Economic policies that shook Nigeria in 2024

December 28, 2024 9:33 am

Under President Bola Tinubu’s government, Nigerians have witnessed a barrage of hard-hitting policies introduced in various sectors of the economy.

The federal government believes the policy adjustments would revive an ailing economy inherited from the past government. But citizens have so far been severely pressed amid a significantly high cost of living as the promised ‘renewed hope’ becomes more elusive.

As 2024 closes on Nigerians struggling to remain afloat, TheCable examines some economic policies that shook the country within the year, sparking debates and raising emotions across the board.

SUBSIDY REMOVAL

After Tinubu’s epic “subsidy is gone” declaration on May 29, 2023, petrol pump price exponentially increased and continued to peak in 2024 — stoking inflation to over 30 percent.

With the average price of petrol, also known as premium motor spirit (PMS), hovering around N668 per litre in January 2024, there were concerns that the government had reintroduced the subsidy as the price was not cost-reflective given the market realities at the time (landing cost was around N1,200).

On February 12, the International Monetary Fund (IMF) asked the federal government to completely phase out petrol and electricity subsidies in the country — indicating that the federal government only partially removed the subsidy.

Nigeria’s journey to full subsidy removal kicked-off when the Nigerian National Petroleum Corporation (NNPC), on August 19, revealed that the government owed it N7.8 trillion in fuel subsidies, despite claims that the subsidy had been removed.

On September 1, the national oil company admitted to owing the sum of $6 billion to petrol suppliers . Speaking on the issue, Olufemi Soneye, the company’s chief corporate communications officer, said the NNPC was facing a serious financial strain due to the petrol supply costs — a development that affected the company’s ability to sustain PMS supply.

Amid the developments, the NNPC increased the price of the product to N855 per litre at its Lagos filling station on September 3 — inching closer to market pricing.

With subsidy removal now in full swing, the petrol price has increased by 58.6 percent from an average of N668 per litre in January to N1,060 in December. Although the NNPC and oil marketers recently slashed prices to around N900 after ex-depot price fell twice in November and December.

On November 24, Wale Edun, the minister of finance and coordinating minister of the economy, said the federal government has saved $20 billion from the subsidy removal and market-based exchange rate.

FOREIGN EXCHANGE MARKET UNIFICATION

Introduced last year, the unification of the foreign exchange (FX) market is one of the federal government policies that shook Nigeria due to its economic impacts in 2024.

On June 14, 2023, two weeks after the subsidy removal, the Central Bank of Nigeria (CBN) announced the unification of all segments of the FX market as part of reforms intended to rejig the sector.

The move collapsed all FX windows into the investors and exporters (I&E) window (now Nigerian Autonomous Foreign Exchange Market), under a willing buyer, willing seller framework.

The policy significantly devalued the local currency, which traded at N800 to the dollar within the month it was announced — causing high levels of volatility in the market.

To curb the fluctuations in the market and increase market liquidity, the central bank removed the allowable limit on exchange rates for international money transfers.

Additionally, the CBN imposed restrictions on international oil companies’ ability to repatriate funds, citing concerns over the impact on the FX market liquidity.

As at December 6, 2024, the naira traded at N1,600 at the parallel market, a 6.7 per cent gain from the N1,715/$ recorded the previous day.

HIGHER ELECTRICITY TARIFF FOR BAND A

Musliu Oseni, vice-chairman of the Nigerian Electricity Regulatory Commission (NERC), announced on April 3 that Band A customers, who enjoy an average of 20 hours of daily electricity supply, would face a significant tariff hike.

According to NERC, there are five bands for electricity customers: A, B, C, D, and E.

The commission said while those in Band B receive at least 16 hours daily, Band C customers get a minimum of 12 hours of power each day, eight hours for Band D clients, and 4 hours for Band E customers.

Oseni said those in Band A would pay N225 per kilowatt (kW), starting from April 3 — up from N66.

The tariff hike was criticised by many Nigerians who complained about high energy costs.

On November 9, 2024, the Manufacturers Association of Nigeria said the hike was unsustainable for manufacturing firms, especially those receiving electricity in the Band A category.

THE 0.5% CYBERSECURITY LEVY

In May, the CBN instructed banks and financial institutions to impose a 0.5 percent levy on electronic transactions to fund national cybersecurity.

The levy was to be paid into the national cybersecurity fund, which was to be managed by the office of the national security adviser (ONSA).

The policy was met with widespread opposition. Following public outcry, Tinubu suspended the levy on May 14 after a federal executive council meeting.

In September, rumours about the levy’s possible reinstatement began circulating, but the CBN denied the reports.

DEREGULATION OF THE DOWNSTREAM SECTOR

On October 11, the federal government announced a major step towards full deregulation by allowing oil marketers to purchase petroleum products directly from the Dangote refinery and other local producers.

The initiative effectively ended the NNPC’s long-standing role as the sole distributor of petroleum products, a position it had held for many years in Nigeria’s oil industry.

The announcement also meant the elimination of government control in the downstream sector, especially in term of pricing, creating a more competitive market and enabling companies to operate more freely.

On July 29, the federal executive council (FEC) approved Tinubu’s proposal, which directed the NNPC to sell crude oil to the Dangote Petroleum Refinery and other refineries in naira.

This decision was meant to strengthen the local economy and reduce reliance on FX for crude oil transactions. The initiative officially began on October 1.

TAX REFORM BILLS

Currently at the national assembly, the tax reform bills may easily be termed the most controversial of policy of the federal government in 2024.

Tinubu, in July 2023, approved the establishment of a committee on fiscal policy and tax reforms and appointed Taiwo Oyedele, a tax expert, as chairman.

Four months after its inauguration, the 38-member committee introduced 20 policy recommendations, tagged, ‘quick-wins’, as they were meant to be implemented immediately.

The panel later proposed the economic stabilisation bills (ESBs) comprising four documents: the Nigeria tax bill, the Nigeria tax administration bill, the Nigeria revenue service establishment bill, and the joint revenue board establishment bill.

While the ESBs were approved by the federal executive council (FEC) on September 23, Tinubu had asked the national assembly to consider and pass the four bills.

However, the bills have received stiff opposition from northern elites under the umbrella of the Northern States Governors Forum (NSGF) — with the national economic council (NEC) asking Tinubu to withdraw them for further consultation.

The NSGF called on the national assembly to reject legislation that could harm the region’s interests and stressed the need for fair and equitable implementation of policies to avoid marginalisation.

The Senate has since passed the bills for a second reading as of November 28, and further deliberations are expected in January, when official activities for the next year resume.

TheCable’s explainer on the tax bills can be found here.