Tinubu. |
“The President must be told that these combative postures and potentially destructive actions of state actors will create more uncertainty in the business environment leaving local businesses and potential investors confused and weary of the Nigerian economy… reform fallouts are best addressed with civility, tact, and diplomacy”.
Mr. President
must be facing a dilemma as his sweeping reforms, which he believes
are necessary to rebuild the economy, bring dislocation and hardship
and set the stage for social unrest and a prolonged domestic economic
crisis. This reform fallacy is predictable. Reform implementation often
throws up several unintended but predictable consequences, which would test the
ingenuity of the policy makers.
The potential
benefits of market-based reforms include opportunities for exports, and for
Foreign Portfolio and Direct Investment flows which could facilitate economic
expansion and propel progress toward Nigeria’s development goals. However,
since the unification of the exchange rates and elimination of subsidies on
gasoline, an auspicious fiscal space seems to be the only visible, albeit
significant, benefit. All three tiers of government now have access to
more resources from the FAAC. This provides tremendous opportunities for
the governors to deliver on their promises, including achieving the Sustainable
Development Goals (SDGs), reducing poverty, re-building infrastructural
facilities for growth, wealth, and jobs etc.
On the other
hand, the reforms have brought difficult adjustments and are reshaping the
economy in countless ways. The Naira has been on a roller-coaster, with
the exchange rate spiking to N1,700/$ in mid-February 2024 from N460/$ in May
2023. Currency devaluation has elevated domestic inflationary
pressures to almost two-decade high. This is creating
difficulties for businesses and elevating citizen’s levels of
vulnerability and deprivation. Despite large volumes of funds distributed
amongst the three tiers of government, the pain and misery associated with the
reforms have not abated. There are pockets of protests in major cities
around the country: Minna, Kano, Ibadan, Benin, Jalingo, and
Lagos. Our commodity and food markets are literally being raided by
our neighbours because devaluation has weakened our currency relative to theirs
and made our products cheaper and more attractive to them. They smile, whilst
we cry.
What has been
the response of the authorities to these difficulties and adjustments?
It appears that
the authorities are both unable and unwilling to accept the recent
developments in the economy as the predictable consequences of their attempt to
implement an unrestrained open economy agenda. The response has
therefore been a cocktail of unorthodox actions and contradictory
pronouncements which are unhelpful and capable of distracting the government
from urgent and critical tasks. There is also an impression out there
that the government is in a panic mode and is unsure of what the next steps
should be.
First, there are the conflicting statements, on the next steps, coming from the highest levels of government. The most alarming came from the Presidency. To ease the cost-of-living pressures on the populace, Mr. Vice President had hinted on plans to lift all restrictions on selected food imports, and to establish a National Commodity Board which will “continually assess and regulate food prices.” In fairness, the VP committed no crime. The first suggestion is a pretty standard inflation-mitigating measure while the second is a well-known campaign promise by the APC and features prominently in their Renewed Hope Agenda. Notwithstanding, these pronouncements were countered by Mr. President: “What I will not do is to set a price control board. I will not also approve the importation of food,” President Tinubu said at a meeting with 36 state governors, attended by the Vice-President.
There are other
discordant tunes. While the Minister of agriculture threatens to close
Nigeria’s land border to stop cross border trade in agricultural products, the
Housing Minister would do the opposite to facilitate the importation of cement.
The threat to close the border is obviously at variance with the President’s
open economy agenda! On the other hand, the pronouncement by the Housing Minister
was made only weeks after Mr. President had foreclosed the idea of lifting
restrictions on and opening our borders to facilitate food imports. Does the
Minister’s pronouncement signal a new direction? Is the government prioritizing
cement over food?
Second, the
government seems to unduly politicize the issues at
stake. Cross border trading which has witnessed an upsurge in recent days
is seen as the evil actions of ‘desperate politicians who lost 2023
elections.’ According to the Vice President, opposition politicians
are ‘sabotaging the country by smuggling food out to other countries to
trigger food price hikes.’ On the contrary, the surge in exports to
the region is indeed a predictable consequence of Naira’s depreciation against
the CFA. The CFA/Naira rate had deteriorated from CFA/N0.7193 in January 2023
to CFA/N2.42 early this year, thus making local produce
cheaper and more attractive to foreigners and consequently leading to an
increased demand for exports.
Third, the
authorities have adopted a coercive and combative approach, threatening
‘hoarders’ in the commodity markets and what the Minister of Information calls
‘speculators and other unscrupulous players within and outside the country who
profit from dysfunction and opacity’ in the currency markets. Mr. President
must be so unnerved by the developments in the currency markets, that he
approved the mobilisation of a 7,000-man ‘special taskforce to clamp down on
dollar racketeers’, to ‘address exchange rate volatility’ and ‘to safeguard
Nigeria’s FX market and combat speculative activities’.
Mr. President
watches as state agents, including the EFCC and state-level anti-graft
agencies deploy brute force, to ‘stabilise’ the currency and commodity markets
by sealing warehouses and raiding stores and offices on a daily basis. As I
write, the executives of Binance have been reportedly arrested and are being
detained by the EFCC on the orders of the National Security Adviser. The
EFCC has been effectively turned into an armed wing of the CBN. It is the
‘monetary police’!
It seems Nigeria
is on a journey back to 1984!
So, what should
we tell Mr. President?
First, these
discordant tunes and pronouncements in response to reform fallouts demonstrate
either a lack of within-government consensus on the President’s reform
objectives or insufficient understanding of the same. If the
President’s men don’t understand the reform objectives, who will?
Second, the
President must be told that these combative postures and potentially
destructive actions of state actors will create more uncertainty in the
business environment leaving local businesses and potential investors confused
and weary of the Nigerian economy. He should be advised that such reform
fallouts are best addressed with civility, tact, and diplomacy. Dealing with
reforms aftershocks sustainably, requires thoughtful strategies and a
comprehensive approach.
Third, the
government's responses speak volumes about the readiness of our institutions to
implement and monitor reforms as we transition from state controlled to
market-based economy. I have argued previously that “The successful transition
from state - to market-led growth goes beyond policy pronouncements. It
requires, among others, a complete transformation of the public sector, which
we all know is characterized by poor coordination, ……. and
insufficient capacities and strategies for change.” The discordant
tunes from the Ministers speak to this.
The speed with
which Mr. President handles public sector reforms will determine the speed and
outcome of his economic reforms.
Fourth, Mr.
President should put in place a more robust economic policy architecture, with
an Economic Management Team and a Council of Economic Advisors. The latter
should be made up of professionals from outside of the government with the
requisite experience, exposure, and proper training on policy
matters. The Council shall be expected to offer what Mr. President
needs urgently: neutral and independent advice on policy
design, development, and implementation. It seems like the government is only
speaking and listening to itself.
The President’s
newly formed Advisory Committee with Private Sector conglomerates as members,
is at best a Consultative Forum and does not meet the criteria of neutrality
and independence. Besides, economic policy design isn’t the sort of
thing that accepts all comers! What the President needs is a body capable
of providing analytical support for his fiscal and monetary
authorities on the economy, across a wide range of areas, including
formulation of the annual and supplementary budget, national development plan,
investment, trade and industrial development as well as labour market and
social development policies.
Finally, the
government must strengthen its communications with citizens and manage
their expectations about the form and longevity of government policy measures
and responses: this could help in removing at least some of the anxieties and
uncertainties faced by citizens and businesses.
Muhammad Sagagi
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