- President Bola Tinubu has come in with Nigeria’s economy in turmoil.
- In his inaugural address on May 29, President Bola Tinubu stated his plans to revive Nigeria’s ailing economy.
- If the government under President Bola Tinubu can implement the stated plans, it will undoubtedly ramp up growth in critical sectors of the economy and ensure sustainable development.
Nigeria’s economic struggles
President Bola Tinubu has come in with Nigeria’s economy in turmoil. Nigeria struggles with massive debt, foreign exchange pressures, a depreciating currency, record-high inflation, and fuel shortages from declining oil production due to underinvestment and crude theft.
Nigeria’s economy rebounded after the difficult period of COVID-19, growing 3.5 per cent in the first three quarters of 2022. However, that recovery has created more hardship for the citizens. Socio-economic conditions have deteriorated. Budget deficits have ballooned to nearly 5 per cent of GDP. This rate exceeds the 3 per cent Fiscal Responsibility Act of 2007 recommends. Consequently, the abysmal revenue generation of about 9 per cent of GDP means that the government now depends on debt to finance over 40 per cent of Nigeria’s budget.
Nigeria’s unemployment rate stands at about 33 per cent. The number of Nigerians living in poverty rose by 35 million in 2022. The rise meant that under President Buhari, Nigeria overtook India as the global poverty capital, with half its estimated 200 million people living in abject poverty.
Africa’s biggest economy experienced two recessions in the past year. Consequently, the naira also lost 70 per cent of its value to the dollar. Moreover, the country’s inflation rate rose to 21 per cent in 2022, compared with the 10.6 per cent average for developing and emerging economies and 8.8 per cent for the world. With this economic hardship, Nigerians can only hope that the new administration under President Bola Tinubu will bring a much-needed economic revival.
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Tinubu’s Promise for Nigeria’s economic revival
In his inaugural address on May 29, President Bola Tinubu stated his plans to revive Nigeria’s ailing economy. After being sworn in as Nigeria’s 16th President, Tinubu expressed his immediate objective to achieve higher GDP of not less than 6 per cent annually and a significant reduction in the unemployment rate.
The new administration also plans to remove all inhibitions to the inflow of foreign investment, unify the exchange rate regime and remove the oil subsidy. Money saved from the subsidies will go to developing critical areas such as education, health and creating jobs. It will equally close the infrastructure gap, provide a vibrant credit culture and address the national debt crisis. The new government will create one million jobs in the digital economy.
The need for reforms
President Bola Tinubu emphasized that his administration would accomplish these goals by implementing budgetary reforms. These reforms would stimulate the economy without causing inflation. Tinubu stated that his industrial policy would employ a comprehensive range of fiscal measures to promote domestic manufacturing and reduce import dependence.
Additionally, he emphasized the importance of improving the accessibility and affordability of electricity for both businesses and households. Tinubu pledged to nearly double power generation and enhance transmission and distribution networks. He also encouraged states to develop local energy sources.
Addressing concerns raised by local and foreign investors, Tinubu assured them that his administration would thoroughly review complaints related to multiple taxations and other barriers to investment. The nation’s tax system needs urgent reform so that many companies will be brought into the tax net. Let the government and the private sector work together to create more jobs.
President Bola Tinubu emphasized his commitment to ensuring investors and foreign businesses can repatriate their dividends and profits back to their home countries. The President’s plan to unify the multiple exchange rates is a welcome development. A stable and predictable foreign exchange market will restore investors’ economic confidence.
While Tinubu’s economic plans look ambitious, they are also achievable. The new administration requires a pragmatic approach to implementing them. Nigeria needs a robust economic roadmap with a focus on agriculture and manufacturing.
If the government under President Bola Tinubu can implement the stated plans, it will undoubtedly ramp up growth in critical sectors of the economy and ensure sustainable development. To achieve his laudable economic plans, Tinubu should hit the ground running. There is no time to waste.
Read more: What removal of fuel subsidy means for Nigeria
Debt reduction is a priority
Without mincing words, the most significant economic challenge for President Bola Tinubu is the national debt. Nigeria’s debt is $99.68 billion, per the Debt Management Office (DMO). This excludes the N22.7 trillion Ways and Means Advances from the CBN. Nigeria’s debt situation will continue to deteriorate because the government is spending more than it gets in revenue.
Nigeria’s unsustainable debt profile means Tinubu won’t have much space for an expansionary fiscal policy. About 65 per cent of government revenue and over 90 per cent of foreign exchange earnings come from oil. Uncertainties in the global oil market, sluggish revenue growth, and the negative impacts of COVID-19 on the economy imply that the country will face challenges generating enough revenue to service debt and finance budget deficits.
The Tinubu administration should efficiently raise its revenue profile to escape the debt crisis. According to data from the Budget Office, Nigeria has limited borrowing space. Nigeria could run into serious trouble due to the poor debt-to-revenue ratio, which remains too small to sustain the size of its debt. Nigeria’s debt service will soon exceed the 30 per cent threshold. In 2021, Nigeria’s debt service was 83.2 per cent and 96.3 per cent in 2023. Reversing this trend should be a priority of this administration in the quest to revamp the economy.
The profligacy of those in government has not helped matters. But Nigeria can reduce government profligacy and rein in corruption. Tinubu should rejig the Economic and Financial Crimes Commission and the Independent Corrupt Practices Commission to make them more effective in fighting corruption. Nigerians want to see more corrupt individuals prosecuted and jailed. They want to move beyond mere naming and shaming. This way, they can gain confidence in President Bola Tinubu to activate Nigeria’s economic revival.
