Tinubu Reforms Left Nigerians In Cold While Investors Applaud
LAGOS AUGUST 2ND (NEWSRANGERS)-President Bola Tinubu has barely been in power for two months but his radical reforms are already trying the patience of fellow Nigerians.
Surging gasoline prices and rampant inflation following the abolition of fuel subsidies and exchange rate reform are hammering the poor in Africa’s most populous nation, where 40% of its citizens live in dire poverty.
The same measures have been celebrated by foreign investors, the World Bank and International Monetary Fund. The stock market has risen more than 20% and the country’s dollar-denominated eurobonds have seen double-digit returns since the president’s May 29 inauguration.
That’s no comfort to Seun Ameke as he surveys the relatively light traffic around the patch of ground where he runs a roadside car-repair business.
“There is no more traffic in Lagos because of Tinubu” Ameke, 35, said, laughing at the thought that the city’s notorious congested streets are a beneficiary of higher fuel costs.
He voted for the president but confesses surprise at how much harm that choice has done to his livelihood, with the number of his weekly customers down by 75%.
“When I call some of them, they tell me that they have stopped driving because of the higher cost of fuel,” he said.
Frustration has not yet sparked the sort of mass protests that turned deadly last month in Kenya, and Tinubu on Monday announced a $652 million package of measured designed to cushion the impact of his reforms, asking for patience for the measures to work.
“I plead with you to please have faith in our ability to deliver and in our concern for your well-being,” he said in a televised national address. “We will get out of this turbulence.”
Even so, observers worry that the pain from Tinubu’s actions could boil over as it did in 2020, triggered back then by fury over police brutality.
High gasoline prices are also keeping Bellow Ariyo off the road. The 35-year old single father and Uber driver says he’s sent his four-year-old daughter back to live with her grandmother because he can’t make ends meet.
“There’s no coping. I just have to survive like everybody,” he said, describing how the increased fuel cost has made it barely worth his while to venture out looking for customers because of the pinched profit margin. “We are basically living from hand to mouth now,” he said, adding that the only solution was to reinstate the fuel subsidy.
The subsidy cost the country an estimated $10 billion last year and it was highly vulnerable to corruption while encouraging smuggling into neighboring countries. Likewise, Nigeria’s exchange rate controls fostered an expensive and inefficient system that hurt investment and created profit opportunities for the well-connected with access to foreign exchange at the subsidized rate.
Tinubu, who last month declared a state of emergency over high food prices, channeled popular hostility toward the system by calling out the “handful of people who have been made filthy rich simply by moving money from one hand to another.”
The money saved by his reforms can now be better spent on improving services for the nation’s more than 200 million citizens, and in upgrading public infrastructure that will yield long-term gains.
“The pain is short to medium term but the nation will be better off for it and the people will be better off for it,” said Kola Karim, a prominent businessman and chairman of domestic oil producer Shoreline Natural Resources Ltd.
Nigeria spent 96% of its revenues to service its debt in 2022 and Tinubu is trying to work that staggering burden down.
“If it stays the course, Nigeria and Nigerians will thank this man after so many have tried and failed,” Karim said.
The boldness of Tinubu’s actions stands in stark contrast to the region’s other economic powerhouse, South Africa, where President Cyril Ramaphosa faces criticism for excessive caution in tackling the country’s challenges.
Back on Nigeria’s streets, the muted public opposition so far to these painful reforms suggests Tinubu is continuing to get the benefit of the doubt from most in the country who didn’t trust the old system.
“It is clear to a lot of people that the subsidy and the foreign exchange arbitrage were not benefiting majority of the population,” said Cheta Nwanze, lead partner at Lagos-based consultancy SBM Intelligence.
Such recognition has dimmed the appetite for protest at the short-term costs of the reforms, he said. The currently fragmented nature of the opposition and a lack of forceful pushback from labor unions also gives the government room to run.
The last widespread public protests over the removal of fuel subsidies was in 2012 and encouraged back then by Tinubu himself. The absence of a similarly galvanizing figure this time around is playing into the government’s hands, Nwanze said.
Kamilu Sani Fagge, a professor of political science at Bayero University in Kano, said Nigerians also appear to lack a “culture of resistance” that could generate effective, nationwide mass protests.
The county is divided along ethnic and religious lines, which the government can exploit. And people may mistrust the labor movement, believing its leadership will sell them out in negotiations, Fagge said.
The Nigerian Labour Congress has called for nationwide protests starting Aug. 2 over what it calls the “anti-poor” policies. But the action faces a court injunction and the NLC is holding talks with authorities.
The World Bank, which estimates that 4 million Nigerians were pushed into poverty between January and May 2023, says ending the fuel subsidy will lift inflation this year. But it sees that as a one-off effect while the reforms open a “window of opportunity.”
In the meantime, the dent in disposable income is going to be a drag on growth, something that Omotayo Olokede is already witnessing.
The manager of the upscale Westgate Shopping Mall on the Isheri road near Ikeja, the capital of Lagos state, said grocery store sales have been dwindling all year and the trend has gotten much worse.
“Sales have dropped by about 30% to 35% and there is nothing in the horizon that gives optimism,” he said.
Bloomberg Businessweek
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Posted by News Rangers
on Aug 2 2023. Filed under International, National.
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