THE naira has continued to take severe bashing since President Bola Tinubu unilaterally collapsed the multiple exchange rates on June 14. From N472.50 to $1 at the Investors and Exporters window pre-rate unification, and N763 at the parallel market, the naira has steadily depreciated, oscillating between N740 and N800 per $1. This is taking a heavy toll on the economy and the cost of living. The President has to swiftly implement other critical policies to save the naira.
From the start, Tinubu has shown his preference for an unfettered free market economy. From yanking off petrol subsidy a month ahead of schedule, and prompting the Central Bank of Nigeria to float the naira, he has swallowed the long-standing recommendations of the World Bank/IMF, which previous governments resisted. Shocks have followed. Instantly, petrol price jumped to N500 per litre from N198 per litre, while the value of the naira nosedived, and is inching towards the N830 per dollar mark.
Tinubu’s laissez-faire policies have won praise, especially from economists, and the multilateral agencies, which see them as bold and necessary. Apparently, however, Tinubu and the optimists are disconnected from the harsh realities. Emerging evidence shows that the administration neither made preparations, nor undertook a thorough diagnosis of the existing conditions in the economy.
The euphoria is evaporating, as the shock waves upturn businesses’ and households’ survivability and the government flails in confusion. Last week, the naira plunged to N820/$ before appreciating slightly to N798.25/$ by Monday as the distorted market forces manifest. Worse, petrol prices shot up to N590-N620 per litre on Tuesday and are set to rise even higher on the back of volatile crude prices and currency exchange rates.
Danger looms. Stripped of the hype and cheerleading, Tinubu’s “shoot first and ask questions later” approach is tipping the economy into disarray. Bold reforms and the courage to initiate and see them through require meticulous planning, preparation, and fallback measures to absorb the shocks and protect critical economic sectors, and the vulnerable sections of the polity.
Optimists are mistaking hastiness and lack of rigour for competence. Just as he did not plan for the anticipated impact of subsidy removal, Tinubu apparently made no accompanying policies to cope with the naira devaluation he triggered. Evidence of this is demonstrated in the scrambling for loans to provide “palliatives” and the flirtation with the failed cash distribution policy of the immediate past administration. Manufacturers and other private sector operators that are undergoing a reality check. Importers and students cannot find or afford the dollars to import goods or pay overseas tuition.
Tinubu and his advisers are not taking Nigeria’s realities into consideration. Free market policies are good and desirable; but policies adopted must be creatively adapted to domestic conditions.
Nigeria’s economy is disarticulated: it is overwhelmingly dependent on oil and gas revenues; it is import-dependent; it imports what it has or can produce in abundance such as petroleum products and food; over 60 percent of the economy is in the informal sector; the government has an outsized role in the commanding heights; and it is a federation where only the central government has economic plans and targets and the component states are prohibitively parasitic cost centres.
Added to this is corrosive corruption that has rendered state institutions ineffective, including regulation, and fostered massive insecurity and revenue leakages. For decades, oil thieves have been stealing up to one quarter of its daily crude oil production.
Although it is the largest in Africa with a GDP of $477.39 billion, productive activities are underwhelming, having failed to develop its agricultural, mining and human capital. It massively imports basic items, food, and raw materials. It sold crude worth $27.73billion in 2020; but with virtually no domestic refining at its four public refineries, it imported petroleum products worth $71.28 billion, a loss of $43.56 billion.
While Nigeria’s total non-oil exports rose to $4.82 billion in 2022 according to the Nigerian Export Promotion Council, its food import bill in the six years to 2022 was N7.8 trillion, with N2 trillion spent in 2022 alone. Food inflation has reached 25.25 percent, says the National Bureau of Statistics.
