Economic expert and immediate past president of the Lagos Chambers of Commerce and Industry (LCCI), Dr Muda Yusuf, in this interview with IMOLEAYO OYEDEYI, examines the economic performance of President Bola Tinubu’s administration after 100 days in office. He suggests what government should offer Nigerians as palliatives to moderate the socio-economic glitches its key reforms have thrown up.
President Bola Tinubu’s administration is already 100 days in office. How will you rate its performance in terms of economic development?
Well, we will rate the administration high in terms of economic reforms, especially considering the fact that the administration has taken some bold steps around two major disruptions in the country which it inherited from its predecessor. I am talking about the forex and the oil and gas sector reforms. This is because there were disruptions in the forex market, which was very bad for the economy. There were also disruptions in the petroleum downstream sector, which was also very bad for the economy. And these two disruptions have been the biggest challenges the economy has faced in the last couple of years. So the corrective reforms that have been taken show that the administration has done well in that regard.
However, the administration has not responded well enough to the consequences of those reforms. This is because the reforms, especially the fuel subsidy removal, expectedly have thrown up some damaging challenges. It has resulted in high inflation, and soaring cost of transportation which have both weakened the purchasing power of the people. So the response of the administration to these social outcomes has not been as fast and appropriate as we had expected it to be. Even as we speak now, the administration is still struggling with the issue of what should be the right palliatives for Nigerians in view of the economic hardship they are facing.
It will be recalled that the president announced some palliatives about two weeks ago, including some concessionary funding for some Small and Medium Enterprises. But all these things are yet to begin to manifest or even be implemented. If you should talk to business owners, I am not sure those funds are available. But more important is the fact that the situation is still very challenging for individuals in the country, talking from the welfare point of view. You can see how the citizens are complaining bitterly about the high cost of food, transportation, and energy. We have not seen any significant concrete steps taken by the government to address those concerns apart from this issue of cash transfer and donation of bags of rice, which are not likely to go viral. So the reforms have been good, but the government’s response to their negative consequences and social outcomes has not been very impressive.
But generally, we have also seen some very good policies from the government like the decentralisation of electricity, which is also a very good thing as it will open up the space for more investors to come in and bring about meaningful growth. So, in terms of reforms, it has been good so far. But the government needs to do a lot more to douse the social tension so that the people can also feel some benefits of the reforms.
Meanwhile, the government has also been doing a lot in terms of tackling the menace of crude oil theft, which has also been one of the biggest problems that the economy has been facing. We all know that the economy has been bleeding a lot from the loss of revenue and foreign exchange from the oil and gas sector as a result of impunity, criminality, and all manner of atrocities being perpetrated in the sector. So the government is taking some very good steps in this area. In summary, those are the few things I think one can applaud so far.
But the belief of some experts is that the way the government has approached the two economic reforms so far shows that it did not have a clear economic roadmap from the onset. Do you share that belief?
Well, I don’t share that belief because the government was clear about what it was going to do in the area of the economy. Apart from the president, other presidential candidates also said the same economic reforms should take place immediately. And these two key reforms were parts of the major reforms. The three presidential candidates in the last election were all very clear that these two policies are fundamental if the country must chart a new way forward for the economy.
And there was even an economic advisory committee that was set up before the current administration took over and the committee had a fantastic document containing an economic roadmap and even timelines. So I think the government had good ideas on what to do about the economy. But you know, economic issues are also not straight-line issues. They are not linear. When you start implementing them, you could see some variables that you had not taken into account in the drawing stage. The truth is the economy is a social science, so you cannot predict accurately what will be the outcome of some reforms. That was why I was talking about the social outcome of the reforms, which needed to be responded to immediately. So I don’t share the view that they were not clear as to what to do, particularly around the macro-economic environment.
As for specific sectors, yes, it may take us some time to get a clear pattern, considering the fact that they have just put in the ministers, which came later than many of us had expected. The majority of us had thought that within the first month, the government would have emplaced its ministers. But it took almost 60 days.
But going forward, what do you think should be the right focus and palliatives that the government can actually give Nigerians that will really be effective, considering the fact that the billions of naira given to each of the state governments may not likely trickle down to everyone at the end of the day?
The government should simply use policies to drive palliatives. That is, the palliatives should be policy-driven. And when I say policy-driven, I mean the government should look at the sectors in the economy that are hard-hit by the reforms and give them generous tax concessions, even if it is going to be temporary. The government should also look at the sectors of the economy that are affecting the livelihood of people. It should look at the tariff policies and import duties that the people are paying. The government can reduce this. For instance, look at transportation, one of the biggest problems of the fuel subsidy has been the high cost of transportation. What is wrong with announcing that you are reducing the import duties on buses by 50 per cent? The government can also remove the VAT on buses so that more companies can buy buses. The local governments can also buy buses and the commercial operators can also buy more buses, including the state governments. Through this kind of policy, the government can easily ease the problem associated with the high cost of transportation.
