President Bola Tinubu’s recent economic decisions, including the removal of fuel subsidies and the unification of exchange rates, have been hailed by The Economist for their boldness. However, the British weekly newspaper notes that while business executives are reaping the benefits, ordinary Nigerians are feeling the strain of rising commodity costs.
The main stock index on the Nigerian exchange has seen an almost 30% increase since Tinubu’s inauguration, pleasing investors despite concerns over the government’s performance. The Economist observes that Tinubu’s early resolve seems to be giving way to indecision, inadequate preparation, and internal conflicts within his team. Furthermore, significant security challenges, including a jihadist insurgency in the North, remain largely unaddressed.
The abrupt unification of exchange rates, a significant move by Tinubu’s government, has generated controversy. The previous administration employed currency controls to maintain the naira’s strength, resulting in a shortage of dollars and a thriving black market. By scrapping this system and allowing the currency to float, the naira experienced an immediate 34% decline against the dollar, and a total of 63% in the long run. The timing of this devaluation, just before the start of the American and British school terms when demand for hard currency surges, sparked additional discontent.
The Economist predicts a rise in Nigeria’s inflation rate to 28% this year and questions whether President Tinubu will maintain his course or be compelled to reverse some policies, especially in light of escalating fuel prices. However, it cautions that backtracking could worsen Nigeria’s economic woes.
Tinubu’s approach to appointing his cabinet has drawn criticism. While he’s known for building strong teams, his current administration is notably lacking in technocrats. Instead, it appears that he’s prioritizing political alliances and reinforcing support, resulting in nine former state governors holding cabinet posts.
Political commentator Feyi Fawehinmi expressed concern over the lack of technical expertise, particularly in the face of unexpected challenges. He highlighted the significant shortfall in the country’s foreign reserves, with over 40% encumbered due to loans and forward contracts. This vulnerability could leave Nigeria exposed to external shocks, as the central bank currently lacks the capacity to stabilize the market.