Tinubunomics: How not to grow an economy

After eight years of lacklustre performance with the economy during the Buhari administration in which the economy virtually stagnated and even experienced two unprecedented bouts of recession, Nigerians were looking forward to a much more economically buoyant Nigeria irrespective of whoever took over the reins of power when the Buhari Administration ended in 2023.

However, expectations were dashed as soon as the Tinubu administration began and a concoction of economic policies was implemented which sent the economy into a tailspin in a downward spiral trajectory. I call it a “concoction of economic policies” because there is no evidence that these economic policies were carefully thought out before implementation. Rather they seem impulsive and without any plans for addressing the shocks that may occur as an aftermath of the implementation of the policies.

Starting on May 29th, 2023 while basking in the euphoria of being sworn in as president, without any consultations, cabinet, or even economic team in place, President Tinubu announced that “fuel subsidy is gone” and with that singular statement he made oblivious of the power a statement that the Nigerian president makes connotes, he sent the Nigerian economy nose-diving and a year later, the economy is still in turmoil.

Many would argue that all the leading candidates in the 2023 presidential elections agreed on the need to stop the payment of subsidies on petroleum products which this writer also subscribes to, but what they fail to realize is that careful considerations need to be taken before the implementation of any economic policy to ensure that whatever backlash it may cause would be mitigated against.

For instance, when the Jonathan administration decided to stop the payment of subsidies on petroleum products in 2012, they came up with a policy denoted as the Subsidy Reinvestment and Empowerment Program (SURE-P) to manage the funds saved from the removal of subsidies and use it to help reduce unemployment, improve infrastructure and provide other essential services to help reduce the negative impact of removing the fuel subsidy on Nigerians.

Ironically, Tinubu then an opposition leader was one of those who led Nigerians in protest against the removal of the subsidy only for him to make the removal of the same subsidy the most urgent policy of his newly sworn-in administration without having any proper implementation plan for removing it as was done during the Jonathan administration.

In the case of Atiku, going by what was documented in his manifesto and other campaign promises that he made, he planned to use the savings made from the payment to fuel subsidy to partly fund a $10 billion economic stimulus plan targeted at funding Small and Medium Scale Enterprises (SMEs) to help boost productivity in the country, create millions of jobs and raise the average household income to help mitigate against whatever negative consequence the removal of fuel subsidy might have caused.

While Nigerians were still agonizing as a result of the pains caused by the poor implementation of the fuel subsidy removal, the Tinubu administration without any sustainable policy to strengthen the Naira decided to float the local currency which led to an unprecedented crash in the value of the Naira. This along with the hike in the price of petroleum products led to the price of goods and services increasing by as much as 300% while the income levels of most Nigerians remain stagnant.

In a claimed bid to curtail inflation (which was actually caused by the government’s fiscal irresponsibility), the CBN governor on three separate occasions increased the Minimum Rediscount Rate (MRR) which is the base rate that determines the interest rate in the country while at the same time increasing the Cash Reserve Ratio (CRR) of banks in a bid to reduce the money available to lend to the public under the guise of fighting inflation.

However, the logic of increasing interest rates to reduce consumer spending in an economy where consumer credit is almost nonexistent is confounding most economists even as it is obvious that the inflation we have in Nigeria today is a cost-push inflation rather than a demand-pull inflation that hikes in interest rates are normally used to curtail in countries that have consumer credit generally available to the public.

The real reason the CBN has been increasing interest appears to be to make it more attractive for investors to invest in government securities and as a result of this, the government can borrow more money from the public to fund its huge deficits. The downside of this however is that the government is muscling the productive sector of the economy out of the money market in their insatiable greed to raise money to fund their excesses thereby compounding the economic woes of the country instead of resolving them and at the same time denying the productivity sector of the funds needed to grow the economy

The fourth major economic policy of the Tinubu administration was the 200% hike in the electricity tariff of Band A customers which has further compounded the economic woes which Nigerians have been facing as a result of the economic policies of this administration and led to the shutting down of some manufacturing companies.

While the government claims that these pains are temporary and are a necessary measure to fix the economy as they ask Nigerians to persevere, the government itself has been indulging in excessive luxuries that border on the obscene even when there is no clear path to economic growth based on their policies and the current trajectory of the economy.

After one year of running the economy, we can now begin to understand the orientation of this administration’s economic policies, which we can aptly christen as Tinubunomics. Rather than implementing policies that will grow the economy and create wealth for Nigerians, Tinubunomics is more focused on making more revenue available to the government to spend and this was done primarily by stopping the payment of subsidies without reinvesting it in people-oriented programs, widening the tax net, devaluing the Naira to get more naira for their dollar revenue, seeking more foreign loans and increasing interest rates to sell more government debt instruments.

In all these policies, not a single thought has been given to implementing policies that will grow the economy while the government is just focused on generating more revenue for themselves at the detriment of the economy and the private sector. They are too in a hurry to generate money to fund their excesses and would rather not go through the route of supporting the private sector to grow and create more jobs to make the economy more buoyant and ultimately make more tax revenues through increased economic activities.

The level of activities in the productive sector of an economy is always a good gauge of the health of the economy and it is the government’s responsibility to support this critical sector of the economy to ensure their growth. Sadly in the last one year, over 722 manufacturing companies along with some multinationals have closed shop as a result of the harsh economic climate resulting from the policies of the current administration

Suppose there is to be any hope of growing the Nigerian economy or salvaging what is left of it. In that case, the current administration must change its focus from generating revenues at all costs and at the detriment of the Nigerian economy to focusing on supporting the productive sector of the economy to thrive while also making drastic cuts in the cost of governance to help reduce the deficit and cut down on inflation. The current trajectory of Tinubunomics can only lead us to Venezuela, something urgent needs to be done to halt the slide NOW!!!

Oshobi, a development economist, management consultant, and author writes from Lagos.