Two years of reforms, and still searching

The economic reforms embarked on by President Tinubu’s administration have demonstrated the attributes of such exercises. By their nature, economic reforms are not shotgun exercises. They are not short-distance sprints that gifted sprinters complete in minutes. This explains why the full results take time to manifest. However, the critical issues in these exercises demand that their objectives and framework for their achievement be spelt out.

Economic reforms have become a permanent feature of modern-day economies. Without them, countries would continue in the old-fashioned ways of doing things, with little or no improvements in results or outputs. Tinubu entered the office with a bold ambition to alter some things going on in the economy, especially resource allocation and distribution of benefits in the economy.

The trouble with these reforms is that most of the time, the expected results do not appear as early as people expect them. Besides, the differing effects of such programmes on different segments of society often lead to disenchantment among the populace.  This is what the Tinubu reform agenda has been dealing with, and probably will continue to deal with, until there are benefits that each segment of Nigerians can identify with.

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The aim of all economic reforms is the attainment of sustainable economic growth. Today, sustainability underlines every action or decision made by humans, whether as individuals, households, organisations or nations. Thus, the starting point of reforms in today’s parlance is, if we continue this trajectory, where will the journey take us, and at what cost?

Reforms provide governments with new toolkits with which to confront the challenges of an economy. Thus, the content or focus of reforms varies, depending on what the government of the day sees as the major problems that need to be addressed. Tinubu’s reforms targeted primarily a defective resource allocation system.

As evaluations of the two-year-old reform continue, variations are expected in perspective, with many pointing out more on the defects in the process. While most people believed before the reforms that measures were needed to address the chaotic petrol subsidy, the trouble with it is its implementation. “Sub is gone” has been etched on the psyche of most Nigerians who heard it and the immediate impact it had on our lives. That impact continues today, two years after it was made from Eagle Square, Abuja.

Just imagine for a while that President Tinubu took his time on that day, addressed Nigerians and made them see the inevitability of the subsidy eventually going. Imagine also that he took a few more days consulting with his policy advisers and other key stakeholders in the oil and gas industry, including labour leaders.

The president could have then addressed Nigerians, in a national broadcast, to plead with them to bear with him on the measures he was about to unfold. I say “plead” because political leadership must be anchored on partnership, on agreement and open communication. Imagine also that he laid out a phased removal of the subsidy, perhaps over a year or two, or less.

He would have disappointed the speculators at the petrol stations who were waiting to hear his pronouncement on the subsidy issue. The government came to fight speculators, but it ended up handing Nigerians over to them and their long knives. Hardly had the word come out of the president’s mouth when they adjusted their meters, and the impact has remained with us since then.

It was about the same thing with the unification of the naira’s multiple exchange rates. When the CBN announced the flotation of the naira on June 14, 2023, the bank, as an institution, threw caution to the wind. CBN as an institution should be a repository of knowledge, which includes the concept of sequencing policies. With the full-scale removal of fuel subsidy and its impact on the price level already, it was professionally wrong for the management of the central bank to go ahead that day to let the naira loose.

Even if they had before then decided on the exchange rate unification measure, a simple econometric modelling, using the new price levels in the economy, inflation and other interest rates, the level of productivity, and other relevant variables, would have shown them the potential impacts of running these two major actions concurrently. In that case, the bank, as an adviser to the president, should have raised a note of caution. This was a major institutional failure on the part of the bank. But more broadly, it shows a serious lack of coordination among those who surrounded President Tinubu as he formed his initial team.

Nigerians have lived since then to pay for the sloppiness of our managers. All the interest rate hikes that the central bank subsequently embarked on were mere fire fighting that should not have been embarked on in the first place. No law said the policies must subject Nigerians to this kind of pain.