New government, key economic policies and their implications

It was with fun and pageantry that President Bola Ahmed Tinubu was ushered in as the 16th President of the Federal Republic of Nigeria on May 29, 2023, under unprecedented full security measures. President Tinubu is the first president of Nigeria with a private sector background, as he has worked in the banking and oil sector in the past. He has also been preparing for this post since 1998 when the campaign for the governorship position of Lagos State started. He has no excuse not to impact the federal government of Nigeria in the areas of electricity generation, job opportunities creation, security provision, infrastructure development, housing provision and food security.

It is on record that between 1999 and 2023, as the governor of Lagos State, Bola Tinubu successfully improved the economy of Lagos State by increasing its Internally Generated Revenue (IGR) from a paltry N600 million monthly in 1999 to over N52 billion under the present governor of Lagos State, Babajide Olusola Sanwo-Olu. This laudable achievement is possible because of the revenue generation structures that Bola Tinubu put in place. During his inaugural address, President Bola Tinubu stated that he would remove petrol subsidy and introduce commodity boards that will regulate and help farmers to market their farm produce in the international markets.

According to the President of the African Development Bank (AfDB), Akinwunmi Adesina, “fuel subsidy benefits the rich and kills Nigeria’s economy”. Enormous amount of money will be saved by the government from the removal of the fraudulent petrol subsidy. The new president has given the Central Bank of Nigeria (CBN) the mandate to achieve a unified exchange rate immediately. There should not be a difference in the official and black market rates. The failed naira redesign policy means that there are rots in the CBN. President Tinubu has directed that the apex bank should be thoroughly cleaned. We can get a better CBN than it is presently constituted!

The banks’ interest rates are too high and anti-business investment. The president has assured the nation that it will look into means to reduce the interest rate and encourage prospective investors to take loans from banks. These measures will include encouraging the masses to have bank accounts and keep their money in the banks instead of in their houses. Nigeria is underbanked with about 36 percent of the total adult population in the country financially excluded, according to a recent report by Enhancing Financial Innovation and Access. The new government also said it will focus on infrastructure development to create jobs for the masses. Nigeria has poor infrastructure stock, according to the World Economic Forum Infrastructure Table for year 2022. Housing and road deficits, two major critical infrastructures, are very high.

Infrastructure provision, according to Patricia M. Hillebrandt, in ‘Economic Theory and the Construction Industry’, published by Palgrave Macmillan in London in 2000, has the advantage of providing physical assets, jobs, and governments are the major providers. Electricity supply is paramount to the new administration. Generation, transmission and distribution will be doubled and state governments will be encouraged to take part in electricity generation, transmission and distribution. All anti-investment and multiple tax policies of the previous governments will be reviewed. Those poor income earners like those in levels 1 to 6 earning less than N100,000 per month should not pay tax. We are taxing poverty by taxing these people. Government will make available structures that will make repatriation of investment and profits to be prompt and responsive.

This will encourage foreign investors to invest in Nigeria. Foreign direct investment (FDI) is very low in Nigeria. It is on record that Nigerians invest more outside the shores of Nigeria. With adequate provision of labour (Nigeria has more youths than dependant population) and friendly investment policies, foreign investors will find Nigeria attractive. In October 2022, President Tinubu released an 80-page policy document titled “Renewed Hope 2023 – Action Plan for a Better Nigeria”. He emphasised that his objective is to foster a new society based on shared prosperity, tolerance, compassion, and the unwavering commitment to treating each citizen with equal respect and due regard. Top on his priority lists of action are national security, economy, agriculture, power, oil and gas, transportation and education.

He promised to review the revenue-sharing formula among the three tiers of government. The president will allocate more funds to the states and local governments to address local concerns and fulfil their expanded constitutional obligations to the people. He stated that the existing arrangement has been problematic because “state governments are closer to the people and must be more responsive to local needs and aspirations of the people.” On his fiscal policy, Tinubu has promised to review the federal budgetary methodology, embark on a national infrastructure campaign, drive an import substitution agenda, reform the taxation system whereby the rich will pay more for what they consume, and lastly fight corruption, inefficiency and waste in government.

On his government’s monetary policy, the nation should be witnessing a very tight management of the exchange rate that will be different from the current loose, open market approach. Inflation (currently at 22.04%) should be more targeted and well managed, while foreign debt obligations will be limited and re-negotiated. Most important is the industrial policy. There will be a national industrial plan that will be focusing on the following: give tax and other credit facilities to prospective industrialists, encourage domestic manufacturers and producers, develop major and minor industrial hubs in all geopolitical zones, promote and boost industrial creativity with the use of new innovative technologies, and provide tax credits and reduce interest rate on loans. The manifesto of the president which formed the basis of his programmes to be implemented saw a key gap in the housing sector of Nigerians.

There are huge housing deficits in Nigeria, both in terms of qualitative and quantitative measures.  President Bola Tinubu’s housing policy will focus on creating mortgage and consumer credit reforms, and introduce a home ownership programme for civil servants with flexible payment terms over their service years (35 years). Government must ensure the homes go to first time beneficiaries so that the houses will not be warehoused by rich Nigerians. The seven modern needs of man are food, shelter, clothing, transportation, medicals, education and security. These seven needs of man can be best provided if the government can ensure more adults are at work.

Any Third world government that wants to succeed must take the issue of economic development as a matter of priority. Overall, I think this administration will improve on the performance of the last administration.