The Independent Media and Policy Initiative (IMPI):conomic policies had sunk the country to a level that it had to change course or be doomed.
According to News Agency of Nigeria, “We have observed with interest the criticisms that continue to trail the reforms implemented by President Bola Tinubu’s administration. Of particular interest are two opinions that gained some traction. One of the critics finds the reforms to be a: ‘wreckage of the past 15 months, from which the country is reeling.’ The other viewpoint, an editorial, brands the ‘government as insensitive and strategy-deficient.’ It also sees the government as incompetent to perform its primary duty of delivering welfare and security to the people.”
These attacks on the ongoing reforms are natural if viewed from the relatively narrow and subjective context of the steep change in the country’s cost of living, said the group. It said the reality of the nation’s current macroeconomic situation was a consequence of its past. “When the premise and pred
icates of the nation’s economic trajectory are reviewed and aggregated, the apparent conclusion will be that we are where we are because this affliction of economic malaise at this point is predetermined.”
Since 1972, the Nigerian economy has been characterised by an unpredictable circle of bust and boom. “In layperson’s terms, it means that one moment, we are deemed rich and able to buy whatever catches our fancy, and everybody, including the media, is happy. The next, we are flat broke. We lament the difficulties encountered in sating our basic needs, whining and criticising the government in power as the source of our decimated existence,” said IMPI.
IMPI cited similarities between Nigeria and Venezuela, another oil-rich country, to drive home its position. It said: “Like Venezuela, oil has taken Nigeria on an exhilarating but dangerous boom-and-bust ride. Again, like Nigeria, decades of poor governance have driven what was once one of Latin America’s most prosperous countries to economic and political r
uin.”
In 2008, crude oil production in Venezuela was the tenth-highest in the world at 2,394,020 barrels per day, and the country was also the eighth-largest net oil exporter in the world. It said Venezuelan leaders implemented the wrong macroeconomic policy between 2000 and early 2010 when Venezuela’s economy, like that of Nigeria, was booming due to a prolonged period of high and rising grain, metal, oil, and gas prices.
“Between 2000 and 2015, government spending in Nigeria, like Venezuela, was deeply pro-cyclical. Instead of saving at least some money for bad times during the good times – as Norway, Saudi Arabia, and virtually all other oil exporters have done – Nigeria established the Excess Crude Account (ECA) by fiat in 2004 without legislative backing. In May 2007, the ECA had up to $20 billion. Still, like the Venezuelan government, which ran double-digit fiscal deficits as the economy boomed, spending far outpaced income from taxes and other revenues.”
While Venezuela saddled the state-owned oil
company with over $100 billion in obligations, IMPI said the Nigerian government depleted the ECA by more than 80 per cent, from $20 billion to $2.4 billion. The IMPI, quoting a World Bank report, said like Venezuela, which lost $300 billion to corruption through its foreign currency system, Nigeria incurred a loss of N13.2 trillion implementing its foreign exchange subsidy policy between 2021 and 2023.
The policy group noted that it was against this backdrop that the Tinubu administration introduced reforms targeted at preventing the country from going the path of Venezuela. “The Venezuelan economic crisis scenario remains a possible reality for Nigeria if the Tinubu administration had adopted the Maduro option in 2023. Our estimation of his decision to scrap the populism macroeconomic template is that the President has salvaged Nigeria’s national economy from a whirlwind of economic turbulence and total collapse.”
However, it said as the World Bank noted, though fiscal reforms were painful, they were need
ed to save the country from imminent collapse. “Given the comparative analysis we have conducted in this Policy Statement, we fully adopt the World Bank submission and subscribe to the fact that the Tinubu reforms have started yielding results.”
The policy group said the structure of the Nigerian economy was changing and conforming to targeted reforms. “Even now, the Federal Government’s revenue from Value Added Tax (VAT) and Company Income Tax (CIT) is rising in leaps and bounds, notwithstanding the increased cost environment. Both CIT and VAT rose by 85 per cent year-on-year to N6.44 trillion in the first half of 2024 compared to N3.48 trillion in the same period of 2023,” said IMPI.
It said the Chartered Institute of Taxation of Nigeria noted that tax revenue was currently the highest income source for the country, signaling a significant shift in the nation’s revenue generation template. “Besides, there has also been a resurgence in foreign exchange inflows through International Money Transfer Operators
. This grew by 47 per cent to $2.33 billion in the first six months of 2024 from $1.58 billion in 2023.”
“We also observed that manufacturing companies are adapting to the high-interest environment by reducing their debt burden by N1.62 trillion between February and June 2024,” it said. The group said this drop, representing a 14.85 per cent decline in manufacturing loans, came amid rising interest rates that had increased borrowing costs across the economy.
“Transcorp Hotels, for instance, grew its profit before tax in the first nine months of 2024 by up to 191.1 per cent from N5.63 billion in the same period of 2023 to N16.43 billion in the current year. In addition, in a show of faith in the economy, Flour Mills of Nigeria Plc, the nation’s largest miller, has announced its plans to spend as much as one billion dollars over the next four years to expand its facilities and restructure after its majority shareholder offered to take it private.”
This is an extension of the N427 billion new investments manu
facturing companies have committed to invest in the economy, a reflection of their confidence in the economy, IMPI added. It said the response of macroeconomic indices to the reforms indicated that the economy was on an upward trajectory, an expanding economy with the capacity to produce jobs and create wealth.