Nigeria’s Economic Recovery Under President Tinubu’s Leadership and Reforms

Nigeria is currently navigating significant economic changes prompted by a series of bold reforms introduced by President Bola Ahmed Tinubu.

In response to Nigeria’s escalating economic challenges, Tinubu has approved a $2.25 billion injection into the economy. This funding, sourced from the World Bank, aims to enhance revenue and support economic reforms amid the severe cost-of-living crisis, reported the Associated Press. As part of a rapid stabilization and development strategy, this urgent financial assistance is intended to revive the economy quickly. The funds are specifically targeted to reduce interest rates in key sectors and provide credit lines to support small, medium-sized, and large businesses.

To further support Tinubu’s plan, Chidiebere Ogbonnaya—the newly appointed professor of human resource management at King’s Business School, the business school of King’s College London—will leverage his research to develop policies that can effectively drive economic recovery. Ogbonnaya, in an interview with me, shared, “In 2020, I was awarded over $240,000 by the UKRI to investigate how effective policies can support economic growth and tackle the root causes of poverty in Nigeria.” He added, “This year, I’ve received more than $510,000 as part of the UK government’s Official Development Assistance (ODA) research funding to support international development and address global challenges.” With these funds, Ogbonnaya explained that he hopes to develop actionable policies in collaboration with international researchers, government agencies, and policy experts. These collaborative efforts will evidently be crucial as Nigeria navigates its complex economic landscape. After all, the challenges are immense and multifaceted, requiring both immediate and long-term strategies to stabilize and revitalize the economy.

In this context, the reasoning behind Tinubu’s significant investment is rooted in the conviction that fiscal reforms are essential to instill market discipline in Nigeria’s struggling economy. The nation has been facing severe economic difficulties, worsened by both international and domestic factors. Global economic disruptions—like the conflict in Ukraine—have played a role in the crisis, but internal policies have greatly amplified the problems.

The Fuel Subsidy Gamble

Among the most impactful of these internal measures, the elimination of petrol subsidies last year signaled the start of Tinubu’s bold reform plan. These subsidies had kept fuel prices in Nigeria among the lowest globally, but they came at a significant expense to the national budget, consuming 15% of it. The abrupt removal of the subsidy caused a steep rise in petrol prices, which then led to higher transportation and production costs that businesses promptly passed on to consumers.

As a result, the cost of living soared, with petrol prices tripling and food prices rising by 35%, reported the BBC. The sudden implementation of this policy, particularly Tinubu’s unanticipated declaration to end the fuel subsidy during his May 2023 inauguration speech, caused immediate panic and long lines at petrol stations, further intensifying the economic shock, reported CNN. In response to these conditions, a protest is scheduled to commence on August 1, according to the Daily Post.

In a related move, the administration also abandoned the policy of pegging the naira to the U.S. dollar, allowing its value to be determined by market dynamics. This decision led to the naira depreciating by more than two-thirds, significantly increasing the cost of imported goods and exacerbating the economic strain on the country. As a result of these combined policies, inflation has surged to a three-decade high of almost 34%, and poverty levels have risen sharply.

Reflecting on these rapid changes, Ogbonnaya stated, “These policy changes were inevitable, but the speed and manner of their implementation could have been better managed.” He supports this claim by citing his research, which highlights the importance of structured institutional support and careful policy rollout in mitigating economic shocks and promoting social welfare.

Supporters of “Tinubunomics” maintain that these reforms—though painful—are essential for achieving long-term stability and growth. They emphasize that eliminating petrol subsidies, while initially harsh, will eventually free up critical resources for infrastructure development and social services, laying a foundation for sustainable economic progress. Proponents also believe that allowing the naira to float will create a more accurate and stable exchange rate, attracting foreign investors who were previously hesitant due to artificial currency controls.

The urgency of these reforms is further highlighted by Nigeria’s rapidly changing economic landscape. For years, Nigeria took pride in being Africa’s largest economy. Now, however, it finds itself relegated to fourth place in dollar terms, reported Bloomberg. According to the IMF, without a decisive and robust recovery, Nigeria is likely to slip to fifth place by the end of 2024, trailing behind South Africa, Egypt, Algeria, and Ethiopia. This significant decline not only underscores the immediate repercussions of Tinubu’s policies but also highlights the enduring structural weaknesses that have long plagued the nation’s economic framework, reported the Financial Times. Evidently, the once formidable giant must now reckon with its vulnerabilities and strive for a resurgence that can restore its standing on the continent.

Signs of Economic Revival

Nevertheless, there are glimmers of hope. The administration’s efforts to attract foreign investment have shown some early signs of success, with slight improvements in investment flows compared to previous years, according to CNBC. Nonetheless, the overall impact on the economy remains uncertain.

Building on this cautious optimism, Ogbonnaya predicts that if the current reforms are effectively implemented and supported by sound policies, Nigeria could see a stabilization and eventual improvement in economic conditions. “These measures, while painful now, have the potential to lay the foundation for a more resilient economy,” Ogbonnaya stated. However, the associate editor of the Human Relations journal cautions that the short-term pain might continue for some time before the benefits of these reforms become evident. “The road to recovery is challenging, but with persistent efforts and strategic planning, Nigeria can emerge stronger.”

The Road Ahead

And so, as Nigeria attempts to navigate this challenging period, the resilience and adaptability of its people will be crucial. The government’s long-term vision for economic stability remains to be seen, but the immediate needs of the populace demand urgent attention and effective intervention.

The resilience and determination of the Nigerian people will undoubtedly play a pivotal role in shaping a prosperous future. With persistent efforts and collaborative strategies, Nigeria can not only regain its position as Africa’s largest economy but also build a more inclusive and resilient economic framework for generations to come.