Jimmy Arch
After President Bola Tinubu implemented reforms, the Presidency has detailed what it calls substantial economic development in Nigeria. Sunday Dare, the president’s Special Adviser on Media and Public Communication, said the nation’s economy, which was on the verge of collapsing prior to Tinubu taking office, is now making quantifiable strides. He clarified that important areas like as commerce, foreign reserves, taxes, debt service, the elimination of fuel subsidies, the budget deficit, and public financial management have all been impacted by the reforms. A summary of the advancements made possible by the reforms is shown below.
• Prior to May 2023, Nigeria had a negative balance of payments that was draining the country’s economy and a persistent trade deficit, with significantly more imports than exports. The tide has turned today, with Nigeria now recording a trade surplus as a result of reforms, relieving pressure on the external accounts.
• Nigeria used to have several currency rate windows, which led to distortions and a large divide between the official and black markets. The currency rate has been harmonized through reforms, which has reduced uncertainty and narrowed the spread.
• By early 2023, Nigeria was in a precarious position due to unmet foreign exchange demand of $7 billion and net reserves that had dropped below $4 billion. Since then, reforms have restored confidence by permitting FX access even on naira cards, cleared FX forwards, and rebuilt reserves to over $23 billion.
• Nigeria was on the verge of bankruptcy as its tax-to-GDP ratio remained below 10% and 97% of government revenue was used to pay off debt. Today, debt service has dropped below 50% of revenue, while reforms have raised the tax-to-GDP ratio above 15%.
• gasoline subsidies were unsustainable and wasteful, depleting resources while still causing gasoline shortages and a decline in FAAC inflows for Nigerians. The fuel supply is now assured, states receive positive FAAC allocations, and the subsidy has been removed, freeing up funds for important expenditures.
• In the past, low capital investment and large deficits characterized Nigeria’s budget. This trend has been reversed by reforms, as infrastructure spending is increasing and the deficit is currently decreasing.
•Fiscal stability was threatened when Ways and Means borrowed more than ₦30 trillion from the Central Bank by May 2023. This practice has been reduced by the reform process, which has tightened fiscal discipline and gradually reduced it.
•Due to theft, sabotage, and poor management, Nigeria’s oil and gas industry was in decline, with output constantly declining. Now that output has increased due to reforms and improved security, Nigeria’s most significant source of income has returned.
• Investors were turned off by the pre-reform policy climate because it was erratic, opaque, and hostile to markets. Since then, reforms have improved the climate’s predictability, attracting capital inflows and even resulting in upgrades to the sovereign rating.
• Prior to reforms, lending rates were growing in tandem with a sharp increase in inflation, which choked enterprises. Even if inflation is still high today, it has begun to decline, and interest rates are leveling off.
• Before changes, Nigeria’s reality was characterized by growing poverty and dwindling employment possibilities. Although poverty rates are still high today, changes are consciously reversing this trend through policies that provide access to decent work and infrastructural improvements. Before Tinubu took office, Nigeria’s budgetary administration was ineffective, disorganized, and full of inefficiencies. Economic changes have enhanced openness, bolstered collaboration, and disciplined public financial management. • Nigeria would have faced growing deficits, depleting reserves, hyperinflation, soaring debt, and potential economic collapse in the absence of the reforms.
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