Shock therapy alone will not cure Nigeria's economic ills

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Since assuming the presidency nearly 15 months ago, Bola Tinubu has forced his 220 million compatriots to swallow bitter medicine. He has scrapped a generous fuel subsidy, one of the few perks enjoyed by citizens of an inefficient and corrupt state. He has allowed the country’s currency, the naira, to plummet, fueling imported inflation and triggering the worst cost-of-living crisis in a generation.

These measures plunged tens of millions of already poor people into destitution. But they were necessary to begin to reverse the country’s long-term economic decline. The fuel subsidy was ruinous, swallowing up nearly a third of the federal budget. It was also distortionary, channeling Nigerians’ energy into rent-seeking, smuggling, and corruption. The exchange rate regime, which vastly overvalued the naira, wiped out exports of everything but oil. While real industries were starved of hard currency, cronies had access to cheap dollars to sell on the black market. Nigeria’s elite learned a lesson that proved disastrous for the country’s prospects: Why produce anything when you can make a fortune through arbitrage?

A shift to more orthodox policies is essential to revive an economy that has not grown per capita in a decade and one of whose most lucrative industries is kidnapping. It is necessary, but not enough. “Tinubunomics” is so disjointed that it barely deserves its name. Shock therapy will likely fail unless significant adjustments are made.

The president must first set a course of action and convince Nigerians that they are in solidarity. For this to be at all credible, the political class must make sacrifices. The generous pay rises for civil servants and the luxury cars (not to mention jets) for government officials must be abandoned. Tinubu need only look at Kenya, where violent street protests forced the government to reverse tax increases, to see what happens when a sense of injustice takes hold.

Similarly, some of the savings from fuel subsidies should be reallocated as a priority to the most economically vulnerable. Hunger levels are soaring and millions of children are forgoing meals and school. Nigerian politicians love to be seen handing out bags of rice. But what is needed is direct cash payments to people’s phones, for which the technology already exists, and in the longer term, an adequate safety net.

As things stand, the state has neither the capacity nor the probity to manage such a project. Tinubu must urgently remedy this. With few exceptions, his cabinet is filled with lightweights who owe their positions to political patronage, not expertise. Technocratic talent is in abundance. It must be harnessed.

Corruption must be addressed. It does not help that Tinubu’s wealth is hard to decipher and that his poverty minister has been suspended for embezzlement, which she denies. It does not help that the state is implicated in massive oil theft, which is draining the nation of billions of dollars. Tinubu should use all his political cunning to stem this flow.

Some will argue that the Nigerian state is so weak that Tinubu can only relinquish his influence and step aside. Nigeria collects taxes worth about 10% of gross domestic product, one of the lowest rates in the world. This is a clear sign of the lack of trust between the government and the governed. But if the economy is to be revived, the state must play a facilitating role. It must provide electricity, roads, security and justice, not to mention schools, hospitals and assistance to the poorest in society. Without a well-articulated and coherent plan, Tinubu’s bitter medicine will not cure Nigeria’s ills. It will only leave a bitter taste.