It is trite to say that President Bola Tinubu assumed office over one year ago at a time Nigeria was in the intensive care unit – literally on life support – from an economic point of view. What the president has been trying to do, since then, is akin to reviving a patient that had been in a coma to achieve a reasonable level of stabilization that would enable the latter to respond properly to treatment in order to attain full recovery and sound health.
The two key policies Tinubu put in place to stabilize the economy and bring about a revival of the economy are the removal of subsidy on petroleum products and floating of the exchange rate. The policies have had some unpleasant outcomes, as everyone knows and the government has admitted. The prices of basic needs like food, transportation and healthcare have gone through the roof. These outcomes, as the government has tried to explain, were unintended.
It is obvious a great majority of Nigerians are not on the same page with the government as to whether or not the policies are working, as far as achieving their objectives are concerned. To the generality of Nigerians, the success of the policies can only be seen on the prices of food items in the market, as well as imported products on supermarket shelves. While the government acknowledges the pains Nigerians are going through, it likens it to labor pain that must precede the arrival of a new baby.
The National Council of States appears to have agreed with the government on this, the reason it passed a vote of confidence on Tinubu during its first meeting under the present administration. The latest inflation figure of 33.4 per cent for July, a marginal drop from the 34.19 recorded in June, appears to support the position of the government that things are beginning to look up.
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The reason Nigerians have yet to feel the immediate impact of the reforms of the government cannot be removed from the fact that the country operates a mono-economy, with exports in the non-oil sector that are too insignificant to impact on the exchange rate and, by extension, the economy. The overdependence on oil has created a situation whereby the country’s economy is permanently tied to the vagaries of the international oil market.
In the face of all these difficulties, the Tinubu administration has ensured the economic ship remains on course through adoption of various measures that would enable it to arrive safely at its destination – economic recovery, growth and prosperity for all Nigerians. These measures include monetary and fiscal policies that have seen a steady increase in foreign portfolio investments (FPIs) over the last eight months, as well as foreign direct investments (FDI), especially in the oil and gas industry.
Included in the mix are the contributions of multilateral organisations that have bought into the reform agenda of the government. The latest of the measures to stabilize the exchange rate – a key driver of economic growth – and increase the country’s external reserves is the $500 million Domestic Bond the government issued on Monday, August 19, 2024.
As the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, explained at a hybrid roadshow for the bond in Lagos, the exercise has the twin-objective of a rapid enhancement of the country’s external reserves and stabilization of the exchange rate, with the trickle-down overall objective of reducing inflation and interest rates, thereby opening windows for borrowing for investments, increasing productivity, creating jobs and reducing poverty. It is also a veritable source for funding of key sectors such as education, healthcare and infrastructure, the latter of which is necessary for reducing the infrastructure deficit that has stunted growth in virtually all sectors of the national life over the years. All these would come about with the expected inflow of more foreign exchange into the economy through FPI, FDI and the dollar-denominated bond.
A major advantage of the current bond lies in the fact that it is, unarguably, the best alternative to borrowing (whether foreign or local) to fund developmental projects and programmes, with no financial obligations on the government. The expected foreign exchange is going to have a direct impact on the economy in a manner that would positively affect the standard of living of Nigerians. This is a part of the larger picture the government is seeing in its current economic reforms, a picture the greater majority of Nigerians do not seem to see, understandably so, because of the current hardship in the country. There have been cases of similar foreign currency denominated bonds contributing to the economic recovery and growth of developing countries.
The expected positive outcome of the FGN Dollar Bond is not only for the government, even if Nigerians are going to be the ultimate beneficiaries in terms of access to healthcare and education, as well as critical infrastructure, which would improve their living conditions. There are immediate and direct opportunities for Nigerians as individuals, as well. It is an opportunity for Nigerians in the Diaspora with foreign savings; foreigners resident in Nigeria, as well as Nigerians with domiciliary accounts, to invest in the bond which is as low as $10,000, with 9.75 per cent return. What’s more? Its safety is guaranteed by the fact that it is to be listed on the FMDQ and the Nigerian Exchange Limited.
Obi, a public affairs analyst, lives in Lagos.
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