How ‘toxic’ policies, bad choices drove Nigerian economy off course

As President Bola Ahmed Tinubu took the mantle of leadership, economists have started charting the way out of the economy. In this first of a two-part analysis, we try to look at how the country got there and the way out.  A snapshot of Nigeria’s economy, as presented by the Central Bank of Nigeria (CBN) […]

As President Bola Ahmed Tinubu took the mantle of leadership, economists have started charting the way out of the economy. In this first of a two-part analysis, we try to look at how the country got there and the way out. 

A snapshot of Nigeria’s economy, as presented by the Central Bank of Nigeria (CBN) on May 13, 2023, showed the state of the economy: an inflation rate of 22.04 per cent, and a monetary policy rate of 18.5 per cent. The official exchange rate of the naira was N461.03 to the dollar.  

And on the website of the National Bureau of Statistics (NBS), a more worrisome picture emerged: an unemployment rate of 33.3 per cent, with underemployment rate standing at 22.8 per cent.  

Among the youths, unemployment is as high as 42.5 per cent.  

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Late last year, the NBS reported that as much as 63 per cent or 133 million Nigerians are multidimensionally poor. 

These are significant figures. The inflation rate is the highest since September 2005.  

The 18 per cent monetary policy rate came as a result of the decision by the Monetary Policy Committee (MPC) to keep raising the rate to keep pace with inflation.  

How long the members plan to sustain this is not certain, but the new government says it will prefer inflation targeting policy. 

This is the picture of the economy as the nation prepares for a transition from one administration to another.  

These statistics are simply the consequences of the roads taken by the outgoing administration, economists who spoke to Daily Trust said. 

Toxic policies 

“Most of the policies put in place by the outgoing government in the last eight years have been toxic,” says Professor Babatunde Adeoye of the Department of Economics, University of Lagos. 

The economics lecturer recounted that the outgoing government led by President Muhammadu Buhari came into office on three pillars, represented by the acronym SEC: Security, Economy and Corruption.  

The government came with a promise to secure the lives and properties of Nigerians; work on the economy to return it to the path of development, and fight corruption. 

“But it did not deliver on these three items. We are still battling with these three items.  

“So, if we are to assess the government on these three items, the government performed woefully,” he told Daily Trust in an interview in his office. 

Over the last eight years that the administration has been in power, Nigeria’s key economic indicators have deteriorated, leading to an erosion of the citizens’ welfare, as the economy veered off-course.  

The value of the naira has depreciated by 300 per cent, according to Adeoye.  

“We have an unstable macroeconomic environment,” he noted. 

The multiple exchange rates of the naira have also added to that unstable economic environment, with different operators accessing foreign exchange at different rates. 

“We cannot be running an economy where some players are getting foreign exchange at the rate of N460 or N470 to the dollar, while a majority is getting it at N750 to N800 to the dollar.   

“You can’t run an economy that way,” says Dr Muda Yusuf, Director of Centre for the Promotion of Private Enterprise (CPPE),

a Lagos-based think tank. 

Before this administration came on board, inflation was in single digits (about 7-9 per cent); unemployment was less than 10 per cent. 

“Today it is 33.3 per cent, according to the NBS. Youth unemployment is 42.8 per cent, to show you that this country is on a time bomb.  

“No country in the world can have this kind of unemployment and still have stability,” he warned. 

He said this has led to the exodus of young people. Majority of the young adults are those that have been trained here and have requisite skills in all fields of human endeavour. 

But if Nigerians think the worst is over for the young people of this country, they may have to think again. 

“Look at the education sector; it has collapsed. The zeal to teach and conduct research has fallen.  

“It is the same thing with the health sector,” Adeoye laments.  

Public universities in Nigeria went on strike for a record eight months last year, which added to the woes of many parents.  

There are cases of students who have spent five years in the university but are still in year two! 

Over the period, Nigeria’s poverty incidence has also risen, from less than 40 per cent.  

“Now, we are talking about a poverty rate that is over 80 per cent. That means over 70 per cent are poor – that is, in abject poverty.”  

By a recent World Bank reclassification, those who live on less than $2.15 dollars a day are considered to be living in abject or absolute poverty. 

Economic dislocation 

Notable examples of toxic policies implemented by the outgoing administration include the closure of Nigeria’s land borders with its neighbours in 2019, and the naira redesign (otherwise known as cash swap) programme of the CBN in early 2023. 

These two actions, which brought severe dislocations in the economy, are examples of cases where an individual “just walks up to the president with an idea and the president buys into it and it becomes a policy,” says Dr Yusuf. 

He told Daily Trust that this can only happen in an environment without a structured economic policy framework. 

Some commentators have argued that what Nigeria is facing is part of a global trend, including the rise in the cost of living partly occasioned by the war between Russia and Ukraine.  

But Adeoye disagrees. “While the government’s handlers will argue that rising inflation is a global phenomenon, the major component of inflation is purely food inflation.  

“The trend in the past eight years supports this, as food inflation has always been higher than the headline inflation rate.  

“Nigeria’s food inflation has risen from 9.2 per cent in January 2015 to 10.6 per cent in that year.  

“It has continued its upward trend to 24.61 per cent, its latest value for April this year,” he argued.  

Nigeria also faces mounting debt burdens, currently put at over N77 trillion naira.  

The Debt Management Office has raised a series of alarms on the possible macroeconomic implications of debt accumulation on the economy.   

A significant proportion of the debt burden came through the government’s abuse of the Ways and Means window that gives it access to short-term credit from the CBN. 

Recently, President Buhari sent a request to the Senate to permit him to borrow over $800 million.  

For a government that has about two weeks to go. 

Commenting on the president’s promise to fight corruption, Professor Adeoye says things have hardly changed.  

“Within the government sector a lot of corrupt things are going on and the government has not done anything about it,” he said, blaming it on the failure of institutions. 

“The institutions are there but they are not strengthened enough to fight corruption.  

“We have the ICPC, the EFCC, but they do not have enough legal provisions and backups to fight corruption,” he said. 

As examples of what it means to fight corruption, he cites the cases of the immediate-past American president, Donald Trump, who is facing prosecution and Nigeria’s former deputy Senate president, Ike Ekweremadu, who has just been jailed in the United Kingdom for organ harvesting.