Nigerian President Bola Tinubu’s push to reshape Africa’s biggest economy appears to be a case of too far, too fast.
Four months after he took office, inflation is surging and the naira’s street value has slipped to the psychologically important level of 1,000 to the dollar. The national power grid collapsed twice in September and a surge in business confidence that accompanied his announcement of a spate of reforms has dissipated.
It’s easy to see why.
The government appeared ill-prepared for the price surge that followed the scrapping of a fuel subsidy, $6.8 billion of forward payments in the foreign exchange market are overdue and a crucial interest-rate decision was postponed after the acting head of the central bank resigned. The new governor’s appointment was confirmed by the Senate yesterday.
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“Volatility is being exacerbated by a loss of trust in the central bank after the lender backtracked on promises to clear a massive foreign-exchange backlog,” said Robert Besseling, chief executive officer of Pangea-Risk.
There’s no doubt that the measures Tinubu is undertaking are necessary and that Nigeria’s economy will ultimately be healthier when the budget is no longer burdened by an unsustainable fuel subsidy and an unrealistic official exchange rate.
What is in question are his methods, the pace of change and whether he can see them through.
Ordinary Nigerians are, meanwhile, struggling to make ends meet as costs climb. And fearing for even tougher times ahead, they’re hoarding dollars and driving the local currency weaker.
It’s a vicious cycle that Tinubu and his new central bank chief, Olayemi Cardoso, will be hard-pressed to arrest.
What is needed is certainty and predictability — in short supply at the moment.
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