Nigeria’s Economic Woes Demand Holistic Approach, Not Shock Therapy– FT

Addressing the country’s economic woes will require more than just shock tactics or business-as-usual policies. The government must prioritise a holistic strategy that tackles the interconnected issues plaguing the economy.

Nigeria is facing a complex web of economic challenges, including rising insecurity, galloping inflation, and diminishing productivity.

President Bola Tinubu is perhaps right to point to his courage in taking tough decisions as a measure of his intention to end the rot in Nigeria and reflate the economy. Taking some tough decisions as the president did has distinguished him from the man he succeeded who barely moved the needle in the eight years that he ruled Nigeria.

The Financial Times in a recent editorial that said tough decisions alone would not be all that is required to turn Nigeria around.

The editorial  titled, “Shock therapy alone will not cure Nigeria’s economic ills,” the publication goes on to posit that “in the nearly 15 months since Bola Tinubu became president, he has forced his 220m fellow Nigerians to swallow some bitter medicine. He removed a generous fuel subsidy, one of the few benefits citizens receive from their inefficient and corrupt state. He allowed the country’s currency, the naira, to enter freefall, fuelling imported inflation and triggering the worst cost of living crisis in a generation. These measures have pushed tens of millions of already impoverished people deeper into misery. But they were necessary to begin correcting the country’s long-term economic demise.”

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According to the FT, “the fuel subsidy was ruinously expensive, guzzling nearly a third of the federal budget. It was also distortionary, channelling Nigerians’ energies into rent-seeking, smuggling and graft. The exchange rate regime, which vastly overvalued the naira, wiped out exports of everything but oil. While genuine industries were starved of hard currency, cronies accessed cheap dollars to sell on the black market. Nigeria’s elite learnt a lesson that was toxic to the nation’s prospects: why produce anything when you can make a killing through arbitrage?”

The Financial Times rightly noted that, “moving to more orthodox policies is vital to reset an economy that has not grown in per capita terms for a decade and where one of the most lucrative industries has been kidnapping. It is necessary, but insufficient. “Tinubunomics” is so disjointed it barely deserves the name. Shock therapy will probably fail if important adjustments are not made.”

So, what does the editorial writers at the Financial Times say should be done by Tinubu.

“First,” the editorial said, “the president must chart a course ahead and convince Nigerians they are in it together. For that to be remotely credible, the political class must make sacrifices. Out must go lavish pay rises for civil servants and flashy cars (not to mention jets) for government officials. Tinubu only has to look at Kenya, where violent street demonstrations have forced the government to withdraw tax rises, to see what happens when a sense of injustice festers.”

The Financial Times also said, “likewise some savings from the fuel subsidy should be redeployed to support the most economically vulnerable as a priority. Hunger levels are soaring and millions of children are foregoing meals and school. Nigerian politicians love to be seen handing out bags of rice.

“But what is needed is direct cash payments to people’s phones, the technology for which exists, and in the longer-term a proper safety net. As things stand, the state lacks either the capacity or the probity to administer such a scheme. Tinubu needs to fix that urgently. “

The FT is also of the view that the much maligned cabinet of the president needs to lose some weight.

According to the editorial, “with a few exceptions, his cabinet is full of lightweights who owe their jobs to political patronage, not to expertise. Technocratic talent exists in abundance. It must be marshalled. Corruption needs to be tackled. It does not help that Tinubu’s own vast wealth is not easy to decipher, nor that his poverty minister was suspended for alleged diversion of funds, something she denies. It does not help either that the state is implicated in the wholesale theft of oil, depriving the nation’s coffers of billions of dollars. Tinubu should use all his political guile to staunch the flow. “

The Financial Times concluded that while “some will argue that Nigeria’s state is so weak all Tinubu can do is remove its influence and retreat, Nigeria collects tax worth about 10 per cent of gross domestic product, one of the lowest rates in the world. That is a sure sign of how little trust exists between the government and the governed. But if the economy is to be revived, the state needs to be an enabler.

“It must provide power, roads, security and justice, not to mention schools, hospitals and support for the poorest in society. Without a properly joined-up and articulated plan, Tinubu’s bitter medicine will not cure Nigeria’s ills. It will just leave a bad taste.”