Nigeria witnessed the swearing-in of a new government under the leadership of Bola Tinubu on May 9, 2023. This marked a significant milestone, as it marked twenty-four unbroken years of civilian rule in the country’s democracy.
In the past 120 days, the administration has embarked on a series of actions to address various challenges plaguing the nation, including security, political, social, and economic issues.
One of the most pressing issues tackled by the new government is the state of the Nigerian economy, which has long been a cause for concern, given the country’s dependence on a mono-economic system. In this report, we provide an overview of the actions taken by the government thus far to address these economic issues.
Highlights of Actions Taken So Far:
- Removal of Fuel Subsidy
- Unification of Exchange Rates
- Dismissal of the Former Central Bank Governor and Appointment of a New One
- Establishment of a Taskforce on Fiscal Policy
- A Surge in FAAC Allocation, with a remarkable 1.9 trillion naira allocation in July
- Approval of a 35% Salary Increase for Staff in Tertiary Institutions
- All Share Index Achieves an All-Time High at 67,325 Points in Fourteen Years
However, it is essential to recognize that every action has consequences. Therefore, it is pertinent to explore the economic fallout resulting from the aforementioned decisions.
Economic Fallout of the Steps Taken So Far:
- The removal of fuel subsidy led to a significant increase in petrol (PMS) prices, rising from ₦180 per litre to ₦617 per litre, with the possibility of further increases.
- Diesel prices surged to ₦1000 per litre.
- The unification of the foreign exchange (FX) rates resulted in a parallel market rate of ₦1000 per US dollar, a stark contrast to the pre-May rate of ₦480 per US dollar.
- Foreign exchange reserves dropped from $35 billion in May to $33 billion.
- An increase in electricity tariffs was suspended as fuel subsidy was reinstated.
- The inflation rate surged to 25.8%, with expectations of further increases unless urgent solutions are implemented.
- Labor unrest escalated as unions demanded a higher minimum wage. The two major unions, NLC and TUC, appeared divided in their actions, with threats of an indefinite strike by NLC ongoing due to stalled negotiations with the government.
- Nigeria currently ranks second after Angola as Africa’s largest crude oil producer, with crude oil production hovering around 1.2 million barrels per day.
- The Purchasing Managers’ Index, a measure of private sector economic activity, dropped to 50.2 points, its lowest in five months.
- Public debt has reached ₦87.3 trillion.
Immediate Social Impact:
- Poverty rates have risen significantly due to the soaring prices of essential goods and services, forcing many households to resort to unconventional means of survival.
- A surge in Nigerians seeking to migrate, often referred to as “JAPA.”
- Despite the introduction of a new educational loan scheme for tertiary institutions, there has been a substantial increase in school fees across all levels of the education sector.
- The power sector continues to grapple with frequent grid collapses, resulting in erratic and inadequate power supply.
- The removal of fuel subsidy has led to a sharp increase in transportation costs, hindering the movement of goods and agricultural produce.
- Widespread insecurity persists throughout the country.
- The challenging business environment has prompted several businesses to exit the country, including reports of multinational pharmaceutical giant GLAXOSMITHKLINE considering leaving Nigeria.
With these significant and challenging issues facing the nation, Nigerians find themselves echoing the words of the late Nigerian music icon, Sonny Okosun, asking, “Which way Nigeria is heading to?”