Tinubu’s economic quandary

President Bola Ahmed Tinubu’s economic reform agenda is presently stuck between heaven and earth—not yet here and not exactly there. By declaring the fuel subsidy gone and floating the naira at the same time, the president had aimed to slay two dragons of the Nigerian economy on the same day. Thus far, neither dragon is fully dead, and the economy is barely breathing. Yet, these two signature policies must have a happy ending for them to take firm root, for Nigerians to appreciate them, and for the president to earn any credit for them.

This is Tinubu’s second quandary. If the first is about his reputation in the public mind, the second is about his programme in the policy space. If the first is about what Nigerians know him for, this one is about what Nigerians will remember him for. A presidential legacy is as much about the president’s reputation as it is about his performance in office. Two questions are thus supremely important at this point. Why is Tinubu and his government where they are now with his economic reform agenda, stuck as it is, between the rock and the hard place? And where next can he take Nigeria to with those reforms?

In my view, three things explain the president’s floundering economic programme, all of them deeply structural. The first is easy, but we all missed it, not just Tinubu or his government. Independent economic thinking has since left the shores of Nigeria. Universities, think tanks, civil society organisations, media, labour unions, political parties, and governments are the usual spaces in a society where you would expect to find serious thinkers on the economy, or, for that matter, on everything else. Unfortunately for Nigeria, all the main actors in these spaces had fallen for the drip-by-drip cool aid on the Nigerian economy coming out of the World Bank and IMF.

Over the past 20 years, the World Bank and IMF have done literally nothing other than to manufacture consent around the removal of fuel subsidy and the devaluation of the naira as the two solutions to cure all of Nigeria’s economic problems. These solutions have been repeated at every opportunity and in one policy paper or press statement after another. As a result, we all bought into them uncritically, and a general consensus was formed around them across all the main levers of thought in the country.

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This consensus that removing fuel subsidy and floating the naira are the right things to do for the Nigerian economy became so pervasive that all the four leading presidential candidates in the last election enshrined them in their manifestoes; just as all previous governments since 1999—bar Yar’Adua’s—had also tried to implement them in one form or another.

So, the first answer to the question of why Tinubu’s economic agenda is now stuck is because he simply didn’t know what the full implications of these policies would be, and he didn’t know because the consensus formed around them blind-sighted nearly everyone.

There is a second answer to that same question, however. This is because Nigeria’s two previous governments—the Jonathan and Buhari administrations—have not been held to fully account for their management of the country’s economic affairs. It is good that the National Security Adviser, Malam Nuhu Ribadu, who now seems to double as the government’s chief spokesman, lamented last week that the Tinubu administration inherited an empty treasury from Buhari. This is true. More informed Nigerians already knew that the Buhari government left behind a complete mess of porridge in the treasury, even if the current government itself had been shying away from saying it officially.

Yet, a more reflective official would have also seen that the Buhari government similarly inherited much of the same messy porridge from former President Goodluck Jonathan in 2015. You see, the Nigerian economy has no golden secret whatsoever. Over the last 60 years, the performance of our economy has been determined largely by crude oil revenues. Whenever oil revenues go up sharply, we will have a boom; when they go down, we have a bust.

This is the short and long story of the Nigerian economy since 1960. There are three other important side stories, however. The cyclical boom and bust periods of the economy usually last about four years each, on average. But for the 15 years between 2000 and 2014, we had a boom throughout, as crude oil prices in the international market kept going up and up during those years.

The boom was particularly high for most of the five years under former President Jonathan’s administration, from 2010 to 2014.

Proceeds from those fat years have remained largely unaccounted for to this day. And in my view, there lie the seeds of today’s economic problems, even if they would soon get worse, not better. Remember, those were the years in which the former Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, said that some $48 billion of government money could not be accounted for in the treasury? Where are the billions of dollars we earned from bumper oil sales under Jonathan?

From the last months of 2014, however, the long period of boom busted as oil prices crashed and remained relatively low until after the pandemic in 2021. This means that Buhari inherited an economy in as much a terrible situation as the current government took over from him. Moreover, beginning also from around 2000, fuel subsidy payments began a dramatic upward movement, reaching their impossible peaks in the last few years of Buhari.

In 2022 alone, the Buhari government claimed to have made subsidy payments of N4.4 trillion, up from N1.4 trillion paid for same the year before in 2021. This increase is completely unrealistic. How did the subsidy bill rise from N1.4 trillion to N4.4 trillion in just about 12 months? That, too, must be accounted for. This is important because, in order to make the claim stick, the government even had to borrow against future oil sales!

But at the same time as fuel subsidy payments were going up astronomically, actual oil revenues were also going down because they were being depleted by both the subsidy payments and the unprecedented oil theft under Buhari. Daily crude oil production fell from about 1.8 million barrels per day in January 2020 to just about 970,000 barrels per day in September 2022, due mainly to oil theft. Thus, a combination of both unprecedented subsidy payments and equally unprecedented oil thefts under Buhari has meant that even when oil prices were going up, actual returns to the treasury would be going down.

Tinubu’s real quandary on the economic front is, thus, how to hold the Jonathan and Buhari governments before him accountable. For one, so much time has passed that effective accountability would be practically difficult, if still morally necessary. For the other, tribal loyalty to party and to a former president elicits the hesitation for full accountability that we see in government today. There is, I think, a way to do both, and it is not the surreptitious method we see with Bawa and Emefiele.

But beyond collective blind trust in foreign ideas and a lack of accountability for the actions of the two previous governments before him, Tinubu is, in a third sense, the architect of his government’s economic quandary. The president has tried to slay the two dragons draining the economy of blood—the subsidies on fuel and the naira—but has also left alive and active the third, and perhaps most important dragon: the corruption and round-tripping in Nigeria’s oil and currency exchange sectors. That is why the entire reform agenda still rings hollow. It is also why the solutions to the problems appear unreachable, as we shall see when next we meet.