No Easy Way Out of Nigeria’s Economic Impasse, by Kenechukwu Aguolu

For some time, Nigerians have been in denial about the actual state of the nation once hailed as the giant of Africa. Nigeria has deteriorated over the years to the extent that it is often referred to as ” a failed nation”. Previous administrations failed to stem the decline in Nigeria’s economic fortunes. Therefore, the current administration inherited a nation in a state of comatose, characterized by high levels of insecurity, poverty, unemployment, inadequate access to education, non-payment of salaries and pensions by some state governments, high unsettled foreign exchange obligations, a debt service-to-revenue ratio of 97%, poor infrastructure, and other symptoms of a failing nation.

The task of putting Nigeria on the path to economic prosperity is enormous, but not insurmountable. It requires transformational and drastic changes, not incremental ones, as the nation has drifted too far from the path of economic sustainability. The current administration, understanding this, introduced major policy shifts—what some may call shock therapy. It has also moved away from the Keynesian economic model, which promotes government intervention in the economy for stability, towards the classical economic model, which supports a limited government role in the economy. It is important to note that the classical model usually comes with some economic fluctuations in the short term, which Nigeria is currently experiencing.

The economic reforms of the current government have already started yielding results. The country’s debt service-to-revenue ratio has dropped from 97% to under 70%, freeing resources for investment in security, infrastructure, and other critical sectors of the economy. Allocations to the three tiers of government have increased. Additionally, Nigeria’s Gross Domestic Product grew by 3.19% in the second quarter of 2024 (year-on-year), which is higher than the 2.51% recorded in the second quarter of 2023 and the 2.98% recorded in the first quarter of 2024. Students have already started benefiting from the student loan scheme, and affordable houses are being built across the nation under the Renewed Hope Housing Scheme. The forthcoming Consumer Credit Scheme is another initiative set to commence, to name just a few.

Nigerians have experienced failed leadership in the past, so many are not fully convinced of the sincerity of purpose and the efficacy of the economic reforms of the current administration. However, the role the government played in securing local government financial autonomy and the unification of foreign exchange rates are examples of its genuine commitment to transforming the nation for good. Local governments in the country are now expected to operate more effectively and contribute more to national development. It would have been convenient for President Tinubu to leave the arbitrage in the forex markets intact and benefit from it at the expense of pursuing economic recovery. Another sign of the current government’s patriotism is its refusal to chase after popularity, instead sticking to its economic policies despite their unpopularity. In a democracy, many leaders avoid making such decisions to avert the risk of losing future elections.

There is no doubt that in addition to the current economic reforms, Nigeria like many other African countries—needs to seek some form of debt relief to free up more resources for national development. This was reiterated by the Chairman of the African Union Commission during the recently concluded Africa Food Systems Summit in Kigali, who said that debt relief is an urgent imperative for many African states to give them vital economic breathing space. Without the current economic reforms Nigeria is undertaking, which show a genuine desire to turn things around, her creditors may be reluctant to consider her plea for debt relief.

Nigerians need to be patient, as there is no quick fix or easy solution to the economic challenges the country is facing. The government should ensure the timely implementation of policies. For example, the CNG initiative and the implementation of the national minimum wage need to be fast-tracked. It will be beneficial for the government to continuously educate Nigerians about its various intervention programs and provide updates on the implementation of its economic policies. Communication is key, especially in times like this.