President Bola Ahmed clocked 50 days in office on Wednesday, July 19, with the populace getting apprehensive as his administration’s economic policies induced unprecedented inflation rates and inflicted agonies.
Tinubu had, immediately after replacing his predecessor, Muhammadu Buhari, eliminated the fuel subsidy regime, a decision that instantly triggered a 200 per cent increase in the pump price of petrol, a strategic commodity that influences pricing and cost in other sectors of the economy.
The Tinubu administration jacked the fuel price from a range of N187 to N255 per litre obtainable in Lagos and Abuja, respectively, to a new price of N488 per litre in Lagos to N560 in Abuja. The prices were higher in some other states across the country.
On Tuesday, July 18, the administration effected another round of fuel price increases. A litre of petrol now sells for N570-N620 in Lagos and up to N700 in Abuja. The price is higher in some states across the country.
Another key policy pronouncement of the administration is the foreign exchange rates unification, by which forces of demand and supply determine the rates, with direct consequences, especially on prices of imported goods.
Policy impact
The astronomical spike in transportation costs is a crippling result of the fuel subsidy removal. Fares have gone well over 100 per cent on many routes across the country, with multiplier effects on passenger commuting, goods movement, and prices of foodstuffs.
This has further worsened, for most Nigerians, the poverty level and quality of living generally. More commuters have taken to the roads trekking long distances as they cannot afford the new high fares.
The unification of forex rates hits the national economy through debts, with the profile rising to N81 trillion following the floating of the naira and the resultant devaluation by the Central Bank of Nigeria (CBN).
The devaluation saw the local currency, which was exchanged at N430 to the dollar at the official window before Tinubu assumed office and as at the end of the first quarter when the Debt Management Office (DMO) last published the national debt profile, shoot over N750 at the close of trading at the import and export window on Tuesday, July 18.
A June 6 report by The Guardian newspaper highlighted trouble in the health sector as drugs and cost of care generally increased by 150 per cent, arising from the inflationary impact of floating the naira.
The Guardian report revealed that drugs were fast getting out of stock or unaffordable. The Federal government disclosed its plans to reduce the importation of drugs in the country from 60 per cent to 40 per cent to promote the local manufacturing of drugs. For now, 70 per cent of medicines consumed in the country is imported.
Fears over proposed electricity tariff hike
Despite assurances in June by the Nigeria Electricity Regulatory Commission (NERC) and electricity distribution companies (DisCos) that electricity tariffs would not be raised, there are indications that the tariff will go up latest August as the Tinubu administration pushes to completely hands-off power sector subsidy, as it did petrol.
The president of Nigeria Consumer Protection Network and coordinator, Power Sector Perspectives, Kunle Olubiyo, believed the tariff would soon be increased.
Olubiyo told The ICIR, “Tariff adjustments happen every six months. However, most of us just concluded that the six months period was supposed to end on June 30, 2023, and that with effect from July 1, there might be an upward review.
“However, that is not sacrosanct; there is nothing in the books that says it has to be July 1. But, of course, in this month of July, somewhere along the line before this month ends, you may load credit and notice some adjustment.”
Food prices going out of reach
The sharp increase in fuel prices on May 29, when Tinubu assumed office, has greatly affected prices of foodstuffs. Distributors and dealers of food items complain of high transportation costs following an increase in petrol price.
Checks in most markets in Abuja revealed that the price of a mudu of garri has risen from N300 to N600 between May and June. A six-piece bunch of plantain that sold for between N600 and N800 two months ago is now selling for N1,400.
Consumers are worried prices of foodstuffs are likely to go higher following the fresh increase in fuel price on Tuesday.
The worry is heightened by the possibility of prices going through the roof, with the Nigerian National Petroleum Company Limited (NNPCL) maintaining that market forces would determine the fuel pump price. Nigerians do not see market forces as favouring the local economy now.
What economic analysts are saying
To many key economic watchers, the government’s direct announcement and strict implementation of its key policies without unveiling mitigation strategies is not pro-poor, as the poor have been left to absorb the shocks.
“Let us not be carried away by the positive reactions in the capital markets by these policies. Above all, we should remember that the economy is meant to serve the Nigerian people.
“The reality is that Nigerians are suffering greatly because the cost of living has risen beyond their means,” a former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Muoghalu, said.
Muoghalu noted that the Federal government should have moved faster on the matter of a new minimum wage and should have had a way of subsidising transportation.
“All these should have been addressed with the same determination that we have seen in the government’s reforms,” he said.
The Lead Director of Centre for Social Justice (CSJ), Eze Onyekpere, saw the steps taken so far by the Federal government as signalling no hope for poor Nigerians.
“Implementing policies has been a problem for this new government. Announcing these policies when it had not been thought through is not giving any hope. The poor are now bearing the brunt,” Onyekpere said.
He added that continued devaluation of the naira would further affect the prices of goods in an upward swing.
Onyekpere is foreseeing the likelihood of prices of petroleum products continuing to rise with the imposition of a 7.5 per cent value-added tax (VAT) on their importation.
He advised the government to think out measures that would sustain forex inflow to match demand, or there would be a run on the naira, which he feared could see it exchanged for N1,000 against the dollar.
Despite the agonies the Tinubu administration’s reforms seem to be inflicting on the people, analysts like Tilewa Adebajo of CFG Advisory are urging the President to ensure policy consistency.
Adebajo said keeping at it would put investors on alert on “how serious Nigeria is,” which he viewed as having the potential to attract more private capital into the Nigerian economy.
“Consistency in policy reforms is key. We need to show long-term commitment to our policies such that both local and international investors can take us more seriously,” he said.
According to Adebajo, Tinubu must use the meeting at the United Nations General Assembly in September to market Nigeria’s policies and show commitment on transparency and accountability.
“The President is to go to the United Nations General Assembly in September, and he is to deliver a major speech with respect to the policy direction of Nigeria.
“We need a budget that is clear and transparent, devoid of ways and means, so that by the first quarter of next year, when the International Monetary Fund comes up with its Article 4 report on Nigeria, we can see credit rating agencies begin to upgrade Nigeria and pull us out of junk status,” he said.
