Of economic reforms and human face President Bola Tinubu [OPINION]

By Simon Kolawole

As I was saying, I have witnessed several episodes of economic hardship in Nigeria. I lived through the “austerity measures” of 1982/83 as the economy went into a storm basically because of falling oil revenue. Prices of basic stuffs doubled overnight — that was if they were available at all. I also lived through the sapping crisis of 1986/87 when the military government introduced the structural adjustment programme (SAP) in an attempt to tackle our economic pathologies. I must now necessarily conclude that the current crisis, caused by falling oil revenue (as usual) and forex scarcity, is one of the most devastating. The collapse of the national currency has been rapid and relentless.

The bad news is that things could get worse. Every successive government is always rated as worse than the previous. There is a million reasons for that, but the structural issues with the economy remain largely unsolved from one administration to the other. We keep running into this vicious cycle of devaluation and inflation and unemployment and economic hardship whenever there is a drought of petrodollars. As the Yoruba would say, “For as long as your robe harbours lice, your fingernails will be blood-stained” (since you will keep killing the parasite). Every economic crisis since 1982 has been principally triggered by our overdependence on petrodollars. We always hope for another oil boom.

When Gen Ibrahim Babangida overthrew Maj-Gen Muhammadu Buhari in 1985, then-Brigadier Joshua Dogonyaro said in his coup speech: “The economy does not seem to be getting any better as we witness daily increased inflation.” Babangida inherited the economy almost in the same state Buhari met it when he overthrew President Shehu Shagari in 1983. Although Buhari was fiscally disciplined, Babangida still had to deal with the huge public debts, high unemployment, unpaid salaries and unmet forex obligations that had started mounting under Shagari. The fastest way out of the forex quagmire was to take a loan from the International Monetary Fund (IMF). We resisted it.

In 1986, Babangida came up with SAP in trying to tackle the economic problems. The agricultural policy focused on enhancing farming of cash crops in which Nigeria had competitive advantage — to address food shortage, create jobs and bolster the non-oil sector. Even though we did not take the IMF loan, we adopted similar stringent reforms the financial institution would have demanded in the first place: removing subsidies, liberalising the forex market and cutting down on public spending. Read that again. Is that not what we are still trying to do today? Any stranger reading the story of Nigeria, whether on the economy or politics, should be forgiven for thinking we are on auto replay.

Babangida had, in 1986, abolished the discretionary import licensing regime and created the second-tier forex market (SFEM) for importers to access foreign exchange. What happened next? The naira fell to about N4/$. That was massive depreciation for a currency that had been stronger or roughly at par with the dollar for years, even if it was as a result of official pegs. Alas, SAP came at a time when oil price had crashed from $27/barrel to below $10. It was double whammy. In fact, triple whammy. To reduce budget deficit, Babangida kept raising fuel prices. From 20 kobo/litre that he met in August 1985, petrol price nearly doubled by March 1986. Transport fares and cost of living went gaga.

Nigerians began to regret that Buhari was overthrown. By contrast, Buhari did not increase fuel prices or allow the naira to depreciate in his 20 months in office. But the economic implications were inescapable: forex remained scarce, leading to strict currency restrictions (Fela was jailed in 1984 purportedly for exceeding the PTA cash limit of £50-per-traveller while going for a foreign tour), while debts and deficits kept hampering public finance. GDP growth was negative in 1984 but recovered on the back of higher oil prices in 1985. Still, the GDP growth did not translate to jobs. There can’t be plenty jobs when factories are not expanding output because of poor income and low consumption.

The exchange rate kept falling under Babangida, hitting about N8/$ in 1989. There was intense public debate over the economic hardship. The blame was placed at the doorsteps of Western “imperialist” agents, namely the World Bank and IMF, for prescribing bitter pills for us. Obasanjo, who had handed over a robust economy to Shagari in 1979, famously said in one of his media interventions that SAP must have “human face”. All that Nigerians could feel was hardship. No economic theory would calm the distressed masses. Prices of goods cannot be skyrocketing and you will be gleefully announcing — as Chief Olu Falae, Babangida’s minister of finance, usually did — that “the GDP grew in Q2”.

