Politics is a game of difference. Two differences, in fact. There is the implied difference between the aggregated interest groups (political parties?) that contend for the popular vote during elections. Most often, this dissimilitude is a question of degree – of where the contending parties are situated on a continuum that favours the state, at one end, and the private sector at the other end, or of how best to capture the state in the aggrandisement of narrow interests. Then, there is the other difference. The difference that once in office, political parties are expected (and often times party manifestos advert to this) to bring about in the lives of their constituents.
The catalogue of achievements of the Tinubu administration that is increasingly the staple of recent social media engagements on the state of the economy, is of the latter vintage. The list of reforms that the Tinubu government has wrought since coming to office on May 29, 2023, is indeed impressive. By taking the pressure off domestic demand for the U.S. dollar, the introduction of the price mechanism in the downstream oil and gas sector and the foreign exchange market has largely dispelled some of the more powerful headwinds into which the federal government’s budget previously sailed, enhanced the naira earnings of subnational governments, and led to growth in the balances on the nation’s gross and net external reserves.
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The incumbent government’s fans swear that these reforms have increased the inflow of foreign investment into the country. Although, one could argue that the improvement in the economy’s dollar supply is the result of better prices that are now available in the foreign exchange markets, this is to split hairs. A better plaint is the fact that despite the promise of the recent tax reforms to improve the economy’s tax management processes, reduce the cost of tax compliance on small businesses, and, in consequence, ramp up the economy’s tax take, the Tinubu administration is yet to staunch our sieve-like exchequer.
We may have foregone the central bank’s monetisation of the federal government’s annual budget deficits, but these deficits, and the economic harms associated therewith remain, nonetheless. No less large gaps are to be found in the efficiency of government spending. Ordinarily, by pushing up credit costs, large government borrowing crowds out bank lending to the private sector. By extension, it crimps the economy, on our case, savagely over the last decade-and-a-half. But the Central Bank of Nigeria’s (CBN) incessant pursuit of financial repression has kept the domestic cost of money below that of the headline inflation rate. Two things have happened, as a result.
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Although considerably higher than that of many of the world’s low-income and Western economies, the national savings rate is still lower than those of the world’s high-saving economies. In result, while the current levels of savings reflect significant national capacity to fund growth internally, considerable room exists to encourage even more domestic investment and capital accumulation. However, none of this will happen before a fix is found to the inflation bugbear – the second consequence of the CBN’s pursuit of monetary policy designed to keep interest rates artificially low or otherwise restrict the financial sector, usually with the goal of reducing the government’s borrowing costs.
The toll of inflation on consumer spending, and through that, to business investment, and ultimately to domestic output is why government sceptics insist that the Tinubu government has not made a difference to the lives of the Nigerian masses. Arguably, there is a lag from the implementation of reforms, to when their benefits start flowing in. But if we take the Javier Gerardo Milei government in Argentina (it assumed office on December 10, 2023) as our counterfactual, then the question of reform salience bruited about by those who would have the electorate vote out the Tinubu government come the 2027 general election becomes very relevant.
By pruning government spending by about 5% of gross domestic product, the Milei government reduced inflation dramatically, achieved a budget surplus (for the first time in more than a century) in 2024, and has driven strong output growth. Is there an argument for fiscal discipline bringing about the same outcomes in Nigeria? Without any doubt, yes. A no less fundamental reform requirement for a young, if troubled democracy such as ours, is one that ensures that every vote is counted, and every vote counts in a way that eliminates the rancid atmosphere that inevitably follows every general election in the country and strengthens the legitimacy of the governments that emerge from every exercise of the poll. Invariably, reform of the criminal justice system will have to be sequenced along with the electoral one.
While the parlous state of the fiscus and central bank’s external reserves on the Tinubu government’s assumption of office made the most dramatic of the reforms advertised by the government inevitable, as currently set up, it is doubtful if the government sees any compelling need for much deeper and broader changes to Nigeria’s governance.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
