthermore, it must ensure that businesses, small and medium enterprises (SMEs), and large corporations can access affordable capital. As a result, the proposed $800 million loan from the World Bank – which was initiated by the previous administration – should be directed towards mitigating the impact of subsidy removal by improving public transportation systems and providing affordable and accessible capital for SMEs.

Most importantly, Nigeria must strive to build an export-driven economy, which is crucial for realizing its true potential. Competing directly with Chinese, Vietnamese, or “Asian tiger” economies in garments, electronics, or automobiles may be overly ambitious. However, Nigeria can focus on agriculture (with value addition), gas, and specialized human capital to gain a competitive edge. Also, since neighbouring countries rely on Nigeria’s subsidized fuel, we can become the dominant petrol trader in the subregion with efficient refineries and improved productivity.

Admittedly, President Buhari set a low bar, but Tinubu’s pace and decisiveness are sending the right message.

 Ayodele Adio, Managing Editor, Avalon Media Group