Bayo Onanuga, the special adviser to President Bola Tinubu on Information and Strategy, recently addressed Nigeria’s current economic situation, explaining the reforms undertaken by the administration since June 2023.
Onanuga’s comments were in response to a New York Times article which portrayed the Nigerian economy as deteriorating under Tinubu’s leadership.
He noted that the economic difficulties were inherited and not a direct result of the president’s policies.
Bayo Onanuga pointed out that before Tinubu’s administration, Nigeria’s economy was already in an unstable state. The previous government had heavily subsidized both fuel and the exchange rate, with the Central Bank of Nigeria (CBN) spending approximately $1.5 billion monthly to maintain the naira’s value.
This approach led to widespread arbitrage, where over 5,000 Bureau de Change (BDC) operators exploited the difference between the official and parallel market rates.
The Tinubu administration quickly recognized the unsustainable nature of these subsidies. One of the initial moves was to eliminate the fuel subsidy, a decision necessitated by the absence of budgetary provisions beyond June 2023.
This step was essential in addressing the ‘cancer of public finance,’ which had seen 97% of revenue directed towards debt servicing under the previous government.
Simultaneously, the government floated the naira, allowing market forces to determine its value. This policy was aimed at curbing the rampant arbitrage and restoring investor confidence, which had waned due to inconsistent exchange rates and unmet remittance obligations to foreign businesses.
Despite initial turbulence, including the naira plunging to an all-time low of N1,900 to the dollar, Onanuga reported that stability is returning to the foreign exchange market.
The naira has appreciated and now trades below N1,500/$, with optimistic projections suggesting it could strengthen further to between N1,000 and N1,200 by the year’s end.
In addition to stabilizing the currency, Nigeria recorded a trade surplus of N6.52 trillion in the first quarter of 2024, a turnaround from the N1.4 trillion deficit in the previous quarter. This positive trend, according to Onanuga, shows the initial success of Tinubu’s economic reforms.
Onanuga acknowledged the persistent challenge of inflation, particularly in food prices. He highlighted endless actions by both federal and state governments to boost agricultural production and reduce food costs.
Initiatives include extensive investments in dry-season farming, distribution of fertilizers, and setting up retail shops in states like Lagos and Akwa Ibom to sell food at reduced prices.
The economic reforms have begun to restore international confidence in Nigeria’s financial stability. Notable indicators include the World Bank’s $2.25 billion loan and additional financial support from the African Development Bank (AfDB) and the African Export-Import Bank (Afreximbank).
Through decisive policies and sustained reform efforts, the government aims to stabilize the economy and ensure a sustainable future growth.