Reforming the reforms: From T-pains to T-gains

Let’s return to policy. In three months, President Bola Ahmed Tinubu will be celebrating his second year in office. From that point onwards, electoral politics will more likely dominate the government’s attention than policy for the rest of the term. When will the pains of reform—fuel subsidy removal and naira devaluation—transform into gains for Nigerians during the life of this administration? We must return to this question because, after nearly two years in operation, we know two fundamental things about the government’s reform agenda.

First, Tinubu’s reform policies have been effectively a declaration of war on the poor. What has happened in Nigeria since June 2023 is that the fat man has become slim, while the slim man has died. Nigerians who were relatively comfortable before have fallen into poverty or closer to it in less than two years. Those who were already poor before, on the other hand, have fallen deeper into poverty and are now barely surviving. While incomes have stagnated, a state of near hyperinflation has closed down any room for comfortable living for millions, let alone for savings.

President Tinubu himself admitted this much when he said that a friend of his who used to own five exotic cars now uses only a modest Honda. If those who kept exotic cars only a few years ago are now so worse off, we can only imagine what has happened to the majority of Nigerians who had no cars at all before. For example, the consulting firm PwC reported in January that 13 million more Nigerians are likely to fall into poverty this year. That will bring the total number of the poor to 117 million by the end of this year, up from 104 million in December 2023.

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Just as important, the government’s reform policies have stifled and severely depressed the “informal sector” of the economy where over 65 per cent of Nigerians eke out a living daily. The volume of passenger travel between towns and cities has drastically reduced throughout the country, and the commercial transport sector has all but collapsed. The customer base of restaurants, bukatarias, tea shops and mama-put eateries has fallen sharply. Private schools have stacked up mountains of debt that cannot be paid by parents, while “the urgent 2k” we send between family and friends, has almost dried up. And these are just a few examples.

In short, the underlying conditions of economic insecurity and precariousness for millions of Nigerians have only gotten worse under this government. Yes, inflation and food prices have reduced marginally over the past few weeks, and the economy as a whole is projected to grow by 3.5 per cent or higher in 2025. Yet, none of these changes much because the reductions are nowhere near pre-2023 levels.

Secondly, the pains of reform, which should be temporary, have not yet translated into enduring gains for a majority of Nigerians. President Tinubu has owned these policies as evidence of his “brave leadership”, of his willingness to take “tough” or “painful” but “necessary” decisions for a sustainable economic future for Nigeria. Yet, two years on—and presidential bombast aside—millions of Nigerians can’t see or feel the gains of reform.

As things stand, both fuel subsidy removal and naira devaluation have scarcely yielded any benefits other than unprecedented suffering for tens of millions of Nigerians and trillions of cheap naira at the lavish and wasteful hands of the federal government and state governors. That can’t be the original intention.

The whole point of naira devaluation and fuel subsidy removal was to enable the government to do more for Nigerians in areas like health, education, and infrastructure. Yet, the fundamental challenge of how to move from short-term pains to long-term gains remains unresolved. Worse still, while the government has faced this challenge throughout, it has not yet fashioned a convincing answer, let alone a roadmap and timeline for achieving it.

The reforms are here, and still biting, but the desired results and fruits are still nowhere to be found.

Part of the problem lies with the external influence operations that laid the groundwork for the government’s uncritical embrace of these policies. The World Bank and IMF, who ceaselessly promoted these policies over the past 15 years or so, presented them as if they were the very ends in themselves. “Seek ye first the kingdom of no subsidy and devalued naira,” the gospel seems to have been revealed, “and all else shall be added on to you”.

The Tinubu government embraced this gospel with the dogmatic fervour of the newly converted, without thinking about what they needed to do to turn temporary pains of reform into enduring gains for Nigerians.

This is why it was amusing to hear the president say that African leaders should stop depending on foreign blueprints and should instead wield policy as a “surgical blade,” rather than as a mere slogan. Fine words, indeed. But where is the example? The government’s policy blade has cut the patient in half, but the surgeon has scarcely demonstrated any idea how to revive her. In fact, the Ministry of Finance, which should lead policy design and implementation for turning the page of economic reform, has been worse than dormant under Tinubu.

Otherwise, there are at least two options open to the government. The government could either reform the reform or complement it with reforms in other areas. We know that most of the structural gains of reform—expansion of the fiscal space, significant increases in federal revenues, and external reserves—are largely due to the impacts of naira devaluation, not the fuel subsidy removal. Yet, it is fuel subsidy removal that has caused the most pain directly across all sectors of the economy.

Therefore, the government can reform the reform by returning to a partial fuel subsidy regime that will bring down the cost of fuel to about half its current price.

This will help to reduce inflation and food prices sharply, and ease conditions for millions of Nigerians. It could even win the government the election it now appears most concerned about already. Moreover, the cost of this policy will no longer be as prohibitive as during the pre-2023 years.

For example, in 2022, when a litre of petrol ranged from N195 to N220, depending on your location, the Buhari government paid N4.4 trillion in fuel subsidy, the highest subsidy payment ever in Nigeria’s history. Were the government to return to this level of subsidy payment, it would cost just about 8% of the 2025 budget of over N54 trillion, and therefore would not significantly dent the government’s fiscal space.

All that is required to make this policy work effectively is for the government to root out the corruption in fuel subsidy management. In fact, there is an important sense in which fuel subsidy removal actually means pushing the burden of the corruption perpetrated by a handful of people involved in its management onto the rest of us.

It was the corruption in subsidy management that made it appear unsustainable. Removing it was therefore like throwing the baby away with the bath water. But it should not be hard for the government to root out corruption in that sector, after all, the current National Security Adviser, Malam Nuhu Ribadu, once said that he could root out “subsidy thieves” in one week. And few would doubt him.

The second option is more complex, but an absolute necessity. As we shall see.