The same thing applies to the issue of energy. Right now, we are still importing diesel. What policy has the government announced so far to bring down the cost of diesel importation? The government can simply instruct the Nigeria Port Authority (NPA) to stop all charges on the importation of diesel or any energy products so that the cost of energy can come down.
The government can also talk to those in the agricultural sector and food processing companies, including flour mills and those producing noodles and others on what can be done to bring down the cost of food. These things are more systemic and will go around everyone in a more sustainable way. If you talk to those in flour mills now, they will tell you the heavy import duties they pay on wheat, sugar, and other materials they use. The government can simply engage them and before you know it, the prices of food and other consumables will come down.
The government can also look at some food items under heavy import prohibitions and review the policies temporarily so that the items can easily come in and moderate the cost of food. It is an emergency situation. I prefer this to all these distributions of bags of rice. The question is how many people can the government distribute rice to?
What other economic advice do you have for the government going forward?
The other economic advice is what the government is already trying to do. Yes, we want a market economy, but the market cannot seize everything. So, we should define the limits of the market. This is because, in every economy, the government has a role to play in ensuring a conductive business environment and the protection of the welfare of the people. It should not surrender everything to the market. That is why in the economy, there is what we call market failure. There are instances where the market will not be able to deliver results for you, especially when you are looking at development and social objectives.
At that point, the government has to intervene. If it needs to kill subsidy, it should kill it. And if it needs to waive taxes, it should do so. This is how it should be. And it should apply to things like energy and even our foreign exchange. Yes, we should float it. But we should not float it completely. If the thing is going out of hand, we need to step in and moderate it, either by pumping more money and forex through the Central Bank of Nigeria (CBN) or by ensuring that the rate in the official window is not too volatile. And we should leave the autonomous market to be as free as it can be. We should not impose a price on them. Otherwise, people will start running away with their foreign exchange. So, let the autonomous market be as free as it can be, but in the official window, there has to be some control and monitoring, because there are also instances of capital flight and speculative activities. So the government has to be vigilant. You don’t just leave the economy and say, well, because you are running a market economy, then, everybody is just free to do anything. No.
It is the same thing with our PMS. It is wrong to be talking about market forces all the time because energy is very critical to an economy. Yes, the reform is good. But you have to also worry about the effect of the high cost of fuel on the citizens. This is because the reform is not an end in itself, but a means to an end. And the end is about the people that you are governing. There is no point in having a reform and the people are complaining. You have to tweak and review the reforms and policies in a bid to minimise the pain on the citizens. That is very important. And I think the government is doing a bit of that already because now, people had thought the fuel price would have gone up to around N700 due to the exchange rate and international crude oil price. But the government has said no, keep the fuel price at the level it is now. Yes, some private individuals within the oil and gas sector are not happy with it, because they want the price to keep going up. But everything is not about the market or pure economics. You have to tamper with the economy sometimes with social considerations.
What about the ministers, even though some have argued that their huge number will increase the cost of governance, what will be your advice to them as Tinubu’s government moves ahead of the 100-day mark?
All the ministers must engage with their stakeholders before they start to take any major step or make pronouncements. Most of them are not experts in the ministry that they have been posted to. And even if you are an expert, you don’t have the facts on the ground because you are not in your seat. But now that you are there, you should first consult with critical stakeholders to know what the issues are before you begin to take any step. So that whatever steps they are taking will be very appropriate and fit for purpose. That is very important.
It will be recalled that the new Minister of Power, Adebayo Adelabu, recently made a public pronouncement in Ibadan, the Oyo State capital that the power supply will be boosted up in six months time. He gave assurance that in six months, the power challenge would be sorted. Before making such a pronouncement, I am not sure the man has consulted the experts and stakeholders in that sector to know what the problems are. He just came out in the heat of the rosy welcome his people gave him in Ibadan and started making bold statements. It does not work that way. You have to first check what is on the ground and assess what is feasible. The other time, another minister announced that solid minerals would be contributing 50 per cent of the country’s Gross Domestic Product (GDP). I don’t know whether the man knows what this means. Even agriculture, as big as it is, is contributing just about 23 per cent of the GDP. So, how do you then move from about one per cent of GDP to about 50 per cent? In how many years? So, the ministers should know what is on the ground, so they can take appropriate steps, such that the end of the day, they will not be deploying policies that are not appropriate for our condition and circumstances.
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