- President Tinubu’s policies please foreign investors, but a devalued currency and soaring petrol prices mean ‘national sacrifice mode’ is widely unpopular
Richard Assheton, The Guardian (UK), Friday June 16, 2023
Nigerians are feeling the strain as their new President pushes through a series of unpopular policies that have earned him praise from foreign investors.
Bola Tinubu, who was sworn in on 29 May, has surprised many observers by taking a running start to his tenure of Africa’s most populous country. In little over two weeks he has banished a longstanding petrol subsidy, ejected the country’s central bank governor and ended restrictions on the rate of the naira, Nigeria’s currency.
The steps have fired up markets, sending stocks in what is also Africa’s largest economy to their highest level in 15 years. But they have also increased living costs and drawn criticism from many Nigerians who have faced years of economic mismanagement.
Joseph Essien, 47, a taxi driver in Lagos, said he had stopped working altogether because he was no longer making any profit after the rise in petrol prices. He said he used to spend about 5,000 naira (£8.40) a day on fuel, which would last him for a day of eight hours and then into the next. Last week he was spending about 15,000 naira on fuel that barely lasted him a day.
“Over the weekend I just told myself it wasn’t worth it; I’m just working to pay Bolt [the ride-hailing company] their commission and I’m left with nothing,” he said.
Tinubu, 71, who won as the ruling party candidate in February’s election, last week suspended Godwin Emefiele, the controversial central bank governor, after criticising his botched replacement of naira notes in the lead-up to the election.
Inflation hit an 18-year high and Nigeria’s debt soared to more than $150bn (£118bn) under Emefiele’s watch.
Nigeria’s president, Bola Tinubu, taking office in May. Photograph: Olamikan Gbemiga/AP
On Saturday, the national domestic security agency arrested Emefiele “for some investigative reasons”, without giving further details.
Rid of its former governor, on Wednesday the central bank floated the naira to foreign exchange buyers, signalling the end of Nigeria’s control of its official rate, which soon dropped by about 40% – the biggest fall in its history.
Countries including the UK had lobbied for that move as essential to boosting foreign investment. A Whitehall source said it meant “short-term pain for long-term stability”.
Nigerians were already reeling from chaos triggered by Tinubu in the first minutes of his presidency when he declared in his inauguration speech, off-script, that Nigeria’s costly fuel subsidy was “gone”. The move sparked panic-buying before pump prices tripled, leaving travellers stranded. Two states have announced three-day office weeks for their civil servants in response, while one has reduced school teaching to three days a week.
Bolt increased its minimum fares earlier this month after the fuel subsidy was dropped but the union for drivers using ride-hailing apps said the increase goes nowhere near covering petrol prices that have roughly tripled.
Drivers went on strike last week in protest, and this week suspended the strike while negotiating with Uber and Bolt. Nigeria’s main workers’ union has also threatened to strike.
Dosunmu Oluwaseyi, 35, the floor manager of a restaurant in the Victoria Island commercial district of Lagos, said she like many had taken to “trekking” to work, choosing shorter, cheaper bush taxi routes and making up the difference on foot.
“Some people stay at work,” she said. “They will not be able to go home every day. By the grace of God they should reduce [the price].”
A vendor selling local newspapers in Lagos on Thursday. Photograph: Sunday Alamba/AP
Ikemesit Effiong, head of research at analyst company SBM Intelligence, said Nigeria was in “national sacrifice mode”. The devaluation of the naira combined with the dropping of the fuel subsidy was already causing inflation, he said.
He added: “The hope is that the end of the subsidy regime frees up enough resources, political trust and transparency permitting, to be channelled towards desperately needed infrastructural and social investment.”
Some have urged Tinubu, an archetypal “big man” with a reputation for lavish spending, to tighten his own belt in these times of need. They suggest shortening his convoys of blackout-windowed 4x4s, which can stretch to more than 60 cars, or getting rid of some of the seven aeroplanes in his presidential fleet.
Charlie Robertson of the emerging markets investment firm FIM Partners praised Tinubu’s policies, saying they had prevented Nigeria defaulting on its debts, which would have led to rampant inflation. “We were heading to [the situation of] Venezuela,” he said. “Millions of refugees pouring across the border desperate for jobs and stability.”
He said the fuel subsidy was “simply unaffordable”, and freeing up the naira would encourage investment in the country and could boost a stagnant private sector, potentially creating jobs. But he added: “This is the easy stuff to do. The hard stuff is to make the country ready for industrialisation and a boom.”
For now Essien, the taxi driver, sits at home with his family, desperately learning the coding language Python. “By the end of this month I hope to be able to get a grasp of an aspect of it, and look for remote jobs,” he said.
First published in The Guardian, https://www.theguardian.com/world/2023/jun/16/nigeria-economy-stocks-and-cost-of-living-soar-bola-tinubu-policies