In fairness to Babangida, he provided “SAP relief”, notably rolling out mass transit buses, student bursaries and automatic jobs for 60,000 graduates. Still, the consensus was that SAP failed, although it achieved significant results among rural farmers and opened up the economy through the privatisation and commercialisation programme that laid the foundation for private sector participation in finance, aviation, telecoms and broadcasting. But the ultimate verdict of the masses who endured the high cost of living and agonising pains of poverty was that SAP failed woefully. In fact, SAP was seen as Nigeria’s problem — although it was actually conceived to solve the problem.

With public unrests and riots, Babangida had to reverse or soft-pedal on many policies because of public unrest. In the end, reform is as political as it is technical. One of the major criticisms was that too many hard-hitting measures were being unleashed on Nigerians at the same time. Today, Nigerians are witnessing the most SAP-like reform since 1986. One question I asked ahead of the 2023 elections was: why would anybody want to be president of Nigeria now? We were spending over 90 percent of our revenue to service debts and taking on new loans, mostly from the money-minting CBN, to pay salaries and settle other government bills. Oil revenue was going down.

We were mortgaging our future oil production to subsidise the importation and consumption of petrol. We were running a multiple exchange rate regime that hurt companies and investors. We were facing an outstanding mesh of forex commitments running into billions of dollars with no idea of how to fulfil the obligations. The incoming president would have to take tough decisions, otherwise we would end up like Venezuela where unsustainable public expenditure went on for years until the collapse in oil revenue. For Nigeria, something was always going to give and ordinary Nigerians were going to ache the most. All they can see is the suffering, not how we got here.

And this takes me to my thoughts for today. I have been observing — with serious concern — the way President Bola Tinubu has been implementing his own reforms. Actually, I am worried. He is repeating the mistakes of many before him: treating reforms as purely technical, forgetting that it is human beings — not goats or lab rats — that are at the receiving end. To be clear, I am not against the reforms. They are not even optional given the state of public finance in Nigeria today. I am not against sacrifice. You cannot make an omelette without breaking eggs. But, as Obasanjo said in 1987, reform must have a human face. There is only so much Nigerians can take before things explode.

The two major reform policies of the Tinubu administration — petrol subsidy and forex — have dealt heavy blows on Nigerians and they are desperately gasping for breath. It is all the more painful because there was obviously no adequate planning for the implementation of these policies. The Nigerian government tends to be far removed from the realities on the streets. Decision makers often dump policies on the people without adequate planning, scenario mapping or impact assessment. When the policies begin to inflict unbearable pain, they will rush to roll out mostly ineffective and inadequate measures to cushion the effects. Always putting the cart before the horse.

In June 2023, petrol prices tripled at one blow after Tinubu had said, during his inauguration, that “subsidy is gone”. There was clearly no implementation plan or a relief package for the low-income people. It took weeks before government started planning how to roll out CNG-powered buses to ease transportation costs and give stipends to the poor. We started arguing over the validity of the social register. The next thing was a scandal in the humanitarian ministry at a time Nigerians were being directed to sacrifice. Three weeks after Tinubu directed that 42,000mt of grains be released from the reserves as part of his relief package, has any Nigerian received a mudu of millet yet?

The naira has been recklessly floated, falling headlong from less than the official N500/$ in May 2023 to over N1,500/$. Inflation has followed suit and people are crying. It is clear to me that this is trial and error. The Central Bank of Nigeria (CBN) started releasing tonnes of circulars after the horse had bolted from the stable. Most of these ad-hoc responses would have been averted with proper thinking before the policy was implemented. I don’t know much about the financial markets but when you decide to float the national currency in this manner, there must be some safeguards to avoid a mighty fall. We cannot claim ignorance of the imperfections in the forex market.

Going forward, the Tinubu administration must do better with its policy choices. In a way, retaining petrol at about N600/litre even when the market price is over N1000/litre is an admission that some things are easier on paper, otherwise there could be an uprising. No matter how well intended reforms are, they have to be strategically paced. They must have a human face. There is a reason patients are given anaesthetics during surgery. There are obviously many other reforms ahead and things could be more bearable if the government is more strategic with them. As I was saying, reform should not end up as a case of “the surgery was successful but we lost the patient”.

Culled from TheCable