Hadiza Abdulraheem
The trajectory of many Nigerians’ lives changed on May 27, 2023, when President Bola
Tinubu assumed power with a promise of “Renewed Hope.” Since then, the nation has been
grappling with what might be its most severe economic crisis in decades. The heart of this
turmoil lies in Tinubu’s bold, yet controversial, federal reforms. These reforms aim to reset
Nigeria’s economic trajectory but raise the question: Are they the solution to Nigeria’s deep
economic quagmire, or merely temporary bandages over festering wounds?
The Economic Landscape Under Tinubu
Upon taking office, Tinubu inherited an economy riddled with structural issues: a growing
national debt, high unemployment, and an oil-dependent economy suffering from both
theft and deteriorating infrastructure. His approach has been one of shock therapy, aiming
to rejuvenate the economy through drastic reforms.
Fuel Subsidy Removal: Perhaps the most immediate and controversial policy was the
removal of fuel subsidies in May 2023. For years, Nigerians enjoyed some of the world’s
cheapest petrol, thanks to these subsidies. However, President Tinubu announced, “The
fuel subsidy is gone,” aiming to redirect the massive fiscal expenditure from subsidies,
which amounted to about $10 billion annually, towards infrastructure and social programs.
The immediate aftermath was severe:
- Gasoline prices surged from around ₦185 to over ₦600 per liter.
- Transportation costs and goods prices soared.
- A significant cost-of-living crisis emerged.
On the upside, this led to an increase in government revenue, with a reported 91.6% rise
from May 2023 to April 2024, according to PwC, suggesting some fiscal space for
development once the immediate shock subsides. However, the rapid implementation
without sufficient social safety nets has been seen as a clear indication of an administration
out of touch with the daily struggles of Nigerians. Inflation rates soared to 33.7% by late
2024, with food inflation pushing past 40%, making basic necessities unaffordable for
many.
Exchange Rate Unification: Another pivotal reform was allowing the naira to float freely
against the dollar. This was intended to eliminate arbitrage opportunities in the foreign
exchange market, reduce corruption, and attract foreign investment. The impact was
substantial:
- The naira’s value plummeted by over 70% against the dollar.
- Import costs increased sharply, exacerbating inflation
- Essential imports like medicine, food, and fuel became exorbitantly
expensive.
This policy seems to benefit speculators and international investors over the Nigerian
populace, aligning more with Bretton Woods-style economic liberalization than with the
immediate needs of its citizens. Nevertheless, there’s been a modest increase in foreign
reserves and a reduction in the parallel market premium, which could signal a step towards
economic transparency and market efficiency.
Petroleum Industry Act (PIA):
Enacted to overhaul governance in the oil sector, the PIA aimed at attracting investment
and improving transparency. Yet, with oil production below quotas due to vandalism,
piracy, and aging infrastructure, the benefits are yet to be fully realized. As of June 2024, oil
production was at 1.28 million barrels per day, well below the 1.5 million barrels per day
set by OPEC, highlighting ongoing challenges in the sector.
Fiscal Policy and Tax Reforms
In 2024, Tinubu introduced a comprehensive tax reform to broaden the tax base and
increase revenue without directly raising tax rates. This included imposing Value Added
Tax (VAT) on the informal sector, which has been met with significant backlash. The policy
has been criticized for burdening the informal sector, which employs 80% of Nigerians,
amidst an already rising cost of living. Critics argue it reflects a pro-Bretton Woods stance,
emphasizing fiscal austerity over social welfare.
However, If managed with transparency, this could potentially increase government
revenue by an estimated ₦1.5 trillion annually by 2025, providing funds for public services.
The Federal Tax Reform Bills of 2024
Late in 2024, the government introduced several Tax Reform Bills aimed at:
● Simplifying Tax Obligations under the Nigeria Tax Bill.
● Harmonizing Tax Administration with the Nigeria Tax Administration Bill.
● Centralizing the Revenue Service via the Nigeria Revenue Service Bill.
● Establishing a Joint Revenue Board to oversee and harmonize tax policies.
These reforms have faced resistance, particularly from regions like the North, concerned
about disproportionate tax burdens. The lack of public consultation has been a point of
contention, with fears that these policies might favor large corporations at the expense of
small businesses and the informal sector.
Impact on the Ground
From a personal perspective, consider the daily life of a Lagos cab driver, whose fuel costs
have tripled, or a farmer in Osun State, who now faces higher prices for fertilizers and
insecurity that keeps him from his fields. These reforms, while economically sound on
paper, have immediate, harsh realities:
Cost of Living: The removal of subsidies has led to a dramatic increase in transport costs,
food prices, and basic utilities, pushing many into poverty or deeper into economic survival
mode.
Business Environment: Entrepreneurs are finding it harder to secure foreign exchange for
imports, and with rising costs, many businesses, including international ones like Procter &
Gamble, are either scaling back or leaving Nigeria.
Tinubu’s reforms, while echoing the prescriptions of international financial institutions,
often seem to overlook Nigeria’s social realities and highlight a disconnect between
economic policy and social welfare.
Key indicators show:
- The World Poverty Clock estimates 95 million people living in extreme poverty by end of
2024 - Youth unemployment remains around 40%
- About 8% of Nigerians face food insecurity
Can These Reforms Make a Difference?
The World Bank’s 2024 Nigeria Development Update suggests that while these reforms are
starting to show positive macroeconomic indicators, like modest growth and rising foreign
exchange reserves, the human cost has been significant. Here’s what needs to happen for
reforms to truly make a difference:
● Social Safety Nets: Expanding programs like the National Social Safety Nets Program
(NASSP) to cushion the blow for the most vulnerable. The government has started
distributing grains and setting up price control boards, but more comprehensive,
transparent aid is crucial.
● Infrastructure Development: Nigeria’s economic potential is stifled by poor
infrastructure, especially in power and transportation. Investments here could
reduce business costs, stimulate local production, and ease the cost-of-living
pressures.
● Security and Agriculture: Improving security in farming regions is imperative to
boost food production, which would help curb food inflation.
● Consistency in Policy Implementation: For reforms to work, they must be applied
uniformly and without backsliding into old, corrupt practices. This includes
ensuring that the fuel subsidy removal doesn’t covertly slip back into place, as
hinted by recent reports of ‘implicit subsidies’.
In all, President Tinubu’s economic policies are at a crossroads. While they aim for long-
term economic stability aligned with global standards, their execution has often seemed
out of touch with the socio-economic realities of Nigeria. The challenge for Tinubu’s
administration is to bridge the gap between economic reform and social welfare, ensuring
that the quest for economic growth does not further burden the masses but instead uplifts
them. Nigeria’s economic narrative under Tinubu remains an unfolding story, with each
policy decision holding the power to either alleviate or amplify the struggles of its citizens.
