After one year in the saddle, the time for talking and making promises about the economy is over for President Bola Tinubu. Now is the time to deliver on his avowal to strengthen and rebuild the economy through the private sector.
The Nigerian economy is battling stormy headwinds. Glaring hyperinflation, acute electricity shortages, high energy costs, steep debt servicing, chronic unemployment, divestment of multinationals, shabby infrastructure, and low wages feature prominently. Although Tinubu inherited most of them, he can revitalise the economy by significantly reducing the footprints of the government in business.
Hinting at an economic revamp by strengthening the organised private sector at the third edition of the Nigeria Employers’ Consultative Association summit in Abuja, the President reiterated that he has embarked on economic reforms since he assumed office.
In his Inaugural Speech, he cancelled petrol subsidies. Then, his administration merged the naira exchange rates. In April, the government cancelled subsidies for Band A electricity consumers.
Coincidentally, the reforms have not instigated economic revival. As the naira depreciates to record levels, energy costs have spiralled out of control. At 40.66 per cent, food inflation is at a 30-year high. The exchange rate is N1,500 per $1 from N464/$1 in May 2023. Nigerians do not feel the touted reforms.
Surprisingly, Tinubu, who comes from a private sector background, is falling back on the failed system of public control of the commanding heights of the economy. His predecessor, Muhammadu Buhari, was unrepentantly statist and ruined the economy. Tinubu should discard this archaic economics.
Between 1979 and 1990, British Prime Minister Margaret Thatcher changed contemporary economics by privatising major public assets. These included British Steel, Rolls Royce, British Airways, Britoil, British Energy (nuclear), British Telecomm, British Gas and British Airport Authority.
So, it is naïve that Tinubu has failed to consolidate his initial reforms by unleashing the productive power of the private sector to rebuild the tattered economy. The fuel subsidy crisis arose principally because the four public refineries with a combined nameplate of 445,000 barrels per day were under government control. Two of them have missed several deadlines to re-commence fuel production.
Consequently, Nigeria depends naïvely on fuel imports though it is a major crude exporter. Olusegun Obasanjo privatised two of the refineries in 2007 before the dubious reversal by his successor, the late Umaru Yar’Adua.
Indeed, government ownership of business has delivered only corruption, inefficiencies, and cronyism. Nigeria spends $28 billion annually on fuel imports, per Blackgold Energy Authorities. Therefore, Tinubu should embark on the transparent privatisation of the refineries. This strengthens the OPS.
All the 132 refineries in the US belong to private operators. In the UK, the six refineries are privately owned. It is a safe path for Nigeria. This will reignite Nigeria’s flagging foreign direct investment. At minus $187 million, it entered negative territories in 2022, per UNCTAD.
Nigeria has struggled vainly to kick-start its manufacturing sector since 1978 when it commissioned the Ajaokuta Steel Company. Imprudently, every administration prefers government ownership. Nothing has worked. Nigeria is losing money ($4 billion in annual steel imports) and jobs heavily. By selling Ajaokuta, Tinubu will boost the economy via the private sector.
The Bureau of Public Enterprises said Nigeria realised N550 billion from the privatisation and commercialisation of 142 public assets as of 2018. In the 18 years to 2018, the government realised $7.8 billion in FDI by selling 53 public assets. So, another path to reinforce the OPS is privatising the seaports, the airports, rails, and the Transmission Company of Nigeria.
Tinubu can elevate the economy by delivering on his tax reform plan. There are more than 60 tax heads. The plan is to reduce this to nine. This should be done expeditiously.
The government should divert the savings from privatisation to infrastructure and concentrate on security.